Yesterday I responded to an email from a reader who questioned the predictive value of technical analysis. Last night contributor Chris Kimble, a veteran technical analyst, emailed me some additional thoughts on the merits of TA:

In Kansas, farmers grow a decent amount of wheat. What is the one thing they know at the time of planting? They know when they will "harvest." Investors around the globe were given a 100%+ rally in the late 1990s and a 100% rally from 2003 to 2007. Why do some investors have little to show for these two massive rallies? No "plans to harvest."

Markets are risky. I view support and resistance as "Risk Management lines in the sand." As you can see from the support and resistance lines drawn on the Wilshire 5000, they aren't predictive in nature. No, they are tools to risk-management buy and sell lines. Both support lines below (1) if used as "harvesting tools" would have helped investors pocket some decent gains, regardless of opinions on valuations, dividend yields, etc. I love fundamentals, yet sometimes as this witty poster highlights, they have challenges as well.

Well said, Chris. I use moving averages for a similar risk-management purpose, which is why, without comment, I automatically added a 12-month simple moving average to this chart.