Traditionally, buy-and-hold investors have sought to buy low and sell high to maximize their returns. Although this sounds attractive, there are several problems with using only this approach to the stock market. One of the most common issues is the notorious “round trip”, where the investor buys the stock at a relatively low price, holds the stock as it goes up and then continues to hold as the stock loses the gains until it returns to the price at which it was bought. Unfortunately, many investors have found themselves still holding after the gains disappear and losses continue, hoping the stock will make a comeback rally. Some buy even more, regardless of the losses they are still holding, in a feeble attempt to offset the losses by buying when it’s “really cheap”. This type of averaging down happens when emotions overtake logic and is usually for the worst.

Look at how

Of all investing disciplines, technical analysis should be the most amenable to quantitative research. I define quantitative research simply as the use of a computer and a database to identify investment factors that have historically been predictive of future excess returns (or returns above a market benchmark). Technical analysts rely on historical price and volume patterns to predict future price movement. Applying a computer to this task seems natural, and to the uninformed might seem easy.

In practice, however, much of technical analysis is an art, as is all else in the field of investment. A price pattern that works under one set of conditions may not work under another. What is easy for the eye and the brain to identify—a head and shoulders top, for example—can be very difficult to translate into computer code.

However, certain technical factors are relatively simple to model quantitatively. In this article, I’ll present a couple

In the eleven years that I have been a practicing technical analyst, acceptance of technical research as a viable tool for investing has increased dramatically. This is heartening because it has largely been driven by strong efforts from the Market Technicians Association and its affiliates. 

In 2004, the MTA’s efforts were acknowledged by the SEC in their allowing Chartered Market Technicians to use their designation as an exemption from the Series 86 exam administered to publishing analysts. This not only benefited me directly by giving me added credibility as Chief Market Technician for my firm MKM Partners LLC, but also made me proud that my profession had gone from being considered voodoo by some to being considered respectable by many.

My career in technical analysis started even before I graduated from college. I was fortunate enough to be a student at the University of Richmond’s undergraduate business school, which pioneered a program

Much has been made of the extraordinary stock market gains that have historically followed mid-term election year lows, but not nearly enough has been made of the importance of the lows themselves.

So with that, I offer an observation on mid-term election year lows – and a possible explanation that is deeply relevant both to current market action and the future of the economy.

Since 1934 (basis DJIA), mid-term election year lows have held until the next mid-term low four years later, and if broken decisively, broken only at the end of the next four-year cycle low (1970, 1974, 2002). 1947-1949 saw multiple tests and even a breach or two of the 1946 low, but it essentially held. The 1987 crash came nowhere near the 1986 low, which was set at the start of the year, but found support near the bottom of a large consolidation that occupied the market for much