18 replies to this topic

[selecto]

Perhaps, I do not fully understand the concept, but, Charles, if it is a random walk, then why do a series of accumulation or distribution days operate to signal price direction?

Edited by selecto, 24 December 2006 - 03:37 PM.

[jawndissedi]

jawdissedi,

No offense ment. What I did mean is that in the economy or markets each time is a difference roll of the dice. The dice have no memory. What happens before has no effect on what will happen now. There is no way the variables will be the same in each case. And they would have to be for the past to be a map of the future. The trouble in the housing sector may or may not roil the general economy. At this time no one knows. The point I am making is that the future is unknowable and looking for a pattern based on what happened in the past is a useless endevor. It is a random walk.

Charles

I am broadly in agreement with you that randomness is a much more significant factor in market outcomes than most traders recognize. However, if it was a totally random walk, there would be no point in anything but buy and hold investing based on a presumption of LT growth. In any event, I appreciate the courtesy of your reply and wish you the best in the year ahead.

Edited by jawndissedi, 24 December 2006 - 03:45 PM.

[tuffy88]

selecto---Mainly that it seems to work. But I would add: At least so far. Where I have followed it with my own money at risk. When I get a sell signal on the current buy I will not be sure it will be right. 3 of the 7 signals I have followed with money on the line have been losers in the last 3&1/2 years. (almost 4 years) 4 have been winners. One very big winner. And the present one will be a winner. The fail-safe 7% mental stop loss from the highest close will take me out wih a profit on this buy in the worst case senerio. Even so I am following this signal with only a small portion of my capital. The major part is invested according to the EMH at its effecient frontier. You have a very good holiday. jawndissedi--- The efficient frontier of investing is far from a buy & hold strategy. It uses asset allocation to control risk. And did a very good job controlling risk in the 2000-2002 bear market. You have a very good holiday also. Charles

[arbman]

tuffy88, even selling your gainers and buying some of your loosers to rebalance your portfolio is based on the historical track record of the asset groups. There is no guarantee there either. So, basically people looked and saw that over a 100 yrs the stocks did something like 7% and the bonds 3.5%. This is pure technical analysis since it is pure statistical... They created portfolios based on these assumptions including all of the other asset groups and it is recommended that you keep at most a 80-20 ratio for your stocks to bonds. So, whenever you hit your yearly targets, you rebalance and if they rally even more, rebalance some more so that whatever long term ratios you are maintaining, they stay the same. It is an automated profit taking mechanism inherently driven by the technical analysis... The patterns in the market place are due to the cycles, but the intensity of the cycles are driven by the momentum and it causes the slight variations in the cycles. However the chaotic the market may be, it is still singing a song, if you are not so inclined to listen to its rhythm, you can certainly dismiss it as the noise. The beauty is in the eye of the beholder --and some make more money by appreciating it... Happy holidays... - kisa

[tuffy88]

kisa' Debate on this point will probably never be finished. No agreement reached. You are probably right about harvesting profits. Revbalancing does do that. I had never thought of it that way. I always think of re-balancing as conforming to the markets reversal to the mean. And that is risk control. I think all markets do that, but no one can say when it will happen. I re-balance each January back to the asset allocation I want. Which for me in retirement means 50-50 stock-bonds index funds. That is in my main portfolio. The trading portfolio follows the IBD buy-sell system I have outlined here from time to time. You too have a good holiday. Charles

[pdx5]

The housing chart posted by JawnD above should not be dismissed lightly IMO. Housing now has even a bigger impact on economy with the shrinking of manufacturing portion over the years. So, I will be watching to see how the housing situation plays out in 2007 before committing major portion of my funds to the long side.

[MangeMan]

For every indicator not signalling recession in 2007 there are at least 5 saying the opposite, the ecri index is usually quite good and currently the most positive indicator out there imho, but I still believe there will be a recession 2007

[stocks]

ECRI weekly leading indicator growth starting from 9/29

-.6
-1.0
-.5
-.1
-.1
+.3
+1.2
+1.6
+1.5
+1.8
+2.8
+3.4

http://www.businesscycle.com/

ECRI monitors over 100 proprietary cyclical indexes for major economies covering more than 85% of world GDP. We regularly interpret this data to form a sophisticated cyclical forecast which is available by subscription.

As The Economist magazine recently noted, "ECRI is perhaps the only organization to give advance warning of each of the past three recessions; just as impressive, it has never issued a false alarm."

ECRI weekly leading indicator growth starting from 4/20:

+4.0
+4.4
+5.2
+6.1

Now at the highest level in years

[stocks]

ECRI's "no recession" call for 2007 was correct.

This week's index at -5.2% has now entered the recession zone:



Lakshman Achuthan, managing director at the Economic Cycle Research Institute, agrees that "doomsayers" who predicted a recession in 2007 have been proved wrong.

"But looking forward at 2008, we've got problems," he said.

The ECRI leading U.S. index's growth rate has hit a 5-year low of -4.8%. Typically a -5% to -6% reading is needed for a recession.

Housing is getting worse, he says, and "we're starting to see layoffs."

http://www.businessc...ews/press/1367/