Lessons from the late Ralph Bloch

I was saddened to learn of the recent passing of Ralph Bloch, former chief technical analyst for Raymond James.  Ralph was an inspiration to me back when I began studying technical analysis, and I always enjoyed reading his weekly stock market commentaries in the Mansfield Chart service. 

Bloch could best be described, in the words of one of his colleagues, as “old school.”  He majored in old-fashioned chart reading the Edwards & Magee way and he eschewed many of today’s commonly used technical indicators.  In an interview for a well known financial magazine he was asked if he ever used the stochastics indicator.  He replied, “Number one, I haven’t a clue what it is, and number two, I’m not even sure I can spell it.”  He believed that most technicians today are over-reliant on computer trading systems and have gotten away from the basics of what he called “Technical Analysis 101.”

Bloch made a point of reading Edwards & Magee’s classic work, Technical Analysis of Stock Trends, along with Jesse Livermore’s pseudonymous Reminiscences of a Stock Operator at least once a year, believing that everything a trader needs to know is contained in these books.  He was also a chartist par excellence. He once defined a stock chart thusly: “All a chart is are people’s perceptions of what they think the fundamentals are when they put their money where their mouth is.”  He added that when investors put their money where their mouth is, “that’s when technical analysis takes place.”  He believed that both disciplines, technical and fundamental, confirm each other.

Ralph also emphasized the limitations of technical analysis, believing that it’s primarily a tool for making short-term forecasts.  He was quoted by Investors Business Daily as saying, “It is a mistake to use it for anything longer” than short-term planning.  In an interview with Chris Wilkinson in the book, Technically Speaking, he added: “People who make long-term calls usually go down with the ship.” 

He believed his job as a technician was to look at the market every day and judge whether or not it was healthy.  To do this he embraced a bottom-up approach by looking at individual stock charts first, followed by the indicators.  He defined a strong market as being one where the Dow Industrials are making new highs, the Transports are confirming, and the Advance-Decline Line is also confirming and making new highs. 

Bloch was a big believer in tape reading and was one of the last pure practitioners of the art on Wall Street.  He challenged anyone to match his record on Wall Street, believing strongly that “Technical Analysis 101” would beat new-fangled computer trading systems and arcane indicators.  He believed that analysts who follow myriad technical indicators are purposely avoiding making a decision.  As Wilkinson wrote of Bloch in 1996, “His simple and basic approach” made him “immune from ‘analysis paralysis,” a condition of mental immobility resulting from too many indicators generating conflicting signals.” 

He was a member of a dying breed on Wall Street whose accuracy in making stock market calls was unsurpassed.  He will be greatly missed.