Why are value investor types so rigidly opposed to TA?

[mrbaseball]

News AND noise. It was down 3 bucks yesterday before this news. The momentum player has no interest in why. Where does the fundemental guy get in or out? Nobody knows except maybe Boone Pickens [img]/images/graemlins/smile.gif[/img] How does a fundamental guy make markets? He doesn't! Crude is ultra volatile right now with many huge dips and spikes intraday. Technicians can profit greatly from this kind of action. The fundamentalist sits on his hands and position and takes whatever the market does to him.

[ImBetterAtGolf]

[ QUOTE ]

yet some great hedge funds use TA and are killing it (here you have to include quantitative strategies as TA since they are based on arguably non- fundamentel factors) ... i.e. renaissance, shaw etc.

it doesn't take mathematicians to do fundamental analysis but simons only hires the absolute creme de la creme from the math/stat world (for the most part he doesn't even look at US PhDs...which says something about our education in that subject). so i think he's pretty much a TA type, but again, goes back to wtf is TA???



[/ QUOTE ]

While in some places there is a tenuous relationship between quant and TA, it is in their practice that they tend to be quite different and partially explains why TA is an easy target. How much TA have you seen that is tested with any scientific rigor? To compare the overwhelming majority of TA participants to RenTech is to compare top modern physicians to ancient blood letters.

[Foghatlive]

The value investor believes he represents the respectable (lol) side of the market, and that the TA types are the schemers.

IMO, TA is of value because it allows a trader to see what the specialists and MMs are up to.

[ArturiusX]

Apparently using quantitative statistics is TA now days.

[spider]

[ QUOTE ]
there is one logical reason i can think of: one unchanging factor of TA seems to be human reaction to price movements. there are psychological factors that imo cause humans to act a certain way and TA uses proxies (unknowingly possibly) of those traits in its practitioning.

[/ QUOTE ]

Yeah, I'll admit I could see TA working for psychological reasons, which I think is roughly like saying some people can make money with momentum investing or short term timing the market. However, I suspect this is probably specific to individuals (i.e. can't be taught).

Good Mandelbrot story.

[iambusto]

TA only care about when they are buying.
Value investors care about what they are buying and when they are buying.

Both think they have an edge over the other.

[fanmail]

[ QUOTE ]
I use a lot of technical analysis. Not so much from an investing standpoint (although I do look for support and resistance levels for entries/exits) but more from a trading standpoint. Then again I am a trader. You can't really play the swings and use fundamental analysis for market making? Momentum, support, resistance, trendlines etc. are all technical and the weapons that market makers use. Crude oil for example is down more than 4 bucks right now. What fundamentally changed from yesterday? Who the hell knows! But technically you can see the weakness and get a hellova ride!

[/ QUOTE ]

Good points. An investor should know the fundamentals in order to take a position. A trader should know all the TA in order to best day trade. It wouldn't hurt to be knowledgable in both areas and in fact I try to be as a trader.

[DcifrThs]

[ QUOTE ]
[ QUOTE ]
there is one logical reason i can think of: one unchanging factor of TA seems to be human reaction to price movements. there are psychological factors that imo cause humans to act a certain way and TA uses proxies (unknowingly possibly) of those traits in its practitioning.

[/ QUOTE ]

Yeah, I'll admit I could see TA working for psychological reasons, which I think is roughly like saying some people can make money with momentum investing or short term timing the market. However, I suspect this is probably specific to individuals (i.e. can't be taught).

Good Mandelbrot story.

[/ QUOTE ]

momentum investing is definitely important though and the psychological factors are part of the fundamental drivers of it.

my old employer constructs a buy/sell signal totally on fundamental relationships (doesn't day trade...takes long view positions etc.) and 1/3 of that signal is basically momentum indicators.

Barron

[DesertCat]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Why are those types so ready to dismiss TA as worthless?

[/ QUOTE ]

because they are poor value investors and have a strong need to validate themselves.

[/ QUOTE ]

Neither of this applies to Buffett or dozens of value managers with multi-decade records of beating the market. These guys don't use TA, and don't need any more validation. Whether TA works or not, they'll tell you they never needed it.

[/ QUOTE ]

i don't consider buffett et al "those types" - and (correct me if i'm wrong) i don't think buffett would claim that TA is worthless to everyone.

[/ QUOTE ]

I'm pretty sure Buffett would tell you its worthless to him, that he doesnt think it has predictive value. But I don't think he would be presumptuous as to say something can't work for everyone.

And the problem with big successful funds like Renaissance is that no one really knows what they do. There are many trading strategies such as statistical arbitrage, pairs trading, other arbitrages, etc that have little to do with TA as most people define it, but they are quick to include the successful practitioners as evidence of TA's success.

[DesertCat]

[ QUOTE ]
News AND noise. It was down 3 bucks yesterday before this news. The momentum player has no interest in why. Where does the fundemental guy get in or out? Nobody knows except maybe Boone Pickens [img]/images/graemlins/smile.gif[/img] How does a fundamental guy make markets? He doesn't! Crude is ultra volatile right now with many huge dips and spikes intraday. Technicians can profit greatly from this kind of action. The fundamentalist sits on his hands and position and takes whatever the market does to him.

[/ QUOTE ]

I'd guess that oil has no easily determined fundamental value, it's value is totally dependent on some very complex supply demand curves of a variety of disparate producers and consumers as well as the value of the U.S. Dollar. This is pretty much true of any commodity, a decade or so ago Buffett tried to predict the bottom for silver based on replacement costs and industrial demand and just succeeded in showing how hard it was.