Validea is an advisory service which assesses stocks based on the investing criteria of many of the ...
My Journey into Technical Trading
04/25/2012 2:30 pm EST
The agility to profit even in long-term bear markets helped turn Corey Rosenbloom from a long-term, fundamental investor to a short-term technical trader, he explains.
I’m here with Corey Rosenbloom, and we’re going to talk about the journey from investor to trader, and how you can take that same journey.
Well, I started—as a lot of people did—when the market was rallying and the attention was high in the late 1990s, ahead of the crash. My father was an investor, and, he, all through my childhood, told me to look at the stock market; it’s a good investment, and we studied together.
I had some interest in it, but not too much. I wanted to be a psychologist, so that was my career path, but my father always was talking to me about business and investment, so he allowed me to do some research, at least showed me some things about the market.
And then in late 1998 and 1999, we did well; the market rallied, and we were staying in more Warren Buffett-style, longer-term fundamental valuations, good companies, etc.
We avoided, much to my dismay, the tech bubble, and I had friends who were making lots of money trading, doing intraday things, and we did not do that, and my father continued to resist. That was good, later on, but we lost money throughout the bear market; 2000, 2001, and 2002, as most investors did.
But having that initial success, having that initial interest, and seeing others do it but then lose it, that’s what turned me to technical analysis, and that was about 2003.
I began to learn about technical analysis as another way to look at the market in terms of stock movement, to look at a chart, to use indicators, probabilities, mathematics, support/resistance, moving averages, indicators really, and to look for patterns.
See related: How to Get Started in Chart Reading
That was what my interest was at transition, really spurred by people who have done it successfully, and there must be a way to avoid these long-term bear markets, and I’m not sure if fundamental analysis can do it.Â Technicals did, so that was my initial interest in technical analysis.
And the advent of computerized trading made a lot more information available. Sounds like you married some of the psychology as well, with sector analysis, and looking at trends. What trends are you looking at these days; what do you see that is drawing your attention?
Well, the sector rotation was a good way for me to put together fundamentals and technicals. I also became introduced to intermarket analysis through Martin Pring, John Murphy, those style of intermarket technicians who combined bigger-picture concepts or news events, money flow, economic conditions in different markets like commodities and stocks, and Treasuries particularly, and just different ways to look at the market from a broader, bigger, holistic picture as opposed to just stocks.
See also: What Intermarket Analysis Means to You
And now we’re looking at the S&P rallying, and we’re looking at the re-inflation trade. We have, on one hand, the deflationary scenario, which is that some economies are in trouble or in decline, some would say,Â in terms of the debt loads; Greece particularly, and maybe Italy, Spain, etc. The Federal Reserve and central banks are engaging in policies of monetary easing, like stimulus measures, quantitative easing, and low interest rates.
These are bullish, and they almost, some would say, override or overrule economic conditions, but we have on one hand fundamentals, and on the other hand, the charts.
The charts are telling us that the re-inflation trade is working. Stocks have been rallying; gold certainly has been rallying, commodities, oil, in terms of the bottom in March 2009 to present 2012, and we expect these things to continue.
So if we continue to see higher breakouts; for example, as we speak, the Dow is at 13,000. A higher break above 13,000 is a psychological barrier.
That should lead to continuation, and we expect the charts, if that happens, to show us that things are improving under the assumption or the technical premise that stocks, or actually price, leads the economy.
That would be a bullish thing for economic development. If we continue to see further appreciation in stocks, commodities, and markets that are considered “risk on.”
Related Articles on STRATEGIES
The Roman philosopher Seneca wasn’t talking about the stock market when he wrote that “T...
The Dow Theory was originally referred to as “Dow’s Theory,” since it was based on...
When stocks are selling at valuation extremes and consumer optimism is at one of the highest levels ...