Having many tools in your arsenal is essential to being a successful investor. This week, those that only adhere to the fundamental aspect of investing are being left in the dark and are likely lost as to how to proceed. It is those with a technical background that are more likely to have a plan and a roadmap as to how to navigate these extremely turbulent waters.
Suddenly everybody on television seems to be an expert in technical analysis. It is funny how in normal times, these are the same people who are claiming that it is voodoo and akin to astrology, but now they are clinging to it. I guess drastic circumstances call for drastic measures.
Technicians In Demand
Technical analysis is perfect for this type of market. In essence, technical analysis is the graphical study of human emotions. Right now, this is a completely emotion-driven market. Studying popular theories like “CAPM” and “The Efficient Market Hypothesis” until you are blue in the face will not be of much help in the short-run here.
What you need to know is at what level buyers are likely to step up to the plate and start buying again. This information can most easily be acquired using technical analysis. Support levels are nothing more than areas that investors have bought in the past and are likely to do so again.
I am not saying that fundamental analysis is useless. Nothing could be further from the truth. As a long term investor, it is the best tool out there to buy great businesses at good values. My main point is that fundamental analysis by itself does not tell the entire story of what is happening in the market right now.
As I have said, that’s where technical analysis fills the hole. I have mentioned many times in the past that the more tools you have at your disposal, the better off you are. That is Exhibit A as the market is in freefall. Next week we will look at the actual technical picture of the indices.
Fundamentalists Lost In This Market is an article from: 
