Today, I have a big statement from a long-time reader who always has thought provoking things to say. I always appreciate and enjoy his contributions …
I certainly hope you are right about the market recovery coming soon, but some analysts are saying we are in a primary tide bear market, and by 2012, the markets will be almost as low as they were in March 2009. If they are right, a primary tide is only the beginning of a full-blown bear. However, there is money to be made in this sideways market, as shares especially are simply following their stochastics and MACD’s almost perfectly.
See what I mean, and he is right about the sideways market. Yes, I too hope I am right, although I think I said a rally, not a market recovery, was coming soon. Nevertheless, I do believe the market could recover strongly and soon, if the European policy makers keep on track. As to his other point …
In my eyes, and in general, long-term predictive analyses are only useful for understanding the possibilities. One possibility is that the global economic fundamentals will degrade, that Europe will implode, and that corporate earnings will follow suit. If this were to happen, I could see the market declining to levels not seen since March 2009, however …
The thing about analysts predicting the future with technical analyses, specifically, is that inherent in this practice is the assumption that nothing will change between the future and now. Yes, a “primary tide bear market” is easy to define for a technical analyst, but no, it does not follow that six months from now, the markets will necessarily retreat to March 2009 levels. What happens to the market if European policy makers find a solid resolution to the European debt crisis, or the U.S. and global economies start showing signs of a sustained recovery over the next two quarters, or corporate earnings remain solid over the next two quarters? If any of this were to happen, does anyone seriously believe that the “primary bear tide” prediction would come true?
Folks, as I have always said, it is important to find and follow analysts you trust, but, as I have also said, their conclusions are not what is important. What is important is to understand their data, their reasoning, and their process of analyses. For my money, I like analysts that focus on the fundamentals, not the charts. Although both are pretty equal in predicting short-term market movement, over the longer term, I trust fundamental analysis more. I trust it to outline a shape, perhaps even a picture, of what might come, not to tell me precisely what the market will be in six months or a year. Frankly, the whole idea of accurately predicting a long-term market future fundamentally or technically seems a bit like consulting the oracles of ancient Greece before a battle.
Now that makes me wonder … Over the centuries, how many generals in the Greek armies took their men to defeat because the oracles told them they had the battle in the bag?
Trade in the day – Invest in your life …
