These two strategies together ensure that there is always a healthy mix of cash and open positions. If the market weakens considerably, the system moves to a cash position. For example, during the later part of 1999, the system had close to 75 positions open in six sectors. However, during October of 2000 the system had only two out 100 possible stock positions open. Technical analysis gives you a very solid start for short term trading, but it is not a panacea.
Many traders think that charts predict the future.
They don't, at least not very well or consistently. Technical trading is good for timing, entries, exits and trend identification. We came to the conclusion that the approach to trading has to be more holistic, balanced and cohesive. There are too many factors that influence the direction of stocks. Fundamentals really do matter and they have to be part of the systemic approach, even if the trading system is based on technical indicators.