Page 98 - THE MARKET WHISPERER

96 PART 3 - Market Analysis Fundamentals

crashed in a market which, to date, has yet to fully recover. It was the
trader’s opportunity, not the gambler’s.

If you need further persuasion, let me present another question: is
there any link between a company’s balance sheet and reality? Older
readers may well recall Enron, one of the largest energy corporations in the
world. Enron collapsed when its CEO chose to present the balance sheet
in a “creative” manner, and made sure he found an accountant who would
not stand in his way. Even if we allow that the balance was legitimate, it
nonetheless reflected the company’s status in the previous quarter, which
commenced just three months earlier. Who is interested in it today? I’m
sure that most balance sheets presented to us are legitimate and correct,
but should we gamble on them with our money?

As traders, we rely chiefly on clear technical data. In the past, we have
come across a stock that rose multiple percentages in one trade day, and
only the next day the economic data causing the rise become clarified. This
does not imply we have no trust in economic data. We just feel that they
are already incorporated into the stock’s chart.

As if all that is not enough, there’s another important difference.
Technical analysis can be applied to every stock, sector, and market. Give
me a yearly graph for Japan’s Nikkei index, and within seconds I can analyze
the Japanese market. Show me the yearly graph for the DAX index and in
the blink of an eye, I will analyze the German market. Can fundamental
analysts, who need to read mountains of material before buying any stock,
do that? No! They cannot specialize in every market, sector, and stock. They
are limited to a specific sector and even a specific company in some cases,
and will never review the entire market, but only a slim segment of it.

Why Do I Never the less Use Fundamental Economic
Analysis?

First and foremost, because most of the public uses it. Whether there
is any meaning to fundamental analysis or not is as pointless as asking
whether there is meaning to technical analysis. As soon as a large enough
number of people believe so, and operate on the basis of economic data
with predictable outcomes, the experienced trader will know how to
take advantage of the predicted movement and earn a livelihood from it.
Over the years, I have learned to appreciate the power of the fundamental
herd and rein it in for my own purposes. I take no small number of
technical decisions based on economic factors alone. For example: I
focus a lot on stocks influenced by extreme economic analysis, such as