Sound Advice

Why Technical Analysis Is Useless (Excerpted from Seeking Alpha) Pure technical trading strategy is fruitless. “Fidelity recently conducted a study to identify their best performing clients. They neatly fell into two groups: people who forgot they had an account at Fidelity, and dead people. It all underlines the futility of trading the markets without true professional guidance, something many aspire to, but few actually accomplish. This is an industry filled with professional marketers, charlatans, and con men. Let me point out a few harsh lessons learned from a recent (2017) meltdown, and the rip-your-face-off rally that followed. We are now transitioning from a “Sell in May” to a “Buy in November” posture. The period from October to March is one of historical seasonal market strength (click here for the misty origins of this trend at “ If You Sell in May, What To Do in April? ”) The big lesson learned was the utter uselessness of technical analyses. ...

Dead Cat Bounce? One of the most common occurrences during times of market weakness is what’s known as a dead cat bounce.  A dead cat bounce is a short-term, often only one day, rally of considerable proportion.  These days, that kind of jump would probably be in the range of at least 500 to 1000 points in the Dow Jones Industrial Average.  It would be tempting to think that these interim rebounds are indicative of more to come, but almost always they are nothing more than temporary relief from a lengthy plunge in the leading indexes. It would be naïve to think that they signal a continuing change in the direction of the market. Current economic prospects are not encouraging.  The Fed has already increased the federal funds rate from essentially zero to 3.25%, thanks to a trio of 0.75% jumps, and indications are that there is more to come.  Indeed, one might well expect to see this key indicator near 4.50% before the program of tightening ends next year....

More Pain Ahead? It’s been a difficult year for the investment markets, but tough times have happened before and they will certainly happen again.   Sometimes recoveries are relatively quick and sometimes a hefty dose of patience is required.   No two downdrafts are alike, but the net result is always a rebound to even higher levels than seen before. One of the most uncomfortable stretches over the last half century took place during the oil embargo days of the early and mid-1970s.   Market valuations fell to the high single digits, a level that was about half the historic average.   For investors, this was one of the great sales of all time.   Those who had the courage to get aboard reaped huge rewards. More recent pullbacks of note took place during the dot.com days of the turn of the millennium and the banking crisis of 2008-9.   The former period was marked by what appeared to be investors’ absolute indifference to longstanding measures of reasona...

Unusual opportunities? Really? Even if you spend no more than a few minutes listening to media such as CNBC, MSNBC, Fox News, and the like, you will be bombarded with commercials, many offering opportunities for whom the only beneficiary is the sponsor of the commercial.  These include “. . . investment techniques that could get you unusually high returns”, “. . . cash for your life insurance policies”, “substantial cash compensation” if you used Johnson’s baby powder, served at Camp LeJeune or somehow had a distant relationship with another issue for which some wrong had led to a legal recovery. When you hear these, you have to wonder why commercials are needed to promote these apparent paths to “riches.”  The answer, of course, is that in most cases the chances of a result that could be profitable for you is probably on a par with winning at Lotto.  Ain’t gonna happen. Let’s start with investment techniques.  With investing, the likelihood of success increases as t...