Economy crash =/= stock market crash?

Michael121

coastline said:

Michael121 said:

Personally i think in the short term people are betting on where earnings are going and in the long term they trend up.

S&P 500 Earnings - 90 Year Historical Chart | MacroTrends

Interesting chart especially now market has gone up and earnings have gone down where in the past they tend to follow each other up and down. 

Apart from 1972 crash when earnings rocketed and the market crashed. Now its in reverse, maybe the market comes back down to earnings, i don't know were see.

Earnings are improving but who knows where they'll be in years to come. I'm no expert but I tend to look no further than a year or two out. Can you really forecast any further ? To be fair analysts have called this recover fairly well. Nice little bookmark here.

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I can't forecast anything, i can't even tinker with my portfolio as much as i would like never mind time the market. Even if i could to some degree time the market you are not going to save a whole 50% of your money in a 50% drop more like 10% if your lucky. If its possible to dodge 70% to 90% crash then i would be interested. 

GeordieGeorge

Michael121 said:

GeordieGeorge said:

coastline said:

In that previous post it's hard to imagine many private investors drawing trend lines and placing an order on Eurodollar futures.

No, they’ll generally have more sense.

It was my first trade as a graduate on a trading desk, and nothing I’ve seen in the twenty-five years trading since has suggested that technical analysis has any more validity than reading tea leaves. There’s good evidence as well as common sense in that view.

But if technical analysis were as bad as reading tea leaves say 99.9% then all he needs to do is reverse his view and all of a sudden he is 99.9% accurate.

No, it’s completely random. Toss a coin, look at whether the cows are lying down, see if the frogs are mating, they all offer the same insight as technical analysis.

One good way to see if it’s valid is to look at those making the predictions. They seem to have a cast-iron view every day, so you’d imagine they are all super-rich, but in finance the guys driving McLarens aren’t the ones doing technical analysis.

Bobziz

GeordieGeorge said:

Michael121 said:

GeordieGeorge said:

coastline said:

In that previous post it's hard to imagine many private investors drawing trend lines and placing an order on Eurodollar futures.

No, they’ll generally have more sense.

It was my first trade as a graduate on a trading desk, and nothing I’ve seen in the twenty-five years trading since has suggested that technical analysis has any more validity than reading tea leaves. There’s good evidence as well as common sense in that view.

But if technical analysis were as bad as reading tea leaves say 99.9% then all he needs to do is reverse his view and all of a sudden he is 99.9% accurate.

No, it’s completely random. Toss a coin, look at whether the cows are lying down, see if the frogs are mating, they all offer the same insight as technical analysis.

One good way to see if it’s valid is to look at those making the predictions. They seem to have a cast-iron view every day, so you’d imagine they are all super-rich, but in finance the guys driving McLarens aren’t the ones doing technical analysis.

So all who use technical analysis are misguided ? I was under the impression that there are hedge fund managers and investment banks that use it alongside more fundamental analysis ? Doesn't need to be either or does it  ?

Nebulous2

Bobziz said:

GeordieGeorge said:

Michael121 said:

GeordieGeorge said:

coastline said:

In that previous post it's hard to imagine many private investors drawing trend lines and placing an order on Eurodollar futures.

No, they’ll generally have more sense.

It was my first trade as a graduate on a trading desk, and nothing I’ve seen in the twenty-five years trading since has suggested that technical analysis has any more validity than reading tea leaves. There’s good evidence as well as common sense in that view.

But if technical analysis were as bad as reading tea leaves say 99.9% then all he needs to do is reverse his view and all of a sudden he is 99.9% accurate.

No, it’s completely random. Toss a coin, look at whether the cows are lying down, see if the frogs are mating, they all offer the same insight as technical analysis.

One good way to see if it’s valid is to look at those making the predictions. They seem to have a cast-iron view every day, so you’d imagine they are all super-rich, but in finance the guys driving McLarens aren’t the ones doing technical analysis.

So all who use technical analysis are misguided ? I was under the impression that there are hedge fund managers and investment banks that use it alongside more fundamental analysis ? Doesn't need to be either or does it  ?

There is an industry that has grown up around it and people that use it - but you can say the same about astrology. Equally astrology has a huge number of people who discount it, and quite a few who follow it to varying extents. Up until the pandemic at least I'd still meet professional people at training courses who during introductions would say stuff like: "I'm a typical Capricorn." 

Bobziz

Nebulous2 said:

Bobziz said:

GeordieGeorge said:

Michael121 said:

GeordieGeorge said:

coastline said:

In that previous post it's hard to imagine many private investors drawing trend lines and placing an order on Eurodollar futures.

No, they’ll generally have more sense.

It was my first trade as a graduate on a trading desk, and nothing I’ve seen in the twenty-five years trading since has suggested that technical analysis has any more validity than reading tea leaves. There’s good evidence as well as common sense in that view.

But if technical analysis were as bad as reading tea leaves say 99.9% then all he needs to do is reverse his view and all of a sudden he is 99.9% accurate.

No, it’s completely random. Toss a coin, look at whether the cows are lying down, see if the frogs are mating, they all offer the same insight as technical analysis.

One good way to see if it’s valid is to look at those making the predictions. They seem to have a cast-iron view every day, so you’d imagine they are all super-rich, but in finance the guys driving McLarens aren’t the ones doing technical analysis.

So all who use technical analysis are misguided ? I was under the impression that there are hedge fund managers and investment banks that use it alongside more fundamental analysis ? Doesn't need to be either or does it  ?

There is an industry that has grown up around it and people that use it - but you can say the same about astrology. Equally astrology has a huge number of people who discount it, and quite a few who follow it to varying extents. Up until the pandemic at least I'd still meet professional people at training courses who during introductions would say stuff like: "I'm a typical Capricorn." 

Industries like hedge fund management and investment banking?

Nebulous2

Bobziz said:

Nebulous2 said:

Bobziz said:

GeordieGeorge said:

Michael121 said:

GeordieGeorge said:

coastline said:

In that previous post it's hard to imagine many private investors drawing trend lines and placing an order on Eurodollar futures.

No, they’ll generally have more sense.

It was my first trade as a graduate on a trading desk, and nothing I’ve seen in the twenty-five years trading since has suggested that technical analysis has any more validity than reading tea leaves. There’s good evidence as well as common sense in that view.

But if technical analysis were as bad as reading tea leaves say 99.9% then all he needs to do is reverse his view and all of a sudden he is 99.9% accurate.

No, it’s completely random. Toss a coin, look at whether the cows are lying down, see if the frogs are mating, they all offer the same insight as technical analysis.

One good way to see if it’s valid is to look at those making the predictions. They seem to have a cast-iron view every day, so you’d imagine they are all super-rich, but in finance the guys driving McLarens aren’t the ones doing technical analysis.

So all who use technical analysis are misguided ? I was under the impression that there are hedge fund managers and investment banks that use it alongside more fundamental analysis ? Doesn't need to be either or does it  ?

There is an industry that has grown up around it and people that use it - but you can say the same about astrology. Equally astrology has a huge number of people who discount it, and quite a few who follow it to varying extents. Up until the pandemic at least I'd still meet professional people at training courses who during introductions would say stuff like: "I'm a typical Capricorn." 

Industries like hedge fund management and investment banking?

By an 'an industry that has grown up around it' I mean that technical analysis has grown into a sizeable industry. I certainly wasn't claiming hedge funds and investment banking existed because of TA. 

It is a tool which some hedge fund managers and investment bankers may or may not have in their toolbox to use. It certainly wont be the only thing they are using to make investment decisions. 

Equally some of them will engage a Feng Shui expert to tell them how to layout their office. 

jamesmorgan

TA doesn't give absolute guarantees, but percentage probabilities.  It may suggest that for a given pattern it is 60% more likely to rise than fall.  If you trade this pattern 10 times, 6 of your trades may go up but 4 will fall.  You can make money doing this as long as the overall gains from the 6 trades override the losses from the 4.  This is all about effective money management techniques.  The most important being when to sell - especially for the shares that go against the predicted outcome.

The other key consideration is timescale.  You can't look at a 6 monthly stock chart and expect to make predictions about the next 12 months.  I would only use a 6 monthly chart to decide what is happening over the next month - ie average hold period should only be 1 month.

TA can be an effective trading technique (I made a full time living out of it for 10 years), but the gains are likely to be only slightly better than passive long term buy and hold.  If you don't understand what you are doing you are quite likely to end up making losses  Most people that criticise TA don't really understand it, or expect it to do things that are impossible.

It is essentially trading on emotion cycles.  It takes time for new news to fully impact a shares price.  The TA signal is usually generated on the news.  You trade on the signal and then exit the trade once the price has fully formed.  For my style of trading that cycle was normally 2-3 weeks.

Linton

jamesmorgan said:

TA doesn't give absolute guarantees, but percentage probabilities.  It may suggest that for a given pattern it is 60% more likely to rise than fall.  If you trade this pattern 10 times, 6 of your trades may go up but 4 will fall.  You can make money doing this as long as the overall gains from the 6 trades override the losses from the 4.  This is all about effective money management techniques.  The most important being when to sell - especially for the shares that go against the predicted outcome.

The other key consideration is timescale.  You can't look at a 6 monthly stock chart and expect to make predictions about the next 12 months.  I would only use a 6 monthly chart to decide what is happening over the next month - ie average hold period should only be 1 month.

TA can be an effective trading technique (I made a full time living out of it for 10 years), but the gains are likely to be only slightly better than passive long term buy and hold.  If you don't understand what you are doing you are quite likely to end up making losses  Most people that criticise TA don't really understand it, or expect it to do things that are impossible.

It is essentially trading on emotion cycles.  It takes time for new news to fully impact a shares price.  The TA signal is usually generated on the news.  You trade on the signal and then exit the trade once the price has fully formed.  For my style of trading that cycle was normally 2-3 weeks.

Assuming that may work for individual shares is it appropriate for fund based investing?  For a fund based investment with 100's of shares each reacting in different ways to minor items of news surely the noise overwhelms the signal.  You may see TA patterns in a global index but comparatively few people are investing emotionally directly in the global index.

jamesmorgan

Linton said:

Assuming that may work for individual shares is it appropriate for fund based investing?  For a fund based investment with 100's of shares each reacting in different ways to minor items of news surely the noise overwhelms the signal.  You may see TA patterns in a global index but comparatively few people are investing emotionally directly in the global index.

You may be right.  I never used TA on indexes for the reasons you outline.  However, in theory they can work on news events that impact all shares (eg a pandemic).  The FTSE100 have a fairly strong sell signal on 25/2/20 when it fell below a long term trend line and closed at 7017.  On 24/3/20 there was a reasonably strong reversal so I would have closed this trade at a price of 5446 (an overall gain on the trade of 29%).  However, pandemics don't come along very often and the chance for this type of trade is slim.  I suspect most of the time TA trades on an index wouldn't generate sufficient returns to justify the effort and increased risk.

I certainly don't see anything from a TA perspective on any of the major indexes to suggest a trade at the moment. 

coastline

Fully agree with above there's no guarantees otherwise we'd all do it. As I've posted before my results buying and selling improved with the guidance of the likes of lower indicators and moving averages. I've never been on a TA course and don't even apply it rigidly to guage my entry and exit points. What I've posted on this thread about lower indicators being high or low is the main part to my system. Right or wrong that's what I do. No doubt somebody form a far will be saying " you're doing it all wrong mate "
I'll start off with the guidelines for the challenge. RSI, SLOW STOCHASTIC and MACD. The basic stuff with lower indicators. To keep my eye on things I'll add in the 10 and 20 day MOVING AVERAGE in the DAILY timeframe.
Just think of "" getting frothy " when indicators are on the top and " froth blow off " when they are on the bottom. If we are above the 10 and 20 day MOVING AVERAGE then we are still in the game at the top. The indicators can also roll along the top or bottom again just think " walking stick handles " as an alert. I tend to use the SLOW STOCHASTIC in general for moves.
Here we go with the DOW . So it's DAILY timeframe 10 and 20 day MOVING AVERAGES . Lower indicators RSI, SLOW STOCHASTIC and MACD. The link should open with a 6 month view and all you need to do is set the information as above.
As I've mentioned I look at the SLOW STOCHASTIC in general and move from there . Straight away you should see MAY 8th,MAY 15th, JUNE 8th , JUNE 21st and today we are on the top. If the "walking stick handles " show and the 10 and 20 day averages are threatened it's SELL.

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