Industry And Sector Technical Sentiment Indicators
Q: I am curious if you guys agree with this, or not: After charting some proprietary market indicators we've developed, and some that already existed, I am TOTALLY SOLD on the concept that some approximation of the references mentioned above is true. In the past, I have spent a lot of time looking at technical indicators with ABSOLUTELY NO CONCEPT of what the trend of the individual industry was. Never again do I want to enter into a trade without knowing this information. People have called this SYSTEMATIC RISK which is basically risk that impacts an entire industry, sector, or market. We've observed for ourselves that the market has a phenomenal effect on the price movement of an individual stock. What are your thoughts?
A:
I have no such bias. Show me a tool, give me a chance to figure
out what it might be good for and, if in fact it IS good for
anything, I'll use it. I've been using charts since two years
BEFORE I started trading stocks more than 41 years ago. Kind of
a Sunday morning game around the dining room table of a farm
family that I worked for a
then stayed with me (in numerous different forms other than the
original) simply because it was useful for insight into what was
happening with individual stocks and markets.
To be sure, my real motivation was simply to help out in a
horribly trying time for the markets generally, but every single
entry point in "My Plan for the Cubes" was defined by conventional
long term technical analysis. There wasn't any "value" there.
Pile of crap stocks, only a few of which have gotten into value
ranges even now (and some of those have been lopped out of the
Naz100 in the process) but that's what technical analysis is
for. When there aren't any valuation answers, how does one
arrive at a meaningful decision as to what to do if, in fact, one
does want to do anything at all? It is for situations of that
particular sort that technical analysis is downright brilliant.
I see that I've still got a piece of "My Plan for the Cubes"
available at http://www.dimensional.com/~bgrumbin/naz001.gif, so
you can see the kind of long term technical analysis that I was
using during that exercise and what I'm talking about here. Not
that it matters that much after the fact, but I went nine for nine
successful (profitable) trades in the cubies during that period
Dec00 to July02 using nothing but technical analysis and my usual
attention to markets. Fundamental analysis would have (and did)
tell me to stay the heck away from the whole mess, which in fact
I did other than my trades in the cubies.