OsoDorado said:It's interesting what you say about the momentum and trend, especially because practically all of your market comments are related to the fundamentals. Please keep posting your insights on the technicals too!DiabloWags said:OsoDorado said:
I'm going to defer to you with respect to fundamentals, but how much do technicals (i.e., momentum and trend) matter in your thinking, and how do you read the technicals now?
There have been some terrific shorting opportunities.
Especially when JPM's quant department got super bullish in mid-August anticipating the SPX breaking back above the 200 day moving average and attracting all kinds of CTA trend following "momo" money. Talk about a contrary signal! That move in August just above 4300 turned out to be the Top. - - - And now 4100 is clear resistance with yet another Bear Market rally ending.
My position has been that market participants have been in "fantasy" land thinking that the S&P can rally from 17.5x earnings. Especially given that margins are about to decline. They've been piling into "defensive" names in the Dow, which has allowed that index to hold up the best.
There's a big "gap" in the SPX chart down at 3825 that needs to get filled (seen in yellow)
That's where I thought we'd be heading after the market failed (again) at 4100.
All "gaps" eventually get filled/closed.
Thanks.
I spent 10 years as a commodity floor trader in #4 WTC.
So 99% of my trading was based off of "technicals" aside from my Federal Reserve "Tea Leaf" Reading.
On the trading floor, your time horizon is extremely short.
The long term to me was 2 hours. The short-term was 2 minutes; not even.
Clearly, fundamentals arent involved when it comes to such a time-frame.
Moreover, there is so much fundamental "data" that gets thrown at an investor/trader these days that it can literally be overwhelming and you wind up "freezing". That's why "technicals" can provide a lot of value. It's part of my KISS (Keep It Simple Stupid) methodology.
However, it does take a lot of years and market history under one's belt to be able to read a chart correctly. For some that I have mentored, they've never really been able to figure it out. It's like trying to read a "foreign" language for them. - - - Clearly, there is an awful lot of "trial and error" that one has to experience in order to come up with the right "style" of investing or trading that suits them. We all have our strengths and weaknesses. For example, I have great difficulty trying to buy strength. It's one of the hardest things for me to do, even though I know a stock (or the market) is going higher.
I use Fundamentals largely for breaking down the growth prospects for a Company and/or the sector they're in.
I use Technicals for short to intermediate Trading..... entry and exit levels.
That means using various indicators like moving averages, rate of change osciilators, etc.
But mainly looking at what the trend is given that the "trend is your friend".
That's really where it all starts. Identify that key concept and you've won at least half the battle.
There's nothing worse than fighting the trend.
I also use a lot of fibonacci retracements and try to identify potential "measured" moves.
They seem to be a constant in my tool box.
I've tried to keep this thread on the stock market alive, but it just doesnt seem like there are many who are involved in the markets. So please forgive me if I'm not posting here that much anymore.
"Cults don't end well. They really don't."