It’s always… interesting… to read about what technical analysts think the market is going to do. You know technical analysts – they’re the ones with the crazy charts that seem to think they can tell what the market will do next based on the shape of previous price movements.
Just to make sure that I am very clear – technical analysis does not work. It is just guessing. There is no evidence that technical analysis can do any better than the proverbial monkey throwing darts at the Wall Street Journal.
The only difference is that the hyperactive trading of technical analysts means higher expenses and taxes for the investor. So you might be better off with the monkey.
This article points to two factors as reasons investors should be nervous:
- The number of stocks in the S&P 500 Index that have recently lost value is greater than the number that have risen, and
- The market has been going up as much recently as it has in the slightly less recent past.
They take this all as evidence that the market is due for a drop.
My response is, “So what?”
Every movement of the stock market is watched incredibly closely. If current price movements have anything to tell us about future price movements, you and I wouldn’t be able to do anything about it. The market incorporates new information almost instantaneously, and if previous moves were any indicator, it would affect future moves immediately.
This means that all of the stuff you hear about resistance bands or moving averages is just noise. Paying attention to all of this stuff won’t get you any closer to reaching your goals.
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