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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: Dan Duchardt who wrote (16248)	2/10/2003 10:29:32 PM
From: macavity	Respond to of 19219

From Fleck@RealMoney thestreet.com Brit-Lambasted Bull: Meantime, the mania's aftermath has seen no shortage of investing myths masquerading as truths. But a study by three academics from the London Business School, which is reported in a great story (buried on the last page) in today's Wall Street Journal titled "Long-Term Risk Is Underestimated," goes a long way toward debunking these myths. To begin with, Professors Elroy Dimson, Paul Marsh and Mike Staunton dispel the buy-and-hold notion by observing that "not only can markets take a long time to recover, but also investors generally underestimate what the safe long-run period is to hold stocks." ......... .......That's pretty staggering. Most people feel it's a slam-dunk that they're going to win over 20 years. Of course, that presupposes they won't fall prey to another problem, which is survivor bias. It's quite possible that even if the market worked out over 20 years, the handful of stocks they picked might not, as most people who bought Internet stocks can now see clearly. Chiseled-in-Stone-Cold Comfort: The professors then highlight the myth and risk of "basing expectations on past returns." They point out that "historical analysis can never reveal the full range of century-long returns that might have been experienced by investors [the emphasis is mine] . An individual country confronts many possible futures but can report only one past." So, this should be food for thought for most people, who automatically assume that things will work out over time. Further, it should alter the fundamental notion of risk -- from the "risk" that the market will take off without you, to the risk that you will make an investment and then be forced to sell at a price considerably less than what you paid for it. The article also explodes one of the present-day myths that I refer to as arm-waving. You know, the market's been down three years in a row, and therefore it can't decline for a fourth, as posited by so many pundits. The professors' response to that: "The history of stock market performance shows that across 16 markets, the probability of a fourth down year is 40%. That also happens to be the probability of any other year being a down year."....................... Just like a coin toss, the odds have not really changed due to the past 3 years ..............So, falling rates don't guarantee higher prices. Three down years don't guarantee an up year this year. The Fed cutting rates doesn't guarantee that things will get better. There are no absolutes in investing. All one can do is to try to assess the probabilities of what the potential outcomes might be, and incorporate those probabilities, as best the circumstances permit, into managing risk (defined as the chance that you will lose meaningful amounts of money) and reward. We're all going to be wrong in our investments from time to time. The trick is to not get carried out when you make your mistakes. thestreet.com © 1996-2003 TheStreet.com, Inc. All rights reserved. -macavity

To: Dan Duchardt who wrote (16248)	2/11/2003 7:57:00 AM
From: dvdw©	Read Replies (1) \| Respond to of 19219

In a Supply / Demand market each stock manifests a current state. Any given stock falls into one of four categories; 1. Accumulation 2. Distribution 3. Neutral 4. Obfuscation For years metrics have been used to account for conditions 1 thru 3. Most of those systems had statistical integration schemes built around them evolving into TA trading tools; some of which fall into classes such as Money flow metrics, & OBV ( On Balance Volume). After years of experimentation; I've found the three original categories, inadequate in the important measure and correlation of price action against the relative constant of Supply. I chose Obfuscation as the term that best suited the missing condition or the 4th dimension of the market. Obfuscation is a condition attached to any of the 3 other conditions and works in conjunction with that condition in the current trend. In bringing Obfuscation to the supply demand equation, what you end up with is the unmasking of the action for what it truly is; the buying , selling or neutral states of any security tell a story about how the market views that security within the context of an objective. Indexing has brought us too a place where all fund managers must own all stocks in a given index in order to be qualified for that index. Because all such funds are competing for investor dollars, their track record becomes wholly tied to the manager or team members ability to weight the portfolio to those securities with the most favorable current trends of performance, short or long. By introducing Obfuscation to stock analysis, the complete picture of the component index parts can be accounted for and applied across your stock asset allocation weighting for each company in the index. The accuracy and performance of any constructed portfolio is wholly at the mercy of the current trends of each component contained therein. Weighting strategy and tactics are directly related to fund or portfolio performance.