With all these chartists talking about an impending storm (and head and shoulder formation), who knows, maybe we are past the worst. Or maybe not. Anyone here with an invite?
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Reuters Technology Report
Tech Wizards Gather on the Beach
By Haitham Haddadin
JUPITER, Fla. (Reuters) - A band of renegades converged on this posh resort town on the beach last week to talk "support" and "resistance." No, it was not a posse of Harley-Davidson riders or a troop of paramilitary types. It's Wall Street nerds on a mission.
Welcome to the 27th annual get-together of the Market Technicians Association. The group, also known as the MTA, is meeting here just steps from the Atlantic Ocean from Wednesday through Sunday.
More than 150 stock, bond and futures traders and money managers from across the nation and Canada, and a few from as far afield as Switzerland and Austria, flocked to Jupiter near Palm Beach to hear words of wisdom from the high priests of technical analysis about what to watch for in these turbulent times for the markets.
"We have the masters here. It's all the top names in technical analysis," said Ralph Acampora, the MTA's president and Prudential Securities' top technician, whose most famous call is his prediction that the Dow Jones industrial average would hit 10,000, which it did in 1999.
Technical analysts, or technicians, study stock prices to forecast future moves. They are a different breed from fundamental analysts, who make up the majority on Wall Street. Technical analysts pore over charts of stock prices and other indicators to look for patterns and peg the stock index levels for "support," where buyers tend to swoop in, or "resistance," where sellers move in for the kill.
In contrast, fundamental analysts assess the impact on stock prices of corporate earnings, economic indicators like the monthly unemployment rate, and the direction of interest rates.
REVENGE OF THE NERDS?
Sure, you can fly the nerds to Palm Beach. But you can't make them play the day away.
Over cocktails and golf, and in the convention hall in Jupiter, the talk often turned to topics that only the cult of technical analysts could love: Doji Star, Head and Shoulders, Three Black Crows, Point and Figure, fractals and Fibonacci. To the uninitiated, these names may sound like ingredients that could join Eye of Newt in a witch's brew. But to Wall Street's technicians, these are popular patterns and indicators used to analyze stock charts.
"Most technicians don't talk in a way that is socially acceptable. We talk about 'Head and Shoulders' and people say they just don't understand," said Paul Desmond, president of Lowry's Reports Inc., who's among the top technicians.
A "Head and Shoulders" pattern in a stock-price chart, of course, is a reversal pattern usually seen in uptrends, which is a bearish sign. It tracks a series of rallies and selloffs.
During the convention's opening ceremony late Thursday, Desmond received "Charles Dow Award of 2002." The award is named after Charles Dow, the journalist who created the Dow Jones industrial average in 1896 and a co-founder of Dow Jones & Co.(NYSE:DJ - News), publisher of The Wall Street Journal and Barrons. The award, for excellence in the field of technical analysis, recognized Desmond for his March 2002 research paper: "Identifying bear market bottoms and new bull markets," in which he argued that the bear market ravaging Wall Street since early 2000 has yet to put in a final bottom.
NO LONGER LONELY
Before the 1990s, when watching the stock market became the national pastime, "technical analysis was seen as witchcraft," Acampora told Reuters.
"When I reflect upon my early years as a fledgling technical analyst" in the mid- to late 1960s, "I will never forget how lonely it was," Acampora said in an article published in the MTA's newsletter "Technically Speaking."
Acampora began in the days of charting stock prices with pencil and paper. Now he is among the best-known technical analysts who can sniff out stock market trends with the help of daunting-looking computer models.
His name became a household word among stock investors after he made a prescient call in the mid-1990s that the Dow Jones industrial average would go to 7,000, when most of the Street believed the blue-chip index, then at just over 4,000, would be in decline. That call, which panned out, was surpassed by an even bigger target, when Acampora said the Dow would go to 10,000, which it did. On the flip side, even technical gurus like Acampora can get it wrong. He predicted the Nasdaq would go to 6,000 or higher by June 2001.It peaked at just over 5,000 in March 2000 and now stands at less than half that value.
PRICE EQUALS KNOWLEDGE
Legendary chartist Alan Shaw of Salomon Smith Barney, who took Acampora in as his protege at Harris Upham in the 1960s, summed up the industry's rallying cry this way: Study a stock's price and all is revealed.
"In price, there is knowledge. That is what we are about," Shaw said, laughing, to applause from the convention crowd. "That is why we are so important -- to warn those pilots that there may be a storm ahead. We are not like that other practice," of fundamental analysis, "that is embattled nowadays."
He was referring, of course, to headlines of recent weeks, which have been dominated by New York Attorney General Eliot Spitzer's probe of conflicts of interest afflicting the practice of fundamental stock research.
Fred Dickson, chief market strategist at D.A. Davidson, said fundamental analysts often get fixated on analyzing dated earnings data, while missing the big picture when a plummeting stock's chart is screaming: Get out!
Pointing to a giant chart of the movements in the stock of JDS Uniphase Corp. (NasdaqNM:JDSU - News), the beleaguered fiber-optics firm, Dickson said: "No fundamental analyst foresaw the downturn until the spring of 2001."
Those analysts then raced to slash their earnings estimates for JDS Uniphase, after the earnings collapse had begun, noted Dickson, who uses both technical and fundamental analysis. On Friday, JDS Uniphase stock closed on the Nasdaq at $4.49, a sickening drop from its 52-week high of $24.21. |
