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Attaching Labels to Market Anal-ysis Approaches 9/7/23

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14 hours ago, WTF said:

Interesting... I would have never figured you for a market efficiency guy... If markets are efficient, then all information is already incorporated into the price, and so there is no way to "beat" the market because there are no undervalued or overvalued securities available.

I don't know what "market efficiency guy" means. I don't assume that markets know anything, or that prices carry any information about "value," which nobody knows what it is anyway. The value is the price. The price is the value.

I actually have no conception of value, other than what someone will pay me for what I own and can sell, and then what I can buy with it. My apartment pays me to travel. That's a great value. Real estate has value because it gives people a place to sleep or do stuff. Everybody likes those things, and the more they like a place, usually the more people want to be there, and the more they will pay because the supply, if not fixed, is constrained. 

As for other investments, to me, there's no difference between stocks and bitcoin. Stocks can be created or destroyed at will, just like money. Neither have any intrinsic value. Investment value for intangible assets to me is like religion. I'm an atheist. Value is what somebody will pay for something at any given moment in time. 

Over the past 59 years since I first became interested in charting markets I observed that all the noise around markets obscured the signal-- the price. Over time, I came to just focus on price and liquidity flows as a means of evaluating the likely persistence of the current trend. Everything else became irrelevant in my analytical framework, mere sideshows that distract from the matter at hand- which is to correctly guess the near term future price trend. Price is the final arbiter.

I look for trends and turning points, and the conditions that are likely to foster turning points. One of the conditions is liquidity. Another is time. I'm sure that there are others. But that's what I focus on.  

Whatever people want to think about what prices represent is up to them. If opinions are bullish on balance and the forces of liquidity creation support it, prices rise. If opinions are bearish on balance, and the forces of liquidity creation are also tight, then prices fall. 

There's a lot of gray in there. Sometimes the trend is flat and we don't know which way the breakout will come. So we watch the charts, and time, and liquidity for clues. 

That's what I do. 

Thinking about what dealers, traders, investors and central bankers think about the current price level is way beyond my pay grade. I could never figure it out, and it wouldn't do me any good if I could. What anyone thinks about whether prices represent good value or not is irrelevant and immaterial. That's sentiment analysis. Some people do that, and do it well. 

It's not what I do. 

As for today's price analysis, as usual I present the hourly chart of the 24 hour ES, S&P futures, without any idea or intent of having an idea on its, other than attempting to determine today's direction in order to help the 3 people reading this decide how to execute their trades today if they want to, or to have a good laugh at me if they don't.

As I look at this chart, I see the elements of a 5 day cycle bottom forming. The 5 day cycle projection of 4455 was hit and the market stopped going down. To confirm an up phase in absolute terms would require an hourly close above 4460, methinks. Otherwise, we might see a breakdown below  4440 or fight, which would then suggest a move to 4415-20.

11b0df

That ladies and germs is my view of value today. Looking at price is the most efficient way of guessing where price will be a few minutes, hours, or days from now. For a longer view see Classic BTFD Setup Or Not

Here's a chart representing competing "investment," in which every single one of us, directly or indirectly, has a stake. That's the 10 year Treasury yield. It stopped going up yesterday. But for how long? Beware! Jobs Really Much Weaker Than They Say 

11b0fz

For moron the markets, see:

If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam folder. 

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EFFICENT MARKETS HYPOTHESIS

Markets are not efficient.

The efficiency does not reside at the market or price level.

It resides at the individual investor level.

(the efficient investor hypothesis!!!!)

Investors can be "relatively efficient over the long term" by applying value metrics to stock purchases.

And only buying stocks which meet their value metrics.

Which can be a very small time window of opportunity indeed!!!!

Even then this applies only to long term investors.

Notice how I dont say perfectly efficient or short term!!!!!!!

Short term investors ie traders/speculators really don't care about value.

They care about technical analysis and liquidity.

As they exist in a different "frame of reference" than long term investors.

Uncle Warren covered this in the voting machine VS weighing machine analogy.

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"Value investing" is really sentiment analysis. Buffet buys when sentiment is "too bearish." Whether on the market, or a particular stock. Normally when that happens in terms of the market, the Fed reacts by radically increasing liquidity, which triggers a turn in the price trend, and hence, sentiment. 

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3 hours ago, DrStool said:

  

I don't know what "market efficiency guy" means. I don't assume that markets know anything, or that prices carry any information about "value," which nobody knows what it is anyway. The value is the price. The price is the value.

I actually have no conception of value, other than what someone will pay me for what I own and can sell, and then what I can buy with it. My apartment pays me to travel. That's a great value. Real estate has value because it gives people a place to sleep or do stuff. Everybody likes those things, and the more they like a place, usually the more people want to be there, and the more they will pay because the supply, if not fixed, is constrained. 

As for other investments, to me, there's no difference between stocks and bitcoin. Stocks can be created or destroyed at will, just like money. Neither have any intrinsic value. Investment value for intangible assets to me is like religion. I'm an atheist. Value is what somebody will pay for something at any given moment in time. 

Over the past 59 years since I first became interested in charting markets I observed that all the noise around markets obscured the signal-- the price. Over time, I came to just focus on price and liquidity flows as a means of evaluating the likely persistence of the current trend. Everything else became irrelevant in my analytical framework, mere sideshows that distract from the matter at hand- which is to correctly guess the near term future price trend. Price is the final arbiter.

I look for trends and turning points, and the conditions that are likely to foster turning points. One of the conditions is liquidity. Another is time. I'm sure that there are others. But that's what I focus on.  

Whatever people want to think about what prices represent is up to them. If opinions are bullish on balance and the forces of liquidity creation support it, prices rise. If opinions are bearish on balance, and the forces of liquidity creation are also tight, then prices fall. 

There's a lot of gray in there. Sometimes the trend is flat and we don't know which way the breakout will come. So we watch the charts, and time, and liquidity for clues. 

That's what I do. 

Thinking about what dealers, traders, investors and central bankers think about the current price level is way beyond my pay grade. I could never figure it out, and it wouldn't do me any good if I could. What anyone thinks about whether prices represent good value or not is irrelevant and immaterial. That's sentiment analysis. Some people do that, and do it well. 

It's not what I do. 

As for today's price analysis, as usual I present the hourly chart of the 24 hour ES, S&P futures, without any idea or intent of having an idea on its, other than attempting to determine today's direction in order to help the 3 people reading this decide how to execute their trades today if they want to, or to have a good laugh at me if they don't.

As I look at this chart, I see the elements of a 5 day cycle bottom forming. The 5 day cycle projection of 4455 was hit and the market stopped going down. To confirm an up phase in absolute terms would require an hourly close above 4460, methinks. Otherwise, we might see a breakdown below  4440 or fight, which would then suggest a move to 4415-20.

11b0df

That ladies and germs is my view of value today. Looking at price is the most efficient way of guessing where price will be a few minutes, hours, or days from now. For a longer view see Classic BTFD Setup Or Not

Here's a chart representing competing "investment," in which every single one of us, directly or indirectly, has a stake. That's the 10 year Treasury yield. It stopped going up yesterday. But for how long? Beware! Jobs Really Much Weaker Than They Say 

11b0fz

For moron the markets, see:

If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam folder. 

great stuff.....

 

50 Shades of Efficiency

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Yes, great stuff.

 

I take the paradox of the old cliche "the markets can stay irrational longer than I can stay solvent" as the operating principal.  If I watch the innards of the market (liquidity and technical analysis) with sufficient experience to recognize patterns, then I can navigate through the irrationality and maybe 55% of the time come up with short term patterns that rescue me from the solvency problem.  I'm getting better and I have constantly improved my sources.  My biggest problem is I still expect things to happen rationally in a too soon time frame.  Patience is a premium to negotiate the irrationality.

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Markets are perfectly rational in this context. As my father used to say,  "Money burns a hole in your pocket." When market participants have money, or think they can access it easily, it burns a hole in their pocket. They buy compulsively. 

When the margin man comes a callin, it works in reverse. 

When the Treasury is issuing T-bills hand over fist, there's a large class of market participants who think that they can access cash equal to the amount of their T-bills, quickly and easily. 

Doesn't mean that they have to, but they're kind of addicted. 

T-bill issuance is therefore a variant of self QE creation for the addicted who have access.  

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2 hours ago, DrStool said:

"Value investing" is really sentiment analysis. Buffet buys when sentiment is "too bearish." Whether on the market, or a particular stock. Normally when that happens in terms of the market, the Fed reacts by radically increasing liquidity, which triggers a turn in the price trend, and hence, sentiment. 

Works on individual stocks too:

Tesla at 20 = "Complete shit, crap car, total hoax!"

Tesla at 400 = "Gotta have one, fantastic car!"

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