Re: Interesting
mInvestor
9/16/2011 5:03:52 PM
Thank you Fred,
This is a good piece.
I especailly like this" It is as timely today as it ever was because people have not changed. They are still as fearful and greedy as they were more than 60 years ago, so the pictures drawn by daily or hourly price movements are no different."
You are right on this.
Re: Things are looking pretty bad...
yalanand
9/15/2011 3:25:36 AM
let's hope that better days are right around the corner, and that our stocks, as well as our economy and reputation will rebound.
@icebreaker1975, I too wish the same but reality is this will take couple of years for this volatality to settle down.
Re : If It Waves, Salute It
yalanand
9/15/2011 3:20:19 AM
Fred,
Thanks a lot for the post and thanks for introducing us to "Technical Analysis of Stock Trends." As always your articles are very helpful for us to understand the aspects of technical trading.
The pattern comes in both a bullish and a bearish variety. According to Thomas Bulkowski, author of the Encyclopedia of Chart Patterns, "I uncovered 523 flags without making an intensive search. Many were just a few days long and they are a colossal pain to catalog because they are so small and so plentiful."
He is speaking of individual stocks, so with regard to the S&P 500 index they will be less frequent, but they will appear often enough to make them worthwhile to study when they appear. And remember, a valid pattern must be confirmed by a 3% decline below the trend line or a 3% rally above it for a bullish pattern.
And even when confirmed, there is a chance that the projected high or low may not be reached. Unfortunately there is no perfect indicator or chart pattern.
This seems to be a vicious pattern; exactly how common is it?
Well, let's stipulate that you are correct and the earnings end up at $95 a year from now, as is predicted by Standard & Poors, even though the estimate was just lowered from its last prediction of $98. Then, we have to take on faith that the PE ratio will be 11.5 and not 7 as was the historic low after a severe economic shock.
Many investors are of the "buy and hold' philosophy and have the intestinal fortitude to hang in there during severe declines. I am not one of them. I do not have the constitution to sit calmly by while the money I have accumulated over 50 years of work fluctuates by as much as 40%. After all, I may need some of that money before the market snaps back
So, I must be content to sit on the sidelines during periods of extreme volatility and try to take advantage of positive periods when they occur. I may end up with less than those who stick it out, but that is a price I am willing to pay for stability.
The market may not fall below the "flag" I have descrbed, and I hope it doesn't, but if it does I will sell the few remaining investments I have in equities and hang on to my 6% in gold and 10% in foreign currencies. The rest will be in insured fixed income vehicles.
let's hope that better days are right around the corner, and that our stocks, as well as our economy and reputation will rebound.
Based in fact?
tokyogai
9/13/2011 9:56:03 AM
While trends and the past may indicate these moves in the S&P, I think what is behind the average and the performance of the companies in the S&P is more relevant than a technical pattern. At 11.5 times earnings, we can argue that the S&P stocks are cheap and there are bargains to be had. No need to wait for the average to fall way below 1000.
always interesting
driven
9/13/2011 9:55:26 AM
I always learn something new from you Fred.
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