I just got back from a fantastic trip to Seattle for the stockcharts.com ChartCon 2018. It was a pleasure to reconnect with many people that I consider mentors in my own career. Also great to meet others with a passion for technical analysis and data visualization.
As with any productive conference, I took copious notes and have enjoyed revisiting some of the insights that I picked up during the two-day event.
I wanted to share ten quotes that I found in my notes along with brief comments on each. Some quotes were reminiscent of things I already knew, while others served as a reminder that I still have plenty to learn! Overall, I enjoyed stepping away from the office for a week and revisiting my own way of thinking.
"Technical analysis is a windsock, not a crystal ball."
Anyone that tells you their investment process has an outrageously high success rate is most likely lying to you. Plain and simple. This business is about learning to be wrong and learning to adapt.
"Before trends change, the momentum will change."
Julius de Kempenaer
"The slowdown of momentum happens before the change in momentum."
Greg Schnell, quoting George Lane
Pairing these quotes is a reminder of the value of momentum as a leading indicator for price. Julius' RRG chart is a beautiful data visualization that captures the essence of sector rotation. They work because they recognize that momentum shifts before the trend reverses.
Greg's presentation shared ideas on screening for stocks in uptrends with weak short-term momentum. The George Lane quote made me think of the bearish divergence in charts like AMZN. Not necessarily a sell signal, but certainly something to acknowledge.
"The cleaner and simpler you make them, the more you can get out of them."
Art's work resonates with many because of the beauty of its simplicity. Charts don't have to be complicated, and in fact, they add the most value when they tell a simple message. Probably true of investing in general!
"A phenomenon will remain in effect until noticed."
I have followed Tom's work for years. While I'm not a huge fan of analogs, I am a huge fan of listening to people whose toolkit is very different from my own. Tom's comment reminded me of Bob Prechter's cautionary comments on drawing simple relationships between two factors- gold and stocks, interest rates and stocks, etc. The markets are a complex system and two factors never operate in a vacuum!
"Discipline... is a lifestyle decision."
Greg spoke eloquently about the poor decisions investors tend to make. Creating a solid investment process is the easy part. Actually following what your process tells you is the hard part!
"Value lies in the zone between two moving averages."
This was my first time hearing Alexander speak, and while he tends to operate on a different time frame than I do, his comments on creating a simple trading system using moving averages made me want to dig in more deeply.
The relationship between the long-term and the short-term, the structural and the tactical, the secular and the cyclical- this is a concept where I feel charts can add a great deal of value.
"It's hard to outperform the S&P when you own stocks that are underperforming the S&P."
A great quote to support the consistent outperformance of the momentum factor!
"You'll find in a bull market that overbought conditions can be relieved internally."
Look at any of the FANG stocks in recent years, and you'll see a chart that remains consistently overbought. Being overbought just means the price is going up. Which is a good thing! In an extended bull market, overbought conditions often work themselves out before the next leg higher.
"That's not what you typically see in a bear market."
When in doubt on market direction, look at the charts. If they are going up, we're in a bull market. Sounds straightforward, but it's funny how often we ignore a simple approach that has stood the test of time.
"I don't care about causation, I care about indication."
This final quote is a great summary of how best to combine technical analysis with fundamental analysis. Charts will never answer the "why" of price movements. But they will tell you the "when" and the "how" of supply and demand.
Charts are not about figuring out why something happens, they are about recognizing when something is happening and planning accordingly.
Disclaimer: This blog is for educational purposes only, and should not be construed as financial advice. Please see the Disclaimer page for full details.