Ask a Technical Analyst

[Acein8ter]

I know you mentioned that you analyze stocks, but I'll have to ask 'What do you think about the US Dollar Index'? (From a technical standpoint)

[hawk59]

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The market for the last 5 years has been relatively "easy" to predict/fluke compared to historical precedent

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What has been so easy about the last 5 years that differs from any other random 5 year period?

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Is this a serious question?

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King,

This is a very serious question, it amazes me how people can look back at the past and think it was so easy to predict when things are always uncertain in the present. The reason the past seems easy to predict is because you know what happened!!!

How long have you been involved in the markets? Do you remember how bad things were in 2002-2003? Everybody was afraid of everything, credit worthy companies couldn't get financing at reasonable terms, credit protection on investment grade credits traded at 300 bps, junk bonds were trading at historically huge spreads, and it was a serious fear that huge companies could go bankrupt overnight due to Worldcom and Enron. You really mean to tell me that it was easy to predict that in 3 years we would go from an environment that was literally one of the most risk averse ever to an environment that is as blind to risk as has ever been? Where junk spreads are at historically low levels, risk is supposedly non-existant, selling CDS at 20 bps is actually thought of as a smart strategy, and raising $10bn for an LBO is no big deal and can be done on good terms? No you did not predict this, you had no idea, neither did anybody else.

[The once and future king]

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Where junk spreads are at historically low levels

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You havnt been keeping your finger on the pulse.

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Where junk spreads are at historically low levels, risk is supposedl non-existant, selling CDS at 20 bps is actually thought of as a smart strategy, and raising $10bn for an LBO is no big deal and can be done on good terms? No you did not predict this, you had no idea, neither did anybody else.

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This has all changed in just the last week. Big LBOs have been canceled and spreads have blown out.

Im not talking about the change in the market over a 5 year period, but the conditions inherent in the market for the last 5 years or so. If you rolled out of bed in the morning, stuck a pen in the WSJ bought that stock then sold it in the evening you would have been more likely to show a profit then a loss. Therefore when someone says I did X analysis and showed y profit we cant be sure it was the analysis that led to the profit as it may have been pure coincidence.

[Alfil]

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I'm currently using MACD to find the longer-term trend, and I'm experimenting with it as an oscillator also.

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Is there a prenup involved in this marriage? How would you plan on resolving conflicting signals if you were using MACD for trend and trying to use it as an oscillator as well. This sounds like a recipe for confusion.

Since you are trying I have to ask what brought this idea to your attention since I don't see what additional benefit would arise from this. Additionally since the underlying data is used in various oscillators already might you be putting spinners on a Pinto here?

[hawk59]

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Where junk spreads are at historically low levels

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You havnt been keeping your finger on the pulse.

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Where junk spreads are at historically low levels, risk is supposedl non-existant, selling CDS at 20 bps is actually thought of as a smart strategy, and raising $10bn for an LBO is no big deal and can be done on good terms? No you did not predict this, you had no idea, neither did anybody else.

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This has all changed in just the last week. Big LBOs have been canceled and spreads have blown out.

Im not talking about the change in the market over a 5 year period, but the conditions inherent in the market for the last 5 years or so. If you rolled out of bed in the morning, stuck a pen in the WSJ bought that stock then sold it in the evening you would have been more likely to show a profit then a loss. Therefore when someone says I did X analysis and showed y profit we cant be sure it was the analysis that led to the profit as it may have been pure coincidence.

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The market tends to rise over time so you could say that about any time period, by your argument every single day is equivalent to any other. Why were the last 5 years different from any other time?

All the stuff that has happened recently is irrelevant, the point was the change in the market was completely unknowable and at the time nobody would have predicted it.

[The once and future king]

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Do you remember how bad things were in 2002-2003? Everybody was afraid of everything, credit worthy companies couldn't get financing at reasonable terms, credit protection on investment grade credits traded at 300 bps, junk bonds were trading at historically huge spreads, and it was a serious fear that huge companies could go bankrupt overnight due to Worldcom and Enron

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Why were the last 5 years different from any other time?

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[mrbaseball]

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If you rolled out of bed in the morning, stuck a pen in the WSJ bought that stock then sold it in the evening you would have been more likely to show a profit then a loss.

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Well? The last five years has not been the best 5 years for this particular strategy. Lots of other periods were better for dumb luck longing. But we are talking trading here. I can't speak for Hun but most traders swing from both sides of the plate meaning a willingness to short as well as go long. Trends are one of the mainstays of technical analysis and putting on trades in the right (trending) direction (either long or short) is all part of the process. Trends trade differently from chops and this particular 5 year period had about half of both.

[RandomFluke]

I was wondering - is there any kind of software out there you can buy that lets you view the previous days trading in real time?

Like how when you watch a stocks price change in real time, except maybe a 8 hours delay or some such?

I'd like to be able to come home from work and then 'start' the market at the begining of the business day so I can practice some trading techniques and such.

I expect there isn't such a beast, but thought I'd ask. Thanks

[kimchi]

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I'm currently using MACD to find the longer-term trend, and I'm experimenting with it as an oscillator also.

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Is there a prenup involved in this marriage? How would you plan on resolving conflicting signals if you were using MACD for trend and trying to use it as an oscillator as well. This sounds like a recipe for confusion.

Since you are trying I have to ask what brought this idea to your attention since I don't see what additional benefit would arise from this. Additionally since the underlying data is used in various oscillators already might you be putting spinners on a Pinto here?

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I'm not sure what your 2nd paragraph means. I'm using MACD histogram to define the long-term trend and using seperate oscillators to find overbought/sold areas.

A seperate system is using the slope of a long EMA to define the trend and using the MACD lines as oscillators.

MACD has many uses and can provide conflicting signals, both of which can be profitable. It's not the entry signal that's important - it's what you do after entry that decides whether or not you make a profit.

[mrbaseball]

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I'd like to be able to come home from work and then 'start' the market at the begining of the business day so I can practice some trading techniques and such.

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Most charting programs have a bar by bar feature. What this means is you can scroll a chart back and then with a mouse click move it forward bar by bar which can be a useful learning process to test your strategies.