But a BIG QUESTION you have the accepted Sperandeo trendline line. in a back look it seems to so the bull run we have now.
The question did it show that break REALTIME or is it that it shows it after math manner.
I do see i beat his line in 2000, as i called sell, sell like hell all longs on April 5-7 2000--it was a mix of data and Intuition( Sperandeo trendline doesn't give sell signal until the final break of 3624.)
I didn't need to yell after that.
i don't know Sperandeo(i assume he is propietary)
Victor Sperandeo - book: "Methods of a Wall Street Master"
amazon.com
Despite the cheesy title, its worth while reading. Frankly there are only a couple of things that I really use from it, but they are worth far more than the price of admission (the book). The trendline methodology is one; the other is a clear definition of the "2B" Test of Top/Bottom. Those two ideas probably take up on ly 5 pages in the book. The rest of his thinking might also be worth while too.
For a technical analyst, the correct methodology for drawing trendlines can dramatically improve one's ability to mark out patterns, let alone more correctly draw trendlines. Of the two, the former is more important in my books for every day use.
Back to the use of trendlines - in the short term, I agree they are valuable. But in the long term, I question their utility, with the exception that if an obvious long term trendline break occurs (talking years), clearly others will see it too and that can have an impact on investor psychology.
But there is no more meaning than that embedded in very long term trendlines (talking many, many years again). Particularly in indicies, where the actual components change extremely frequently relative to the length of some of these lines.
Back to what prompted this discussion on my part, the magical moving trendline which Jaime highlighted
trendvue.com
(magenta)
Isn't a "trendline" at all. Its just a line connecting two points on a chart. Whether one agrees with Sperandeo immediately or not, it should be self-evident that a trendline should have some relationship with what defines a trend.
Namely - higher highs and higher lows, or lower highs and lower lows in a downtrend.
The Orange line on the chart accomplishes that. The Magenta line does not.
I do not use trendlines of these sorts to justify buy or sell decisions - but I would certainly put some weight on my thinking that after the break of the orange downtrend line, it was time to start thinking that longs needed to be favoured.
Truth be told, the intraday action one dark day in October 2002 had me seriously thinking that an important bottom had been put in. My partner and I - both experienced if not even accomplished short sellers - both sensed that capitulation had finally been reached. Intraday futures traders tend to get a sense for this, but even a casual day end observer could see that the market had been directional for so long, really any fool that pressed Sell was making money.
So, on extreme 'bearishness' the market reversed and passed a test of bottom that October. That was the first clue.
Its not like we were calling the bottom all the way down. Way back in 2001 I surfaced during one rally to offer my own version of a warning against premature optimism:
Message 15437043
Sadly we took down the site that holds those old charts, but on them, you'd see those same horizontal lines I favour so much.
The fact is, until the bottom most range (on a daily chart at least, but a weekly chart is probably easier for most to see it on) had tested, reversed, and cleared the top of the range, "da bull" was not dead.
Going back to this chart again
trendvue.com
The swing high immediately prior to the lowest low in October should have been used by investors as the important line in the sand. Clearly it did for most, as leading into 2003 that line in the sand was crossed and tested a number of times. Upon the exit up in Spring 2003, There's no reason not to be going long, secular bear market over or not. Or at least not being net short.
Is "the bottom" over? I've no idea. There are plenty of world and economic reasons why that may not be the case, but the world is a pretty funny place, liable to do some rather strange and amazing things. Since we can't predict all turns, I refrain from using terms like bull and bear - our job is to make money from the market, protect capital when we must, and avoid being trapped in analysis paralysis at all times.
For now, the market is trending up, so we know what to do. We'll see if a decent test of bottom is set here if price continues up... or if it fails to hold then we'll adjust our thinking and do the right thing. |
