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the dust as the stock market soared (vs. the GDP) to a valuation 50% greater than in 1929. (That is one comparison that can't be explained away by "new paradigm" excuses!) Stock technicians have so vanquished stock fundamentalists that news (Clinton's scandals, Buffett's silver buying, Yeltsin's threats against the U.S. in the Iraq crisis) and astronomical valuations that would have sent stocks plunging in the past are now greeted with a yawn and the words, "The momentum is up." Twenty years ago, in the glory days of technical analysis in futures, I tried to study everything I could about technical analysis. I read the "old masters," like Elliott, Gann, Edwards and McGee, Wykoff, Andrews, and others in the original, not relying on the popularizers. After long and painful periods of study and attempts to use the methods I learned, I concluded the spectacular results of "technicians" during the 1973 to 1980 period were flukes based on the power of trend-following. But even trend-following was losing its punch as more and more "breakouts'' failed, because they were simply the result of mindless buying and/or selling by the "technicians," who now dominate futures. |
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Neal: I remember the days when you avoided technical analysis. |
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Grant: For a long time, I was so disgusted at traditional technical analysis I hardly looked at a chart. I spent my time on cycles, public sentiment, and using traditional technical methods on nonprice data. Slowly but surely, I have come to realize the best form of technical analysis brings price back to its rightful place alongside time and sentiment in predicting long-term trends. But we must realize three things: |
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1. Because of inflationary bias, bear market analysis has not gotten the attention it deserves. But after inflation, there have been many "stealth" bear markets, like stocks from 1968 to 1982. Since bear markets unfold quite differently from bull markets, no wonder many periods of trading are |
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