Qualified Prediction vs Anticipation with Probability

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holycow

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Post Number: 1042
Registered: 08-2004

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Saturday, April 02, 2005 - 11:30 am:

(not sure why I want to write all these - trying to convince others of TA and its power in market prediction - embarrassing things meant for a fool - but it's something I think I like to get out of my chest, no, not my chest, it's my stocmach(s)...)

Not long ago there was a discussion on using TA to predict the market against using TA and MM to "win" in the market. But further back I came across a very interesting "rant" from a FA guy (Ann, trust me, it's not you) making some very funny remarks on TA and its practitioners which I thought was very well observed and yet at the same time I feel/felt he was "misguided" may be by focussing on all the negative and brainless speculative TA views (meaning: no basis) splashing all over various forums and or he has some extreme prejudice and has not been to IC forum because I am sure there are quite a few here would be able to give him some pretty good reasons for a new appraisal of his view on TA.

(Of course I am not talking about me being credible, doing so would make me an arrogant cow extra-ordinaire and I am not going down that road. I am referring to others who live here. If you open your eyes and read carefully you know their views are quite well presented... but this is getting away from the topic. Stop!)

Yes, I think I like to do some qualified prediction here. But before I do that I like to provide some background here... unfortunately it is in the PBG thread I made all those comments and is not meant as a reaction to Ann's comment.

The reason why I made those comments were base on a few factors, referring to the following 4 charts - XAO, XDJ, PBG, PBL:

PBG/PBL combo daily
predict

1) XAO although was trending up with a series of white candles but I was not convinced by its volume, on top of that the candle was getting squashed as they were reaching higher. I took that the "general market" was reaching a distribution phase;

2) XDJ, the chart at bottom right, was making a new minor top but its volume was pathetic, I was expecting the following day to be a day of "sell", which was subsequently proven true. The candle action and the established downtrend gave me the confidence that the bounce in XDJ was just a minor reaction (read: weak rally);

3) I was watching PBL (and made some money out of it), it was showing some kind of big move (probably one of the reasons why XDJ was moving higher); but when I look at PBG, it was looking miserable with a doji star, showing weakness in its upward move at that point. This negative view was further strengthened by these news...

... which prompted me to expect further re-test of its low made on 24/2.

4) looking back with a more thorough review, I am not sure if I have made a qualified prediction, but I sure put in a lot of alternative "moves" in the event that such anticipation didn't materialise - and I believe it's these anticipation, wait for event confirmation, adopt/adapt appropriate actions that kind of define what "dealing with probability" some stock traders are talking about?

So, is this TA in a nutshell? Am I on the right track?

(this is getting too long... I will start a new thread on predicting the future so I can't lie my way out with hindsight. But don't hold your breath for it though coz I am already half dozing off... )

HC

"... if you've got a chart, I have an opinion!"

holycow

Member

Post Number: 1043
Registered: 08-2004

Rating:
Votes: 1


Saturday, April 02, 2005 - 02:28 pm:

(Next... the story continues with "Now what?")

First, I want you to refer to this post where I have listed all the sector charts.

Do you know why I ask/asked you to check them out? No?

Ok, that's because when the market is reaching a top, the cunning big players, the instos and the smart money with plenty of capital, like to play on the average - they do target buying on big index components giving an impression all is well whilst they off load their stocks (for you cash, if you don't get it) somewhere. Sometimes they do this in year end and they call it "window dressing".

(There's nothing worse than being screwed and not knowing you are being screwed, so I hope you can take this to mind and keep an eye on the index AND your stocks at the same time! Don't let the index performance induce you into a false sense of security! Get it?... I know I am getting a little condescending here sorry!)

So if you reckon the XAO is giving you hope that it is just a temporary and just a minor set back (like I just read someone said confidently that it is not going to go any lower, etc...); and you really want to get rid of all these "fog of war", you'd need to look elsewhere, places where they, the market big boys can't hide their sneaky moves.

You look at the sector indexes or indices because this is where they can't cover all the ground with their resources. So take a closer look at the sector charts now and see if they give you any sign of "NEGATIVE DIVERGENCE", yeah, negative divergence since everyone loves technical jargon to sound convincing. Do you see any negative divergence between the sector indexes against the XAO?

Yes or no?

Sure, I can almost "anticipate" the arguments and counter arguments - everyone is playing around with time frame! It's like how long is a piece of string! What does all these tell you?

1) it simply means - at this point, it's still too early to determine with any certainty the market has reached a top and is going for an intermediate or substantial correction; hence views with different time frame seem all exhibit some kind of validity with their respective argument. This is only natural because I think we all know time is relative by now, especially with subjective matter such as perception.(here's a big thank you to Einstein for making life interesting...)

2) there's a lot more hope/greed and much less fear in the market at the moment - try picking up how many posts/views are on why the market should/will go higher because the correction was over as measured against views that are negative - the market and the herd are still in party mood and they want to continue partying. They can't wait for the rally to continue and some don't even "entertain" the thought of further correction. When there's no room for fear, we can expect more wagers on rally and the market will not go down until these excess/extra cash is used up. (will these cash ever run out?)

And this is what "they" want the herd to think and do so they can continue their milking.

3) Here is something you as a market participant has to do - go through all the sector index charts and assess them as objectively as possible. In particular pay attention to those where market leaders are residing, stocks with big capitalisation because that's where big money is at stake, and it is here where "they" can't easily manipulate the movement and direction of the sector.

Look at big sectors such as financial, financial&property trust, materials; and lesser sectors such as industrials, consumers (both staples & discretionary), property trust and energy. These sectors are where bulk of the $$$ goes to and hence their individual/collective divergence with XAO or XJO would make the overall general market trend looks suspicious (at least).

Briefly these are what each sector chart is indicating from my angle:

1) XFJ - since Feb 10 the index has been making lower highs and frankly my view is it is going down, todate you are looking at about 35+ sessions and yet it is not making any headway in reversing the trend. So it's short term down and what's your take that it will reverse the tide and do a phoenix rising from the ashes?

2) XXJ - is twin brother to XFJ, you see one, you see another.

3) XMJ - since Mar 15, this index has been showing... ahem, no showing at all - it's going down. Ok, yesterday it was UP, yeehaa! Good news. But wait a minute - didn't we hear day in day out the iron ores, coal, copper, base metals this and that are hot? How come the index is down?

Ok, here's the bet - anyone wants to bet from now on the index will make it back up all the way and overtake its recent peak of 7637? I am not saying this is not possible, I am asking you to wager a bet here! Ask yourself, what's the odds stacking against such bet? Your perception of the market will determine your bet here, most likely.

4) XNJ - industrial sector - does it look bullish to you? I could be wrong here - I am seeing a double top. What about you? Are you seeing a big "W" or a big "M"? With this index, I will ask you to wait for a while - if(IF!) it is making a recovery, and if it were to fail in taking out 5215, I think I will tell you it is going down in flame. Just wait and you shall find out - there's no need to "debate" this index - let time be the judge.

5) XDJ - I think it's gone.

6) XSJ - it's already taken out the previous peak and is making for the lower minor peaks - whether it can reverse its still early down trend is questionable. Let's give it the benefit of doubt and let it show us if CML, CCL and WOW are that invincible - many others in that group are already half buried. But let's wait, just to be objective.

7) XPJ - see for yourself. Go do some homework.

8) XEJ - this, so far, is the only credible strong uptrending sector. Can you tell me how many stocks are in this sector please? Or you can refer to my old copy of XEJ component list below and then ask yourself - how many of these stocks are actually leading the market?

How many are actually come with a lot of credentials (meaning big capitalisation)?

And most important of all - do these stocks represent the whole market?

Can they actually single handedly lift the whole market beyond the peak they made recently?

Ok, start thinking now and draw your own conclusion and form your own "perception" - remember, it's not what you/I and everyone in this forum see/feel that matters - it's the larger herd outside of here that are charging that will determine how this market will move from here. Of course running beside them will be many predators watching...

Also, it is important to remember since beginning of this year, many news, forward economic/market indicators are saying the growth is slowing down. On top of that, there was a rate hike, with another rumour on its way. Let's throw away all our personal bias and ask this simple question: will the next two quarters be better than the last two quarters?

Will the businesses moving forward able to maintain their revenue, profit margin and profit growth? Remember if you are betting a higher market you are implicitly betting on a better business outlook and outcome that will support your thesis of a higher market valuation from here. Fair point?

Ok, enough... and later.

(Hope you love the story... next I will move on to individual stock qualified prediction...but first my lunch...)

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HC

"... if you've got a chart, I have an opinion!"