XAO Technical Analysis

[stoner]

Re: XAO Analysis

Hi MRC,

I respect your opinion re fundamentals, but you have failed to answer the crux of tech/a’s question here. How does one successfully apply fundamentals in trading?

Over 12 months ago, you would have struggled to find economists or fund managers who base decisions from FA that were bearish the market, but there we many more cries from technicians warning of inevitable collapse. Why is this so?

The way I see it, the market movement is an expression of crowd mass psychology. As mentioned earlier its peoples perceptions that make markets move. Hope, fear and greed have always been the propellent of markets NOT fundamentals. As an example, take the dot.com boom. Was it fundamentals that drove that boom? What fundamentals? Simple answer: NONE

Another example. What drove the recent Oil bubble? Surely not just supply and demand! What has changed in 3 months for god sake?

The latest movements in the markets have been charged with one emotion: FEAR, which is the psychological reality as expressed by the movements of the stock market and other markets. The economic reality comes after that, as in a recession. So you see fundamental analysis does not lead the market, therefore you cannot successfully apply it consistently. As you mentioned, you don’t know what’s gonna happen tomorrow. The chart if properly analysed gives you something; we can look at circumstances and probable technical setups to trade from. Which is better than nothing.

When you think about it MRC, this really is a silly debate we are having here, because what causes the trends in the market is not really that important or doesn't really have to be explained. What is important, is identifying a trend irrespective of whatever has causes it, and joining in isn't and most of all trying to find ways of determing when that trend is at risk of ending.

All the best

STONER

 

[korrupt_1]

Re: XAO Analysis

Sometimes I really hate our market's position within the global time frame.

Are we celebrating yesterday or fearing tomorrow?

can't catch a break either way!

same here.... its hard work figuring which way it's going to be heading... before, the market was tamed and almost predictable,.. but now it's like a wild beast that has a mind of it's own.

lately, i've been trading 1hr trends and catching the larger moves. i get many false entries, but because of the volatility, if you catch a good run, it'll more than make up for the losses on the false entries.

 

[motorway]

Re: XAO Analysis

Stoner and Tech,

Peoples perceptions of fundamentals are currently negative. So what happens if positive news comes out, if banks start becoming profitable in the next 18 months and China resumes growth? What is the point of your 2 year + analysis? It is based on waves of crowd behaviour right? But that will CONSIDERABLY alter over time, the longer the timeframe, the further that will alter. Fundamentals drive markets in the long-run, regardless of what anybody says. It is plain obvious. So why has the stock market risen in the US throughout a boom period and fallen throughout a recession?

Pretty obvious. Not because of perceptions which can only be traded short-term IMHO, especially when it comes to application.

The "Method" takes for granted:

That the price of a stock at any given time is its correct valuation up to the instant of purchase and sales (a) by the consensus of all buyers and sellers in the world and (b) by the verdict of all of the forces governing the laws of supply and demand.

That the price of a stock reflects or crystallizes everything known about or bearing on from the first sale on the Exchange (or Prior) up to that time.

That those who know more about it than the observer cannot conceal their future intentions regarding it. Their plans will be revealed in time by the stock's subsequent action.

Victor De Villiers, "The Point and Figure Method of Anticipating Stock Price Movements", Published 1933, pg 8

the Bold text Qualifies all... Including fundamentals ( the rest of the text ) because the fundamentals that matter are of tomorrow and only unfold and are only known by the very few.....


Question

How much is just demand deferral atm
and not really demand destruction

guess what will reveal ?

demand deferral will cause overshoot to the downside
those expectancies

motorway

 

[treefrog]

Re: XAO Analysis

Markets always Overshoot ALWAYS

Wait for a clear bottom
A Sign of Strength
and a CLEAR --LAST POINT OF SUPPORT

motorway

nice post Mr M - clear and (becoming) concise

 

[dhukka]

Re: XAO Analysis

On a slight aside, the Fed are currently in a 2-3 day meeting on their next rate move. Looking at the Dow chart, things strangely rocketed toward the end of the day. Now I don't know why, as there were no major stories that I know of. But is it possible that some news has leaked out about the Feds next move to some major players.

Announcement tomorrow US time I think, so if it is good news and made public, then could see another good run tomorrow. Just a theory though.

I think this Fed meeting is potentially one of the least important they have had over the last 12 - 15 months. The effective Fed funds rate is currently trading below 1.0%, in essence there has already been a 'stealth' easing. I would fully expect some type of knee jerk reaction after the announcement, whatever the verdict but it will be indicative of very little. If however, as has been bandied about, a coordinated rate cut is announced in tandem with the ECB and the UK it may have more import in the short term.

 

[treefrog]

Re: XAO Analysis

Fundamentalsare what is thought
Sentimentis what is felt
Technicalsare a measure of what is actually done..

Identify After
do not predict before
but always anticipate

that upside count is not really there and maybe becomes a downside count
It does not exist until it is activated.
motorway

also nice post Mr M
clear and (also becoming) concise

 

[OzWaveGuy]

Re: XAO Analysis

Hi MRC,

I respect your opinion re fundamentals, but you have failed to answer the crux of tech/a’s question here. How does one successfully apply fundamentals in trading? ...

Agreed. Whilst fundamentals influence individual stock movement in the short term, hence Elliottwave doesn't always apply here (and perhaps where the confusion lies), but at a market level, the crowd is the one driving it - and there are patterns of how social mood can be recognized.

Changes in Interest rates, GDP, Growth, employment, oil prices are ultimately a result of human expansion or contraction (aka progress). It is humans that drive the expansion and contraction - not market events. Market events are driven by Human social mood, whether it be positive or negative.

You can be sure of one thing - the financial reporters will find a way to join an event to the action in the market and when the market reverses an hour later the reporter will create an alternative story as to why the market reversed.

 

[nunthewiser]

Re: XAO Analysis

thanks treefrog . u know where we are

 

[treefrog]

Re: XAO Analysis

Hi MRC,

I respect your opinion re fundamentals, but you have failed to answer the crux of tech/a’s question here. How does one successfully apply fundamentals in trading?

frog has spent a lot of time up this tree and was once "analysed" (after answering some highly paid d'heads 50 questions as having a bias towards analysis - paralysis from analysis is near enough.
And has applied and traded many combo's on TA and FA forming the following conclusions for stocks.
1) the only way of trading pure FA (no chart) is to weigh up the fundamentals and wait for positive announcements - I have seldom heard of people trading FA: but investing yes!
2)MT is best suited to a combo
3)ST is best suited to a combo with most weight toTA

so the debate boils down to what timeframe and what market.
e.g. FX puts the lie to not being able to trade ST on fundamentals (announcements) - this market seems not to leak like the insider problems that stocks have.

 

[MRC & Co]

Re: XAO Analysis

Actually, many fundamentalists were calling for an end to this bull market for some time. See Uncle Festivus, Dhukka (on the severe and imminent market correction thread). No doubt, it is hard to invest based on fundamentals and far harder currently (as nobody actually knows what is going on).

But, fundamental news and sentiment changes over time. Which is why I find it impossible for EW or any form of TA to give any indication of how the market will move years out from now.

IMHO, and agreed upon by others like Linda Bradford Raschke, TA works best on very short time-frames, the shorter, the better, as there is no chance for fundamental news to alter sentiment and you can therefore look for sentiment through current supply and demand, second by second if you will (see TH and scalping).

Years? Sentiment and CURRENT crowd behaviour gives NO indication and hence, no need for any type of TA or application. Crystal ball gazing to me.

Oh and fundamental news can EASILY be traded for those with the fastest execution and news feed. Unexpected news with an expected reaction to that unexpected news, will just give you more conviction (see latest 1% interest rate slash).

You can make your own conclusions, just throwing my opinion out there, as I see most of this EW analysis for years out a complete waste of time. Like any form of TA, only think it would work short-term.

 

[tech/a]

Re: XAO Analysis

Actually, many fundamentalists were calling for an end to this bull market for some time. See Uncle Festivus, Dhukka (on the severe and imminent market correction thread). No doubt, it is hard to invest based on fundamentals and far harder currently (as nobody actually knows what is going on).

But, fundamental news and sentiment changes over time. Which is why I find it impossible for EW or any form of TA to give any indication of how the market will move years out from now.

IMHO, and agreed upon by others like Linda Bradford Raschke, TA works best on very short time-frames, the shorter, the better, as there is no chance for fundamental news to alter sentiment and you can therefore look for sentiment through current supply and demand, second by second if you will (see TH and scalping).

Years? Sentiment and CURRENT crowd behaviour gives NO indication and hence, no need for any type of TA or application. Crystal ball gazing to me.

Oh and fundamental news can EASILY be traded for those with the fastest execution and news feed. Unexpected news with an expected reaction to that unexpected news, will just give you more conviction (see latest 1% interest rate slash).

You can make your own conclusions, just throwing my opinion out there, as I see most of this EW analysis for years out a complete waste of time. Like any form of TA, only think it would work short-term.

You may find myself as an unexpected supporter of some of your views.
I agree that ANY long term analysis of any kind can only indicate a probability.
This can and does alter with time.

Most analysis is only good for near term.
Even Fundamental.
VSA is only applicable to the next 3 or so bars in whichever time frame your trading.
Elliott I have found best in shorter time frames.
Conventional tech analysis is only applicable to the duration of a setup sell or buy---its either proven or dis proven.

I made a lot of $$s on a technical equivalent of trading "news"
I used to have live Volume increase%/Number of shares traded increase %/Gap %/and price increase % data.
A simple glance at the columns would show me instantly runners in realtime.
I could get on and then trade short term technical analysis.I vividly remember one trade which went from 5.4c to 10c over the day 4 hrs actually and I got 90% of it with some real $$s

Did very well until Marketcast folded!

Must look into that again.

Ah found it again!!
http://www.markettools.com.au/
Must ring Scott and set this up through E signal!

 

[frenzel]

Re: XAO Analysis

I think this Fed meeting is potentially one of the least important they have had over the last 12 - 15 months. The effective Fed funds rate is currently trading below 1.0%, in essence there has already been a 'stealth' easing. I would fully expect some type of knee jerk reaction after the announcement, whatever the verdict but it will be indicative of very little. If however, as has been bandied about, a coordinated rate cut is announced in tandem with the ECB and the UK it may have more import in the short term.

In agreeance with some previous posts that sentiment is what runs markets. If the Fed were to offer some radical rate cuts or moves, as I suspect, then this could provide a serious boost to the market, although short term definitely. I'm still holding strong that there will be a serious announcement by the Fed tomorrow that will rock the markets on the basis of that late Dow trade. I'm not putting cash on it, but still a hunch...

Today, the ASX reminded me of a dog you throw a ball to without letting the ball go. It runs down the backyard, and then stops looking for the ball. Then it slowly comes back with that stupid look on its face. Tomorrow it could find the ball.

 

[tech/a]

Re: XAO Analysis

If the Fed were to offer some radical rate cuts or moves, as I suspect, then this could provide a serious boost to the market,

Seems it was all priced into the rise yesterday.
Think its run its course.The benifits provided wont be seen for 6 mths or so.

 

[OzWaveGuy]

Re: XAO Analysis

I promise, I won't wade into any more "anti-Fundamentals drive the market" discussion - at the end of the day it's whatever works for you right?

When you wake up today and switch on the news or read the web sites today you'll probably see a headline reflecting the media's analysis of what happened on the US markets last night, and you'll say "oh ok, that makes sense" or perhaps a profanity or two depending on what happened.

But make sure you understand how the headline was eventually derived.....

 

[M34N]

Re: XAO Analysis

I promise, I won't wade into any more "anti-Fundamentals drive the market" discussion - at the end of the day it's whatever works for you right?

When you wake up today and switch on the news or read the web sites today you'll probably see a headline reflecting the media's analysis of what happened on the US markets last night, and you'll say "oh ok, that makes sense" or perhaps a profanity or two depending on what happened.

But make sure you understand how the headline was eventually derived.....

So true OWG, I watched the Dow this morning swing from +120 to +280 within an hour, then watched in those last 20 or so minutes when it dropped 300 from that high. What a roller coaster indeed, and it's so very typical to see the headlines change on sites like Yahoo Finance, MarketWatch and CNBC to 'suit the mood'.

But I guess that goes to show you, what fundamentals are there in this market? It's completely irrational, and the markets will move depending on what the big boys/hedge fund managers do, not what is fundamental.

I must admit though, the price of oil went up a fair bit (+$6US) and there was no headline about how that caused the markets to fall, even though it had been rising all afternoon along with the markets. Maybe it's no longer the flavour of the month to blame oil.

Anyway here's hoping for a half reasonable day on the markets today, our market performed very average yesterday considering the gains in the US, and the US done relatively well to only lose 1.5% after that big rally. You could of sworn our market was factoring in some 6% drop on the Dow this morning by the way it traded yesterday?

 

[CAB SAV]

Re: XAO Analysis

Would expect our market to be positive with resources & aus going up overnight. But the 64 dollar question will be tonight when US GDP data is released. Naturally expected to go down and if falls within "range" should be Ok, but if falls more, Well, back down again tomorrow.
Could go anyway, although with a bit of "tweeking" can look ok. Just like yesterday, Durable goods up 0.8% but take out transport/DEFENCE = -0.6% down. Wars er I mean defence certainly help their economy.

 

[sails]

Re: XAO Analysis

... It's completely irrational, and the markets will move depending on what the big boys/hedge fund managers do, not what is fundamental...

I think you've summed that up pretty well...

 

[OzWaveGuy]

Re: XAO Analysis

Would expect our market to be positive with resources & aus going up overnight....

I'll stick my neck out a little - usual caveats apply as the short term market pattern isn't confirmed. There will be a rally upto the 4000point mark or at least higher than the market yesterday. Followed by a reversal down to 3800 or less, but unlikely for a new low (but possible), followed by a rally to around 4200-4300.

Interpretation for Elliottwavers, Flat 3-3-5 correction upwards on the wave C leg of a 4th wave triangle Pattern still needs to be confirmed - but is a top count at the moment.

 

[$20shoes]

Re: XAO Analysis

I promise, I won't wade into any more "anti-Fundamentals drive the market" discussion - at the end of the day it's whatever works for you right?

Can I just raise one point on whatever works for you...??

Fundamentals, tea leaves, morning stars...whatever your approach, should it not simply be an "enabler" to trade. That is, your approach SHOULD be presenting the opportunity to trade. Read that sentence one more time. You don’t want your equity to grow so you have lots of money. That’s just a by-product of a strategy that can look after itself! Got nothing to do with how clever you are in picking a winner. You simply do not know what the market will do tomorrow. So manage you bad trades, manage your bad trades, manage your bad trades.

You simply want your equity to grow so as to give yourself the opportunity to trade more and more positions. That is it!! It's so simple it is actually boring. BUT this is compounding at work!! The end result is profits - but THAT IS just the end result. You have no control over the market. But you do have control over a trading plan that will allow your equity to grow, and hence allow your trades to compound. And you do have control with respect to exiting the markets.


If you bank on a probability that the majority of your trades should have turned a profit at some point down the road, are you robbing yourself of opportunity?. Is locked-in capital actually hurting your equity graph??

The fundamentals v technical argument is interesting but skewed really, because the arguments too often applaud their own virtues, at the expense of the more pertinent points - risk/opportunity/probability.

Give me tea leaves and blue moons, if a backtest can show a reliability and probability and prove your avg win is greater than your avg loss.

Interesting question - if I opened 10 positions by randomly drawing them from a hat (whose contents is the XJO universe ) on a moon's waning crescent, and protected my capital with a stop and a 1% equity risk, and then closed out all my open positions on a waxing crescent and repeated the same exercise over and over again for 10 years, would I or would I not have a successful trading system ??

XAO - I thought I should mention it as it is the XAO thread

 

[skyQuake]

Re: XAO Analysis

Interesting question - if I opened 10 positions by randomly drawing them from a hat (whose contents is the XJO universe ) on a moon's waning crescent, and protected my capital with a stop and a 1% equity risk, and then closed out all my open positions on a waxing crescent and repeated the same exercise over and over again for 10 years, would I or would I not have a successful trading system ??

XAO - I thought I should mention it as it is the XAO thread

Great. Way to spoil my secret trading strategy.