TAN Association Testimonial With David Lundgren, CMT, CFA

DL: I’m David Lundgren, Director of Technical Research at Wellington Management. I manage technical trend following portfolios, advise other Wellington PMs with risk management and idea generation, and present market overviews to external clients.

CMT: Could you describe how you use technical analysis in your role?

DL: As a technical analyst, I focus entirely on price trends, relative performance, intermarket relationships and various technical indicators, all in an effort to identify markets and market segments offering the highest odds of sustained outperformance.

I would label my process as systematic discretionary, meaning the research process is very systematic (modeling, screening, correlation, time series and cross sectional momentum) while the portfolio management process is more discretionary, using the systematic research process to guide my security selection. I lean more heavily on trend following concepts, and less on pattern recognition and forecasting.

 

CMT: How does this give your strategy an edge?

DL: Of the various tools within the technical analysis toolbox, I lean most heavily on trend following concepts for two reasons: the process is most aligned with my personality – which puts me in a better position to properly execute my strategy since there is no internal conflict – and the strategy is complete, in the sense that it offers specific, unambiguous entry and exit signals and risk management parameters.

 

CMT: What was your first exposure to technical analysis/charts?

DL: In college, I was told by my securities analysis professor that charting doesn’t work, but that it did provide value, according to my accounting professor. This was enough to pique my interest.

My first job on Wall Street was a broker with Dean Witter in Toronto, where I had the incredible fortune of sitting next to a fellow broker named Kuldeep Rahil, who managed his entire client book using technical analysis. Watching him really brought the unique features of technical analysis to life for me, especially risk management and idea generation. The first books I read on the topic were How I Made $2,000,000 in the Stock Market by Nicolas Darvis, and How the Average Investor Can Use Technical Analysis for Stock Profits for Stock Profits by James Dines.

 

CMT: How did you first become involved with the TAN Association?

DL: Actually, I failed Level III on my first try, back when the exams were essay-format. I strongly disagreed with the result, since despite failing the exam, most of what I wrote in my answers went on to happen in the markets. I took my case to Ralph Acampora and he kindly listened, and said he thought it had merit and that he would look into it. Unfortunately, the tests were in the towers when 9/11 happened, so I was told that I had to take the exam over. Not wanting to further argue with the organization, given all that was happening, and not wanting to retake the exam, I decided to let it go at that time.

Fast forward to my eventual transition to Wellington, my manager Frank Teixeira insisted that I get my CMT. The painful part was when I reached out to them to retake Level III, too much time had lapsed, so I had to first retake levels I and II again! With all that in my rear view mirror, joining the TAN Association and obtaining my CMT charter has been one of the best decisions for my career, whether it be the credibility associated with the charter, or the contacts and friendships I have made within the organization.

 

CMT: Is there a TAN Association event or publication that you especially look forward to?

DL: I look forward to the Symposium more than anything else. It’s an opportunity to hear about what the organization is up to, learn about new techniques and applications in the field of technical analysis, and catch up with colleagues.

As a member of the TAN Association, and as a member of the board of directors, I am continuously impressed the by passion of the team within the organization, as well as its members. Whether we’re talking about the world-class Annual Symposium, the information-packed Technically Speaking, or the always-informative webinars, I find there to be tremendous value in the CMT charter, and I am proud to be a member of the TAN Association.

 

CMT: How has earning the TAN designation impacted you professionally?

DL: Taking the exams (several times!) really reminded me of how deep the body of knowledge is in our community, and how that knowledge base continues to expand each year. What is most impressive to me is the fact that many of these concepts have been bedrock principles for technicians for well over 100 years, and are as relevant today as they have ever been.

So as quant strategies have had to adapt to SOES bandits, and now HFT, and fundamental investors have had to adapt to passive investing, QE, negative interest rates, corporate scandals, and an ever increasing stream of new acronyms since the GFC, the essence of trend following remains unchanged since the days of Charles Dow in the late 1800s. The repeatability, deeply rooted in history, is what attracted me to technicals, and the TAN designation, along with the TAN Association, keeps me both rooted in those classic techniques and up to date with their latest applications.

 

CMT: How does your technical expertise complement your other designations?

DL: I also have my CFA charter, which I obtained due to my deep interest in fundamentals, recognizing that all good charts reflect bullish fundamentals, and all bad charts reflect bearish fundamentals. This concept goes all the way back to Dow Theory. But so, too, does the notion that investors should respond to trend change, not predict it. For that reason, on my business card, CMT appears before CFA, reflecting my philosophical belief that trend comes first. We make money trading price, not earnings per share.

 

CMT: What is the greatest advice that you have received in your career to date?

DL: My dad was disappointed that I did not go into the family business, but after overcoming that feeling, he became my biggest champion and confidante. He gave me many bits of advice, but three really stand out. First, he said, always give 100% of your effort and loyalty to your employer. You expect that of them, and they deserve it of you. Next, play so well that they can’t sit you. In other words, let your performance and results speak for themselves. Finally, my dad was in the car business, and he told me that it wasn’t enough to look at your inventory on a computer screen. You have to go outside, rain or shine, and touch every car every week. Look at it, sit in it, make sure everything is still ok. The computer screen won’t tell you about the flat tire, dented door, or broken windshield. As such, I have made it a practice to look at every chart that matters every week, sometimes every day. It is not enough to look at rates of change in a spreadsheet, you have to “touch every chart,” whether you’re making money or not, to make sure the trend isn’t dented.