There is an increasing number of amateur technicians who actually believe in what we used to laughingly call the envelope method twenty years ago.

The joke comes from holding your envelope up to your computer screen along the trendline, and thinking it is a tool that forecasts future price movements. The method works at least half the time, so it at least as effective as flipping a coin. Still, thousands of expensive courses, free bogs and everything in between convinces an awful lot of new investors that they can make a living as traders. Obviously, a few succeed and most are disappointed, but that doesn’t stop them from continuing to try and continuing to lose money. The amateurs who are right half the time, lose money because they make other mistakes, such as holding on to their losing transactions and ending the winners too quickly.  (By the way, the pros can make money on a 50/50 proposition because they are disciplined and do exactly the opposite.)

So why do the investment schools teach this to people as some kind of silver bullet? Because the world is full of traders whose lives are just too unpredictable as traders, and they want the regular income they can get by teaching instead of doing. Let me point out that the very successful investors like Steve Shobin, Stanley Druckmiller, and Jimmy Rogers do not fly around the country teaching investment classes. They make the money by actually investing.

I realize this blog will not be popular as there are many believers in this method. I only can propose a simple empirical test. Given the number of schools and their graduates who are proponents and practitioners of this idea of investing by support and resistance, I ask only one question: WHERE ARE ALL THE RICH PEOPLE?