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

To: HairBall who wrote (66883)	1/15/2001 3:20:06 PM
From: FR1	Read Replies (2) \| Respond to of 99985

Never is the wrong word. never say never. I just think it is easy to get lost in analysis. Here is a TA you might enjoy: ddc.net What I am trying to say is that there is fundamental analysis (common sense) and technical analysis. I prefer way more fundamental and technical. The TA charts show a trend toward a near term bull leg. In common sense, the FED rules. The FED has stated that it is starting its rate cuts. Historically, this is the end of the bear market and the beginning of the bull. It usually takes two cuts to really get going. Given that this is a earnings month with tomorrow really getting things going, you would expect some choppy going as people look for the best growth stocks and CCs. By the end of the month the FED meets for the second cut and earnings are over. So that should really start the naz going up. If the FED was crazy enough to turn bear at the end of January, all those TA charts would be meaningless.

To: HairBall who wrote (66883)	1/15/2001 3:31:47 PM
From: KymarFye	Read Replies (2) \| Respond to of 99985

LG: Don't know anything about Mr. Ross personally, but anti-TA people love to make generalizations like that. If you've never read A RANDOM WALK DOWN WALL STREET, Malkiel writes: On close examination, technicians are often seen with holes in their shoes and frayed shirt collars. I, personally, have never known a successful technician, but I have seen the wrecks of several unsuccessful ones. (This is, of course, in terms of following their own technical advice. Commissions from urging customers to act on their recommendations are very lucrative.) So, LG, maybe it would be helpful if you could describe the condition of your shoes. Malkiel goes on to quote a colleague, Richard Quandt: "Technical analysis is akin to astrology and every bit as scientific." Malkiel's other claims (comparing stock charts to coin toss charts, and so on) may be familiar to those who recall previous discussions on this thread with a certain Mr. A. The key conclusion is probably the following: I am not saying that technical strategies never make money. They very often do make profits. The point is rather that a simple "buy-and-hold" strategy (that is, buying a stock or group of stocks and holding on for a long period of time) typically makes as much or more money... Only if technical schemes produce better returns than the market can they be judged effective. To date, none has consistently [my emphasis] passed the test. Being very susceptible to "scientific" points of view and determined to check my own perceptions against criticism, after the discussion on this board I attempted to do some research into the whole subject matter. My tentative conclusions are: 1) Random Walk theorists, like more than a few other researchers not associated with the school, have successfully cast doubt on the validity of many TA notions, but 2) the RW'ers in particular do not appear yet to have developed models sufficient to assess the validity of "technical trading" as practiced successfully by many traders. I have yet to find a systematic, persuasively conceived and executed study, for instance, of very short-term swing- and day-trading approaches, or even of sophisticated longer term approaches. (BTW-I'd be grateful for useful references and suggestions for further reading and research.) In most of the work, for instance, it appears that "short-term" means using weekly data instead of monthly or yearly data. More generally, even apart from the self-defeating attempts to create objective models universally valid over huge amounts of data and large time periods, most of the studies appear to set up obvious "straw men" hypotheses, trying to judge, e.g., stop loss orders, moving average signals, and momentum indicators by using them in ways that no even remotely sane or minimally intelligent or experienced trader would even think of using them. 3) Key elements of RW theory (in particular the Efficient Market hypothesis) have been persuasively disputed within the academic community, most notably in A NON-RANDOM WALK DOWN WALL STREET. Statistical studies of the stock and commodity markets in relation to TA precepts also seem to indicate that sufficiently tradable persistent non-randomness should be present. This conclusion conforms strongly to my own direct observation of market behavior. 4) RW theory is itself a form of technical analysis. In my opinion, Malkiel's approach specifically is TA taken to an absurd extreme. In other words, on the basis of a general technical study of the stock market, he comes up with a "system" that equates with "buy-and-hold index funds." Among other things, he appears to presume that the stock market will perform in the future more or less as it has in the past, and that the "average investor" will be able to follow the recommended discipline perfectly. On this note, it's not surprising to me that, at many points in A RANDOM WALK, Malkiel falls into descriptions of market history that appear to reflect a view almost entirely opposite to the one he otherwise advances. Of course, showing that RW theory may be flawed does not prove the opposite - i.e., that stock price movement is sufficiently predictable (over any given time frame) to be profitably or very profitably tradable over the very long term. Still, a review of the counterarguments in conjunction with my own experiences and my own observations of the experiences of others lead me to believe that technical trading (broadly enough defined to include swing trading) can be successfully practiced, and in a way that can be vastly superior by many standards to buy-and-hold.