support could be overlooked. My friends reminded me that I was
a paper trader, meaning I was dealing with stock certificates
and I was not asked to give my dissertation on some company’s
long-term prospects. That fine company stock eventually sold
off 75 percent.
The stock market was in a full retreat, and fundamental
analysis was getting a black eye almost on an hourly basis. Unlike the scandals in our recent history, the analysts back then
were folks, I believe, that were trying their best. The only scandal was that most had never seen a long-term bear market and
as a result could not fathom how deep a sell off could go. Wall
Street is noted for its “gallows humor” and I will say that by
the time the bottom in 1974 appeared, the quality of the jokes
about the business was the best vintage that I have ever seen.
I remember going out to lunch one day during the 1973–74 bear
market and running into a friend that had just been promoted
to research director at one of the firms (life expectancy was about
1 year). He said he felt like he was promoted to first mate on
the Titanic.
A MISSED OPPORTUNITY
I must say that as technicians, we knew from firsthand experience that certain price patterns had implications that were totally rational. A stock breaking down from a top pattern on expanding volume was not only a clear sign showing the sellers
overpowering the buyers, but also an early warning that some
negative corporate news was about to be announced. We didn’t
know “when” and we didn’t know “what,” but we knew if the
stock was falling away and breaking supports levels that any
upcoming news wasn’t going to be good. This response to upcoming developments was reflected in the increase in daily volume and the price movement on the chart.
Indicators carry the same predicative qualities. It is not
strange to me that an increase in volume accompanied by a positive increase in price in the housing market index might have
a secondary implication generated about lumber prices or perhaps the health of the market in general. I remember an analyst came out with a recommendation on the auto industry one