Does Technical Analysis work?

Valdimir Bajic

3 months ago

Technical Analysis does work to a degree. However, one can’t rely on technical analysis to provide the full picture. Additionally, when you one utilises technical analysis, one needs to customise the settings and not rely on standard settings. Everyone uses the default setting, so by following the default setting you are going to see what everyone else sees. If every knows something it is longer useful.

So far, the first part is coming to pass. Once the MACD’s complete the bullish crossover (weekly charts), we expect a mini feeding frenzy that will ultimately pave the way for the next top. Novice traders are about to get clobbered; “the term he got beaten within an inch of his live” comes to mind. Market Update Nov 11, 2021

Next year, technical analysis will only work well if used in conjunction with Mass Psychology. Those that fail to take this route are better of tossing skull bones or reading tea leaves. As for fundamentals, toilet paper will be much better; at least it’s good for one swipe.

We expect the markets to mount a sharp rally to the end of the year, and this could extend into January. While we expect the markets to top, don’t expect them to break down immediately. There will be several head fake moves before the market breakdown. The intensity is expected to be sharp, the duration short. However, after the primary selling wave is done, the markets are expected to tread water for some time before breaking out. Still, many strong stocks will bottom and break out long before the market puts in a bottom. Even if the markets don’t surge to new highs next year, many stocks will. This is what we mean when we state that we expect the “disorderly” nature of the market to worsen.

Market forces are changing very rapidly, and we monitor the psychology behind the markets very closely. Hence, we might issue a general sell signal. Before we continue, remember Tactical Investors never panic. Such a sell signal is not be construed as a signal to panic. It simply implies that not all stocks might trade to the suggested exit points on time, and the better option would be to seek the best possible price on most of our holdings. An example of a general sell signal. Close the following positions out when the Dow trades in the 38,7K to 39,3K ranges. At that point, individuals would start to slowly (remember slow but sure as we never panic) enter GTC orders. The idea would be to aim for the best possible exit price. On the same token, we might also issue a general buy. For example, deploy 1/3^rd into the following companies when the Dow trades in the 29 to 30k ranges. We could also mix match by issuing specific exit points on particular stocks, while lumping a group of others into the general sell category.

Our strategy will be based on what the markets are doing. Once again, remember, we never panic. A Tactical Investor is last to leave the room and the first to enter. We stroll in, and we stroll out; leave the running to the fools.

The idiot’s index is moving to the Neutral zone, indicating that intelligent individuals (but dumb investors) are becoming more confident. This indicates that market action will be volatile as smart individuals generally make for the worst investors.

Conclusion

So does technical analysis work. In our experience when one combines it with mass psychology and custom settings the outcome is usually quite positive.