Technician and CEO from JK Investment Group believes 2,040 on the S&P is the ‘line of demarcation’ for the bulls. If we trade down below it with vigor, he thinks the selling could intensify. In addition to trying to scare people with all of that, he delved into other forms of technical analysis witch-craftery to make his case against stocks.
I respect those who partake in the consumption of technical analysis theories. Although not a big fan of it myself, the plebian class lives and dies by it, as a method to fastidiously analyze stocks without having to undergo the nuisance of having to read earnings reports and undertake balance sheet analysis. If this Mr. C. Johnson is correct, markets might be at the tipping point for much lower prices, or a supreme support level from which new highs could be launched from.
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Show me the entrails — and they better have come from a virgin goat.
If technical analysis worked really well, then all the TA people would easily become jillionaires. How many jillionaire TA people have you ever heard of?
Having to read earnings reports and undertake balance sheet analysis is indeed a lot of trouble. Better instead to use a simple method that does not work.
People love simple solutions to complex problems. And occasionally one of these solutions actually works, proving what people want to see proven, that the universe is as simple as lost people would like it to be.
If fundamental analysis worked really well, then all the FA people would easily become jillionaires.
The truth is both techniques are valid. FA is much better for long term analysis and TA works well for short term trades and for finding entry/exit points. Two reasons:
1) A stock is only worth what someone is willing to sell it for
2) A stock is only worth what someone is willing to buy it for
In other words, a perfect fundamental analyst must do more than evaluate a stock potential future cash flow and earnings: he or she must calculate *everyone else’s evaluation of the same stock*.
Also, TA works because people *thinks it works,* much the same way if everybody thinks the market will crash, then once it starts dropping it *accelerates* instead of slowing down, even as the fallign market becomes closer to fair value, and the crash becomes reality. Emotion is a much bigger factor for short term trading than any value analysis, and TA does a good job of predicting emotion (that is when people *feel* like a stock has fallen or risen “enough”.
If I think a stock is worth $70, but I see that there are fools that think it is worth $90 and it’s got a rising trend, I’m not jumping in front of that train, especailly when I know I’ll be able to short it at $100.
Then of course, there is human emotion invlived in a loss vs a gain. Ideally, sunk cost shoudl be ignored and you long/short entry point shoudl be irrelevant for any long-term holding – but it isn’t. So any active trading level will stay active the next time it is hit.
Some simple examples: look at stocks yesterday such as TLT. You think that yo-yo motion and plummet was caused by people constantly reevaluating the market’s worth?
Take a look at AMZN. My fundamental analysis says that the company is not going to have any problems sticking around for a while, and cash flow and debt look good. Nonetheless, the PE is outrageously high. It earned $1B the last two quarters, but even if you assume it will earn $10B (400% 1 year growth) and the stock price didn’t change, the PE woudl still 32 in year’s time. Expensive under optimisitc scenarios = good company, bad stock.
So now you look at the chart over 1 year and you see two things:
1) it had a lot of resitance at $680 (it was tryign to breach for ~ 1 month in Nov/Dec)
2) it got past $680 with it’s 1Q earnigsn report – but it gapped up, directly from that critical level
Even basic TA tells you that if it shows weakness, it will $680, and it is defeintely showign weakness.
., even if That stock is probably worth $400-500, but selling at $700. Also,
That was longer than I realized…
All the billionaires and millionaires are FA investors. Your point has been rejected.
On the example of AMZN, it did go down under $500. The technicals look horrendous then. If you’re a FA investor, you would have bought it under $500 and not give a damn about the technicals.
Old man Buffett openly mocks TA. And he is the nicest guy in the world. He sneers at it like a jackal.
Paul Tudor Jones
@trumpmeister
My point has been missed and is repeated here:
“The truth is both techniques are valid. FA is much better for long term analysis and TA works well for short term trades and for finding entry/exit points.”
It’s amazing how stocks get “fundamentally” valued at even numbers all the time, $700, $80, etc.
Fly- can you comment on Phil Mickelson? If the sec has proof of insider trading why is it just a lawsuit and not charges?
They’ve been after him for a very long time with other stocks too.
Mickleson was not charged because he was not aware of the source of the tip and he has cooperated fully and is refunding all gains. I got that from Google
Well done with the screen shot. Homeboy looks lost in Oakland. lol
Incredibly not fascinating. -1
Lame post -15
So we either go up a lot or go down a lot. Fucking brilliant
@trumpmeister. The discussion was about easily becoming jillionaires, so your rejection is rejected way back into the 43rd row. Billionaires use every possible edge known to mankind. I’d bet uncle Warren wakes up some days and thinks the stars are aligned perfectly to buy a stock if the temperature of his cherry coke washes down his breakfast ice cream in the perfect way.
Dumbest comment about Buffett I have ever read. Congrats.