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Strategies & Market Trends : TA Science Projects & Experimental Indicators -- Ignore unavailable to you. Want to Upgrade?

To: HeyRainier who wrote (211)	6/27/1998 2:06:00 PM
From: ftth	Respond to of 237

Hi Rainier, I don't know if you remember this post: Message 3523236 but that sums up my view of BB's. I don't use them for trading decisions. As you say (well, using different words, but same idea), there's no reason a breakout should be confined within some arbitrarily selected number of standard deviations of previous closes; some stocks will, some won't. They're all but useless at getting us out of an impulse move that quickly retraces most of the move. They're probably more useful as an indicator of when equilibrium has been restored, but even that has its caveats. In the "restored equilirium" sense, maybe they could serve as an indicator of when you "zero out and restart" the float turnover indicator you were working on. They probably do serve as a good way to stay away from abrupt moves, and instead point out more controlled moves. That may seem silly on first thought, but abrupt moves don't fit everyone's trading style when all is said and done. They seem great as they're rocketing up, but they also have a much higher probability of giving back much of the move in a short time, compared to the controlled move. Unless a person also has a method to detect when the odds are high of that retracement, the more controlled move up will likely leave a person with a better net return a few weeks later, and cost much less in the anxiety and frustration department. I still find candles, trendlines, and volume hard to beat as the all-purpose core TA toolbox. I'm not saying everyone's toolbox should be based on these, but those are sort of the hammer, pliers, and screwdriver for me. Bollinger Bands wouldn't fall into the all-purpose category at all. dh

To: HeyRainier who wrote (211)	10/19/1998 1:24:00 AM
From: ftth	Read Replies (1) \| Respond to of 237

My latest science project: FED intervention versus stock prices. I plotted the Federal Funds Rate versus the NYSE composite index from 1987 thru today. Why? Because I'm always skeptical of "conventional wisdom" and because I wanted another data point regarding the significance of the latest Fed moves. "Conventional wisdom" says when the Fed lowers rates, stock prices go up, and vise versa. Chalk this up as another market myth. There is no significant correlation whatsoever. No useful conclusion regarding stock prices can be drawn from changes in the Federal funds rate. Yes there are periods when there is a strong directional correlation, but there are more periods when there is not. It would appear that a Fed rate change acts much like an earnings surprise. The market will focus on that one number for a short period (both in anticipation and after-the-fact), but the memory of it fades fairly quickly. After the memory fades, the ability of that number to support prices is nil. A rate change, like an earnings surprise, is more of a micro influence. Shortly thereafter, the macro "big-picture" expectations for the future dominate price action. When the macro picture and the micro picture are congruent, you get the "conventional wisdom" case. When they aren't, you don't. In other words, a rate cut will only have a lasting positive effect if there is a credit crunch. In Greenspan's own words (Oct 7): 'We are far short of anything that could resemble a credit crunch in the United States. To be sure, there are all sorts of difficulties lots of people are having borrowing. But it is by no means evident that this is having as yet a significant impact on the real variables." and Richmond Fed President Broaddus Oct 15: "I don't think we're anywhere near a credit crunch at this stage." Hmmmmmmmmmmm. dh