It’s January and a question we invariably get from clients is, “What do you think the markets will do this year?” Our response is an honest, “We have no idea. Unfortunately, the future is unknowable.” Of course, we don’t leave anyone hanging like that. We go on to discuss what really matter. Focusing on your plan and what you can control.
But we do have a discussion on technical analysis, and how we use it to both build and maintain our discretionary model strategies. Technical analysis is not a crystal ball and we’re not gypsies. But it is a useful tool that many in the industry do not take advantage of. In my opinion, to the disadvantage of their clients.
As for forecasts, I tell our clients that you can take two brilliant economists, analysts, whatever their title, and both can give impressive forecasts for the future. Their opinions will be 180 degrees apart and when all is said and done, neither will be correct. Technical analysis is a helpful tool to pull emotion from our decision-making, and show us what brilliant strategist Tom Dorsey used to say, “What is.”
Below is the commentary of another such brilliant mind, J.C. Parets, that I thought was worth sharing.
The frustration we’re seeing from permabears is at a whole ‘nother level these days.
I don’t need to name and names. You know who they are. They’ve been calling the top since the last top. It’s what they do.
They claim the system is broken. They cry that nothing matters anymore.
And to be clear, it’s not that ‘nothing’ matters.
It’s just that the things the market cares about are NOT the things you think it should care about.
The market is a forward looking mechanism.
Why do you think so many stocks were already rolling over well before COVID? Why do you think Treasury Bonds and other defensive assets were already catching a bid before COVID?
Because these are forward looking instruments.
What we’re seeing today is the market pricing in the things we’re going to find out about later on this year.
The media will claim that it’s “news”, just because it may be news to them. But by then, that will have already been priced in, and the market will be looking out even further into the future.
The permabears will claim everything is broken. The media will lie to you about how the market is doing what it’s doing “because” or “despite” that news that they claim is news.
But it will only be news to them, and people who are unaware of how the world actually works.
And then the cycle repeats itself.
You see, the market doesn’t care about last week’s “number”. It’s looking out quarters into the future.
Don’t be a fool.
Price is the only news you need to know. The rest is glorified gossip, at best. Malicious distraction at worst. Usually plenty of both.
Grow up. Ignore that stuff.
J.C. Parets, Chief Market Strategist, All Star Charts, Technical Analysis Research, January 13, 2022
As always, give me a shout if you need anything. In the meantime, have a terrific week!
Jon
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Jon Kagan and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James is not affiliated with and does not endorse the opinions or services of All Star Charts or J.C. Parets.
