From Chartist to Technician

From Chartist to Technician

Here we will examine whether the evidence supports a pessimistic view of charting

Though chartists are not held in high repute in Wall Street, their colorful methods, suggesting an easy way to get rich quick have attracted a wide following. The companies that manufacture and distribute stock charts and charting paper have enjoyed a boom in their sales, and chartists themselves still find excellent employment opportunities with mutual funds and brokerage firms.

In the days before the computer, the laborious task of charting a course through the market was done by hand. Chartists were often viewed as peculiar men, with green eye-shades and carbon on their fingers, who were tucked away in a small closet at the back of the office. Now chartists have the services of a marvelous electronic computer, replete with a large display terminal which, at the tap of a finger, can produce any conceivable chart one might want to see. The chartist (now always called a technician) can, with the glee of a little child playing with a new electric train, produce a complete chart of a stock’s past performance, including measures of volume, the 200-day moving average (an average of prices over the previous 200 days recalculated each day), the strength of the stock relative to the market and relative to the industry, and literally hundreds of other averages, rations, oscillators, and indicators.

Once the chart has been thus displayed, another press of the button will make a Xerox copy of the entire picture, which may be studied further on the train back to Larchmont and later tacked on one of the bulletin boards around the room. The result is akin to the Pentagon war room. One mutual fund was known to concentrate its technical information in what is called “information central.” The computer also adds an aura of mystery and wonder to charting. Even if the chartist’s techniques are unscientific, it is difficult to make fun of the computer, and some of the public’s awe and admiration for computers has rubbed off on the technical analysts.

Correction does much, but encouragement does more (Johann Wolfgang von Goethe). Photo by Elena.