Hi Bill,
(The following isn't meant as a criticism of TA. Most of us look at charts, but we also look at other factors. Just some thoughts...)
One of the things that is different today from 1987 is that many market participants have PCs and charting packages. Sophisticated algorithms previously utilized by a few are now employed by the masses.
For example, I too lucked out on the KO drop with puts. My neighbor, who has a fancy TA package, brought me a chart a few days later showing KO sitting on its 200-day moving average. He suggested I sell my puts since KO always bounces off it's 200-day MA. In fact, I was told, it was a good time to buy KO according to this and other technical indicators (MACD, etc).
Being a faithful follower of the Big Kahuna cult, I suggested that it might be different this time. I.e., from a value standpoint, KO, as well as others of its ilk, are still overvalued. (I even told him the story about the naked emperor.-ggg-) I suggested that most TA packages only work when following trends. Buying the dip will make you a lot of money, as long as the trend continues upward. The trick is to avoid buying the dip that turns into a crash.
I fear many market participants are now looking at their charts and reading signals generated by fancy algorithms all screaming: BUY, BUY, BUY!
As the immortal Don Franklin, aka DJF20000 would say (BK#1312):
"BUY THE DIP, BUY THE DIP, BUY THE DIP.......NDX only down 12 today...DELL only down 1/16, SUNW UP 7/16, IBM down only 2 1/8...BUY THE DIP. DON'T DELAY, BUY THE DIP. I love this market !!! 100 % long at close today....Took all my $$$ and bought T ROWE SCIENCE & TECH FUND. I'm GONNA BE RICH. The big kahuna is a rocketship blasting off for DOW 20,000. Today was just a refueling stop. DJF"
(Where did this frustrated bear go?)
Anyway, the public, now trained to buy the dips, according to MACD etc, will at some point invest its last dollar just before the Big Kahuna.
Best regards, John.
PS: I hope that you don't mind being the implied founder of a cult. What were you doing in California anyway?-ggg- |
