technical analyists: useful members of the investment team or charlatains?

Hmm! wrote:

TA is useful so long as there are sufficient momentum traders to exploit.

...and the majority of the market thinks TA is bollocks...

webby wrote:

ChiTown Hustler wrote:

^^^^^^^ Then how do you trade??

Investing or trading, you can only make money consistently if, more often than not, you are on the right side of the long-term trends of the stocks you own. That means you need to find stocks that are fundamentally undervalued -- companies that are growing revenues and profits faster than consensus, or at least faster than the consensus of important people.

There is nothing of value in technical analysis. Successful traders who abide by TA are only successful to the extent that have other talents, good instincts about what major brokerages are doing, or inside information.

Well, finding long term trends is certainly TA in my book.

ChiTown Hustler wrote:Well, finding long term trends is certainly TA in my book.

Finding trends retrospectively is TA, but it doesn't make you any money. Predicting trends can only be done by understanding how companies are valued and why, and making astute observations about how key factors are likely to change going forward.

If your observations are wrong you lose money in the long term. If your observations are right, you make money. If you base your decisions on lines and pictures and the resemblance of trading charts to body parts, you break even in the long run, minus commissions.

Applying your logic to the macroeconomy, webby, you'd find it an absolutely absurd time to buy. And, yet, we go higher. Here's a formula at the bottom of another "worthless" read for you, you being a fundamentalist and all. As I said, we are kicking the can down the road. Who knows how long the musical chairs can play on...

You've enjoyed and continue to enjoy a technical, momentum and sentiment-driven rally catalyzed by the Fed's punishment of savings without even realizing it. What metric are you currently using to value the S&P 500?

http://www.financialsense.com/Market/daily/tuesday.htm

Fundamental Analysis only works if enough traders agree with you to push price the direction you predicted. If they don't agree, you lose - even if your analysis is correct.

Used correctly, TA doesn't predict anything. It tells you what is happening now. You just hop on for the ride and get off when TA tells you the ride is over.

What's this baloney about "body parts"?

I'd be interested to hear from anyone on Letsrun who has actually read one of the links that Sagarin has posted to narrowly-distributed, bearish online newsletters. There's so much financial information available from reputable sources that I can't see why anyone would search for insights in such places, but please weigh in if you have found any of them to be informative.

My view on the valuation of the S&P is that it is reasonable based on an expectation of moderate corporate profit growth over the next five years. The problem with the formula that you are hanging your hat on is that is uses book value as the gold standard at the tail end of a severe recession, while the Fed has a stimulative stance of unprecedented proportions and people with money have very few attractive investment options.

For what it's worth, Sagarin, I've got a portfolio that's possibly delta negative right now. I'm really making my bread and butter on time decay right now with fairly limited upside -- not banking on a run-up in stock prices.

Long Stock

1700 SPDR TR UNIT SER 1

300 ISHARES BARCLAYS TIPS BOND FUND

1000 VANGUARD FUNDS EMERGING MARKETS

500 DIAMONDS TRUST SERIES I COM

900 ISHARES MSCI EMERGING MKTS

900 ISHARES RUSSELL 2000 IDX FUND

1000 POWERSHARES QQQ

1000 AKAMAI TECHNOLOGIES COM

1000 SALESFORCE.COM INC COM

5000 HOME DEPOT INC COM

1500 J CREW GROUP INC COM

300 NORDSTROM INC COM

Short Stock

Qty Description

-1000 ABERCROMBIE & FITCH CO COM CL A

-2000 EBAY INC COM

-2500 LOWES COS INC COM

-2000 LAS VEGAS SANDS CORP COM

Long Options

Qty Description

2 GOOG Nov 530 Put

20 GYMB Nov 35 Call

35 WDC Nov 38 Put

67 YHOO Nov 17 Put

Short Options

Qty Description

-5 DIA Nov 96 Call

-9 EEM Nov 38 Call

-10 QQQQ Nov 42 Call

-4 SPY Nov 105 Call

-3 GOOG Nov 520 Put

-10 GYMB Nov 40 Call

-3 JWN Nov 34 Call

-10 AKAM Nov 21 Call

-35 WDC Nov 37 Put

-100 YHOO Nov 16 Put

-5 SPY Dec 100 Put (L-09)

-50 HD Dec 26 Call

-10 XRT Dec 34 Call

-8 IWM Dec 57 Call

-10 IWM Jan 62 Put

-10 VWO Mar 35 Call

-15 JCG Mar 30 Call

-5 SPY Dec 100 Put (L-10)

-2 SPY Dec 100 Call (L-10)

-6 SPY Dec 94 Call

-5 IWM Jan 60 Call (L-11)

-4 IWM Jan 60 Put (L-11)

-3 EEM Jan 37 Put (L-11)

-2 DIA Jan 110 Put (L-11)

webby, I've posted links to bullish and bearish "newsletters." Hell, I posted a bullish piece from an investment strategist I used to work with back in April referencing historically high levels of cash and negative sentiment as cautionary notes for the perma-bear.

I happen to be posting material that CONCURS with my overall stance that there will be a steep price to pay for this chicanery. You disagree and see this within the purview of normal post-recessionary pickups. And that's fine. A lot of very shrewd strategists and fundamentalists disagree, but that's what makes a market and provides a wall of worry. This is a global reflationary trade, and that muddies the waters a bit, but, STRUCTURALLY, the US is a sorry state of affairs. But that's not oing to stop Big Mo just yet.

Good for you selling premium. I really have no interest in your portfolio, though it appears diversified enough.

Blowing.Rock Master wrote:

Fundamental Analysis only works if enough traders agree with you to push price the direction you predicted. If they don't agree, you lose - even if your analysis is correct.

Used correctly, TA doesn't predict anything. It tells you what is happening now. You just hop on for the ride and get off when TA tells you the ride is over.

What's this baloney about "body parts"?

Exactly..... My fundamentals are saying that bonds should be through the floor with the current risk appetite in spus and currency printing press, but the chart tells me otherwise. Have been fundamentaly bearish in stocks since June, but not going to argue with the almighty SPU.

He's talking about, 'Head and Shoulders' chart patterns.

ChiTown Hustler wrote:

He's talking about, 'Head and Shoulders' chart patterns.

Ah, forgot about those. I don't pay much attention to patterns because I find them too subjective. If I start looking for them I see them everywhere.

Are any of you actually beating the market in the long run? Not trolling, this is a serious question

That's not the correct way to ask the question. I have double the return of the S&P 500 YTD in my wife's IRA, about a 33% return in my own IRA (a much larger portfolio) and a trading account that is probably underperforming, WHEN ADJUSTED FOR RISK. That is the key parameter. This has been true for the past five years, but particularly the last three.