1. Brett alluded to the fact that fund and portfolio managers doesn’t use things such as the MACD or Bollinger Bands, but when asked, he never said specifically what they do use. He sounded like a politician to that question and never gave a solid recommendation as to what the retail investor should do.

2. It makes since that a manager building sizable positions over long periods of time (weeks, months, years) wouldn’t use certain TA tools because they will be changing through many cycles durning that time frame. Also, there are good and bad money managers, so a title doesn’t impress me, performance does.

3. He made it sound like the poor, dumb retail investor is being fed a line of bull when it comes to using TA tools. No doubt there are some “systems” and seminars out there that over promise/under deliver, or just plain don’t work. But to say that TA doesn’t work is ignorant and just as irresponsible as those systems referred to in the interview.

I use a combination of IBD tools and Tom O’Brien’s “Timing The Trade” for my trading and investing style. I’ve been in the market just 3 years now but have found great success by studying price and volume particularly at swing points.
I use Fibonacci expansion/contraction projections, the MACD, and 50, 200 day, & 10 week moving averages. These have helped me pick buy and sell points with greater success and to just stay away when there isn’t clarity.

Nothing works 100% of the time, the market is too big and too dynamic for that. You can be 100% right about a stock’s fundamentals, but if you buy at the wrong time you could be in a losing position for awhile.

I believe Bret when he says that most traders don’t use TA as a primary tool for developing positions and analyzing the markets. In fact, I believe that most traders are offended to think that their trading actions/behavior can be determined by drawing lines on a chart. Sure, traders do key of some specific levels like the 20 and 50 day moving average, and they look at where options line up. But the majority of their trades are based on sophisticated money management strategies, fundamentals, and news.

What I think this boils down to is a fundamental misunderstanding of what TA is all about. Guys like Bret think TA is some sort of pseudo science, not based on reality, because it’s not something “real” traders do. Well, this is where the misunderstanding lies.

TA is not a science, it’s an art and a craft to visualize mob behavior. Whether Bret cares to admit it or not, the stock market is nothing more than a mob of traders that behave like any other mob in human populations. Mobs exhibit certain characteristics and patterns as a group, without being conscious of those actions. And TA, in the right hands, is an effective tool for characterizing that behavior.

It works in stock markets as well as in general populations. Elliot Wave theory is also such a craft. Actually, EW is based in scientific principles, and the numeric patterns it is based upon (the golden ratio) actually exist in virtually every part of nature.

So, whether Bret wants to admit it or not, the behavior of a mob of traders can be plotted and predicted with a reasonable degree of certainty using TA.

-zach