In an article for Portfolio.com, Felix Salmon recently dismissed the value of technical analysis by pointing to a blown call by CNBC's Jim Cramer that relied on an interpretation of an arcane technical indicator ("the S&P Oscillator"). In fact, Salmon went so far as to call technical analysis "the art of drawing lines on charts and extrapolating from them what the market is going to do next" and "the financial equivalent of astrology."

In response, Barry Ritholtz of The Big Picture has posted a lengthy defense of technical analysis, arguing that it can be an effective tool in any investor's toolbox  - if used properly and judiciously:

"I posit that, when used appropriately, charts and data can provide tremendous insight:

-Provides a statistical approach to investing, one that describes the probabilities of various outcomes (versus making predictions)

-Charts show you if we are in a bull or bear market, allowing you to manage risk appropriately;

-Trends can keep you away from the wrong sectors (Housing, Autos, and Finance are obvious examples) or keep you in the right sectors (e.g. Energy and Ag)

-Developing good risk/reward analyses;

-Tracking what the institutions are doing;

-Identifying specific stocks that might be appealing;

The bottom line is that technical analysis is merely a tool, albeit one used more skillfully by some than others."

After all, as Barry points out, everyone peeks at the chart of a stock from time to time, so there is definitely some value in understanding recent chart behavior. What do you think? How important is technical analysis to your investing approach?

[image: Jim Cramer's Adventures in Technical Analysis]

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Ultimately, all of our investment choices are 'best guesses' based on our level of knowledge. At least they should be. If you are just figuratively throwing darts at the board and investing in whatever you hit, do yourself a favor and wuit while you are ahead or behind as the case may be.

Everyone has a 'system', and there are MANY MANY tools and information available to work from. For the love of pete at least use some of them. It is very easy to get overwhelmed by all the resources available too, but ehy are all just tools. The difference between you and Jim Cramer, Warren Buffet etc. is that they have knowledge you don't. It's really that simple.

So get the knowledge be willing to make mistakes, learn from them and move forward. Given the currently large part of the market that is speculation, I use technical analysis as a screening tool, then look at which way the wind is blowing and make a judgement call. How accurate that call is depends on how much research I've done. However, as with anything you do repeatedly over time, you develop a feel for what works. This is where the beauty of technical analysis comes in. It allows you to back up your feeling based on past mistakes, successes and experience, and back it up with facts or prove it wrong and prevent a future mistake.

Yes it is only a tool, but just like when you're under the car or the sink or up on the roof, the one tool you didn't bring is the one you are going to need. Keep as many in your toolbox as you can.

Somewhere I have heard it said that , "If a technique or system is well known by the few, then they will have an advantage.  However, if the many know then there is no advantage and this will be priced in the market response."  Not my own thought or an exact quote from anyone I can name but I am sure we all get the meaning.  It sounds reasonable even if it is not true.  In relation to technical analysis, it is one of the checks I use to give me a warm fuzzy.  It is not something I would exclusively rely on when buying or selling an equity.

AHH Yes!....The Warm Fuzzy Indicator or WFI as I will call it now...:0)

Really, for most investors, it comes down to your best guess based on the all the facts you know. The less facts the greater the chance for failure.