Page 99 - THE MARKET WHISPERER

THE MARKET WHISPERER 97

an analyst’s upgrade, but then I choose a technical entry and exit point.
Using fundamental economic analysis does not in any way indicate that I
believe in that method, but I’m definitely a firm believer in the predictable
behavioral outcomes of those who do use them. I have no need to deny
any kind of prediction. Rather, I need to evaluate whether it will be self-
fulfilling.

Technical Analyst or Coffee-Grounds Reader

Is technical analysis an exact science or an art? I think the truth is somewhere
in between the two. Senior analysts in Tradenet’s trading room often ask
me whether it’s worth buying this or that stock, and my answer could
very well be that it’s actually worth selling the stock. If technical analysis
were an exact science, there’d be no room for two differing opinions on
the same stock. By the way, even within the science of economics, disputes
are abundant, and what one economist considers a solid company will be
viewed unstable by another.

If that is how things operate, you will surely be asking yourself what
function technical analysis holds. At the start of this chapter, I noted that
the market is like a giant of tremendous proportions, in a constant state of
change. Technical analysis helps create order in the chaos and allows the
trader to read the market through stock prices and chart action. Moreover,
from the moment traders learn how to read the market, they no longer
need to examine it constantly from the technical perspective in order to
understand what they see; they simply understand (rather than ”read”)
the market. Technical analysis is therefore a tool that ripens in the trader’s
awareness: we use it to learn how to read the market, and once we know
that, we no longer need it except in instances when reading is difficult.
Traders who understand the market can identify market directions at early
stages, long before the regular technical signals, and trade accordingly.
Obviously, once the technical picture is completely clear, it’s clear to
everyone, and at that point you no longer have any advantage.

While technical analysis is not an exact science, there are technical
analysts, many of whom are well-known, that frequently fail in their
analyses. Young traders seeking to coerce technical methods onto the
market will fail time after time. When the market is collapsing, there is
no significance to technical support levels; when it is euphoric, technical
resistance levels are broken without a fight.

Some technical analysts have given a bad name to the field, and
threaten the livelihood of astrologers and coffee-grounds readers. Among