Perfection! Making You Think and Go . . . Huh!

Discussion in 'Technical Analysis' started by ProfLogic, May 29, 2004.

  1. What if the price action and the direction of every Market were perfectly readable. Then "Predicting " the direction of the Market would be unnecessary. A trader would only need to "See" the direction the Market was going and take it.

    Think about this. What is perfect in every Market is Price. It is totally incorruptable. Price is cyclical and oscillates with perfection as well. It's perfect oscillation is from its last bottom (Support) to its last top (Resistance) and from its last top (Resistance) to its last bottom (Support). What are the only things perfect about a cycle? Tops, Bottoms and the constant and consistent oscillation between the two.

    Guess what? If you believe the Market perfectly oscillates between tops and bottoms then all you need to trade perfectly is a way to "Clearly See" both the extreme and minor tops and bottoms in the Market and a way to perfectly confirm each top or bottom has completed and is on its way to retest its sequential cyclical partner.

    I know this thread will generate a ton of opinions but what I'm looking for is PROOF that this is a wrong assumption. What you must prove is that; the Market is not cyclical, the Market can create back-to-back Support levels without a Resistance level in-between, the Market can create back-to-back Resistance levels without a Support level in-between or the Market doesn't do anything at each top or bottom, either extreme or minor to confirm its completed that part of the cycle.

    Seem simple . . . well, to copy the Nike commercial then . . . "Just do it". Put your "Proof" as a response to this thread. If your "Proof" is something that a picture is required to prove your point, then include it. Random statements without something to back it up will only make you look silly. Let's have fun doing this . . . YOU WILL LEARN SOMETHING! I will respond to answer all "Proof" statements.

    There are a few members of ET that make a point of skewing threads to become a forum for themselves. Watch this thread to see the transition of thought and responses.:D
  2. What if the price action and the direction of every Market were perfectly readable.

    It is so what's next?

    Please do not respond to my comment, this is not my thread.
  3. ig0r


    Uhm, I don't think anyone can argue that markets don't have "support" and "resistance". You need to look closer at what you're saying, support is simply where there is enough demand to overcome increasing supply and cause a turn up in the market as the market's demand curve shifts right along the supply curve (resulting in higher prices and more quantity demanded) OR where supply becomes exhausted (shifting to the left, less quantity supplied) resulting in higher prices and less quantity supplied.

    Resistance is where supply overcomes demand and the supply curve shifts to the right (more quantity supplied) resulting in lower prices OR where demand dries up (demand curve shifts to the left resulting in lower prices and less quantity demanded. All of this can be derived by making simply supply and demand curves and looking at market equilibriums.

    All of the above is fact but this will not help you in predicting market movements. Here are a few of the reasons, in the process I will discredit some 'fundamental' beliefs about the market.

    1. Since there are 2 ways in which "support" and "resistance" occur, one of each involving an increase in quantity at equilibrium and one of each involving a decrease, looking at volume will NOT tell whether either A. a break of 'support' or 'resistance' has occured, or B. whether price has found 'support' or 'resistance'. Any of these can occur on either an increase or decrease in volume (quantity traded at equilibrium).

    2. In real time, it is impossible to distinguish between ultra short term bottoms/tops and long term bottoms/tops. In fact, what you call a bottom/top (support/resistance) can only be ascertained in the future. (ie. nasdaq made a bottom 2 monday's ago, something caused an increase in price that started on that day and has so far been sustained fairly well). Calling a bottom on that day would have been merely a guess. By the time you can say that a bottom/top for a certain time period was found, there is no guarantee that the market won't simply reverse, this is common sense.

    3. Looking to the past for clues hinting at which price(s) support/resistance will be found is folly. The combination of information and sentiment possessed by the millions of market participants is never the same, the markets are constantly changing, from one moment to the next. Where there was once demand could be renewed demand or increased supply (or neither) in the future.

    Shall I keep going?

    Edit: One more thing I'd like to point out. The supply and demand curves of any market are constantly changing so trying to graph them would also be useless.
  4. Alrighty Then . . .
    First, so we get on the same page. I'm calling Support, any price oscillation bottom and Resistance, any price oscillation top. (See attached chart) For simplistic reasons. I don't care what creates them just how to perfectly read their oscillation. And you absolutely do not have to look closer at what I'm saying. That is the problem . . . analysis paralysis. You need to stand back and see what is perfect in the oscillation not why it oscillates.

    Your definition of support & resistance are PERFECT. But another way of saying it would be short or long term price tops (Resistance) and short or long term price bottoms (Support).

    One thing as well . . . I said nothing about predicting the Market. It isn't necessary. There isn't any magic to trading the Market. Re-read my opening thread. If you can read the Market you do not have to predict it.

    1. Support is a price bottom and Resistance is a price top. Enough said. No need to make ones head hurt to hit a point home.

    2. You can distinguish between ultra short term, short term, long term or ultra long term Support and Resistance areas if you know what to look for in confirmations at each top and bottom. Confirmations come after the tops and bottoms so there is no need to predict. Wait till the tops and bottoms confirm and then trade into the direction that has just been confirmed. Sorry so simple. I can read ANY chart you put in from of me and tell you 2 things. First where the Market is coming from and from that information along with its sequential support & Resistance level, I can tell you where the Market is going. Not how high or low but in what direction and at what price level the Market will retest or retrace to. Isn't that all that's important?

    3. Common sense is setting on the beach watching the waves and knowing that when a wave crests it WILL crash to the bottom and when a wave ebbs it will RISE to crest again. It happens a million times a day, every day . . . forever.

    I agree that trying to gragh supply & demand would be fruitless. But reading support & resistance is as simple as talking to a 4 year old.
  5. Of course there are : the LAST OFFICIAL THEORY OF MARKET EFFICIENCY which in my opinion is PROPAGANDA AND BRAINWASHING by the inventor of "Eternal plateau" irving Fisher : how funny that this guy who was so strongly wrong about 1929 is now dominating today's economic school :D

    "Exerpt on EMH (Efficient Market Hypothesis)
    Finance theory

    [...] A particularly disturbing finding was that it seemed that prices tended to follow a random walk. More specifically, as documented already by Louis Bachelier (1900) (for commodity prices) and later confirmed in further studies by Holbrook Working (1934) (for a variety of price series), Alfred Cowles (1933, 1937) (for American stock prices) and Maurice G. Kendall (1953) (for British stock and commodity prices), it seemed as there was no correlation between successive price changes on asset markets.

    The Working-Cowles-Kendall empirical findings were greeted with horror and disbelief by economists. If prices are determined by the "forces of supply and demand", then price changes should move in particular direction towards market clearing and not randomly. Not everyone was displeased with these results, however. Many viewed them as proof that the "fundamentalist" theory was incorrect, i.e. that financial markets really were wild casinos and that finance was thus not a legitimate object of economic concern. Yet others crowed that it proved the failure of traditional "statistical" methods to illuminate much of anything. High-powered time series methods were used by Clive Granger and Oskar Morgenstern (1963) and Eugene F. Fama (1965, 1970), but they came up with the same randomness result.

    The great breakthrough was due to Paul A. Samuelson (1965) and Benoit Mandelbrot (1966). Far from proving that financial markets did not work according to the laws of economics, Samuelson interpreted the Working-Cowles-Kendall findings as saying that they worked all too well! The basic notion was simple: if price changes were not random (and thus forecastable), then any profit-hungry arbitrageur can easily make appropriate purchases and sales of assets to exploit this. Samuelson and Mandelbrot thus posited the celebrated "Efficient Market Hypothesis" (EMH): namely, if markets are working properly, then all public (and, in some versions, private) information regarding an asset will be channelled immediately into its price. (note that the term "efficient", as it is used here, merely means that agents are making full use of the information available to them; it says nothing about other types of "economic efficiency", e.g. efficiency in the allocation of resources in production, etc.). If price changes seem random and thus unforecastable it is because investors are doing their jobs: all arbitrage opportunities have already been exploited to the extent to which they can be.

    The "Efficient Markets Hypothesis" was made famous by Eugene Fama (1970) and later connected to the rational expectations hypothesis of New Classical macroeconomics. It did not please many practioners. "Technical" traders or "chartists" who believed they could forecast asset prices by examining the patterns of price movements were confounded"
  6. Harry, I appreciate your desire to be included in a thread but your answer, for lack of a better word, doesn't address the question or is it a response by you personally. It is a canned response you have placed on numerious threads I have read. And to make matters worse the response is regarding information that is between 30 and 100 years old. The purpose of this thread is to make you think for yourself not spew what you read somewhere else or to repeat something someone told you. Please try again and this time respond to the specific question. Thanks. :)
  7. ig0r


    Markets work just as they did 30 and 100 years ago, so the thoughts from back then are just as valid as ours now. EMT is solid, in my oppinion, the fact is markets are not perfectly efficient (caused by many factors, a big one is emotion) thereby creating profit opportunities for those that know what to look for.
  8. ig0r


    I'm sorry ProfLogic, I didn't know showing a picture of a chart with a bunch of arrows on it would so easily prove me wrong. Are you joking me? There's no way to confirm a bottom or top in price except for the context that it's already in (in the past), you have NO way of knowing that the bottom/top will hold this status in the future, to any degree whatsoever. Remember, the markets have one thing that you can't match, infinite capital. They'll stay 'wrong' longer than you can stay afloat. It's how markets have always worked and how they will continue to work, either find an edge or have millions to ride the waves (and millions is definately not a guarantee you'll make it either).

    LOL, ok good luck with that. You're telling me guessing market direction and where it will 'retest' and 'retrace' is not prediction? I thought you said we don't need to predict. Btw, if you don't know how high or low it will go, then how are you supposed to know that the wave has completed?

    Where to, Merlin?

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  9. Ah the thread is degrading already . . .

    When the Model T Ford was running around the streets 100 years ago I can imagine someone was thought to be crazy to imagine vehicles exceeding speeds of 300 mph. I can remember from my history class that some idiots thought the world was flat as well. And in my day I can remember people laughing when the mention of telephones in cars was brought up.

    So I guess today those who believe oscillation can be read . . . like radio engineers, audio engineers, acustic engineers, me, etc. are all crazy because there is no way frequency oscillation is the same or even similar to Market oscillation. Maybe I we all are but the thread started by asking a question to which I was looking for PROOF not opinions.

    Show me 2 Market tops without a bottom in-between. Show me 2 Market bottoms without a top in-between. Show me a Market that either doesn't oscillate or one that STOPS oscillating. Show me don't try to tell me . . . PROVE to me I am wrong.

    Oh, if I see a confirmed Support at let's say 1000 and the last Resistance is at 1050. If I am positive the Market will retest 1050 and I buy from even 1010, then if the Market only gets to 1040 and confirms failure . . . I profit. I didn't predict . . . I knew direction. I didn't need to know how high it was going either.

    Challenge. - If you, ig0r, think I'm nuts, email me . . . I will tell you where the Market is going everyday for a week or a month, whatever . . . if I'm wrong I will post itin a thread . . . if you are wong . . . you run a thread in ET expounding on your mistakes and misconceptions.
  10. Hi ProfLogic,

    You seems like a sincere market researcher, so I will engage. First, while it is true that markets are cyclical, they are not SYMMETRICAL.

    Next, there are multiple cycles that control a market. So if a twelve year top coincides with a 7 year bottom, what you will get is a lateral market. The question would then be, how long?

    Next, when cycle dates come in, it only implies a CIT, not necessarily a top or bottom, so again the CIT could be lateral. What then?

    If we detrend the data, which cycles should be removed?

    The point I am making is that just knowing a market is cyclical is not enough in and of itself to trade it.

    Comments welcome,
    #10     May 31, 2004