Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
No one disputes the content of the point, just the wording 'roughly 47% accuracy score. ... less than the infamous dart throwing monkey would achieve.'
A hopefully not too subtle example: Some of the very first shipments of CD players in the early 1980s had a button called Random. It did what it said. Customers started right away to return the units (not cheap back then) because when they pushed it it played tracks 3, 4, 2, 2, 1, 6, 1, 3, 3. Soon the algorithm was fixed and the button relabeled Shuffle. So 47% is not related to the monkey dart throws except after (probably) hundreds of them. I coauthored a paper in the Audio Engineering Society Journal blind-showing inaudibility of hi-rez audio formats, 48% accurate answers, 38% for female auditioners, and several readers said Wait, something is wrong, why under 50%, and why women less than that??? My statistically trained son quipped that we should have continued the trials so as to leave 48% and approach coin-flip.
"Re "Stuff happens". Thanks Mark. Of course you are correct. And I've wanted to link a clip related to that ever since a prominent political figure (unfortunately I think) voiced the term a few days ago." +++ Hysterical clip hank, thanks, great job!
The NYSE McClellan Oscillator is now at an overbought reading only seen once every few years. Seems we are approaching historic extremes. Scroll down, in the below link, to find the McClellan Oscillator.
Although an old Chinese proverb states that a picture is worth a thousand words, it will not surprise any MFOer that I am not currently a technical analyses or chartist fan.
Many decades ago (1960s) I used the classic Edwards and Magee “Technical Analyses of Stock Trends” to guide my investment choices. In those days, the charts were constructed by the laborious task of hand plotting. I failed to match simple Index benchmarks, and eventually abandoned that approach in favor of more fundamental analyses methods.
I’m sure charting works for some folks; it has survived forever. But it does not work for most folks, at least over the long haul. Do you remember Joe Granville, remember Elaine Garzarelli, and even Robert Prechter’s commitment to the Elliott Wave Theory? They succeeded for some time, but ultimately they were crushed by changing momentum waves.
Charts only record history in an organized manner. From historical data, the chartist interprets some pattern that he believes will be extended into the future. That’s a commitment to event reproduction and unchanging participant behavior. Good luck.
Market data does show that momentum does persist for some ill-defined short period. The trick is to guesstimate that period. Change will happen.
In “A Random Walk Down Wall Street” (chapter 6), Burton Malkiel said: “It seems very clear that under scientific scrutiny chart reading must share a pedestal with alchemy”. The odd methods that chartist pursue buttress that conclusion.
The McClellan Oscillator (MO) falls into that category. It seems like a very forced correlation. What is the logic and/or rational for a 39-day and 19-day exponential moving average? These are odd time spans that appear to be rather arbitrary. In an attempt to capture a market momentum component, the MO takes the difference between these elements. How successful has the MO Indicator proven in the past? Here is a Link to a current history:
Again, this is recent history. Can it be useful in projecting short term reversals? I don’t see its predictive power. Perhaps I’m too inexperienced at this task. If you do, “you’re a better man I, Gunga Din”. It is a challenge to find a reliable scorecard for the long term MO tools performance success ratios. Nobody is a score keeper in the chartist arena.
I’ll punt on the McClellan Oscillator as a signal for the near term performance of the equity stock market. But that’s just me. Others include it in their decision making toolkit.
Henry made some (ethical) mistakes back in the 90s. I've no sympathy for THAT Henry. That said, since then, he has had some 'seasoning' provided to us by the capital markets-- haven't we all? My impression (from some of his posts on BI) is that he has been less than sanguine on equities for a couple years now. That he decided to sell a majority interest in his business now (just like the First Eagle guys), suggests he sincerely believes what he says about his expectations for future equity returns. (i.e. ring the register at/near the top).
I seem to recall seeing an interview with John Bogle 4-7 months ago, where he was asked about HIS expectations for long-term stock- and bond-markets. If memory serves, it was mid-single digits for stocks, low single digits for quality bonds. Let's just say that neither are raving bulls. --- And especially for stocks, returns are not smooth, they are irregular/volatile.
Further, stating the obvious, ALL asset valuations are supported by extraordinary monetary policy measures here and abroad (ZIRP, QEx). At best, assume business conditions improve --- if/when that happens, monetary policy becomes less accommodative -- representing a monetary headwind against higher bond/stock prices (the Fed takes the punchbowl away). ----
Re the discussion of technical analysis, T/A certainly has its limitations, but I have to say I've grown progressively LESS skeptical of it efficacy over the years. In a rational world, fundamentals should prevail. The problem is that by the time fundamental info becomes known, the stock has often already discounted the news. I try to incorporate both. Fundamentals point the way to possible candidates, T/A confirms/invalidates those candidates and is helpful in picking buy/sell price points.
Thank you for your inputs, especially those that addressed the Technical Analyses issues.
Your comments about integrating both Fundamental and Technical Analyses (TA) in making an investment decision prompted me to more carefully scrutinize my own decision tree elements. I do something moderately similar.
In my process, my decision is heavily driven by Fundamental and overarching Broad Market considerations, but I do deploy Technical elements at the periphery in terms of when I finally execute the actual trade. I use the Technical correlations associated with the Calendar technical data sets.
There are thousands of technical correlation and chart pattern guidelines that generate tens-of-thousands of interpretations. Ask a single TA specialist about a chart and he’ll give you several interpretations. Ask a pair of TA specialists about the same chart and they’ll present you with a full score of divergent interpretations. Somebody just might be randomly right.
This exchange reminded me that, given its popularity, even Burton Malkiel accepted the fact that a merged Fundamental and Technical approach might be gainfully used. It was a begrudging compromise that he documented in Chapter 5 of his hugely successful book.
This exchange also reminded me that, in the past, I have recommended a TA book and website authored by Thomas Bulkowski. His work is comprehensive and consistently excellent. He does a little self-scoring and partially documents the success rates of numerous chart patterns that he recognizes. Here is a Link to Bulkowski’s website:
Bulkowski seeks, monitors, and reports on so many technical signals that the site itself is difficult to navigate. Bulkowski has posted so much work on this site that it surely can reach overload conditions quickly. The TA user gets to pick the various signals that he favors. Good luck.
In the end, a visit or two to Bulkowski’s site is well worth the required effort. Please give it a try. I encourage you to do so.
I show a picture of the Nasdaq composite on the daily scale. One of the things I noticed is that the pattern shown here resembles a head-and-shoulders top. I show that as the ABC pattern. It won't confirm as a valid head-and-shoulders top until the index drops below the right armpit. However, this could be a warning that the upward move of the last two weeks is coming to an end.
+++
Swing and Position Traders: Chart Pattern Indicator
As of 10/09/2015, the CPI had: 1 bearish patterns, 18 bullish patterns, 295 patterns waiting for breakout. The CPI signal is 94.7%, which is bullish (>= 65%).
+++
Buy-and-Hold: 12-Month SMA
This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly. See 12-Month Moving Average for more details. Dow Industrials: bearish. Nasdaq Composite: bearish. S&P 500 Index: bearish. Dow Transports: bearish. Dow Utilities: bearish.
+++
Earnings, Chart Patterns & Industries
Earnings season will be starting in about 4 days. I found 57 pipe bottoms last week, which is very bullish! Large numbers of pipe bottoms often signal the start of a short to intermediate-term move up before price drops back down, forming an unconfirmed double bottom.
All righty then. There you have it. There is some quote about monkeys, or maybe it's darts, or something; it'll come to me eventually.
Linked below is Jeffrey Saut's weekly commentary on the market. I enjoy reading it from time-to-time and usually find good value in it. I hope you will as well ... and, it might even add some good meaning to this thread. I wonder if he perhaps might of have read the thread before he wrote his blurb?
Well, this interchange has been stimulating, and has taken some unexpected but welcomed turns. Good for all of us.
Thank you for reading my contributions. But for me, it is time for closure, to move-on.
I’ll close my participation by referencing a terrific song by Bruce Springsteen and his team titled “Further Up On the Road”. It is a haunting song and captures the dark uncertainties that are ahead, especially for us investors. Here is the Link:
Enjoy. I’ll be seeing you guys further down the road.
Comments
A hopefully not too subtle example:
Some of the very first shipments of CD players in the early 1980s had a button called Random. It did what it said. Customers started right away to return the units (not cheap back then) because when they pushed it it played tracks 3, 4, 2, 2, 1, 6, 1, 3, 3. Soon the algorithm was fixed and the button relabeled Shuffle. So 47% is not related to the monkey dart throws except after (probably) hundreds of them. I coauthored a paper in the Audio Engineering Society Journal blind-showing inaudibility of hi-rez audio formats, 48% accurate answers, 38% for female auditioners, and several readers said Wait, something is wrong, why under 50%, and why women less than that??? My statistically trained son quipped that we should have continued the trials so as to leave 48% and approach coin-flip.
"Re "Stuff happens". Thanks Mark. Of course you are correct. And I've wanted to link a clip related to that ever since a prominent political figure (unfortunately I think) voiced the term a few days ago."
+++
Hysterical clip hank, thanks, great job!
http://www.ritholtz.com/blog/2015/10/if-you-are-reading-this-the-world-has-not-ended/?utm_source=The+Big+Picture+Updates&utm_campaign=9ac0a49bb5-big_picture_email&utm_medium=email&utm_term=0_662cf1de86-9ac0a49bb5-43756865
Barry Ritholtz has written lots of great articles about market forecasting
http://www.bloombergview.com/articles/2013-12-11/why-do-forecasters-keep-forecasting--draft
https://www.stocktrader.com/2015/10/08/market-recap-oct-8-2015/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+Stocktrading101+(StockTradingToGo)
If you hadn't posted the link, I would have sworn you just made that up.
No, not making it up for sure.
The link below will provide some information on the oscillator and how it is used by some traders and the more skilled investor.
http://www.investopedia.com/terms/m/mcclellanoscillator.asp
Although an old Chinese proverb states that a picture is worth a thousand words, it will not surprise any MFOer that I am not currently a technical analyses or chartist fan.
Many decades ago (1960s) I used the classic Edwards and Magee “Technical Analyses of Stock Trends” to guide my investment choices. In those days, the charts were constructed by the laborious task of hand plotting. I failed to match simple Index benchmarks, and eventually abandoned that approach in favor of more fundamental analyses methods.
I’m sure charting works for some folks; it has survived forever. But it does not work for most folks, at least over the long haul. Do you remember Joe Granville, remember Elaine Garzarelli, and even Robert Prechter’s commitment to the Elliott Wave Theory? They succeeded for some time, but ultimately they were crushed by changing momentum waves.
Charts only record history in an organized manner. From historical data, the chartist interprets some pattern that he believes will be extended into the future. That’s a commitment to event reproduction and unchanging participant behavior. Good luck.
Market data does show that momentum does persist for some ill-defined short period. The trick is to guesstimate that period. Change will happen.
In “A Random Walk Down Wall Street” (chapter 6), Burton Malkiel said: “It seems very clear that under scientific scrutiny chart reading must share a pedestal with alchemy”. The odd methods that chartist pursue buttress that conclusion.
The McClellan Oscillator (MO) falls into that category. It seems like a very forced correlation. What is the logic and/or rational for a 39-day and 19-day exponential moving average? These are odd time spans that appear to be rather arbitrary. In an attempt to capture a market momentum component, the MO takes the difference between these elements. How successful has the MO Indicator proven in the past? Here is a Link to a current history:
http://www.etfinvestmentoutlook.com/etf.php?s=SPY&c=breadth_advance_decline_d
Again, this is recent history. Can it be useful in projecting short term reversals? I don’t see its predictive power. Perhaps I’m too inexperienced at this task. If you do, “you’re a better man I, Gunga Din”. It is a challenge to find a reliable scorecard for the long term MO tools performance success ratios. Nobody is a score keeper in the chartist arena.
I’ll punt on the McClellan Oscillator as a signal for the near term performance of the equity stock market. But that’s just me. Others include it in their decision making toolkit.
Best Wishes.
I seem to recall seeing an interview with John Bogle 4-7 months ago, where he was asked about HIS expectations for long-term stock- and bond-markets. If memory serves, it was mid-single digits for stocks, low single digits for quality bonds. Let's just say that neither are raving bulls. --- And especially for stocks, returns are not smooth, they are irregular/volatile.
Further, stating the obvious, ALL asset valuations are supported by extraordinary monetary policy measures here and abroad (ZIRP, QEx). At best, assume business conditions improve --- if/when that happens, monetary policy becomes less accommodative -- representing a monetary headwind against higher bond/stock prices (the Fed takes the punchbowl away).
----
Re the discussion of technical analysis, T/A certainly has its limitations, but I have to say I've grown progressively LESS skeptical of it efficacy over the years. In a rational world, fundamentals should prevail. The problem is that by the time fundamental info becomes known, the stock has often already discounted the news. I try to incorporate both. Fundamentals point the way to possible candidates, T/A confirms/invalidates those candidates and is helpful in picking buy/sell price points.
Thank you for your inputs, especially those that addressed the Technical Analyses issues.
Your comments about integrating both Fundamental and Technical Analyses (TA) in making an investment decision prompted me to more carefully scrutinize my own decision tree elements. I do something moderately similar.
In my process, my decision is heavily driven by Fundamental and overarching Broad Market considerations, but I do deploy Technical elements at the periphery in terms of when I finally execute the actual trade. I use the Technical correlations associated with the Calendar technical data sets.
There are thousands of technical correlation and chart pattern guidelines that generate tens-of-thousands of interpretations. Ask a single TA specialist about a chart and he’ll give you several interpretations. Ask a pair of TA specialists about the same chart and they’ll present you with a full score of divergent interpretations. Somebody just might be randomly right.
This exchange reminded me that, given its popularity, even Burton Malkiel accepted the fact that a merged Fundamental and Technical approach might be gainfully used. It was a begrudging compromise that he documented in Chapter 5 of his hugely successful book.
This exchange also reminded me that, in the past, I have recommended a TA book and website authored by Thomas Bulkowski. His work is comprehensive and consistently excellent. He does a little self-scoring and partially documents the success rates of numerous chart patterns that he recognizes. Here is a Link to Bulkowski’s website:
http://thepatternsite.com/
Bulkowski seeks, monitors, and reports on so many technical signals that the site itself is difficult to navigate. Bulkowski has posted so much work on this site that it surely can reach overload conditions quickly. The TA user gets to pick the various signals that he favors. Good luck.
In the end, a visit or two to Bulkowski’s site is well worth the required effort. Please give it a try. I encourage you to do so.
Best Wishes.
Since the site is impossible to work with, I simply went to
http://thepatternsite.com/Blog.html#P12
Here are some of his latest postings:
I show a picture of the Nasdaq composite on the daily scale.
One of the things I noticed is that the pattern shown here resembles a head-and-shoulders top.
I show that as the ABC pattern.
It won't confirm as a valid head-and-shoulders top until the index drops below the right armpit.
However, this could be a warning that the upward move of the last two weeks is coming to an end.
+++
Swing and Position Traders: Chart Pattern Indicator
As of 10/09/2015, the CPI had:
1 bearish patterns,
18 bullish patterns,
295 patterns waiting for breakout.
The CPI signal is 94.7%, which is bullish (>= 65%).
+++
Buy-and-Hold: 12-Month SMA
This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly. See 12-Month Moving Average for more details.
Dow Industrials: bearish.
Nasdaq Composite: bearish.
S&P 500 Index: bearish.
Dow Transports: bearish.
Dow Utilities: bearish.
+++
Earnings, Chart Patterns & Industries
Earnings season will be starting in about 4 days.
I found 57 pipe bottoms last week, which is very bullish! Large numbers of pipe bottoms often signal the start of a short to intermediate-term move up before price drops back down, forming an unconfirmed double bottom.
All righty then. There you have it. There is some quote about monkeys, or maybe it's darts, or something; it'll come to me eventually.
http://raymondjames.com/inv_strat.htm
Well, this interchange has been stimulating, and has taken some unexpected but welcomed turns. Good for all of us.
Thank you for reading my contributions. But for me, it is time for closure, to move-on.
I’ll close my participation by referencing a terrific song by Bruce Springsteen and his team titled “Further Up On the Road”. It is a haunting song and captures the dark uncertainties that are ahead, especially for us investors. Here is the Link:
Enjoy. I’ll be seeing you guys further down the road.
Best Wishes.