4 ms·

> Writers at the FT ponder how to spend their day while equity and commodity markets vacillate listlessly. ... This is what a lot of people don't get about mar

by aazaa 5y ago

> Writers at the FT ponder how to spend their day while equity and commodity markets vacillate listlessly. ... This is what a lot of people don't get about market bottoms. Nobody cares. It's not like they hate an asset class. They just could not care less. This is one of the reasons that buying market bottoms is so hard. There's no story. You tell somebody what you did, and they just look at you with a blank stare. Then you get to wait while ... nothing at all happens. Good news that should turn prices around - nobody cares. Or worse, a surprise snap lower that makes you question your "value" stance. During the transition period from bear to bull, nobody believes it's real. The bears from the previous cycle who called the top and made the right choice to sell will not believe the bull is real and so will stay on the sidelines. As the market rises, everyone - even the bulls - will expect the inevitable return to baseline. Rinse and repeat. Maybe for years. Not many people will continue to hold on during that period. Near market tops, of course, it's exactly the opposite. You will be congratulated from here to Timbuktu and back for your "wise" investment when buying into a market shooting higher. You'll look like a star. Somebody who knows what they're doing. There will be lots of talk about new paradigms and how this time it really is different, and why. You should be selling, but your own brain and the brains of the people around you will make you buy, buy, buy instead. It's so predictable as to be laughable, except for the pain and chaos that happens when an especially monstrous bull goes to the slaughterhouse.

anonu 5y ago
What? Market timing has always been a thing. Whether it's a bottom or a top or a head and shoulders pattern. This is the whole point of technical analysis and there's enough people out there to care about every single thing the market does at any stage in it's cycle.
- EMM_386 5y ago
  > Whether it's a bottom or a top or a head and shoulders pattern. This is the whole point of technical analysis I'll let you in on a little secret. Technical analysis is a lot of smoke and mirrors. I was in this industry. You can draw all the head and shoulder patterns you want, if Elon posts a Tweet about price targets of 420.69, Apple doesn't sell enough iPhones, the company you are charting causes a major oil spill, or the weather gets warmer, those patterns vanish in an instant. Millions of global traders do not obey lines drawn on charts. The market is too complex for that.
  - anonu 5y ago
    It's not smoke and mirrors because enough people follow it. Then it becomes self fulfilling. Yes, conceptually, in a vacuum it's BS. But you have enough demand and belief in it, it validates itself. This is how the market works...
    - JumpCrisscross 5y ago
      > not smoke and mirrors because enough people follow it There is a lot of empirical evidence around it not working. Flow of funds analysis has merit, but that largely occurs by trading against people looking for constellations in candlestick charts.
      - fighterpilot 5y ago
        You can't prove a negative like that. It'd be like academics looking for monetizable edge in the orderbook after properly simulating latency. They wouldn't be able to do it due to a lack of domain knowledge but they didn't prove a negative through their failure. As for the effectiveness of TA, there's a tonne of dogma on both sides with extremely certain people saying it does or does not work. If we take a broad definition of TA (which is edge existing in operations on a time series of prices), I have conclusive evidence that it does work. I have seen a strategy print money almost daily using only that data as an input. If we take a narrow definition of TA, defined as lines on a chart, well I'm a believer of that too, although the evidence is not as strong. I just suspect that it works due to my observation of how things react in the market according to those levels and lines. Here's one you can look out for yourself. Observe what happens when the price moves through yesterday's close price. You will notice that volatility becomes significantly elevated. That's edge, and it's TA edge. I don't believe it works merely due to the self fulfilling prophecy aspect. It works because other market participants put stop orders, resting limit orders, or algo trading rules (in banks' liquidation or acquisition algos) tied to those levels.
    - engineer_22 5y ago
      It's the quants jobs to snipe the technical analysis retail investors.
- smabie 5y ago
  Professionals by and large do not use traditional/manual TA. If you find some features/indicators that work, you include them in your algorithmic trading system. There's absolutely zero legitimate reason for a human to look at charts and use TA.
hiram112 5y ago
Similarly, while there is an explosion in the markets we all know the most - equities, real estate, "commodities", etc. - there are many other markets out there that are, in fact, at a bottom. And like you said, nobody is paying attention or even considers them as an investment. So while the hordes are all trying to suck blood out of increasingly tapped investments in real estate (e.g. 8th tier mountain "resorts" in the middle of nowhere) or equities (me-too energy or tech pump & dumps), the next big thing is completely being ignored. And in 10 years, everyone will say it was obvious that these would be the next big play. 20/20 hindsight.
- jdkskskdb 5y ago
  There are many more you say, but why don’t you list them?
xorfish 5y ago
> You should be selling, but your own brain and the brains of the people around you will make you buy, buy, buy instead. This is bad advice. There is always a reasonable chance that the next bear market is more than 4 years away and that equities are still cheaper now than they will be at the bottom of the next crash. You have also explained quite well that you likely won't be able to hit that bottom of the next crash. So just don't care about anything and invest every month, even if everything is "overvalued" and a "crash is imminent".
refurb 5y ago
Great summary. After the crash of 2008, when housing prices in places like Vegas were 50% of peak, condos in Miami went for $30k, the story was always doom and gloom. I knew a few people who took a gamble and bought up real estate and made out like bandits. At the time people thought they were nuts. Humans suffer a lot from recency bias - whatever has happened for the past 5 years will continue forever.

by aazaa 5y ago

anonu 5y ago

What? Market timing has always been a thing. Whether it's a bottom or a top or a head and shoulders pattern. This is the whole point of technical analysis and there's enough people out there to care about every single thing the market does at any stage in it's cycle.

EMM_386 5y ago
> Whether it's a bottom or a top or a head and shoulders pattern. This is the whole point of technical analysis I'll let you in on a little secret. Technical analysis is a lot of smoke and mirrors. I was in this industry. You can draw all the head and shoulder patterns you want, if Elon posts a Tweet about price targets of 420.69, Apple doesn't sell enough iPhones, the company you are charting causes a major oil spill, or the weather gets warmer, those patterns vanish in an instant. Millions of global traders do not obey lines drawn on charts. The market is too complex for that.
- anonu 5y ago
  It's not smoke and mirrors because enough people follow it. Then it becomes self fulfilling. Yes, conceptually, in a vacuum it's BS. But you have enough demand and belief in it, it validates itself. This is how the market works...
  - JumpCrisscross 5y ago
    > not smoke and mirrors because enough people follow it There is a lot of empirical evidence around it not working. Flow of funds analysis has merit, but that largely occurs by trading against people looking for constellations in candlestick charts.
    - fighterpilot 5y ago
      You can't prove a negative like that. It'd be like academics looking for monetizable edge in the orderbook after properly simulating latency. They wouldn't be able to do it due to a lack of domain knowledge but they didn't prove a negative through their failure. As for the effectiveness of TA, there's a tonne of dogma on both sides with extremely certain people saying it does or does not work. If we take a broad definition of TA (which is edge existing in operations on a time series of prices), I have conclusive evidence that it does work. I have seen a strategy print money almost daily using only that data as an input. If we take a narrow definition of TA, defined as lines on a chart, well I'm a believer of that too, although the evidence is not as strong. I just suspect that it works due to my observation of how things react in the market according to those levels and lines. Here's one you can look out for yourself. Observe what happens when the price moves through yesterday's close price. You will notice that volatility becomes significantly elevated. That's edge, and it's TA edge. I don't believe it works merely due to the self fulfilling prophecy aspect. It works because other market participants put stop orders, resting limit orders, or algo trading rules (in banks' liquidation or acquisition algos) tied to those levels.
  - engineer_22 5y ago
    It's the quants jobs to snipe the technical analysis retail investors.
smabie 5y ago
Professionals by and large do not use traditional/manual TA. If you find some features/indicators that work, you include them in your algorithmic trading system. There's absolutely zero legitimate reason for a human to look at charts and use TA.

hiram112 5y ago

Similarly, while there is an explosion in the markets we all know the most - equities, real estate, "commodities", etc. - there are many other markets out there that are, in fact, at a bottom. And like you said, nobody is paying attention or even considers them as an investment. So while the hordes are all trying to suck blood out of increasingly tapped investments in real estate (e.g. 8th tier mountain "resorts" in the middle of nowhere) or equities (me-too energy or tech pump & dumps), the next big thing is completely being ignored. And in 10 years, everyone will say it was obvious that these would be the next big play. 20/20 hindsight.

jdkskskdb 5y ago
There are many more you say, but why don’t you list them?

xorfish 5y ago

> You should be selling, but your own brain and the brains of the people around you will make you buy, buy, buy instead. This is bad advice. There is always a reasonable chance that the next bear market is more than 4 years away and that equities are still cheaper now than they will be at the bottom of the next crash. You have also explained quite well that you likely won't be able to hit that bottom of the next crash. So just don't care about anything and invest every month, even if everything is "overvalued" and a "crash is imminent".

refurb 5y ago

Great summary. After the crash of 2008, when housing prices in places like Vegas were 50% of peak, condos in Miami went for $30k, the story was always doom and gloom. I knew a few people who took a gamble and bought up real estate and made out like bandits. At the time people thought they were nuts. Humans suffer a lot from recency bias - whatever has happened for the past 5 years will continue forever.