Contents

AL
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About the CMT Association ix

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What Is the CMT® Program? xi
How This Book Was Created xiii

MA
Prefacexv

SECTION I Chart Development and Analysis 1

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Chapter 1 The Basic Principle of  Technical Analysis—The Trend 3
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Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 2 Dow Theory 15

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Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 3 History and Construction of Charts 27

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Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 4 Trends—The Basics 45

PY

Charles D. Kirkpatrick II and Julie R. Dahlquist

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Chapter 5 Breakouts, Stops, and Retracements 73

Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 6 Moving Averages 95

Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 7 Bar Chart Patterns 123

Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 8 Short-Term Patterns 156

Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 9 Confirmation198
Charles D. Kirkpatrick II and Julie R. Dahlquist
 Chapter 10 Candlestick Charting Essentials 240
Steve Nison

Chapter 11 Point-and-Figure Charting 250

Perry J. Kaufman

Chapter 12 Introduction to the Wave Principle 276

Wayne Gorman, Jeffrey Kennedy, and Robert R. Prechter, Jr.

Chapter 13 The Anatomy of  Elliott Wave Trading 294

Wayne Gorman, Jeffrey Kennedy, and Robert R. Prechter, Jr.

SECTION II Markets 309

Chapter 14 Overview311
David Wilson

Chapter 15 Government320
David Wilson

Chapter 16 Companies344
David Wilson

vi Chapter 17 Hard Assets 370

David Wilson
Contents

Chapter 18 Indexes386
David Wilson

Chapter 19 Measuring Market Strength 394

Charles D. Kirkpatrick II and Julie R. Dahlquist

CHAPTER 20 What Is the Efficient Market Hypothesis? 427

Edwin T. Burton and Sunit N. Shah

Chapter 21 The EMH and the “Market Model” 435

Edwin T. Burton and Sunit N. Shah

Chapter 22 The Forerunners to Behavioral Finance 443

Edwin T. Burton and Sunit N. Shah

Chapter 23 Noise Traders and the Law of One Price 448

Edwin T. Burton and Sunit N. Shah

Chapter 24 Noise Traders as Technical Traders 456

Edwin T. Burton and Sunit N. Shah

Chapter 25 Option Pricing Basics 466

Edwin J. Elton, Martin J. Gruber, Stephen J. Brown, and
William N. Goetzmann
SECTION III Statistical Analysis and System Development 477
Chapter 26 Objective Rules and Their Evaluation 479
David Aronson

Chapter 27 Basic Concepts and Calculations 494

Perry J. Kaufman

Chapter 28 Academic Approaches to Technical Analysis 507

Andrew W. Lo and Jasmina Hasanhodzic

Chapter 29 Understanding Implied Volatility 521

Russell Rhoads

Chapter 30 About the VIX Index 533

Russell Rhoads

SECTION IV Introduction to the Tools for Building

Technical Investing Strategies 547
Chapter 31 Being Right or Making Money 549
Ned Davis

Chapter 32 The Model‐Building Process 579 vii

Ned Davis

Contents
Chapter 33 Seasonality and Calendar Patterns 594
Perry J. Kaufman

Chapter 34 Consensus and Commitment Indicators 606

Dr. Alexander Elder

Chapter 35 Relative Strength as a Criterion for

Investment Selection 613
Robert A. Levy