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Join Date: Aug 2003
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Regarding Iris’ ocean waves and Time the Trend theory.
What is so hard to understand?
Throw a rock in a pond and a wave will come to the shore. Each wave had fractal waves of different timeframes within them. They and the big primary one will get there in a predictable time. Sometimes another rock is unexpectedly thrown in and sends a wave in the opposite direction. If it is bigger it becomes dominant and changes the direction and speed. Sometime they are cancelled out and then one has to wait for another rock to be thrown in, and who can predict which direction it will go. One has to be watching for the rocks. Markets are interdependent and each one does not function on its own. E.g. If Interest fall then stocks up, if US$ fall then interest up, if inflation up then interest up, if GNP down then interest down, if Ger Bund down then interest down, if p/cap spend up then inventories down, if unemployment fall then p/cap spending up, if inventories down then production up, if production up then GNP up, if Fed Money Supply is added then interest falls etc and vise versa. Each of these are rocks, each making waves. How to look for the waves: e.g. News Flash: "Unemployment Rises"; = p/cap spending falls, =inventories rise, = production falls, = GNP falls, = interest falls, = stocks rise. What is missing from the nonexistent perfect computer equation is Iris’ Time Delay i.e. each sequence (and there are many permutations of the variables) has a reaction time, and each reaction is two swings of the pendulum. So, the “Time Trend” of Iris is actually the completion criterion; so, at the end of the above hypo should be added e.g. “over the next 3 months” to complete the thought process. Single waves are not realistic in reality – events are often multiple and 2 or more significant rocks may cause conflicting waves in time (look at the BoJ pitching in huge bundles of cash to keep the JPY moving almost permanently in a sideways motion – you want to trade it and not get whipped to death, you have to have insider information as to when they throw in the wheelbarrows of Yen into the perpetual bottomless Yen pit of hell!). Back to reality: Factor in actual statistics versus market (experts!) expectations, cumulative differences of these results over the last few time frames (Boy were they ever and always permanently wrong!), and over longer time frames (everyone is a Guru that eventually makes excuses for their ignorance and incompetence – do they ever give back any money?), and throw in the longer time frame mean values (Governments are always revising, but the damage they caused is long gone, and all you can do is average out the mess made by the Economists (world wide) – did you ever actually see an economist really trade a market with their own money instead of hiding in the basements of banks or lecture halls of Universities and theorizing?).
Finally interwoven, is the Inter-market technical analysis: Bonds and its inverse ratio to stocks, dollar follows interest rates (T Bills) but only after a period of time, falling dollar is bearish for bonds but also only after a while, gold usually does best in an inflationary environment and during a bear market in stocks. E.g. rising interest rates = dollar up, gold peaks, CRB Index peaks, Interest rates peak, bonds bottom, falling interest rates, dollar lower, gold bottoms, CRB Index bottoms, Interest rates up, bonds peak, stocks peak, rising interest rates pull dollar higher. All the markets (National and International) are tied together. Computers (the Holy Grail Machines (sic!)) cannot read the causes of the waves (see Iris’ prior post regarding the Ultimate Oscillator – the Human Brain) – computers can only read the effects of a wave, after they occur – therefore the myth of Program Trading, and the myth of Trading Strategies and the fallible Black Boxes. The key is inflation and the role of the business cycle (often quoted as 4 years). Every major downturn in the stock market has almost always coincided with a major downturn in the bond market. Bonds have bottomed an average of 4 months prior to the bottom of the stock market in times of recession. Stocks begin to turn down at least 6 months prior to the onset of recession and begin to turn up at least 6 months prior to the end of recession. A rising dollar is bullish for bonds and stocks, and opposite is true, but is not that simple, and there is a significant Time and Trend delay – the impact is not direct, but indirectly related to the effect on the dollar of commodities, and the dollar’s impact on inflation. Clearly, the EUR is impacted by the dollar - therefore what in reality impacts the EUR? A falling Bond market is almost always bearish for equities, but the opposite is not necessarily true, because deteriorating corporate earnings during an economic slowdown may overshadow the bullish effect of a rising Bond market and falling interest rates (as now, for e.g.) – but a bull market in stocks can almost never occur without a rising bond market. Therefore to see it all, “Time is the Trend”, and as Iris said, one must look at the Monthly, Weekly and Daily charts to see the waves “and the nature of things” (Tao Te Ching – Lao-tse). If M, W, D do not agree, someone has thrown another rock. So, trading inside the daily timeframes, without “Time the Trend”, is a roller-coaster ride. Sure there are waves up and down on the ride, but you are moving so fast that you cannot see the scenery, and you cannot hope to know when you are going up or down. All you can do is hang on and hope that the ride ends soon because you cannot get out, and when it does, hope that you can still walk despite the pain. In reality, you do not need to know any of this, because wisdom of the markets have factored it in over Time!. The charts tell it all in plain pictures – did you ever notice that fancy stuff like Stoch’s, RSI, Divergence etc, is the self-same line picture of that chart, and tells you nothing more, other than in delayed time and slow motion of what is long gone? The markets tell you what they have done. Nothing can tell you what they are going to do. Listen to the Markets - they teach basic principles and often repeat themselves for those that want to see. Markets are the greatest ego equalizers of all time in history. Time is the Trend!
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