If Technical Analysis doesn’t work, how do you define a bull market?

Discussion in 'Technical Analysis' started by Blitzjoker, Dec 28, 2021.

  1. A bull market just means prices are rising. It’s not a prediction about the future.

    Markets are semi-strong firm efficient, which means very little excess returns from analyzing historical data (technical OR fundamental!). Modern technical analysis used at CTAs and hedge funds revolves around the quantitative analysis of trends (momentum factor) and large data sets. The charting methods of the old days (40s to 70s) are largely eroded, and just the same with historical financial analysis has diminished. (Graham himself said that there was no more money in the strategy he articulated in the Intelligent Investor). Neither technical or fundamental analysis are good enough.

    To generate excess returns you must exploit flaws in behavior, informational edge, or analytical depth.
     
    #11     Dec 28, 2021
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  2. Fonz

    Fonz

    If you are an investor, perhaps just like that:
    TSImage5.jpg
     
    #12     Dec 28, 2021
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  3. smallfil

    smallfil

    There was an accounting scandal then, remember Enron? Top accounting firms were exposed just accepting the figures given by companies instead, of doing their jobs and auditing the financial statements. One more reason to doubt, figures published on earnings. How many companies re-state their financials? So, at a minimum, inaccurate or maybe, even fraudulent?
     
    #13     Dec 28, 2021
  4. MKTrader

    MKTrader

    It's not an all or none question. Measuring things like
    • Whether a stock index is above its 200-day MA or other long-term trend indicator
    • Whether the market has fallen over 20% from an all-time high (classic bear market definition)
    are helpful, albeit imperfect measures of the market's current trend. Saying that TA gives you an edge in trading is a very different claim, which is largely untrue with a few exceptions. In fact, defining the long-term trend is one of the few edges if coupled with a profitable strategy (which may or may not involve classic TA).
     
    #14     Dec 28, 2021
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  5. KCalhoun

    KCalhoun

    I booked profits today using TA: s&p bearish cup, descending triangle so I went long TZA UVXY :D
     
    #15     Dec 28, 2021
  6. Snuskpelle

    Snuskpelle

    The past is a flat fact (probability 1) vs the future which has a range of potential outcomes (w/ a probability distribution). Similarly, you can therefore talk about a piece of the past as if it was a bull or bear market as a fact, but you can't talk about the future like that.

    The confusion stems from semantics. When people say "TA doesn't work", they generally mean that most of it lacks the predictive qualities many of its proponents claim (and this is easy to confirm by proper back testing). TA works absolutely fine for hindsight analysis, e.g. for figuring out which stocks went up a lot recently. The tool/hammer simile as brought up is generally unhelpful, since people show with it how applicable TA is for hindsight analysis, which nobody was questioning in the first place.
     
    #16     Dec 28, 2021
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  7. zdreg

    zdreg

    A bull market is when you go consistently short and are losing on nearly every trade.

    A bear market is when you go consistently long and are losing on nearly every trade.
     
    Last edited: Dec 28, 2021
    #17     Dec 28, 2021
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  8. deaddog

    deaddog

    Mark Twain said “history never repeats itself but it rhymes"
    Trading is a game of probabilities.
     
    #18     Dec 28, 2021
  9. MKTrader

    MKTrader

    Yeah, but if you have some indication of which type of market you're in, that shouldn't happen... you'll still lose some, but certainly not all. Whether you identify the type of market by classic TA measures (above/below 200 day SMA) or by looking at "naked" charts doesn't really matter.
     
    #19     Dec 28, 2021
    murray t turtle likes this.
  10. What type of market we are in only impacts your pnl 1:1 if you’re taking on simple beta. That means you’re not taking active risk.
     
    #20     Dec 28, 2021