Any day, you can listen to the financial talking-heads in the media and hear pretty much anything you want to read or hear. It’s even possible to hear viewpoints within the same hour that are diametrically opposed to one another. So what is an investor to do?
One could pick a favorite in terms of style or performance, but the problem surfaces when it comes to predicting where the economy, inflation, or the market will go in the future. Many times when predictions are involved, there may be an agenda that is not apparent.
I’m not casting judgement or even suggesting anything regarding the positive outlook of a prominent national homebuilder as quoted in an article appearing on Business Insider today (8/21/2013), but I will use it as an example. The quote from CEO Douglas Yeardley in an article titled, “The American Housing Recovery is Only Beginning”. In the article, he stated, “We believe the recovery is real and w are in the early stages of the rebound”. Maybe he’s right, maybe he’s wrong – only time will tell.
Here is what the data shows. Overall, the graph below (click on graph to expand) shows nationwide Housing Starts from 1976 to 2013. In the graph, it is apparent that housing starts declined dramatically from 1984 to 1991, then increased from 1991 to 2006. And then we see a very dramatic decrease beginning in 2007. From 2012 until a few months ago, housing starts have been increasing, but since April of this year, they have been declining.
The beauty of technical analysis is that it shows “what is”. When I’m driving at night, I want to be careful to not drive at a speed that causes me to not be able to see beyond my headlights. Technical analysis provides the ability to make decisions using real data from the market to make decisions today, and not drive past your headlights.
Graph produced by Dorsey Wright and Associates. The postings on this site are my own and do not necessarily represent Dorsey, Wright & Associates positions, strategies or opinions.