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The Elves Index
Christmas is upon us and I saw the Will Ferrell movie “Elf” last weekend on TV which reminded me of a story I came across about something known as The Elves Index. This was an an index that tracked the sentiment produced by technical signals used by analysts who appeared on Wall Street Week with Louis Rukeyser on a regular basis. Rukeyser referred to the technical analysts themselves as The Elves. Wall Street Week aired for about 36 years from 1970 until 2005 but Rukeyser abandoned the Elves Index in 2001. One of the reasons could be that the index was notorious for being wrong more often than it was right. In fact some people even used it as a contrarian indicator – when the Elves recommending selling or shorting the market, it was considered a good time to buy.
There is no shortage of “Elves” on TV today (talking heads and guest analysts) pontificating about the market’s direction. Unfortunately, there is no way to tell in advance if they actually have enlightened insight, or if they just sound smart. At best, analysts just narrow the range within which we guess.