I found this technical analysis from INO of the Dow Jones and S&P 500 indexes. Although I don’t really believe that technical analysis is everything that it is cracked up to be, I wanted to share this video with you.
Does this video really tell you where the market is going?
I think it is possible to get some useful and actionable information from technical analysis, but I also think that we are easily fooled by it. Why? Because our brains are designed with certain biases that we are unaware of.
One of these biases is the humans ability to do pattern matching. We will see patterns and accept them as real, even if they don’t even exist! A good example of this is watching static on TV. We see different, repeating patterns, but those patterns are not really there. They are generated by the pattern matching powers in our brain.
Another challenge with technical analysis is that there never seems to be an accurate accounting of when the prediction was correct and when it was incorrect. We tend to look at data up to the current moment, and make predictions from that. But we seldom go back and see how often our prediction was correct and how often it was wrong.
You’re probably thinking, “If technical analysis is so wacky, why are you sharing it?” The answer is that I want you to decide for yourself. Technical analysis can work. But only for those who are willing to invest the time and effort to become proficient at it.
Another reason I want to share with you is that you get to decide what is right for you. I don’t want to tell other people what to think about technical analysis. I am simply sharing my opinion and encouraging you to go out and get other opinions. Then, you can decide for yourself and make a good, educated decision.
And I think that is true for investing as well. If we are going to succeed as investors, we need to get different opinions and find out what is right for us. Only through constant learning and growth can we develop ourselves into successful investors.
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