The "expected negative return" that you describe can be understood in a number of different ways, but you'd have to explain the particular origin and basis of your calculation for us to discuss it meaningfully. On the surface, it merely corresponds to the "fresh loser" theory, which holds that the majority of traders lose, but whose results can be attributed to the failings of some or most traders (especially beginners, of course) rather than to the inherent inadequacy of the theories they may attempt to put into practice.
No offense intended, but in other regards your reasoning seems rather fuzzy, and your statements seem at the very least inconsistent, if not quite random. At times you seem to be arguing for an absolutist belief in the hopeless randomness of the markets - imputing to the latter a total insusceptibility to probabilistic analysis (based on chart-reading or any other method that I suppose you would term "a posteriori" analysis). In your response to Grace Zaccardi you likewise assert "no causal" link between any basis for prediction and actual results. When you switch to fudgy phrases like "SIMILAR [my emphasis] to a random walk," however, you're back into an intelligibility and therefore a potential predictability paradigm. On other days, you have seemed to be asserting, with apparent complete self-confidence, a different perspective, as in your post which seemed to describe a belief in a prevalent, predictable price pattern (a "pervasive" consolidation count - siliconinvestor.com, which, however, you refrained from explaining when queried. Your response to Zeev Hed likewise suggests a causal relationship between various theoretically analyzable factors and actual later results.
On that note, I think it should also be pointed out that, contrary to your earlier statements, the daily charts of the Dow in August 1982 do not show what I believe a responsible chartist would call a "confirmed" downside breakout. They rather show a somewhat rounding bottom on relatively light volume (i.e., non-confirmation), followed, probably as a result or at least a co-result of the Fed intervention and quite possibly some of the other CAUSES that you mention, by a succession of very high volume upsurges that, at the time, could accurately have been read (and presumably were successfully traded) as suggesting the probability of a sustainable long-term rally, as of course transpired. |
