AAPL Intraday Updates (Archive)

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    Posted: 23 December 2008 03:49 PM #91

    chiforce - 23 December 2008 07:42 PM

    TA is NOT as reliable an indicator as it would be in a relatively stable environment.  Agreed?

    Take care.

    I would agree that highly volatile environments make any kind of analysis more difficult. And at some point, the volatility reaches a state of entropy, beyond which results in chaotic market behavior. At that point, the rules of chaos apply (whatever they are).

    As a general rule, and from the experience of this bear market, I would say that a VIX reading above 60 produces such a chaotic environment. Between 45 and 60, it is tenable, but erratic. Below 45 it is relatively stable.

    -ernie

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    Posted: 23 December 2008 04:45 PM #92

    Fundamentals vs TA

    Share price is determined by perception of life cycle discounted cash flow which would include perception of current and future fundamentals*.  So, is important to be aware of fundamentals.  TA is a read of such perception i.e. secondary to fundamentals.  However, there are far too many fundamentals that we don’t know.  TA is a tool to compensate our ignorance.

    *fundamentals include economic factors.

    chiforce - Investors would want more evidences that those economic policies are working before they are comfortable to employ their cash hoard (current estimate is about 50% of stock market networth).  Currently, TA indicates that market has not bottom which is not inconsistent with economic conditions and expectations of most AFBers.

    ernie - I like the Russell chart.  Look like a leading diagonal (wave one).  The decline after the rising wedge is a retest (not break below) of the low ... wave two.

    [ Edited: 23 December 2008 04:50 PM by Mace ]

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    Posted: 23 December 2008 07:29 PM #93

    erntheburn - 23 December 2008 07:31 PM
    chiforce - 23 December 2008 07:01 PM

    A note of caution - While TRADERS use TA for minute to minute trades, these stats do NOT account for the extraordinary factors in play such as fed actions and global policies.  Clearly many are trading on these indicators but looking ahead further than your nose they are not the most important determinant of market direction.

    IMHO, there still are a TON of short sellers yet to cover during this time of FUD, but when a few more clues surface in the housing market and/or with corp earnings, they will cover in force and the market TA stats will be blown away.

    Happy holidays!

    EDIT: TA is rarely used for minute-to-minute trades. It is used for all time frames, but mainly for time ranges around 2 days to a couple of weeks.

    It really amazes me how many of you are in complete denial with the validity of TA, as if it were some prescriptive science. Well, it is not a science at all, it’s more of an art, in the same way that great architectures are considered artful.

    I believe the criticisms are misplaced. All TA does, is take past events, filter them with well established patterns, the analysts’ experience and basic high-level rules, which point to a relative/probable future direction. Of course random events can skew that probability, but even then, after such events, a well crafted TA prognostication still holds up quite well.

    In any event, most analysts don’t rely strictly on TA, they also use fundamental and quantitative analysis to provide contextual input.

    -ernie

    Well said Ernie. Amen!

    The only thing I would add is that while great architecture is art, it is also great science. Consider the Gothic cathedral. The highest art, yes, but science taken to the limit for the time. Same with TA. Both science AND art as I previously mentioned.

    (P.S. We need to revive the TA thread again.)

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    Posted: 23 December 2008 08:08 PM #94

    chiforce - 23 December 2008 07:42 PM

    Respectfully, Earnie, and by your own admission, TA is but ONE TOOL and there are so many other variables and factors that I was simply cautioning people NOT to rely on it too much (particularly if they are NOT day traders).  I agree that it is both art and science, and by art I mean a lot of experience, common sense, good listening and synthesizing a LOT of information, and of course LUCK.

    I know too many people who have lost a great deal of $$ trading on TA without consideration of all the other factors.  Particularly in this case with Apple and the stock price being driven by a fearful market and rumors of SJ’s health, TA is NOT as reliable an indicator as it would be in a relatively stable environment.  Agreed?.

    No!

    I don’t know where the idea that TA is for day traders came from. It is certainly used at the other extreme for position traders. Have your read the book, “Trend Following” by Michael Covel? He bulids the case that the really successful super-rich traders got that way by using trend following. Trend following uses some form of TA to determine the trend. In truth, a real trend following approach is a mechanical system that couldn’t care less about what causes it?including SJ’s health. The original and famous “Turtles” used a mechanical trend following system, and the better turtle traders made huge fortunes.

    Swing traders (those in the market for a day to weeks), are the most heavily dependent on TA. While there are many day traders that use their experience and “feel” of the market without traditional TA, there are probably few real swing traders who do not use TA, since that is why they find swing trading so profitable.

    There are TA tools that work best in a stable environment, and tools that work in an unstable environment.

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    “Whatever happens in the stock market today has happened before and will happen again.”    - Jesse Livermore