Many of you who follow my analysis have learned quite well how I look at the market. And, those of you who have read me in the past know that I do not view fundamentals as being relevant to determining when we can see a major turn in the metals market.
In fact, in 2011, the fundamentals for the metals market were exceptionally strong, with most everyone believing in the certainty of gold exceeding the $2,000 mark, just before we began a multi-year pullback.
Moreover, the fundamentals were terribly weak just as we were hitting the bottom in 2015, with most market participants being certain that gold was about to break below $1,000.
So, I get many emails from followers who forward me other articles they think I will find amusing, especially ones that like to highlight the fundamentals. But, this past week, one statement really caught my eye.
At the start of this particular article, the article writer began with the following sentence:
“Too many technical analysts dismiss fundamentals. True, technicals usually lead fundamentals but understanding the fundamental drivers (when it comes to Gold) can give you an edge.”
Again, for those who read me often, I am quite certain you know what I am about to say. In fact, I even posted this sentence in my trading room at Elliottwavetrader, and asked for comments on this sentence. And, these were some of the comments I received:
"Too many people dismiss B. True, A is usually ahead of B but taking into account B can give you an edge." What? If A is usually ahead of B, then B is usually useless. So his statement makes no sense.”
“Reminds me of a good quote from The Complete Turtle Trader: A technical trader (trend follower) is purchasing quantitative information from a Wall Street fundamental analyst and notices that they both have a number of the same positions open. When he queries the fundamental analyst about this, he receives the reply, "That's true because even with all of our good (fundamental) analysis, if we don't put a trend following component in it, it doesn't do very well."
And, there were many others along the lines of the two I just quoted. I think you get the gist of the point. If one really understands that technicals will lead the fundamentals, what use would there be for something that is lagging?
To use that which lags in order to make a decision to put your money to work is akin to using a several month delayed price quote.
But, investors have been so indoctrinated to believe that one must invest based upon fundamentals that we have become no different than the masses who were so certain that the world was flat. In fact, R.N. Elliott noted “[i]n the dark ages, the world was supposed to be flat. We persist in perpetuating similar delusions.”
One has to ask if we really have a skewed view about the importance of fundamentals. I mean, if one recognizes that fundamentals lag technicals, yet place primacy upon fundamentals, are they not simply looking at the market with blinders on? Would you ever drive your car while looking out the back window? Just something to think about.
Price pattern sentiment indications and upcoming expectations