Financial media pages are full of hindsight. The problem with hindsight is that it does not make any money for investors. Investors need foresight. Unfortunately, foresight is hard to come by. Further, investors face the difficult task of figuring out what works and what does not.
Based on my 30 years of experience in trading and investing as well as after extensive backtesting, I feel comfortable saying that a judicious combination of traditional technical patterns still works to help investors with get an idea of future market direction.
Let us start out with a very recent example of how these patterns called Thursday’s market swoon. The chart shows publication dates of three articles immediately preceding the swoon on MarketWatch annotated on a chart of SPDR S&P 500 SPY.
Please click here for the annotated chart.
The article on May 30, 2013, was titled Island reversal highlights market risk. The article simply highlighted the well-known traditional technical analysis pattern. This is a reversal pattern.
The article on May 23, 2013, was titled Market forms ominous technical pattern. This article highlighted the traditional analysis pattern of an “outside day.”
The article on May 21, 2013, was titled Shades of 1999 serve as warning for investors. This article highlighted an obscene short-squeeze in solar stocks. Such short squeezes often occur just prior to a correction…Read more at MarketWatch
