To: Pruguy who wrote (43968 ) 1/18/1999 10:22:00 PM From: Christopher Read Replies (1) | Respond to
Pruguy, I like your response. You are like me, you don't know everything but your last memo shows that you do have a good head on your shoulders. If we talk about momentum indicators when it comes to TA then we are talking purely about charts and so forth and no FA is involved here at all. You may call that pure TA. However, when we talk about TA and the Business Cycle, Sector Investing, Industry Group Investing, Sector Rotation, Industry Group Rotation, and Intermarket Analysis then TA professional do use Fundamentals of the Economy but not in the same sense that you use FA to study a company you are looking at to buy. Let me give you an example. If the Federal Reserve cut the interest rate then I conclude that the Financial sector of the Economy will prosper and they will come in favor. This would include banks, Insurance Companies, Credit card Companies, and so forth. Also Utility companies will prosper since they depend so heavily on borrowing money. If Oil prices go down then that will help Airline stocks as they use a lot of Oil. As a TA, I need to have this kind of knowledge of the Economy so that I can tell which Sectors will be going up and which ones will be going down as the interest rate changes from time to time. Another example, if the Dollar goes up then Big Caps will suffer and Small Caps will prosper. Strong Dollar hurts exports as other countries will have to pay more for our goods which in turn hurts companies like IBM and so forth. I have read many books on Sector Investing and most of it discuss the Economy in general and TA as well. As a TA person, I need to know how an increase in interest rate will effect the Economy and Sector and where I should spent my time on with charts so I can pinpoint the Sector that are coming in favor. I have read several books on the Business Cycle written by TA professionals. There are books on Business Cycle that don't have any TA. Most FA managers do read these books. An FA manager and myself are very familiar with the Business Cycle from the basic Economic Model and Factor. I also use TA and charts as well to verify the stage that we are in during the Business Cycle.
