Page 96 - THE MARKET WHISPERER

94 PART 3 - Market Analysis Fundamentals

explanation according to economic data, yet most could be predicted based
on technical conduct. Experienced technical traders learn over time to
trust their own considerations, which will often stand in direct opposition
to those proposed by fundamental economic analysts. Technical traders
will be enjoying the benefits of changes when fundamental investors have
long since missed the train.

Would you like an example? Was it possible to profit from hi-tech
companies’ stocks at the end of the 1990s? Of course, and abundantly!
Could even one fundamental investor be found able to justify buying
stocks in technology companies that have no income, only expenditures
and dreams? Of course not! Technical traders knew where the public’s
emotions would lead the market, whereas fundamental investors chose to
ignore the expected change.

At some point, they nonetheless found justification for joining.
Remember the phrase “profit without advertising costs”? Several more
illustrious economic concepts came into being along the duration of
the hi-tech bubble, meant to justify late-entry into a teeming market.
Funds simply could not tell their clients they were not buying when all
competitors presented astronomical profits, therefore they invented a
financial justification, and happily bought in. Those who wasted their time
with analyses of hi-tech companies’ financial reports prior to and during
the rush, left opportunities wide open for technical analysts to enjoy alone.
Those who continued justifying their erroneous fundamental holdings
when the stock exchange changed direction and crashed, lost out.

Over time, once the market had absorbed these large shifts, the two
methods caught up with each other and once again presented a united
front. We ask: must some compromise be found between them? As a
novice, I thought the answer was no. Now, with years of experience under
my belt, I believe I was wrong. As noted, I’m currently operating on an 80%
technical and 20% fundamental mix. I’ve moved a little to the other side
because I found that when sticking with only one approach, the market
seems in many cases to operate as though it has a mind of its own. I found
that relying on technical data alone did not provide me the advantage I
sought. By contrast, it’s completely clear to me that relying on economic
data alone is nothing more than a gamble. If you’ve ever tried to watch how
a stock behaves after its financial reports are publicized, whether good or
bad, you’ll understand exactly to what I refer.

Note that I used the very specific terms “fundamental investor” and
“technical trader.” In the past, when the world was chiefly industrial, it