Technical analysts are dumb because they always change their mind.
Fundamental analysts are dumb because they never change their mind.
— Irrelevant Investor (@michaelbatnick) August 27, 2015
I obviously don’t think technical analysts are dumb because they change their mind, I was trying to encapsulate how some simply dismiss technical and fundamental analysis on Twitter. I was reminded of this today when early on, it sure felt like stocks had a date with the lower end of their range. And then just like that, they reversed on a dime, erasing their losses and then some. There were a flurry of tweets, mocking people who were bearish in the morning, only to change their tune as the market rocketed higher. Today is a great example of why Twitter can be a difficult place to share your market opinions.
I’m going with the assumption that the majority of people who have a view on the direction of the market are technically inclined (I’m not sure how one would even trade on fundamentals). The funny thing is we see people scoff, “nothing changes sentiment like price”. Well, yea, no shit. Aren’t technicians supposed to change their mind when the market tells them they’re wrong? The problem with sharing your thoughts daily is that there is a fine line between changing your mind and looking like a charlatan.
The thing about trading is that some of the most talented practitioners of all time have a feel and an intuition that would sound ridiculous if they tried to explain it. Take George Soros for example, one of the greatest traders of all time.
“According to his son, Robert, Soros’s trading was always influenced by more than reflexivity. “My father will sit down and give you theories to explain why he does this or that”, he once said, “but I remember seeing it as a kid and thinking, ‘Jesus Christ, at least half of this is bullshit’.
“I mean, you know [that] the reason he changes his position on the market or whatever is because his back starts killing him. It has nothing to do with reason. He literally goes into a spasm and it’s this early warning sign.”
Soros has admitted to relying greatly on “animal instincts”, saying the onset of acute pain was often “a signal that there was something wrong in my portfolio”.
Here’s another example of what would be perceived as lunacy from Paul Tudor Jones, another all-time great (from More Money Than God, emphasis mine).
In late June of that year, Jones got himself convinced that the trend was downward. The S&P 500 index had jumped sharply in April and kept rising in May, but Jones thought this was a sucker’s rally. The United States was in the grip of the greatest credit bubble of all time, and Jones studied every precedent there was—Japan in 1989, the United States in the late 1920s, Sweden in the 1990s. He pored over the price patterns in these historical analogues, hunting for hints about how the market might behave. Then on Saturday, June 28, at 3:05 a.m., he fired off a eureka e-mail to colleagues. “I hate being an alarmist, really,” began the subject line. “But the current WEEKLY S&P against the DAILY DJIA back in 1987 is really alarming to me.”
A weekly S&P chart against a daily dow chart! Really?!? Imagine the ridicule a person would take if they posted that on Twitter.
It’s sort of funny that technicians are in the business of changing their mind, yet they’re often ridiculed when they do it on Twitter. It’s difficult to effectively communicate your market views in 140 characters; sometimes it’s better off not knowing how the sausage is made.
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