Technical analysis. For some, it’s witchcraft. For others, it’s the holy grail. While the divide between these two camps has softened over the years, you’ll still find strong opinions one way or another. But I’m not here today to convince you why you should (or shouldn’t) rely on lines drawn on stock charts. Here’s what you do need to know… technical analysis is important. But not for reasons you might think. More Than Lines On A Chart… It should be apparent by now that markets are largely driven by the fickle behavior of humans and algos. (Revisit the recent banking… Read More
Technical analysis. For some, it’s witchcraft. For others, it’s the holy grail. While the divide between these two camps has softened over the years, you’ll still find strong opinions one way or another. But I’m not here today to convince you why you should (or shouldn’t) rely on lines drawn on stock charts. Here’s what you do need to know… technical analysis is important. But not for reasons you might think. More Than Lines On A Chart… It should be apparent by now that markets are largely driven by the fickle behavior of humans and algos. (Revisit the recent banking crisis for a reminder, which I discussed in March.) Technical analysis attempts to use squiggly lines on charts to identify where these human emotions could really come into play. For instance, the 200-day moving average is one of the most widely used technical indicators in stock trading. In August 2022, I pointed out that investors (of all types) should closely monitor the 200-day moving average. The S&P 500 fell below its 200-day moving average at the beginning of 2022. After that, every time the market rallied, it died at the 200-day moving average. Nearly on the spot. As… Read More