“The lure of the distant and the difficult is deceptive. The great opportunity is where you are.” – John Burroughs, 1837-1921. American Essayist

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There are two schools of thought on the study of the stock market: fundamental analysis and technical analysis. A fundamentalist studies the cause of market movement, while a technician studies the effect.

Back in the 1980s, during my wire house days, there was a broker in our office that lived on cigarettes and coffee, sat in the corner office with his three computer screens (a very big deal back then) and said “grrrr” quite often. He kept to himself and his physical appearance said stay away, yet he was quite friendly when approached properly.

The two schools of market analysis are not mutually exclusive but back then it was as if he were a Martian in a retail brokerage office. After market hours I would ask him to explain his trend lines and charts. The two key sources of information for a “techie” are price and volume. For a quick synopsis of what I learned read on.

Fundamentalists examine security values based on qualities such as earnings, balance sheet variables and management quality. The process attempts to determine the true value of a security and if the market price of the stock deviates from this value, to take advantage of the difference by either buying or selling the stock.

Technical analysis already includes the fundamental. If fundamentals are reflected in market price, then the study of fundamentals becomes unnecessary. Technical chart reading is the shortcut that studies relationships and trends among security market variables like price levels, trading volume and price movements for insight into the supply and demand for securities.

My buddy Tom thought it was possible to trade using just the technical approach. He doubted that anyone could trade off fundamentals alone without considering the technical side of the market.

Guess which school of thought he thought was superior? The problem is that the chartists and fundamentalists are often in conflict with each other.

My synthesis of this information over the years has led me to the conclusion that the investor who uses both styles of analysis to compliment one another has a balanced understanding which may provide a basis for investment decisions.

If you are looking for a little light reading in 2008 there is a book that is described as “the standard text for anyone interested in the construction and interpretation of bar charts — comprehensive, profusely illustrated, covering everything from alpha to omega — a brilliant work.” The late John Magee was the author of the book “Technical Analysis of Stock Trends.”

Just for fun, here’s a list of resolutions from a “techie” that we can all take to heart in the New Year:

An investor’s New Year’s resolutions, by John Magee:

“Resolved, that in the coming year –

– I will not alienate my friends and antagonize my family by reminding the world on every possible occasion how right I was about the upturn — or downturn — in steels, motors, airlines, or whatever.

– When I buy a stock I will not mobilize all the good news to make it look pretty. I will try to consider both the favorable and unfavorable angles as impartially as I know how.

– I will not close out a stock position that is doing well by me for no other reason than that I have a profit. I will not cut short my gains in a good situation.

– I will not hang on to a stock that is persistently going against me. I will limit my loss, and close out any position that seems to have gone really bad before I am in danger of serious trouble.

– I will not be swayed or panicked by news flashes, rumors, tips, or well-meant advice.

– I will not put all my eggs in one basket, nor will I be swept off my feet to plunge into some unknown or low-priced stock on a purely emotional basis.

– I will not attempt to tell the market what a stock ought to be worth. I will try to understand what the market has to tell me about what people are willing to pay for it.

– I will never forget that I am not in the market primarily to prove — to my broker, my friends, my wife, etc. — that I am smarter than everybody else, but to protect and if possible to augment my capital.”

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Darcie Guerin is a financial advisor and branch manager at Raymond James & Associates, Inc. located at 606 Bald Eagle Drive, Suite 401, Marco Island, and FL 34145. If you have questions please contact Darcie Guerin via Email at Darcie.Guerin@RaymondJames.com. Phone (239)389-1041, toll free (866)-343-0882 or at www.RaymondJames.com/Darcie.