Let me start by saying that I am sure that everyone on this tread enjoys and looks forward to Stephen's periodic TA of WIND, and we hope he continues indefinitely.
But as Stephen knows, like you, I am a doubter of the merits of TA for two reasons. First, the predictive value of TA is at best, as you suggest, like predicting the weather - a non-linear system very sensitive to small changes in starting conditions. In other words, weather systems, economic systems, stock markets, and the like, all are chaotic, and display predictable behavior only for very short periods of time. No matter how fast Intel makes processors, and no matter how many weather sensors are deployed, it is only possible to extend accurate weather forecasting a little beyond what can be accomplished today, due to its inherent chaotic behavior.
At best, I suspect that TA can only be used for short-term trading, for exactly the same reasons as weather prediction is limited to short time periods. Perhaps WINDs recent price slide is due to a Brazilian reversing a short position and investing long in butterfly wings in the rain forest last month.
But weather forecasters have one advantage over Technical Analysts. They are not in a zero-sum game. Technical Analysts are. Technical Analysts not only must predict the equivalent of weather, but they must do it in view of an intelligent opponent that is actively and aggressively trying to defeat the analyst by overturning his predictions.
If the weather forecaster discovers that certain combinations of observations reliably give rise to corresponding weather patterns, then that will always be the case, and it will not change just because he discovered the relationship. If the Technical Analyst makes a breakthrough discovery, the ever-alert stock market will sense it and attempt to nullify its usefulness.
With all these real or imagined difficulties, perhaps now you can see why we appreciate Stephen's ability to guide us through the morass of market price mysteries.
Allen |
