What traders can learn from the markets' reaction to the S&P warning

Trying to forecast markets based on current events (or fundamentals) is a hopeless task, says John C Burford. The key to forecasting is to keep a close eye on what everyone else - the herd - is doing. And all is revealed in the charts.

In a recent post, I expanded on the idea that trying to forecast the market based on the news (or fundamentals) is a hopeless task. I gave the example of the dollar, where I painted equally plausible scenarios which gave diametrically opposite forecasts.

While this is fine for economists, for traders it's a little unsatisfactory. So is there a better way to forecast markets?

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John is is a British-born lapsed PhD physicist, who previously worked for Nasa on the Mars exploration team. He is a former commodity trading advisor with the US Commodities Futures Trading Commission, and worked in a boutique futures house in California in the 1980s.

 

He was a partner in one of the first futures newsletter advisory services, based in Washington DC, specialising in pork bellies and currencies. John is primarily a chart-reading trader, having cut his trading teeth in the days before PCs.

 

As well as his work in the financial world, he has launched, run and sold several 'real' businesses producing 'real' products.