Perhaps because we often talk about technical analysis and price action of investments, clients sometimes ask questions related to this. They may say ‘Is a technical analysis worth doing?’ or ‘Can’t we just look at the fundamentals? Wouldn’t that be quicker and easier?’ Well, those are good questions. So, let’s answer them.

Technical analysis is universal- anyone can use it, and all kinds of people actually do use it. We also find that often the fundamental analysts turn to technical analysis when it actually comes to time to buy or sell a security.

Tech is a simple way to understand markets and the actions of investors in the markets. Simple (my word) compared to fundamental analysis. Because in fundamental you have hundreds of financial ratios, academic formulas, and so on – so, in my opinion, it really is simpler. And many decisions can be easily made based on a visual analysis only.  Lots of engineers and mathematicians are attracted to tech because of the numbers but they generally do acknowledge that it is not a science.

Let me give an example of what I’m talking about.

Fundamental (especially the academic stuff) often uses a discounted cash flow model to estimate the correct price for a stock. This is a financial model that requires at least 6 inputs. However, most of which are educated guesses. My problem is a simple one: as the computer people would say — GI-GO or Garbage In – Garbage Out. This is a nonsense approach. (And yes, I used to teach this stuff many years ago.)  Living and working in an ivory tower of academia must be a wonderful place to be when no one (out of professional courtesy) challenges their colleagues.

Another thing that Tech analysis has going for it is that it is fun. There are MANY ways in which you can approach the analysis of a stock’s price.  Have a look at the library of indicators in any tech analysis book or software. alone has thousands of indicators to assist you in analyzing markets.  Their section called ‘ChartSchool’ is likely one of the best sources to learn ways to use tech analysis-and it has a free version! (available to anyone with an online computer.)

If you use a method that defines clear signals on what to do, you may hopefully have the courage to buy, sell, or hold with a reasonable degree of confidence.  Also, if you use a timeframe that fits your personality, (for your own personal risk tolerance) works in different markets, and actually follow your own rules, you may find it superior to fundamental analysis for your own uses as an investor.

In closing for today, we continue to suggest that when a clear trend is evident in the markets the wise course is to follow that trend. After a few rocky weeks the current long and intermediate trends show that our long-term bull remains intact and Mr. Bear need not be disturbed in his hibernation. I’m looking forward to a relaxing weekend and I wish the same for you.

Market Minute 3/9/2018 – WOW  (and you can quote me!)

Sometimes it’s a bit difficult to find the silver lining behind a cloud; today is not one of those times. It’s more like a day in which it’s hard NOT to find a silver lining. Markets first – the Nasdaq (our market of choice for equities) showing new all-time highs today. Money is rotating away from large companies toward smaller ones – indicating a larger degree of comfort with the ‘riskier’ smaller companies. Consumer discretionary stocks (cars, houses, things we like to buy) continue to lead vs. the consumer staples (toothpaste and soap) – also indicating a preference for risk-on holdings. The vix (a risk indicator) is one of the few things that I can find today that is down – and that’s a good sign as well.

So, markets are happy. And we find fewer people disagreeing with our earlier comments on expecting a strong year for stocks. And… how about those employment numbers? More people at work – good news. And to top it off, it appears that our President will be meeting with the head man from North Korea – truly a ‘first’. 

It gets even better –  I had my car washed yesterday, and it doesn’t look like rain today.  All I can say is WOW.

It’s not every day that it’s so easy to find the good stuff, and that it’s difficult to find problems.  Enjoy it. And Enjoy your weekend.


Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

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