The team at Casey Research posted an interesting conversation with a technical analyst, Dominick Graziano. He was the guy who helped them to create the GLD put insurance trades that worked well for their subscribers earlier this year.
In the course of talking about all markets, gold came up of course. His view is that it remains in a significant downtrend – and, therefore, news that should be bullish simply won’t be as impactful versus what might have happened to the price in 2010. He also notes that the charts suggest that global equities entered into a secular bull market earlier this year, one that may last for several more years.
All of which brings me back to the problem that I have with TA. In looking at the “What” of price action, the charts don’t ever give you the full story. As I like to say, Enron’s chart looked great, until it didn’t. And such will be the case, in my opinion, with everything else right now. For example, it seems that there is a huge disconnect between the fundamentals of the underlying economy and stock market performance. There is also the problem of a bull market in bonds that appears to be near completion (if not over already) – and higher interest rates are not going to be good for stocks. And, lastly, if much of the stock market levitation is attributable to money-printing, which I believe, then it’s hard to have any confidence that the trend is secular and still has years to go, especially if people start to figure out how the Fed is trapped in its policies.
The fundamentals matter. Which means the “Why”. And since charts are often looking in the rearview mirror in establishing a trend, they can miss the realities distorted outside of a candlestick.
