View From a Height
Commentary from the Mile High City
Tuesday, June 01, 2004

Those Wacky Japanese 

Perhaps with too much time on their hands, and not enough light, the postwar Japanese developed these things called candlestick charts for stock analysis. The idea is that you look for one of about 300 different patterns, and that, along with the shape of the clouds and the color of the tea leaves, will tell you which way a stock is liable to go. These patterns have names like Morning Star, Three White Soldiers, Dragonfly Doji, Double Reverse Screaming Baby, and Inverse Engulfing Sushi. OK, I made those last two up, but you get the idea.

This is all part of something called Technical Analysis, also known as Stock Market Witchcraft, or, as Bush 41 would have said, back in his pre-VP days, "Voodoo Market Analysis." It's actually fairly respectable now, but there was a time, even as recently as 15 years ago, when mere mention of technical analysis would have brought and end to conversation and a beginning to the icy stares.

Louis Rukeyser, of the late, lamented Wall $treet Week, used to have a set of 10 technical indicators he called "The Elves," and every week he would tell you how many were pointed which way. It took about 30 seconds, and they were never referred to elsewhere in the program. Later, perhaps reflecting the growing respectability of chartists (no, not The Chartists), he eventually replaced them with 10 real people.

Nowadays, this stuff is actually taught in respectable business schools.

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