Erik McCurdy's  Instablog

The announcement of the latest "solution" to the sovereign debt crisis in Europe spurred large, unusual moves in several markets today, including the US dollar, gold and oil.

 

 

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As demonstrated by our audit results, judiciously applied chart analysis facilitates the development of highly reliable market forecasts and signals. However, as we often note, chart analysis is a tool, not a crystal ball. There are no certainties in the realm of financial market forecasting, only possible scenarios and their associated probabilities. Both technical and cycle analysis provide the most reliable outlooks when markets behave in a well-defined, orderly manner. The types of extreme moves experienced by global markets today are highly unusual, occurring only about 4 percent of the time historically. In many cases, the unusual price behavior moved against highly likely scenarios.

On market days like today, many observers will dismiss the usefulness of chart analysis altogether, which is a common emotional response. However, it is important to remember that emotion is always your enemy as a market participant. Again, there are no certainties in this arena, only possibilities and probabilities. Even a scenario that is 80 percent likely will not occur 2 out of every 10 times. Of course, certainties are not required to be a successful investor or trader. Aligning yourself with the likely scenarios and protecting yourself from the unlikely ones are the keys to producing consistent profits over the long run, and quality chart analysis enables you to accomplish both of those objectives.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.