From: Gary Miller (garymiller@starband.net)
Date: Wed Jun 11 2003 - 13:37:51 MDT
>> That is, it is impossible at any time to predict whether the
>> market is going to rise or fall.
I believe technical traders invested based on the results of
technical analysis which among other things calculates a variable called
Momentum, which basicly takes into account the steepness of the
growth/decline of a stocks value and the duration of time it has
been increasing or declining.
Based on what you are saying then, there would be no basis for technical
trading on momentum!
Technical trading can not take into account outside sudden forces such
as terrorism, sudden technical innovation, or major media coverage which
is where it's weakness lies.
The reason technical trading works is due to the herd mentality of
investors.
Major good news cause them to stampede into a buying direction while
major
Bad news causes them to stampede to sell.
Even though technical trading is more often applied to individual
stocks. There is
No reason that it can not be applied to to stock indexes. It may even
be more accurate
since you are averaging together a great more investors in the market as
a whole.
In our current F###ed up economy with the high level of uncertainty of
terrorism and high unemployment the small investor may decide the only
way to win is to not play the game.
-----Original Message-----
From: owner-extropians@extropy.org [mailto:owner-extropians@extropy.org]
On Behalf Of Hal Finney
Sent: Wednesday, June 11, 2003 12:53 PM
To: extropians@extropy.org
Subject: Re: Investing
According to the efficient market theory, there are really no such
things as bull and bear markets. They are optical illusions.
That is, it is impossible at any time to predict whether the market is
going to rise or fall. You can't say "we are in the middle of a
bull/bear market and therefore the market is more likely than not to
rise/fall in the next few months."
You can only recognize bull and bear markets retroactively. When you
see a time when prices tended to rise, you call that a bull market.
When you see a time where prices tended to fall, you call that a bear
market. When prices didn't have much of a trend, you'll say that was
neither.
So it doesn't make sense to say, buy stocks during a bull market and
sell during a bear market. That's because it is impossible at any time
to say what the future course of stock prices will be. All you can do
is look back, and with the wisdom of hindsight, say that you should have
bought here and sold there. But that's not a way to make future
decisions.
These observations are based both on theory and practice. I studied
some of the academic literature several years ago, and statistically
they found virtually no correlation between past price changes and
future price changes.
Hal
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