If technical analysis (which means recognising patterns in charts) predicts movements correctly, the FTSE 100 index (i.e. most UK quoted shares) will trade in a narrow band for the next few days and then drop by about a thousand points.
Oh Dear
1 hour ago
7 comments:
Hey ho, FTSE 100 was down two hundreds points when the markets opened.
I'm no optimist, but I have seen such patterns before. Admittedly, they were in commodities rather than stocks. The risk is the head-fake, whereby the first few hundred points of any move need to be followed in detail and captured, as the nightmare is the 'range extension' which simply stops out everyone. I have, for some time, had the number 3,700/4,000 pencilled in as being a reasonable place to start to build a book, so I can't disagree with the implicit forecast.
I speak as a CMT, so I understand exactly what you are saying...
RE, I speak as a non-CMT, and I can't work out what a head-fake is. Do you mean that FTSE will start going up once the triangle is complete?
" . . and then drop by about a thousand points."
Depends how many in the market believe in chartism. It makes sense to be aware - even act on - the most risible garbage if the people or person influencing an event believe in and act on what the garbage-based analysis predicts. I think it was Keynes who observed that playing the stock market (at which he was very successful) depended not on the fundamentals of the constituent companies but on what you considered other players in the market might do.
Accordingly, although IMHO the theory of chartism is a crock, because serious and influential players in the market believe in it, it probably pays to become an adept. This is much like being able to predict (and make one's dispositions accordingly) concerning government policy on CAGW although the theory underlying that is also IMHO even more of a crock than chartism.
Mark - a head-fake is exactly what it suggests; it has been clear for some time that the market is in some (ahem) difficulties, mainly because of a complete sense of naivite regarding the last dozen years. The simple effect is that the whole thing lurches south and those who are looking to build a longe-term position will simply wait. When they do go in, the volumes are so low that the price impact is exaggerated. And that is when the 'surrender dump' takes place. It's q. unusual, but not unknown. Typically, if a market is going to go into meltdown, then it tends to peak first in August.
Umbongo - you may say what you like, but in 25 years 'at it', I've never had a losing year. And I'd like to keep it that way...
"a head-fake is exactly what it suggests": what, a headmaster with falsified credentials? A wig? The boss of a syndicate of frauds?
Robert Edwards
" . . in 25 years 'at it', I've never had a losing year . . ."
I don't doubt it. But you don't have to believe in something in order to profit from it. Not a strict analogy I admit but whether or not the prime minister's father-in-law is a CAGW sceptic, he has identified a money-making opportunity in wind-farming and, accordingly, receives £1,000/day from you and me thanks to the loons in office.
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