Jon,
You have captured my entire point regarding technical analysis and charting. I believe very strongly in it as a way of predicting human behavior, but not as a valid statistical tool to predict how a stock's price is going to behave. The market is a zero sum game. For every trade that you do, someone else does the opposite trade. If you are right, someone else is wrong. Left without human behavior, as influenced by hocus-pocus TA math, fear, greed (MMs only, of course), anger, (occasional)joy, and WAGs about the influence of largely unrelated events on the market, stock prices would bounce up and down only as the underlying company's fundamentals changed. I would certainly challenge anybody that tried to tell me that fundamentals have anything to do with changes in Amazon.com's stock prices.
This is, of course, a chicken and the egg debate. It always has been as far as TA is concerned. It doesn't matter if TA makes sense statistically. It works, because we think it does. I believe the first TA actually began back in the Chinese commodity markets, centuries ago. They did charts...candlestick versions...What the heck, if you can believe that sticking a needle in your ear will cure liver disease..then TA works! Right?
I'm an engineer, and I am afflicted with the need to challenge things that don't make sense to me. That doesn't mean I don't use them, however.
Also, I've read the "bible", and about 20 other great books, including McMillan's tome, which is currently causing great dents in my forehead from falling asleep with it. Options are much too complicated! Give me moving averages...that I understand. Herm, are you going to slap our wrists for getting off the subject? |
