Why Technical Analysis?
The history of the stock market is characterized by alternating, secular bull and bear markets. While holding for the long-term might work well for those with an unlimited life expectancy ("in the long-run we're all dead"), these recurring secular bear markets (lasting, on average, 18-20 years) can turn passive investment strategies into financial suicide and financial careers into fond memories. It is possible to build wealth during secular bear markets, but investors and advisors must first discard the buy-and-hold asset allocation strategies that worked so well during the previous bull market and adopt the dynamic approach known as technical analysis.
There is no reason to think that this secular bear market is close to its conclusion. History has shown that in order to correct the structural distortions built up in the previous secular bull market it is normal for the economy to suffer between four and six recessions before a true change in secular trend is seen. We have, so far, witnessed only our second recession since the 2000 top. Valuations are still far above undervalued levels normally seen at the bottom of a secular bear market. Take a moment to look at the Shiller P/E series. Clearly there is a long way to go to reach bear market lows.