The Nature Of The Market Is Change
by Thom Hartle
Technicians follow numerous markets, and some specialize in specific areas, such as equities or fixed income. With the Treasury bond yields recently hitting lows that were unthinkable by most only a few years ago, we thought that talking to a specialist in this area would be apropos. Meet Bruce Kamich, who is senior vice president for research, development and management of the electronic financial information service MoneyWatch for McCarthy, Crisanti & Maffei, and currently, he's on the board for the Market Technicians Educational Foundation. STOCKS & COMMODITES Editor Thom Hartle called Kamich on October 14, 1998, and asked him about some of his favorite indicators, including the last-half-hour index, secondaries, and the confidence index, and how he views the coming century and the changes it will bring.
ILLUSTRATION BY CARL GREEN
Human psychology will always be the same. Greed and fear are still going to operate in the same way they always have. We just have to determine different ways to measure it. -- Bruce Kamich
So tell me about Bruce Kamich. How did you first get interested in the markets? Did you start out on the fundamental side?
Not quite, but I was always interested in the stock market, even as a kid. I remember my uncle teaching me how to read The Wall Street Journal. I was probably about 13 when he showed me how to read an annual report. I started investing while I was still in high school, and by the time I graduated, I had made enough money to pay for most of college.
That's a pretty good start!
Well, it was more the market than it was me. You know the old saying: "Don't confuse wisdom with a bull market." I got out of the market in 1969 when I graduated from high school, and I didn't get back into it until the winter of 1974.
So this is the Kamich "Go To College" indicator?
Sure -- just go to college during a bear market, and then when you get your first job, you'll make some money, and then you can get back into the market again. I didn't have any great insight about market timing. It just worked out well.
When did you first start thinking about technical analysis?
My first real exposure to technical analysis came in a course in finance when I was in college. As an assignment, everybody had to do a project and test something.
We tested ideas, like what was the performance of stocks mentioned in The Wall Street Journal column "Heard on the Street," or in any other column in the Journal. We had to look at what happened to those companies three months, six months, or later, and find out whether they were up, down, or sideways, and what kind of return they had.
What did you look at?
I had stumbled onto a little book published by Investors Library and Press called The Technique Of Short Selling. It had a collection of 12 rules, such as you had to find a stock that had a big runup in price and that the fundamentals for which were deteriorating. One of the rules was the stock had to have formed a top formation on a chart, like a double top.
What was your immediate impression of the book?
I thought the ideas were interesting, but the concept of a double top wasn't explained very well. But I wanted to find out more, so that led me to Edwards and Magee's Technical Analysis Of Stock Trends to find out what a double top was. So for my project, I collected a set of charts to narrow the focus so I could filter out the stocks that met the criteria. It was a lot of work, as I recall.
And how did your project turn out?
The approach produced something better than market returns. I was pleased.
In the future, most or all of the markets will wind up being electronic. The nature of the business is going to change. It'll change the personality of the markets but whatever happens, it will be interesting times.
Excerpted from an article originally published in the January 1999 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 1998, Technical Analysis, Inc.