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To: Boplicity who wrote (7473)	5/7/2002 2:57:45 PM
From: Bandit19	Respond to of 13815

Greg, Hi. Here's an interesting read from John Murphy.... Fri, May 03, 2002 (#2) - CONFESSIONS OF A TECHNICAL ANALYST LAS VEGAS KEYNOTE SPEECH... I'll be heading off this weekend to attend the Las Vegas Money Show, which runs Monday through Wednesday. In addition to several presentations that I'll be giving, I've been asked to give a keynote address on Monday morning. The headline above is the title of my talk. Since my address is relevant to the current markets -- and what we try to do on this website -- I thought you might be interested in seeing some of the more important points. I'M REALLY A FUNDAMENTAL ANALYST... This is one of the things I'll be confessing to. I really study the fundamentals of the market. The only difference is that I do it by studying charts of price action. I have always believed that the price of a market is the best leading indicator of its fundamentals. Statements like "the technicals are bad, but the fundamentals are good" are nonsense. If the technicals are bad, so are the fundamentals. Worldcom is one dramatic case in point. The stock peaked at 60 almost two years. It's been dropping like a rock since then. Throughout the decline, security analysts kept talking about bullish fundamentals -- while prices were collapsing. What they don't understand is that the falling price is one of the best warnings of bad fundamentals. When a price is falling, I feel confident in saying that the fundamentals have turned bearish -- even if I don't know what those fundamentals are. If the fundamentals are bullish, prices should be rising -- which means that demand exceeds supply. If supply exceeds demand, prices will fall -- which means that the fundamentals are bearish. By studying charts I'm really doing fundamental analysis. I would also argue that fundamental security analysts that don't look at charts aren't really doing their job. Interestingly, this week's economic numbers have been showing new economic weakness -- including today's employment report. We can predict the economy by studying the markets. That being the case, market analysts often do a better job at economic forecasting than economists. I TALK ABOUT THE ECONOMY... It sometimes surprises people to hear a "technical analyst" talking about the economy. They believe the economy should be left to economists. The problem is that economists share the same flaw as security analysts -- they rely on old data and ignore the leading economic signals given by the financial markets. The stock market, for example, leads the economy -- not the other way around. Recent market action is a good case in point. I was interviewed on Bloomberg TV last Monday morning. My market outlook was somewhat negative. I talked about stocks moving lower -- and bond prices moving higher. The commentator asked how I could be bearish on the market when lst quarter GDP numbers had just jumped sharply. I pointed out that the big jump in the market during the final quarter of last year anticipated the stronger economic numbers during the first quarter of this year. Weaker stock prices since then are anticipating weaker economic numbers during the current quarter. The recent collapse in the U.S. dollar also hints at weaker economic numbers. The recent drop in interest rates is hinting at the same things. That's why this week's weaker economic numbers may be "surprising" to economists -- but not to us. CHARTING IS SIMPLE -- JUST KNOW UP FROM DOWN... All charting really boils down to is determining whether a price line is rising or falling. You just have to be able to tell the difference between "up" and "down". Up is good. Down is bad. It's as simple as that. You'd be amazed how many people can't (or won't) do that -- including a lot of highly-paid professionals. The next two charts are good cases in point. The line on the first chart has been going "down" for two years. The line on the second chart has been going "up" for those same two years. Since its line has been falling, the Internet has been a BAD place to be. Since its line has been rising, REITS have been a GOOD place to be. That in a nutshell is what we try to with our sector work. Find the lines that are rising (as early as possible) and participate in the uptrend. At the same time, we avoid the lines that are dropping. We don't always get it exactly right, but that at least is what we try to do. Tell UP from DOWN. SELL IN MAY AND GO AWAY... The stock market is ending the week on the downside. Hopefully, we've made our views clear enough over the past couple of weeks. While the market has been stabilizing because of a "short-term" oversold condition, we believe the more important "intermediate" trend is rolling over to the downside. Our favorite "safe haven" has been gold stocks, which have done very well this year. Our Money Management accounts are in the black this year (up about 3%) -- thanks mainly to our concentration in small-cap value stocks. We'd also like to remind you that the market is entering its weakest six months of the year -- which lasts from May until November. Remember the saying: "Sell in May and Go Away".