I like weird science. Horoscopes. Moon Cycles. Feng Shui.
Observations combined with inklings of the scientific method. Fun stuff. I don’t really live or die by it, of course. I just like the pseudo-science of the observations. And the coincidences are interesting sometimes.
In most of the big firms, for years, technical analysis carried same weight as a boardwalk gypsy reading palms. And to clients? It must sound like the Tarot Cards of chart work.
See that Cup and Handle Formation? Oh, That’s not good– it didn’t break out. (AND It’s in retrograde with Uranus). See that there? That’s a Death Cross. Make sure you don’t use any sharp objects for the next 6 days.
After the dot bomb in 2000, my old firm decimated our technical analysis team. Fired. Not because the analysis didn’t tell them a mess was coming (actually it did). No, the firm got rid of them because they were expendable. In 2000 we weren’t selling technical research. We were selling fundamental research. You remember? Those calls for Cisco and JDS Uniphase to rally back to $80 in no time.
Personally, using charts keeps me sane.
And the other day, when the market was all red & bloody all of the chartists were talking Fibonacci Retracements and debating which wave we were in. And there were headlines calling for a double bottom and subsequent face ripping rally to 1400. The technical cloud of confusion was thick.
How can so many people looking at the same chart see different things? What’s the average CNBC viewer supposed to do? Where can they place all of their faith?
But that’s the problem with charts, people. Most sideline observers think charting is seeking to find the holy grail. All-knowing wizardry. But technical analysis isn’t supposed to be an exact science. We’re not splicing genes here. Charts are just supposed to help you see a range of possibilities. Help you define your risk & reward at any moment in time. It’s all relative.
Otherwise, you might as well break out your trusty CLSA Feng Shui Index calendar. And it works, see?!
Here’s how it did last year:
Here’s what it says about this year…
So, instead of putting ALL of your faith into the the next call from a chartist or indicator as something absolute, or faithfully putting no faith in charts — take it for what it’s worth. A guidepost grounded in observations using tenets of the scientific method and statistical guesswork. A weird science.