Monday, July 11, 2011

Technical Talk or Manipulative Take?

What is needed for successful trading / investment? TA or Fundamental Analysis or something else?

TA was once very useful, when the HFT Algos were not dominating the market and momentum chasing lemmings did not have access to high speed trading network.

There is some voodoo technique called Elliot Wave Technique which is as good as reading tea leaves!

But now the HFTs and Black Box Traders have gamed the TA. These manipulators now take up or take down the market to generate buy or sell signal based on TA and they have various talking heads in 24 hours TV to help them.  I am sure CNBC and likes of Cramer will scream their head off today with the impending gloom and end of the world. This week,their idea is to create panic in the minds of retail investors so that they can buy cheap and sell high. It was only last week or week before when the world was all rose and rainbow and a new bull run was starting and everyone was worried about being left behind and so piled on the buy / long side after S&P crossed 1340!

I have said before that Momentum chasing is not investment. I also said that when we look at 1 min. and 5 min. charts continuously, we lose the bigger picture.  

In this present day environment, I think the single biggest help for trading or investment will come from understanding the players who determine the market in the short or intermediate term and their manipulative techniques. For e.g. GS and other Black Box traders (where 70% of the trade volume takes place) were allegedly selling the shares of the Italian Banks in Europe while pumping up the US markets. Based on my understanding of the market manipulation, the US and world stock markets will sell off hard this week to create the panic and next week will be a buying opportunity for trading. I think 22nd June will start a new bull market.  It is difficult to see that when the market is selling off and that sell off will continue for a while.

By the way, as I write this, Euro breached 1.40 to the downside and reversed.  I think it will go down all the way to 1.35.  There is almost $70 billion Tbill retirement this week. So go figure!