Technical analysis means looking at past behaviors of investors and using visual tools and mathematical indicators to infer how their future behaviors might be. My experience shows that technical analysis is very successful when established trends continue, but is weak in catching sudden reversals. Sudden reversals are usually caused by macroeconomic developments.
Fundamental analysis, on the other hand, means making future predictions by using macroeconomic, industry developments, and ultimately company-level information. The biggest problem with this is that markets run 6-12 months ahead of the real economy. For example, while the FED was still raising interest rates in October 2022, stock markets realized that interest rate increases were about to stop and started to rise. Those who memorize the information have been in the opposite direction ever since. But there is a definite reality:
If you shorten the term of your future predictions, that is, if you become a short-term investor, the probability of both methods giving wrong predictions increases. When you extend your term, the power of fundamental analysis increases significantly. But here, you need to check whether the trend you have caught is going well or not with technical analysis tools.
Long story short:
When you extend your term, the probability of both fundamental and technical analysis giving correct results increases. When you use both effectively, your error rate decreases considerably. Since the beginning of this year, I have stated that US stocks have been at high levels in both technical and fundamental analyses, but have not bubbled except for certain meme stocks.
Whenever we examined those meme stocks, I said that I found them to be overpriced and that they should not be entered. I even went to take profits in stocks like Palantir. I also added European and developing country ETFs and KWEB to the portfolio. When I think about it today, I should have added more. But I also saw that alternative markets should be entered.
There were option closings in the week of February 20, when the first sharp decline in US markets came. I attributed the decline to that and said it could be temporary. I was wrong here. When the declines continued the following week, since the technical outlook was broken and Trump's determination on tariffs exceeded my expectations, I constantly suggested reducing positions.
I gradually pulled back my distribution recommendation to stocks from 80-100% to today's 0-20% range. Of course, these recommendations are my general directional signs. Everyone can follow different paths according to their own term length, tax planning and risk appetite. For example, I switched to a maximum of 38% cash. I could not sell my stocks at the peak and switch to shorts. After all, I am not a fortune teller, and I do not claim to do so. I could not catch the return day, but I started to take precautions from the moment I saw the trend break and understood the Turmp strategy. But step by step, I reduced my positions, increased my cash and survived one of the "fastest" declines in the history of the S&P 500 with relatively little damage.
Right now, I may not be at the bottom, but I am gradually putting the cash I have back into the stock market. I hope that I will compensate for my losses and make a profit again for 2025. What I mean is that if you use technical and fundamental together, extend your term, give up the ambition of catching the lowest and selling the highest, you will win in the stock markets. This is what I can do. Don't expect fortune telling from anyone. Develop your own basic and technical analysis skills, be flexible. After all, this is not a place to be right, it's a place to make money.
