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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Eric Wells who wrote (34994)	12/10/1999 12:50:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 99985

Eric, an interesting aspect of this is that specialists and MM's often 'run stops' that they know have been established on the basis of TA, only to have the stock reverse in the opposite direction once the stops are picked off. btw, the 'self-fulfilling prophecy' aspect of TA imo contributes to the blow-off moves we can observe in many of today's speculative market darlings. nevertheless, TA is a legitimate approach at divining market psychology. since psychology and liquidity are the primary forces moving the markets, TA is much more useful for trading purposes than FA can ever be. the current market bears this out in a very extreme manner. companies that represent great value fundamentally see their stock prices fall day in day out, while basically worthless fluff goes to the stratosphere. based purely on TA, this is less of a surprise than it is in terms of fundamentals, as TA reflects the psychology behind these moves. regards, hb

To: Eric Wells who wrote (34994)	12/10/1999 6:13:00 PM
From: Lee Lichterman III	Read Replies (1) \| Respond to of 99985

Heinz gave you a great answer regarding TA and does it self fulfill but I will add one thought to your question. If everyone agrees that a stock is going one way or the other, then the opposite should be expected since the market historically moves in such a way as the fewest people get the most dollars out of it. Only 30% of daytraders succeed in staying alive and less than that get rich. I have many an investor that is losing money right now in this "Bull Market". Most fund owners are under performing due to either the wrong funds or maintenance fees etc. Momentarily we may all agree on a direction but if too many get on board, there are enough isolated people with big enough wallets to pressure that direction enough to turn it the other way and make it profitable for them while everyone else is figuring out that the momentum has shifted and switches sides allowing those few that caused it to profit from the now numerous late comers. Good Luck, Lee

To: Eric Wells who wrote (34994)	12/12/1999 3:34:00 AM
From: Vitas	Respond to of 99985

Eric, Any approach that is overused will ultimately fail. That is called 'sentiment'. My point about fundamental versus technical analysis relates to the fact that traditional measures of value, that have worked for decades, are no longer working. Perhaps that is because we are in a very untraditional epoch in market history. When was the last time in history that the entire world was a potential market for companies? No more communism. Freedom of information getting everywhere. How can you use traditional fundamental values when sooner or later the business these companies are doing now can only grow exponentially? We are no longer limited to the borders of the contingent United States. Then we had tax laws change in 1986 which benefited financial companies greatly, with IRA's in control while the real estate industry took a big hit with loss of depreciation deductions. (I wonder which lobby pulled that one off.) If anything, fundamental analysis is, or at least was the prevalent form of analysis. After all, how do you, as a mutual fund or similar entity explain to your investors or shareholders that you use voodoo black magic for your investment decisions? There are many many forms of TA, limited only by how many different ways you can think of crunching numbers, oscillators, chart patterns, candlesticks, tick money flow, and so forth. You use TA using point and figure analysis - it certainly is not fundamental value oriented stuff. Since there are so many forms of TA, I would not worry about TA generally leading to everybody getting the same set of signals. And in the meantime, as traders we are just trying to wiggle our way around the elephant institutions that are setting the tone for the market at any given moment. Vitas