Sharp,
I guess we're going to have to define our terms, because what you describe (no matter what system you use to derive it) sounds like TA to me: the analysis of investor emotions, fear, causation based on a few time frames' worth of investment evidence, derived from price and volume.
For me, fundamental analysis goes back to Ben Graham and relies on a clear understanding of a company's (or sector's) improving or eroding economic and financial prospects to determine an investment/trade, long or short. Fundamental analysis would look at Dairy Queen or a carpet company and crunch the numbers, margins, p/e's, pegs, product line, management and come to an asset and earnings valuation of that company. FA puts its faith in the numerical analysis and says investor sentiment is 1) often wrong and 2) basically irrelevant.
Now, when we look at precious metals, we find some interesting things. Let's just take gold. It has no commercial use or value (let's just stipulate that) and every ounce that has ever been discovered or mined is still in existence. Every mine and source of gold which has been discovered is still there, waiting to be mined (unlike hydrocarbons, which are not only used up but may be lost if not properly or consistently mined/extracted). When the price of gold rises enough, supply comes out onto the market. There is no fascinating, new extractive technology which will bring more gold to people. We haven't discovered any new use for gold, it's still jewelry and bangles and baubles and ingots.
So the FA story on gold hasn't changed in 20 years, or 100 years (well, gold standard for currency, etc. but let's move on). What has changed (and can change again, very soon)? Investor sentiment, pure and simple. The analysis of, listening to, and predicting of investor sentiment is just a simple description for TA. None of these companies has changed in a fundamental way; the only thing which has changed is the price they are getting for gold (and the anticipated price for gold in the future). What has changed the price of gold? More jewelry being hammered out in gypsy camps? Nope, just a neat little nexus of investor sentiment, mostly forex based. I have to reject that India/Pakistan has much to do with the spike in gold, since 9/11 caused almost no rumble in gold prices.
Maybe silver is a little different but I doubt it (otherwise, why is it rallying with gold?). Mines have been closed? They haven't moved, have they? Just drive on out and open them up, start digging and chipping away where you left off 16 years ago.
You wrote, "Remember, the only real info on a stock is price and volume. You can judge the direction of change, the rate of change, and the rate of change of the rate of change. Anything else is sheer buggary of a data set too thin to squeeze any more out of."
Exactly, and when you think about it, the direction of a stock's price is pretty limited, too. It can stay the same, go up, or go down, at different speeds.
In any event, it's all interesting and it's all good, but it still seems pretty technical to me.
Kb |
