I was looking through old documents buried on my computer and found this raw text excerpts that I believe eventually made it's way into the Market Technician's Association newsletter in 2000 or 2001. It was comments about a recent MTA seminar written by Bill Meehan, whom we lost in the Towers on 9/11.
RealMoney.com comments on the Seminar
excerpted with permission from a column written by Bill Meehan.
Voodoo, as I use it here, refers to only one of the colorful descriptors that many on Wall Street use to denigrate those who spend their waking hours devoted to the art of technical analysis. Kooks, I believe, is how academia prefers to label chart readers. However, nothing was quite so satisfying as listening to Dr. Andrew Lo of the MIT Sloan School of Management present mathematical proof at the Market Technicians Association's annual meeting that technical analysis cannot be dismissed, at least when it comes to pattern recognition, as mere voodoo practiced by kooks.
It's good to have one's belief verified by such an acclaimed professor. The work continues, especially as to why the results were so significant when looking at Nasdaq stocks and so inconclusive when looking at those traded on the New York Stock Exchange and the Amex. Perhaps readers might have some ideas after reviewing the data.
Oops! I noticed that I made a big mistake above. Having the chance to meet and spend quite a bit of time with Dick Arms, who so graciously fills in for me, was actually the highlight of the meeting for me, with all due respect for Dr. Lo and his paper. And meeting many other leaders in the field was a real thrill that alone is worth the modest cost of joining the MTA.
Passing on Wisdom
I've been a bit out of touch with the market virtually all of last week, without many of the technical tools that I rely on. Therefore, I'll relay a bit of what another presenter at the MTA meeting had to say about the current technical state of the market. In addition, I'll throw in my two cents about the Federal Reserve and some of the psychological indicators that keep me from becoming more bullish in the short term. As time allows this week, I'll also do my best to respond to readers who sent me email while I was away.
While most of the meeting's presenters were very interesting (although a few were speaking a foreign language to my mathematically challenged brain), Phil Erlanger's observations about short interest struck me as particularly important. The MTA's current president focused on adjusted short interest, a sentiment tool that he developed, which has a very strong track record. The Erlanger short interest ratios for the Dow, S&P 500 and Nasdaq Composite are all at multi-decade lows and at levels far below those generally seen at times of high market risk. The charts were startling and alone should make one pause, although relying on one technical indicator isn't wise, in my opinion.
Bill Meehan is the chief market analyst for Cantor Fitzgerald, a Manhattan-based institutional trading and research firm, and writes daily for the Cantor Morning News. He can be reached at firstname.lastname@example.org.