On Tuesday's show we did an Off the Charts segment that was a little different than usual. Normally when we talk about technical analysis, we're looking at the chart of a specific stock. But this time we focused on the entire market.
Since we're fundamentalists in the vein of Benjamin Graham and Warren Buffett (not that Buffett's been all that great lately), rather than Cotton Mather, Jonathan Edwards (as in Sinners in the Hands of an Angry God), we don't normally believe the hocus pocus that makes up the technical case for buying stocks like IBM, Freeport-McMoRan or Transocean, or the technical case for selling stocks like Qualcomm , Jacobs Engineering , Caterpillar, Terex, or Life Partners, which, by the way, is down more than $10 from $28.70 since we told you to sell it on Feb. 12.
All of that, looking at the charts of individual stocks, is technical analysis that we don't put much stock in. But we look at it anyway because a lot of important money managers follow this stuff.
What we did on Tuesday, with help from Helene Meisler who runs the Top Stocks newlsetter at TheStreet.com, where Jim is chairman, was something else entirely. We looked at some tools technicians use that we also have some respect for. When you're dealing with marketwide moves, which is what Jim talked about on Tuesday, then the technicals are more than just mumbo jumbo. The oscillator that Jim looks at to tell how overbought or oversold we are is a technical indicator that works like clockwork. We get too oversold, and we almost always have an oversold like we did on Tuesday.
There are ways you can combine technical analysis with the fundamentals and come out better for it. For example, knowing that Tuesday's rally was based on the technicals would have let you sell off some positions because you knew there was no underlying fundamental basis. I look at this a little differently from trying to spot patterns like head and shoulders or reverse head and shoulders in a stock's chart. The technicals are a way to gauge sentiment, and the ones that work well, like the oscillator Jim mentioned on Tuesday, work really well.
Cramer's charitable trust owns Caterpillar, Freeport-McMoRan and Qualcomm.
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 TheStreet.com 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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