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Tales of a Technician: History Beckons

July 1, 2015

By | 5 Comments

“There is nothing new in the world except the history you do not know”

Harry S. Truman —

Like you, I wear a number of hats during my daily pursuits. Aside from teaching, writing, and trading, I’m also a student of history; an amateur historian, if you will. As the years roll on, my obsession with history grows. Experience breeds a greater appreciation for just how many lessons are hidden in the past.

Nowhere is this truer than on Wall Street. By studying the past behavior of the stock market, we can place modern movements in context. Consider all the questions that can be answered by even a brief study of market history.

  1. What is the typical behavior of the stock market?
  2. How does the current bull market compare to ones in the past?
  3. How often do we see bear markets?
  4. What is the average duration and length of a bull or bear market?
  5. What are the long-term drivers of stock market performance?

I could go on, but I think you get the point. The answers to such questions bring context to our current market, giving us greater perspective. With that perspective, we can better anticipate and therefore better prepare for future potential outcomes.

Let me tell you another reason why I look to the past: I’m a technician schooled in the art of technical analysis. One of the core tenets passionately preached by the gatekeepers of technical analysis is that history repeats itself.

While many parrot the principle, I suspect few can articulate the reason behind it.

So allow me to unveil it for you:

Human nature.

Among the sea of changing variables, human nature stands out as the one true constant. Ever since the famous Buttonwood Agreement was struck in 1792 the twin devils Fear and Greed began their insidious work among investors. As Wall Street’s long and winding tale of booms and busts will attest, human emotion has been driving the bus since the beginning. In short, investors become way too starry-eyed and greedy at market tops while quickly diving into a pool of panic at market bottoms.

And it’s not just at market peaks or troughs that emotion manifests itself. Its influence is seen all along the way as the emotion pendulum is always in motion. Never forget when you are reading a chart you are simply analyzing the behavior of market participants.

Unless mankind discovers a magical way of stripping emotions from their internal wiring, it’s a good bet we’ll continue to see the patterns of the past repeat themselves again and again.

For those interested in investigating Wall Street lore, I have a suggestion to jump start your journey. Grab a copy of Stocks for the Long Run by Jeremy Siegel. It’s a treasure trove of insightful data on stock market history and answers every single question I posed earlier.


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5 Replies to “Tales of a Technician: History Beckons”

  1. Thomas Hammonds says:

    Good Read!!!

  2. GeraldCates says:

    Great Blog Tyler!!! Thanks for the tip on the book, I was looking for my next read.

  3. Al Chandler says:

    Well done Tyler! Looking forward to reading that book.
    Al and Jake Chandler

  4. Tyler Craig CMT says:

    Thanks gents.

  5. Kody Potter says:

    Thanks Tyler! Enjoyed the two podcasts you were on. Learned a lot from them and hope to hear more from you.

Comments are closed.

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