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Over my decades in the business, I've heard all the negatives and disbeliefs about technical analysis.
In general, investors fail to believe that this valuable tool will help them generate returns that beat not only the market, but also a lot of the Wall Street analysts.
Bottom line is that ignoring the technicals not only misses precious opportunities, but can also cost you lucrative returns, especially in a market like this one.
Despite all the doubts, even the most elementary investors are using technical analysis when they murmur the phrase "the trend is your friend." Furthermore, they're applying it to their investment approach when buying or holding stocks that trend higher.
Of course, as a true technical analyst, I need to quantify the term, not just say it to make myself feel good.
That said, the most widely watched - and somewhat accepted - technical indicator out there is the 50-day moving average. This, folks... is the trend that you should consider your friend.
Right now, the S&P 500 is fooling around with ticking off its friend.
About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Penny Hawk. He also contributes to Money Morning as the Quant Analysis Specialist.