Price Is Your Personal Sommelier

December 18, 2022

Fun Fact: In addition to being a Market Technician and CEO of All Star Charts, I am also a Certified Sommelier.

That's like the CMT but for wine.

And just because I own a Winery in Napa Valley and passed a few exams, people think I know everything about wine.

But that's not how it works.

Just like in markets. I've been doing this for almost 20 years. I've passed plenty of exams. But I don't know everything.

That's not what it's about.

Technical Analysis doesn't give us all the answers. But it sure goes a long way in helping us ask the right questions.

In the wine world it's the same thing.

When I'm at a restaurant and open up the wine list, I don't know all of those wines. In fact, I've never heard of most of them.

But I do understand the regions. I understand the styles of wine making. And I know what I'm looking for depending on the occasion and what we're eating.

This body of knowledge helps me ask the restaurant's sommelier the right questions in order to find what I'm looking for.

"I'm having the fish special, but I'm afraid the Chablis might have too much acid and overpower the Branzino. Is there a Cote D'or Chardonnay that would go better with the creamy sauce on the fish?"

"The wagyu beef looks good, but is this Beaujolais Cru going to be able to keep up with the beef? Or do you think the bigger Bordeaux is more appropriate?"

I don't know how the dishes are prepared at the restaurant as well as a professional who works there. I haven't drank most of the wines on the list like the sommelier has. In most cases, he/she ordered those wines specifically because of the menu.

My knowledge of wines from around the world helps me ask the right questions so I can make the best decision.

In the market it works the same way.

As much experience as I have in the market, as much as I may know about Technical Analysis, I've never seen tomorrow's market before. I've don't know what next week or next month will look like.

But I do know which questions to ask.

Price is our own personal Sommelier in the markets.

We want to ask in which direction price is heading?

Is the price showing relative strength or relative weakness?

How does the momentum of those price changes look compared to other times in the past?

How is the implied volatility being priced?

Changes in asset prices are not random. We know that. We have the data.

Asset prices trend.

It's just how the market works.

So that's where we turn to ask the right questions in order to make the best possible decisions.

Price is our personal Sommelier.

- JC