Hmmmm....
Well, I appreciate your remarks- really. But as I do not believe that news and such drive the markets per se, thinking more that news and analyst opinions are explanations after the fact...I read those comments more with mild amusement than anything. I have long ago given up trying to chase the market up and down based on the musings of analysts and news
stories...that's a great way to go broke!
The problem with that sort of "fundamental analysis" (not to be confused with analysis of PE's and accurate observations of hot sectors and economic activity and interest rates, etc.) is that stories and opinions can be easily manipulated
or even innocently favored according to one's personal market bias, which may or may not be correct.
On the other hand, following of Technical Analysis is merely the following of actual chart action and indicators (which are mathematical derivations of chart action:price and TIME). The bias becomes what the chart is pointing out! Of course,
TA can be misused, misinterpreted and this I believe gives rise to the belief that TA doesn't work.
Of course, there's also the voodoo which masquerades as TA
(cycles, wave theory, even my favorite observations of lunar cycles). They do have value, but are very susceptible to
personal interpretation and quirky, unpredictable variations of probability.
I am not making fun of FA'ers...but I really do not believe for a second that "oils, financials and Hewlett were too much for this market to absorb.." This is an after the fact attempt to characterize the actual Chart Action of the day.
Has no value to me, in fact it is dangerous in that it promotes the belief that these considerations are what actually caused the action. They were components, but not
THE reason. Also, if I were to believe that the comments of
"Kumar" moves the market...then I would have to give up trading as I will not assign my fate to the comments of any
analyst...thus waiting with bated breath for every comment of
Joe Analyst and hanging on every word. I can tell you for sure that the market does not care at all what Joe Analyst says. It could be that Joe is very good and has prescient and timely things to say....but I do not believe they "move" markets. You could give me examples of Joe said this, the market did that...and I can give you many more examples of Joe missing the boat altogether. Given the number of analysts and commentators, probabilities are that someone on any given day is going to "get it right", but how is anyone going to know who will be right on any given day?
The reason that TA appeals to me, works for me...is that TA
offers the individual who is willing to study and perfect their science/art of TA the freedom and power of being their
own expert, often bettering the musings of "the experts". I learned as a youngster, that with an open mind and ability to absorb information and interpret that information, I was often much better that the "pro" who got paid to do whatever it was I was studying. Belief in myself and practice becoming expert in whatever endeavor only made the process easier and
became self-fulfilling prophesy as I succeeded. Success breeds success.
I would like to make clear that I do not at this point consider myself a "master" of T.A., so I do not feel I'm just tooting my own horn here. If this were chess, I would consider myself an "A" player of T.A. In chess, there is Candidate Master, Master, Grandmaster yet higher in level.
An "A" player, if statistics haven't changed too much since I last looked, is in the 90+ percentile. In other words, in better than the top ten percent. So, while I consider myself accomplished enough to profitably use TA, there is yet considerable room for improvement. Study and practice are the key. The main thing for me now, is I don't really have to give a darn what Joe says...makes no difference, nohow, noway.
If one were to study or observe the "reaction" of price for example when stochastics breaks from overbought downwards on any given time-frame on chart after chart, one realizes that it is a "good bet" to exit long or go short on this occurrance. A confluence of chart patterns, variety of indicators, volume and it's meaning coupled with price action, and perhaps a little voodoo only improves the forecasting ability and effectiveness of TA in general.
Getting back to the market itself, in particular the $compx chart..I would like to make a couple of observations at this point. On 5/21-23, the comp printed an Evening Star candlestick pattern, a bearish development. 5/25, 29, 30 saw a decline on rising volume (an indication the down move is for real) and then 5/31-6/4 saw a bounce on decreasing volume
(a clue there is NO conviction behind the move). 6/5 was a strong volume day, which often denotes a top. Observe how the strong volume days of 4/11, 4/18, 5/2, 5/22 accurately called the tops in the entire rally from 4/4 to present. It might also be too early to say, but a case can be made for a head and shoulders pattern with 4/19-5/15 the left shoulder, 5/16-5/30 the head, and 5/31 to present the early formation of the right shoulder. If this pattern is true, lower prices are ahead. To be fair, and on the positive side, stochastics on the daily did cross up 6/5 and technically, this has not been negated (yet). However, the cross back up was not from the oversold zone, so the signal is suspect. Another consideration is a trendline using the low points of 4/4 and 5/16 broke to the downside 5/30 and is currently trading below, with 6/5 and 6/6 failed attempts to re-enter above the
line (again in fairness it could be argued the trend-line is invalid due to only 2 touches). Note that each attempt so far to contain the downside potential of price with the lower boundary of an uptrend line has resulted in downward break after downward break, readjusting the lower trendline at a lesser and lesser angle. I believe this is portending a reversal of trend from up to down (on an intermediate timeframe). In conclusion, while I am not stupid enough to say that the Naz is definitely going down the crapper, I am definitely not foolish enough to ignore what very much appears to me as negative developments in the current rally.
Also of note is that my much beloved Penny Stocks have not been behaving very well as of 5/30. When the parallel occurrance back in Jan-Feb took place, the Naz dumped for two solid months. Also, the metals have reawakened recently and their rise I do not consider bullish for stocks.
I could go on and on, but honestly I have already bored and tired myself out.
I wanted to explain why I am currently bearish regarding the market, and why. It is my interpretation of TA and not a personal bias nor the parroting of Joe Analyst's comments.
Each day, another piece of the puzzle is given and of course modifies or fills out the picture being created. This requires the flexibilty to change one's opinion given the right circumstances, at present I see nothing to make me want to
go long anything tech. I believe the following weeks will bear out (or refute) the wisdom (or foolishness) of this opinion.
Best Regards and Best Of Luck,
Eichler
P.S. I am perfectly willing to let the market show me I am wrong. But, I want to see it before I believe it!
Also, I am sorry for all the mis-spellings...I am just too tired and lazy right now to go back and fix 'em... |
