Hi MSB; In fairness to EWT, while I often call it voodoo I know it
has some validity, and least on the shorter time frames. What
gets me is when they start extrapolation it out, and going back
to 1929, I know for a fact it can't work over long time frames
because I've done to much work on indexes. The big market tops
are hardly ever were you see them, the index itself is skewed,
and not always skewed the same amount. No one I know of maintains
or publishes the data, to adjust the index to were it would be
without the foam in it. No index we have measurers the entire
market, and at times the degree ( amount ) of they market they
do measure varies, that un-measured amount as well as the
leverage degree might not change a lot over a year or two,
but it's completely unpredictable beyond that.
Other factors come into the market over time that are completely
new and where no history exist that can be extrapolated even to
the present , at best we factor it in gradually but if we go
back even ten years and try to apply that to the present we
are chasing mirrors and smoke, the internals are not the same
the amount of market measured is off, and the leverage factor
is never the same nor does it have any rhyme or reason to expect
a rhythm that we can count on.
Any way shorter term EWT is not as bad as I at times make it
out to be, but some people over rely on it, so I try to take a
stand that might encourage them to confirm it with other indicators,
as to me any indicator, is just an indicator like the gauge on
a steam line, it may not be right and we need a way to check it
against something else.
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All that aside I see the equity market about 20%+ over valued at
this time, however it can get 50% over valued , it seldom
ever gets truly under valued. The pundits will work day and night
to see that don't happen. <G>
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Also I have no way of calculating the total leverage in the market
while the SEC has limited the amount funds can leveraged since 87,
that's per each fund..but individuals with some talent can
circumvent that..and even if the reduced leverage is applied
how do we know the aggregate amount , no one is reporting it.
Also the amount the market is shorted only comes out after
the fact, we get the info second hand and about 20 days to
late to make sense of it, and then have to use that late info
for another month to guess at were the real top or bottom is
but the short ratio can change greatly in just a few days and we
have no way knowing it.
So when it comes to EWT , or TA one may say the errors are more
built into the internal nature of the index we are looking at than anything else. And that internal nature has no rhythm over
any long period of time, or if it does it changes in such a way
we don't yet have the tools to understand it.
We are still yet sort of like the sailors of old were, even after
they understood the earth was not flat and could sail by latitude, they for years had no way of finding the longitude.
Jim |
