Forum Archive Index - December 2001

[Phaedrus <Phaedrus@techemail.com>]

 She is indeed - discussing trendlines? - a chartist, no less!
When Mary writes of expecting established trends to continue, she is (perhaps 
unwittingly) following a central tenet of Dow Theory. One that forms the very 
basis of technical analysis. As Dow put it "A trend is assumed to be in effect 
until it gives definite signals that it has reversed".
 That is all trend-followers do. Look for trends, buy into them, and sell when 
they end. Some people do this on daily trends, others use longer term trends, 
lasting perhaps weeks or months. Mary is looking at the very long-term trend. 
(150 years). That's the only difference. Of course you don't get many buy/sell 
cycles to the lifetime using this timeframe, and you can expect to be hit hard 
should any long-term downtrend develop.
 To me it is self evident that fundamental and technical analysis are 
complementary. Fundamental analysis tells us what should happen to prices, but 
totally ignores the role of psychology in the market. What drives prices? 
Sentiment short-term, fundamentals long-term. Technical analysis is all about 
timing - detecting when the balance of supply and demand changes. It is the 
study of market sentiment.
 I sincerely hope this does not set off a whole new round of TA/FA debate. It 
is so stupid, and so pointless. Why be limited by the constraints of either 
method?
           Phaedrus.

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