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The Dalio points might be relevant but overlaying a chart on top of another and drawing analogues based purely on aesthetics is bad finance. There's a reason he

The Dalio points might be relevant but overlaying a chart on top of another and drawing analogues based purely on aesthetics is bad finance. There's a reason hedge funds aren't pitching clients on technical analysis based trading...it's because technical analysis is the astrology of the investment world. Also, everybody seems to be scared about the yield curve, but the problem with using an inverted yield curve as an indicator is that...while it may be a good recession indicator, recessions are a bad indicator for market performance. Capital Minded (http://capitalminded.com http://capitalminded.com) did an interesting chart in one of their recent briefings that showed stock market performance through the last 9 recessions. I'll try and dig it up and edit this comment. But essentially half of the time, the market is net positive by a lot during recessions. Hence why market timing is a fool's errand.

jmalicki 8y ago
"There's a reason hedge funds aren't pitching clients on technical analysis based trading...it's because technical analysis is the astrology of the investment world." - Two Sigma, Jane St., and RenTech are just slightly more refined versions of technical analysis - like comparing modern astrophysics to Ptolemny. "Also, everybody seems to be scared about the yield curve, but the problem with using an inverted yield curve as an indicator is that...while it may be a good recession indicator, recessions are a bad indicator for market performance." - everyone should be scared. For the typical person, recessions cause a chance of job loss, which for the majority is a far bigger financial disaster than a market crash.
- pembrook 8y ago
  Ultimately it comes down to semantics but I think there's a lot of confusion about the difference between traditional technical analysis and what a quant shop like Rentech or TwoSigma does. Quantitative strategies might use certain technical data as inputs, but it's not the same thing as drawing teacups on charts and publishing an article in Market Watch saying the world is going to collapse. Nobody knows what RenTech is doing in the medallion fund, but I can tell you with certainty they do not have analysts drawing head-and-shoulders patterns (ie. traditional technical analysis). I think we could argue semantics here again but my point is ultimately that what this article is doing with that chart makes no sense. I do agree that increased risk of job loss is of course bad and that recessions are bad in general, but this article is about the stock market.
  - melling 8y ago
    We do know that humans don’t do the trading. It’s all algorithms.
melling 8y ago
Didn’t Paul Tudor Jones overlay charts to predict the 87 Crash? Saw something like this in the Trader documentary: https://www.reddit.com/r/Documentaries/comments/4cke1z/trader_the_documentary_1987_rare_documentary/ https://www.reddit.com/r/Documentaries/comments/4cke1z/trade...
- pembrook 8y ago
  I've seen that used to sell a lot of cheesy "online trading school" e-courses but I can't speak to whether that was what ultimately drove him to make the trade. This article seems to suggest Jones got the idea from a guy named Robert R. Prechter using Elliot Wave Theory: https://www.nytimes.com/2007/10/13/business/13speculate.html https://www.nytimes.com/2007/10/13/business/13speculate.html Prechter called the '87 crash using wave theory, but he also called for "the end of the great bull market" in 1995. Which was 5 years too early (ie. flat out wrong). The lesson here is there's always somebody calling for the next collapse. When it inevitably happens each time, there's always a fresh stock of people you can point to who "called it." Whether this is genuine smarts or just random probability, is questionable.
  - melling 8y ago
    Yes, i’m not sure how you’re suppose to use Elliot Waves but in the movie they compared charts to the Great Depression era.
  - perl4ever 8y ago
    "Prechter called the '87 crash using wave theory, but he also called for "the end of the great bull market" in 1995. Which was 5 years too early (ie. flat out wrong)." He was in good company though - Greenspan's comment about "irrational exuberance" was in 1996, when the Nasdaq was around 1300 compared to its peak over 5000.
- monitorman 8y ago
  when you keep overlaying charts, eventually, one of them will be right.
deleted 8y ago
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jmalicki 8y ago

"There's a reason hedge funds aren't pitching clients on technical analysis based trading...it's because technical analysis is the astrology of the investment world." - Two Sigma, Jane St., and RenTech are just slightly more refined versions of technical analysis - like comparing modern astrophysics to Ptolemny. "Also, everybody seems to be scared about the yield curve, but the problem with using an inverted yield curve as an indicator is that...while it may be a good recession indicator, recessions are a bad indicator for market performance." - everyone should be scared. For the typical person, recessions cause a chance of job loss, which for the majority is a far bigger financial disaster than a market crash.

pembrook 8y ago
Ultimately it comes down to semantics but I think there's a lot of confusion about the difference between traditional technical analysis and what a quant shop like Rentech or TwoSigma does. Quantitative strategies might use certain technical data as inputs, but it's not the same thing as drawing teacups on charts and publishing an article in Market Watch saying the world is going to collapse. Nobody knows what RenTech is doing in the medallion fund, but I can tell you with certainty they do not have analysts drawing head-and-shoulders patterns (ie. traditional technical analysis). I think we could argue semantics here again but my point is ultimately that what this article is doing with that chart makes no sense. I do agree that increased risk of job loss is of course bad and that recessions are bad in general, but this article is about the stock market.
- melling 8y ago
  We do know that humans don’t do the trading. It’s all algorithms.

melling 8y ago

Didn’t Paul Tudor Jones overlay charts to predict the 87 Crash? Saw something like this in the Trader documentary: https://www.reddit.com/r/Documentaries/comments/4cke1z/trader_the_documentary_1987_rare_documentary/ https://www.reddit.com/r/Documentaries/comments/4cke1z/trade...

pembrook 8y ago
I've seen that used to sell a lot of cheesy "online trading school" e-courses but I can't speak to whether that was what ultimately drove him to make the trade. This article seems to suggest Jones got the idea from a guy named Robert R. Prechter using Elliot Wave Theory: https://www.nytimes.com/2007/10/13/business/13speculate.html https://www.nytimes.com/2007/10/13/business/13speculate.html Prechter called the '87 crash using wave theory, but he also called for "the end of the great bull market" in 1995. Which was 5 years too early (ie. flat out wrong). The lesson here is there's always somebody calling for the next collapse. When it inevitably happens each time, there's always a fresh stock of people you can point to who "called it." Whether this is genuine smarts or just random probability, is questionable.
- melling 8y ago
  Yes, i’m not sure how you’re suppose to use Elliot Waves but in the movie they compared charts to the Great Depression era.
- perl4ever 8y ago
  "Prechter called the '87 crash using wave theory, but he also called for "the end of the great bull market" in 1995. Which was 5 years too early (ie. flat out wrong)." He was in good company though - Greenspan's comment about "irrational exuberance" was in 1996, when the Nasdaq was around 1300 compared to its peak over 5000.
monitorman 8y ago
when you keep overlaying charts, eventually, one of them will be right.

deleted 8y ago

[deleted]