The great thing about investment is that you don't have to know why you are right to be right. Some say the success of the chartists this year is a fluke. But there is no doubt they are having a good run

INVESTMENTS

This is turning out to be a truly bumper year for equity investors on both sides of the Atlantic. With the Dow Jones index bursting decisively through 5,000 for the first time last week, it now looks likely that Wall Street will produce one of its best returns of all time this year.

The market is up 30 per cent already and there is no sign of an end to the giddy upward momentum. It is more than five years, a record 61 months, since the US market last experienced a 10 per cent correction. The market has risen 1,000 points in barely nine months.

In London, meanwhile, the FT-SE 100-share index continues to be pulled along in America's wake, with the Granada/Forte bid the latest in a string of big corporate takeovers that is also helping to keep the market buoyant.

Note that the bull market in London is still more of a "blue-chip" phenomenon than anything else.While the Footsie has been reaching new all-time highs, the All-Share index, which includes smaller companies as well, has not risen quite as rapidly.

Bull markets of this sort naturally tend to make everyone happy, but nobody is happier, this year, than the UK's army of technical analysts. Frequently derided as charlatans by professional investors, this hardy band of enthusiasts, who look for trends in stock market prices, has been having what for them is a quite wonderful year.

While fundamental investors have tended to worry about how high the markets have risen on conventional valuation measures, most chartists have correctly argued that the bull market in both equities and bonds looked set to continue. They spotted early on that the trend this year was a powerful one with plenty of momentum behind it.

In earlier columns, I have highlighted the views of Robin Griffiths, the chartist at the stockbroker James Capel, whose charts and models have helped him to call the markets outstandingly well all this year. He for one will not have been surprised by the latest surge on Wall Street, which he has consistently predicted. He remains fundamentally positive about the short-term outlook for both the UK and US markets.

Given how well chartists generally have been doing, this seemed an opportune week to catch up with someone who can justifiably claim to be one of the doyens in the UK. Until he set up his own boutique in the early 1980s, Brian Marber was a broker who regularly topped the chartist section of the annual analyst rankings. Although the bulk of his business now comes from analysing currencies (where technical analysis has long been much more widely accepted than in the stock market), he continues to call the trends across the market spectrum.

A lively and talkative man who spews out ideas in a seemingly endless stream, Mr Marber has no illusions about what technical analysis can and cannot do.

He points cheerfully to research that shows that, in currencies, technical analysts tend to be right half the time whereas fundamental analysis only comes up with the right answer 40 per cent of the time. His philosophy is that it is better to be right for the wrong reasons than vice versa. Nobody, in his view, should pretend that calling the market right all the time is practically feasible. The best that anyone can hope to do is to catch the best part of a significant price movement.

Investment is a game of being right more often than not; and the golden rule for chartists is to be brave enough to avoid giving a firm view when the charts have no obvious message.

On Mr Marber's desk is a quotation from Winston Churchill: "There is no sphere of human thought in which it is easier to show superficial cleverness with the appearance of superior wisdom than in discussing questions of currency and exchange." I also liked another aphorism from Mr Churchill that "the potential for loss when gambling on certainties is enormous".

What technical analysis can do, and do very successfully in my experience, is help to spot developing trends and keep track of them. The aim is to keep aboard bull market runs and out of downward trends. For example, Mr Marber claims that nobody who followed technical analysis could or should have suffered the way many professional investors did when bond prices fell sharply in February 1994. The risk of an extended fall in bond prices was evident from the shape of the charts.

That may well be true. But, in my experience, the trouble with many chartists is that they are often their own worst enemies - too much jargon and bogus science, too little common sense and plain speaking. An irritating trick of the trade is the habit of inserting so many qualifications to any firm view about the market that it ceases to have much value.

Mr Marber is naturally alive to such accusations, having heard them many times before. His weekly faxes and commentaries are not short of the often baffling lingo in which chartists love to indulge. (A sample from last week: "Stochastics were falling and unless bottom reversal candles intervene, last week's top reversal candles have caused trips previously arranged to the upper Bollinger bands to be cancelled".)

But Mr Marber is simplicity and clarity itself about the direction of the main markets themselves. He remains very bullish about both the London and US stock markets, as he is about bonds too. "We all know," he says, that the bull market is mature, that it has risen very sharply and very quickly and that it "won't last forever". But so far there is no sign of the trend running out of momentum in his daily charts and, until that happens, his conviction is that the bull market is firmly in place.

Mr Marber is also a keen follower of the so-called Coppock indicator, a technique for spotting changes in the direction of markets, named after a devout Episcopalian whose church asked him to work out a formula for deciding when to increase its investment exposure.

Once a Coppock indicator has flashed, it is followed on average by a significant market rise over the next 11 to 14 months. The indicator flashed for the UK market in April this year and, if history is any guide, it will now carry the market up to around the 4,200 level by next summer.

You don't believe any of this? A surprising number of investors do and it pays to keep an open mind in this game. As Mr Marber says, the great thing about investment is that you don't have to know why you are right to be right. Some will say that the success of the chartists this year is a fluke. But there is no doubt they are having a good run; and if the bull market in London and New York continues for much longer, they will be vindicated still further.