Investor’s Library: Fundamental Analysis, Technical Analysis, and Income Investing (Collection)

32. Case Study—Bizarro World

This chapter is meant to shatter the notion that we have mastered the study of any type of financial analysis whether it is technical, fundamental, quantitative, or economic. No matter which method we use, we start with certain premises and assumptions and build from there. The bear market of 2008 showed us in no uncertain terms that traditional chart reading and cherished technical tools did not work the way we expected them to work.

Note that we did not say that they did not work. They did indeed provide guidance, unlike fundamental and other tools, to those with open minds and flexible approaches. What they did not do was give clean signals with high probability outcomes.

For example, if a stock broke ...