Friday, October 25, 2013

The New Way for TA

I have lamented, no complained, no whined for years that technical analysis is just not what it used to be. I still think it works but with the Fed distorting the market like a black hole in reverse little things like momentum, sentiment, price structure and even (shudder) earnings have taken a back seat. Forget the distortions by ETFs and inverse ETFs. We really don't know if a trade is demand, supply or hedge anymore.

Charts break down and then they don't. Stocks get crushed and immediately rebound. And bad economic news is good because it will keep the Fed puking out cash projectile style. Inflation? We don't go no stinkin' inflation - because the economy blows. But all those dollars chasing fewer goods? Forget it.

Bizarro. And because supply and demand are subverted, charts just don't do what they were created to do. You want to measure the mood of the crowd? Just look at the Fed.

This is why I ended up at Stocktoberfest last week in Coronado, CA. Besides having not good, not great but perfect weather I saw the array of speakers and presentations and just had to be there. It seemed to be the way of the future in a business when everyone and their brother has access to everything all the time. Why bother with a CMT? (just kidding, Ralph)? Who needs a $2500/month data terminal when just about everything is free?  Certainly nobody needs to pay for advice (which killed the radio star for me)

So rather than trying to read a chart that is no longer being driven by what it was designed to measure, it is time to step into 2013 and learn the ways of the crowd all over again. Follow it or fade it but we can no longer ignore it.

One product trolled social media to find out what everyone loved and hated. The result? Buy Google before it gapped up and buy some more when it broke out again. There was actual chart reading involved setting objectives and understanding that there was indeed a new trend after only three data points. You cannot do that without taking the social pulse of the stock.

Another product trolled social media to find out who we should follow in the first place. It determines who is a major influencer and who has gained respect from his/her peers.

One speaker did not have a product but rather a story. He told us how he figured out what was going to be the next trend in computer hardware and bought a piece of a company that made one little, tiny yet indispensable part of that hardware. Social media can help with that.

Another speaker saw a trend in the home where everything would be wirelessly controlled. Who makes the components for that? And who makes the antidote for all the radiation we'll be bathed in?

Make your own ETF to invest in an idea. Wear technology. Think differently about crises because Detroit downgrades took top notch nearby credits with them. Or totally unrelated municipal entities that simply had Detroit in their names.

One hedge fund manager showed how he used standard TA and it did indeed still work. But then this dawned on me: We are taught that the price contains all the actions and feelings of everyone else in the market. Isn't that what social media does today? Imagine what would happen if we could crack the code of putting both together?

Maybe there is hope for this old chart reader. Who needs a consultant in their start-up?

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