A Complete Guide to the Futures Market, 2nd Edition

CHAPTER 2

The Great Fundamental versus Technical Analysis Debate

Curiously, however, the broken technician is never apologetic about his method. If anything, he is more enthusiastic than ever. If you commit the social error of asking him why he is broke, he will tell you quite ingeniously that he made the all-too-human error of not believing his own charts. To my great embarrassment, I once choked conspicuously at the dinner table of a chartist friend of mine when he made such a comment. I have since made it a rule never to eat with a chartist. It’s bad for digestion.

—Burton G. Malkiel

One evening, while having dinner with a fundamentalist, I accidentally knocked a sharp knife off the edge of the table. He watched the knife twirl through the air, as it came to rest with the pointed end sticking into his shoe. “Why didn’t you move your foot?” I exclaimed. “I was waiting for it to come back up,” he replied.

—Ed Seykota (an avowed technician)

Fundamental analysis involves the use of economic data (e.g., production, consumption, disposable income) to forecast prices, whereas technical analysis is based primarily (and often solely) on the study of patterns in the price data itself. Which method is better? This question is the subject of great debate. Interestingly, the experts are no less divided on this matter than are novices. In a series of books in which I interviewed some of the world’s best traders,¹ I was struck by the sharply divergent views on this issue.

Jim Rogers ...