Technical Analysis

Not a believer.  This post from Andrew Adams at Raymond James kind of nails it.

I am convinced that momentum trading, which is a part of technical analysis, has merit.  Because math.  But when I read “We have written frequently about the probable “W” or “double-bottom” pattern that this market appears to be in the process of making, and we have mentioned how bottoms themselves are processes and often take time to form,”  it just reminds me of the South Park episode featuring the TV medium.

In addition, he shows us this chart:
151012_3

Ridiculous and completely irresponsible.  These charts pop up frequently.  In fact, during that drawdown in 2011, I’m pretty sure I saw a whole bunch of charts overlaying that market with the crash of 1929.  Have not seen the updates to those charts, LOL.

I’m not saying the market can’t do what he is suggesting;  maybe it will.  Or not.

The only reason that drawing lines on charts makes sense is that a bunch of people are doing it and acting on it, so it may be that if you draw the same lines as a bunch of other investors, there can be a self-reinforcing trend.  That is, it might work a little because people think that it works and act on it.  Other than that, yeah, cartoons.  I keep meaning to learn more about it because I might be really wrong here.

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