Posted on 03/08/2009 3:48:15 PM PDT by maccaca
“Technical analysis” isn’t just horizontal support lines; it also includes such cat entrails as:
Fibonnaci levels (horizontal = price)
Fibonnaci levels (vertical = TIME: One of my VERY favorite indicators)
channels, flags, pennants, and perhaps the top ten candlestick patterns; dojis, hanging mans, shooting stars
Elliott Wave analysis, which I find arcane and hit-or-miss
But the point being, the more of these cat-entrail thingys you get aligned, the more confidence you can work from. This is strictly for trading, you understand. The market is absolutely NOT investable. NOT. It is a random number generator, now more than ever.
“I’m surprised you are still using technical analysis in a market where even the fundamentals are being thrown under the bus. People are selling on fear alone. They have had horrific losses and they want it to stop”
ALL THE MORE reason to employ technical analysis.
Really, there ARE no fundamentals to the market, because expectations still are way too high, and the fraud pervasive in the system has made balance sheet analysis laughable. Plus, fundamental analysis in no way accomodates 1: the freeze-up of credit, 2: the wholesale exit from the market of the fearful.
I am talking about people buying widget manufacturer's stock with no clue what a widget was.
My mailbox starting filling up with solicitations from mutual funds.
I’m looking for a strong intermediate rally at some point, before we go much lower. It is possible we won’t get that rally and we just do a long, slow slide to the basement. I agree with you that what follows will be a long series of upside-down “U’s” that will be an opportunity if I can play them. I don’t know that I can, but I know they will be coming in the sideways markets of the next few years.
I see your point. Human nature doesn’t change just because we are in a generational crash. A fractal is a fractal is a fractal, I guess...
There is a giant business in the securities business.
This business, for better or for worse, is on the verge of chasing great swaths of participants out of it, permanently. It better get its act together or a generation of sheeple will remove themselves from the game.
But over and above that, many trading computers utilize the various fibo levels to execute trades and to gauge reversals. Even a casual study of fibo levels would, IMHO, convince even a skeptic that there’s a significant “there” there. So, they are self-fulfilling, to an extent. Again and again and again, you’ll see rallies and plunges stop DEAD on fibo levels.
I wasn’t aware that people were still stupid enough to use computer trading on technical FIBOs at this point. That is to say, if everybody is still doing that, then I can see where technical traders would still play those moves.
You have exposed one of my key weaknesses as an investor. My biggest mistake is always to do what I think desrves to happen and not to base my decisions on what other people think will happen.
So when we are in a massive bubble I always get out too early thinking “this can’t last.” Good investors will say “a lot of stupid people thing this will last forever so I’m going to stay in and let the stupid people pump up this fraud and get out when I think the stupid people are catching on.”
That’s my biggest weakness as an investor.
A weak intermediate rally may just mean a small upside down V. But I think a bigger rally will tend to be U shaped only because it can't be sustained and the early optimism will slowly fade and then turn into another panicky down leg. It may take a year or more to get the whole shape.
I still can't think of any way to time them other than to buy as things get cheaper. I am now 30% cash, 70% equities. I often wonder whether I should just stay cash until one of the target points that everyone talks about. There might be something at 5000 and there is a fibonacci target at 4250. But I doubt we'll make it there without any intermediate rallies, so I keep going back to my original strategy.
Someone agrees with me:
Roubini (Dr. Doom) Says: Dow 5000, Banks Insolvent, Three-Year Recession
I think most everyone expected a rally by now. I did. I’m surprised it hasn’t happened yet. Now I don’t know what to think. We still have a true capitulation ahead of us and that can happen anytime. I would be afraid to be long stocks right now.
There were some fierce rallies in the great depression and I am sure there will be some in the next 5 years as well, but I’m really scratching my head why we haven’t had a strong rally by now and I fearful that there are just no buyers, period. Only sellers.
You are on the money. I have a lot of respect for the guy being right and sticking to his guns... I wouldn’t fade him, that’s for sure.
Likewise some rallies can happen anytime. This situation is unusual in that the psychology is following rather than leading the market. The market got pummeled in Europe by their relatively larger proportion of bad banks and the inability of government to make them solvent (multiples of GDP in some cases). Over here the banks also dragged down the market as many funds had bad stock in bad banks (including GE) but couldn't do much but watch it disappear. Most everyone else was left in a panic and hold mode. A fair number already capitulated and a good portion of the rest have dug in their heels. It is not a good setup for a lasting rally IMO for a lot of reasons the main one being that the bad banks and other insolvent companies (e.g. GM) are still there dragging down the market. But certain sectors could take off and could be considered cheap at the moment (e.g. clean energy, selected metals, alternative energy, technology especially embedded computers).
You got your rally today. Good call. I’m terrified of this market...
Frankly this rally terrifies me. Citi up 38% because Bernanke “won’t let them fail”?? Or because they had a good 2/3rds of a quarter? I will take a bit of profit tomorrow in INTC and TLM just to get my cash back up a bit.
At some point we had to rally because the sheeple expect a rally. Nobody thinks we can go straight down. Then it becomes a self-fulfilling prophecy. I don’t expect much from this rally. I think it peters out below 800 and we slide back down to 600.
Who knows? I’m just guessing like everybody else. I pray it is an educated guess. But I am NOT in this market. I’m just on the sidelines cowering under a solid outcropping. I don’t want anything to do with equities at the moment.
Awesome and to the point. LOL. I appreciate it.
That was NOT what I was expecting. lol!
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