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Getting Under the Surface

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Are you bullish or bearish? And what makes you that way?

These are facile questions on the surface. But I believe it's critical to our success to understand what it is beneath the surface that causes us to adopt a market posture. For example, maybe it's a combination of macro data. Or maybe it's based on insider buys and sells. Maybe it's something more deeply rooted. I know some money managers who are bullish by nature. And still others who are naturally bearish.

How do you assimilate your view? Do you look for things to vindicate it? On any given day there are piles and piles of "evidence" that bolster both bullish and bearish postures. In fact, have you ever noticed how often it's the case that the same data point is used as fodder by both bulls and bears? Consequently, if you spend time looking for support for your thesis, then you won't have any trouble finding it. After all, what makes a market is the fact that if you are bearish and want to sell, there is someone on the other side of the trade with an opposite view.

I think of the technically based indicators I use as disproving mechanisms. (More about what they are and how they work in the days and weeks ahead.) Far more important to me than knowing if my posture is correct, is knowing when it is wrong. You know the tired old cliché, it's OK to be wrong, but not OK to stay wrong? All of us will find ourselves on the wrong side of the market at some point. The ability to recognize when you're wrong so you can correct it is what will separate a great trader or investor from an average one.

One thing I'll never suggest is that a technical approach is for everyone. That's one of the reasons I find the debate between fundamentalists and technicians so bizarre. The other reason is that I personally know very successful traders and investors who use vastly different approaches to the market. Also, there's my belief that using fundamentals without technicals, or technicals without fundamentals, is a lot like playing the piano with only one hand.

Sure, you can make some sound come out of the piano with just one hand, but the music is much better when you're playing with both hands.

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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