Comments on Fund My Mutual Fund: An Unrelenting Move

It is all a matter of context. As a signal - that...

2008-05-19T23:44:00.000-04:00

It is all a matter of context. As a signal - that is buying above the 40 wk. MA and selling below - it is a poor strategy. The data does not support that it is important. But it probably becomes important in the context. For example, this is still a bear market and inflation is high and sentiment is neutral to bullish (which is a bear signal); so when you add all this up, it seems like the 200 day MA would bring out the sellers. Once again, as a pure signal, it does not stand up.

I respectfully disagree.First nothing works 100% o...

2008-05-19T16:20:00.000-04:00

I respectfully disagree.

First nothing works 100% of the time; in fact if we find things that work 75% of the time we are thrilled. So TA is not fool proof. But if hordes of computers and traders (humans) are set to ABC sign, then it (in my opinion) self reinforces. There is a reason stocks fall back from resistance or bounce off support. Not just random acts.

I explain it like this to people who don't believe... if someone documented a trend that in Miami, when it was over 90 degrees, sweater sales jumped 40% you would say it is ludicrous. So would I. But if that was the trend, every day it was 90 degrees or higher and I were a sweater salesman, I'd be stocking up on sweaters. Because thats when the herd buys sweaters.

So this is how much of the herd now trades. So I simply believe it is self reinforcing. If it were the 150 day or 400 day or 37 day moving average that everyone clung to, I'd observe those as well. But 50 and 200 day seem to be the major trendlines (along with 20 day for stocks in strong uptrend). But again, does it fail quite a bit? Sure. Everything does in the market. But I've just seen too many things respond near perfect to resistance/support over the past 10+ years to dismiss it. But I understand why people do so, and think its voodoo :) Because on the surface it makes little sense.

Hi TraderMark:A lot of folks are mentioning the 20...

2008-05-19T15:54:00.000-04:00

Hi TraderMark:

A lot of folks are mentioning the 200 day moving average as though it is something special. The reality is that it is not, and in fact, it is no better a signal than just buying and holding an index. Yes, folks may focus on this "key" technical level, but like most things on Wall Street it is only dogma and it won't make you any money.