It’s not about using charts in a vacuum
And it’s certainly not about using long-term charts and analogs in a vacuum. It’s about using charts as one tool among several others.
I don’t mean to sound like a dick (but it happens) and surely I’ve written stuff over the years that warrants criticism (let’s for example conjure my 2010 ‘888 ‘3 snowmen’ TA target for HUI). But some things beg highlighting. Especially when put forth by one of we men and women who stare at charts, but do so only based on charts, which was the stern lesson I learned in 2010.
It is so important for the men who stare at charts not to give their findings undo importance, just as a fundamental analyst needs corroborating inputs. It’s an implied responsibility to not b/s yourself so you’re not inadvertently b/s-ing others. Be humble to thine own self, baby. I learned that in 2010.
So that is my disclaimer to a post critical of someone else. I am faulty, it has been proven publicly, and I gladly own it.
In this article posted at GoldSeek, long-term charts and analogs to historical HUI (gold stocks, of all things) are used to advise the now-bearish state of the US stock market. This after the chartist had remained firmly bullish on US stocks to this point.
Since the 2009 crash low in the US stock markets most of our members have been bearish on the US stock markets, not all but a large number. This was one of the greatest bull markets of all time, but so many refused to believe what the charts were showing. Looking back in hindsight it’s very obvious it was a great bull market.
Most of their members maybe, but the ‘everything bubble’ persisted until January, 2022 and it was driven by nosebleed levels of investor over-bullishness, as valuations – now being addressed harshly – went to the stratosphere in the sexy growth/tech names. *
In 2011 the bull market ended for the PM complex in no uncertain terms, but most PM stock investors refused to believe the PM complex could be in a bear market even to this day. Yes, there have been two very large bear market rallies, but that is all they were over the past eleven years. I even thought the 2016 and 2020 rallies could be the start of the next bull cycle, but I quickly went to cash the minute they started to reverse direction.
I have no problem with the gold stock bear market call. I don’t happen to agree with it for long-term technical reasons explained in this public post. But as also noted, there is a scenario where gold stocks may have completed an A-B-C bear market rally in 2020 at the clear upside resistance target of 375. A review of history may show that the quoted source was still firmly bullish after it should have become obvious that the 2016 degradation in fundamentals was in progress.
Meanwhile, the quote below is from a 2019 critique of 3 golden bullhorns. Care to guess who the quoted gold bullhorn was? 2019 was the year that gold certified its cyclical bull market by breaking through 1378. Last I checked it is still above that level. But it’s the authoritativeness that I object to. Those using charts in a vacuum should by definition avoid being authoritative. They should (IMO) advise trends, divergences, overbought/oversold and sure, even patterns. But always with the concept of probabilities, not stand alone and firm definition by TA only.
“It’s been a long time coming so enjoy this day as there will be many more to come. It’s just getting started.” (2.19.19)
“Many more to come”, said so definitively? That is what I don’t like about chartists making declarations on their lines and squiggles. It’ll be enjoyment as far as the eye can see until the chartist sees something to advise just as authoritatively in the other direction.
I hope I can present the Chartology in a way in which you can see the seachange for me from being a staunch bull to now a bear for the first time since the bull market began at the 2009 crash low. For me it is always about the charts and what they are suggesting, when they change I have no problem changing with them.
Giving your charting method a nickname does not supplant the need for alternate forms of research. In Q1 2022 the daily (read: not big picture; a smaller and more acute picture) charts indicated trend changes in US indexes. This came in tandem with myriad indicators pointing southward. While a secular bear market may well have begun, it is not in the big picture charts. Nor is it in the trend lines and analogs presented in the article.
If the stock market makes a lower major low then a secular bear would be confirmed. Using SPX as an example, that does not come into play until 2191 (current ‘cyclical’ bear market price: 3589).
The correct move has been to be bearish for most or all of 2022, not flipping bearish on October 12. If this proves to be a cyclical bear it’s going to be a buying opportunity. But the key play for the last 9 months has been to avoid the bear. That play is still in progress, until we at least register logical downside targets. Then it’ll be time to evaluate.
* As a humorous side note, I saw a headline talking about how Cathie Wood is haranguing the Fed for its tight policy. My immediate thought was that she’s sidestepping responsibility for the train wrecked mess that is the Ark Invest funds.
This Post Has 3 Comments
Let me start by saying that the author is one of the handful of analysts that I have truly enjoyed reading the past 20 years on the pm websites. Further, pure chartists consider the investment universe a closed equation. All answers are therefore in the charts. I can agree with that for a large part; all charts are directly or indirectly “connected”. That being said, if you consider all charts as pieces of a puzzle, then one can not arrange them every time in the exact same way. Because cause and consequence are never fixed in markets. That constantly re-arranging and weighing of puzzle pieces requires abstract thinking. TA in itself does not. That constantly re-arranging is what makes Gary’s work IMO so unique (he calls it “touch-feely” or something).
I don’t necessarily agree about what TA is. There is, IMO, no right or wrong way to do TA. But then again, I am not a pure chartist. The only answers that I think are in charts anywhere near 100% are the hindsight historicals. The data represent past fact.
Charts are a great picture of the past with limited value toward divining the future. Broken trend ‘lines’ are particularly unhelpful but broken or intact trends by other measures are, IMO. Trend lines can break with no problem while a trend remains intact. Hence the use of moving averages for interpreting trends.
Don’t get me wrong. I love charts. Love looking at them and interpreting them. Comparing different markets with them and even getting a little hepped up by patterns sometimes. But it’s all probabilities.
It’s when a TA starts writing things like “complex head & shoulders” (code for a mutant H&S with too many shoulders that the TA wants to see) or issuing apologetic warnings based on the things seen in charts that I tune out completely.
Again, there is no one way to do TA. John Murphy said take from it what works for you and what you are comfortable with and to me that is so simple it’s brilliant.
Another ‘TA only’ guy has gone from staunch bullish to major (secular) bearish. Wonder who’s the engine and who’s the caboose here in the TA flip Olympics. https://www.gold-eagle.com/article/sentiment-speaks-major-market-topping-considerations
Comments are closed.