When the Charts Know and the Analysts Don’t: “How could these stocks be making tops when my fundamental news is right on line and when earnings are coming through for all my companies? It doesn’t make any sense.” That was the reaction of now legendary technician Alan Shaw when he began his career on Wall Street in 1958. He was looking for something other than fundamental research to help him make stock and market calls.
In a special podcast extra edition, I spoke with Shaw at the annual MTA conference in lower Manhattan earlier this year. It was a fascinating and informative conversation.
During his decades-long career, Shaw often had to hide his technical analysis from clients, tapping into his analytical team to come up with fundamental reasons to pitch a specific stock to clients. The choices were always technically driven, but he couldn’t let the clients know that.
Shaw became an advocate for the virtues of technical analysis. He was the founder and first president of NY Society of Junior Security Analysts, and then founded the Market Technicians Association (now the Chartered Market Technician Society).
He lived through seventeen years (1966-1982) of the Dow Jones average bumping against 1,000 before it finally broke out in 1982. The charts kept him out of equities during that period, and got him into the equities when they finally broke out.
Perhaps his greatest market call was in May 1985, research note, titled the Technical Bull Case for Bonds,” when he told his clients that “based on our technical analysis, we believe that a structural bull market is underway for bonds; short, intermediate and long term indicators are allowing the best bond bet to be made in possibly the entire investment career of the reader.”
Shaw retired before the great financial crisis. He had accumulated a large amount of Citibank stock, when his original employer, Harris Upham and Co., merged with Smith Barney in 1976, and eventually was purchased by Citi. (Shaw became the Research Director at Smith Barney). He had sold his shares of Citibank at $55, and advised his former colleagues to do the same. Not all of them liquidated their positions as he did, and he watched in horror as the stock slid to $2.
You can stream/download the full conversation, including the podcast extras, on iTunes, Soundcloud, Overcast, and Bloomberg. Our earlier podcasts can all be found on iTunes, Soundcloud, Overcast and Bloomberg.