Contents

AL
RI
About the CMT Association ix

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

MA
Prefacexv

SECTION I CHART DEVELOPMENT AND ANALYSIS 1

v
D
Chapter 1 Charting3
TE

Perry J. Kaufman

Chapter 2 Moving Averages 71

GH

Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 3 Time-Based Trend Calculations 99

RI

Perry J. Kaufman
PY

CHAPTER 4 T rend Systems (Part 1) 114

Perry J. Kaufman
CO

CHAPTER 5 T rend Systems (Part 2) 138

Perry J. Kaufman

CHAPTER 6 Momentum and Oscillators 156

Perry J. Kaufman

Chapter 7 Volume, Open Interest, and Breadth 197

Perry J. Kaufman

Chapter 8 Bar Chart Patterns 234

Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 9 Short-Term Patterns 267

Charles D. Kirkpatrick II and Julie R. Dahlquist
 Chapter 10 Single Candle Lines 309
Steve Nison

Chapter 11 Multi-Candle Patterns 320

Steve Nison

Chapter 12 Forecasting and Trading Techniques 335

Steve Nison

SECTION II RISK MANAGEMENT 345

Chapter 13 Option Pricing Basics 347
Edwin J. Elton, Martin J. Gruber, Stephen J. Brown, and
William N. Goetzmann

Chapter 14 Understanding Implied Volatility 361

Russell Rhoads

Chapter 15 About the VIX Index 373

Russell Rhoads

SECTION III TECHNICAL INVESTMENT STRATEGIES 387

vi
Chapter 16 Selection of Markets and Issues:
Contents

Trading and Investing 389

Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 17 Intermarket Analysis 415

Markos Katsanos

Chapter 18 Cycle Analysis 427

Perry J. Kaufman

Chapter 19 Relative Strength Strategies for Investing 448

Mebane T. Faber

Chapter 20 A Stock Market Model 461

Ned Davis and Loren Flath

Chapter 21 A Simple Model for Bonds 496

Ned Davis and Loren Flath

Chapter 22 Perspectives on Active and Passive

Money Management 503
Robert A. Weigand
SECTION IV MARKETS 535
Chapter 23 Prospect Theory 537
Edwin T. Burton and Sunit N. Shah

Chapter 24 Perception Biases 544

Edwin T. Burton and Sunit N. Shah
Chapter 25 Inertial Effects 552
Edwin T. Burton and Sunit N. Shah

SECTION V STATISTICAL ANALYSIS AND SYSTEM DEVELOPMENT 561

Chapter 26 Correlation563
Markos Katsanos

Chapter 27 Regression577
Markos Katsanos

Chapter 28 Regression Analysis 583

Perry J. Kaufman

Chapter 29 The Scientific Method and Technical Analysis 595

David Aronson vii

Contents
Chapter 30 Theories of Nonrandom Price Motion 648
David Aronson

Chapter 31 Case Study of Rule Data Mining for the S&P 500 699
David Aronson

Chapter 32 System Design and Testing 746

Charles D. Kirkpatrick II and Julie R. Dahlquist