Page 325 - How to Make Money in Stocks Trilogy

202 A WINNING SYSTEM

Why Is Skilled, Careful Market Observation So Important?

A Harvard professor once asked his students to do a special report on fish.
His scholars went to the library, read books about fish, and then wrote their
expositions. But after turning in their papers, the students were shocked
when the professor tore them up and threw them in the wastebasket.
When they asked him what was wrong with the reports, the professor said,
“If you want to learn anything about fish, sit in front of a fishbowl and look at
fish.” He made his students sit and watch fish for hours. Then they rewrote
their assignment solely on their observations of the objects themselves.
Being a student of the market is like being a student in this professor’s class:
if you want to learn about the market, you must observe and study the major
indexes carefully. In doing so, you’ll come to recognize when the daily market
averages are changing at key turning points—such as major market tops and
bottoms—and learn to capitalize on this with real knowledge and confidence.
There’s an important lesson here. To be highly accurate in any pursuit,
you must observe and analyze the objects themselves carefully. If you want
to know about tigers, you need to watch tigers—not the weather, not the
vegetation, and not the other animals on the mountain.
Years ago, when Lou Brock set his mind to breaking baseball’s stolen base
record, he had all the big-league pitchers photographed with high-speed
film from the seats behind first base. Then he studied the film to learn what
part of each pitcher’s body moved first when he threw to first base. The
pitcher was the object that Brock was trying to beat, so it was the pitchers
themselves that he studied in great detail.
In the 2003 Super Bowl, the Tampa Bay Buccaneers were able to inter-
cept five Oakland Raider passes by first studying and then concentrating on
the eye movements and body language of Oakland’s quarterback. They
“read” where he was going to throw.
Christopher Columbus didn’t accept the conventional wisdom about the
earth being flat because he himself had observed ships at sea disappearing
over the horizon in a way that told him otherwise. The government uses
wiretaps, spy planes, unmanned drones, and satellite photos to observe and
analyze objects that could threaten our security. That’s how we discovered
Soviet missiles in Cuba.
It’s the same with the stock market. To know which way it’s going, you
must observe and analyze the major general market indexes daily. Don’t
ever, ever ask anyone: “What do you think the market’s going to do?” Learn
to accurately read what the market is actually doing each day as it is doing it.
Recognizing when the market has hit a top or has bottomed out is fre-
quently 50% of the whole complicated investment ball game. It’s also the