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

To: Jon K. who wrote (6756)	2/20/1999 3:27:00 PM
From: Bonnie Bear	Read Replies (1) \| Respond to of 99985

Jon: if you do this remember that the Dow is a mutual fund, there has been considerable turnover in Dow stocks and they dumped dividends a long time ago, you you need to find out the dividend history and include that. Stocks used to have 5-7% dividends instead of the 1% they offer today.

To: Jon K. who wrote (6756)	2/20/1999 5:53:00 PM
From: donald sew	Read Replies (1) \| Respond to of 99985

Jon, >>>>>> I was the one who doubted no one could forecast the market better than 50/50 <<<<<<<< Frankly speaking, you are not incorrect. I feel attempts to call the market on a daily basis has about 50/50 chance. I also feel strong predictions like a big Kahuna or DOW 11000-12000 in a short period of time also only have a 50/50 chance. Lets say that a prediction is for DOW 12,000 by APRIL. Even if the market does move up strongly but only gets to 10000, that prediction is wrong. On a mathematical basis, strong predictions involve too many variables and frankly have less than a 50/50 chance of working. What I attempt to do is identify short-term extremes, which have a greater probabiity of a successful prediction. Without getting into specific technicals, lets use the simple tool of moving averages. Lets say that there is a good repeating pattern that when a certain indexes diverges say 7% above the 20 day moving average it reverses downward. That implies that such index is hitting an UP-extreme when its about 7% above the 20 DMA, so the probability of predicting a reversal then is high, but never 100%. My system is much more complicated than that but just citing an example. Many times when I say that my short-term technicals are smack in the middle, that means the probability of predicting direction is the lowest since it is the furthest from the UP or DOWN EXTREMES. On a mathematical basis, the lower the number of variables normally leads to more successful predictions. I feel the shorter the time period - the better success in predicting. Alot more could happen in 50 days than 5 days. Hope I made some sense. seeya