Charts Vs. Fundamentals

I want to emphasize the unprecedented (for Mad Money) nature of the series we're doing this week on technical analysis versus fundamental analysis. This is really the first time that we've explained how to look at charts in depth, or put them to work in a sustained way. That's not to say that Jim doesn't ever rely on technical analysis. After all, he gets a book of charts delivered to his front door every weekend. It's just something that stays very much in the background rather than the foreground. At the end of the day, we're all fundamentalists here at Mad Money.

So why the change, why is Jim talking about both what the charts tell us about stocks like Potash and ConocoPhillips and the fundamentals, the facts about the underlying companies and the macroeconomic backdrop that we usually rely on? In part, it's because we want to be educational.

But mainly all of this stuff about technicals is just an extension of something we always try to do, helping you get inside the heads of the big institutional money managers whose decisions drive stock prices, at least in the short term. Right now, as Jim's said, a lot of the action in this market seems to be driven by the charts. So we're explaining the technicals to you because the big money guys are relying on them more than they usually do.

Over the course of much of last year, when hedge funds were plagued with redemptions and forced to liquidate their positions, we talked about forced selling caused by hedge funds gone wild. The idea is to figure out what's motivating the money managers, who tend to be pretty herd-like in their thinking. And right now we think it's the charts, just as last year we thought it was their need to sell stock in order to give money back to their clients.

We're always going to rely on the fundamentals over the technicals. That's why Jim picked Terra Nitrogen over Potash on Monday night. But we also want you to understand why stocks are behaving the way the do, and what's controlling the market in the near term. There are plenty of investors who rely exclusively on charts, and by the end of this week, we hope you'll be able to understand how they think and how they operate. That's useful long term. Short term, you need to understand the technicals because, for the moment, they seem to be guiding the decision-making of the big money guys.

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Jim's charitable trust owns ConocoPhillips.

Cliff Mason is the Senior Writer of CNBC's Mad Money w/Jim Cramer, and has been that program's primary writer, in cooperation with and under the supervision of Jim Cramer, since he began at CNBC as an intern during the summer of 2005. Mason was the author of a column at during 2007, which he describes as "hilarious, if short-lived." He graduated from Harvard College in 2007. It was at Harvard that Mason learned to multi-task, mastering the art of seeming to pay attention to professors while writing scripts for Mad Money. Mason has co-written two books with Jim Cramer: Jim Cramer's Mad Money: Watch TV, Get Richand Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer). He is 100% responsible for any parts of either book that you did not like.

Mason has also had a fruitful relationship with Jim Cramer as his nephew for the last 23 years and will hopefully continue to hold that position for many more as long as he doesn't do anything to get himself kicked out of the family.

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