Lets clear a few things up here. Rabid, I am going to use your post as an example, even though your reply is among the more thought out ones in this thread. I am just trying to offer a different mindset that may allow a trader to understand more clearly the dynamics of price discovery.
Fundamental analysis is the study of what is happening in the world. This is more than what is on the FF news board. This includes what you wrote above Rabid, plus a whole hellofalot more.
I will make my main point here.
Price does not not rally because it was at the bottom of a range. In fact, price does not "do" anything. It merely reflects human behavior. It helps me to humanize the market, give it psychological tendencies, and put people behind the movement of price. Either way, you must think in terms of supply and demand. Ranges exist because of a fight between bulls and bears; buyers and sellers. When a range hits the bottom, then bounces, it did so as a reaction to buyers entering the markets overcoming the sellers. It is not the "range" or "S/R" that caused the sellers to be bought. It is the buyers that bought out the sellers, thus forming the bottom of this range. The range then becomes a product of supply and demand. It shows a historical battle of two sides.
Now, there is a good chance that there were a great many people who saw the support and a range forming, and therefore decided to buy at the bottom of it. This is technical analysis, and it shows some nature of psychology in the markets. Technical traders can easily justify entering the market at the bottom of a range, however, to be able to stop the downward movement, buy up all of the sellers, and reverse supply and demand takes incredible orderflow, much of which technical traders cannot account for. Just a hint, who do you think benefits from the widespread assumption that technical information holds enough weight to be considered a superior cause of market movement? I wonder. Now, I am sure there are times that sole technical analysis can move markets in areas like this, but I believe those times are few and far between.
So, if technical traders are not often responsible for the reversals of market direction, then perhaps the data on a chart does not carry as much weight as we often assume. Or at the least, maybe we are thinking too concretely about how important a support or resistance line is.
Technical analysis is the study of what is happening on a chart. However distorted you make it (ie with indicators), it is still technical analysis.
Again, it is just shifts of supply and demand. In order to capitalize on supply and demand shifts, if would benefit you to not think inside of technical and fundamental boxes (my point way back at the beginning of the thread). Instead, ask yourself who exactly has the power to shift supply and demand. And then, what reason would they have to make such a shift anyway? Kudos to anyone in this thread who can answer those questions correctly.
Quote:
Originally Posted by Rabid  I guess it depends on how you draw the line. I see fundamentals as stuff like GDP and jobs reports and trade balances, etc. Each of those effects cash flow to some degree, and in that they have an effect, but other than immediate news trading... the impact of those things are fairly random. You can have a great GDP result, but the market priced-in something better, and end up with a massive negative response on seemingly good news. |
Fundamental analysis is the study of what is happening in the world. This is more than what is on the FF news board. This includes what you wrote above Rabid, plus a whole hellofalot more.
Quote:
| Not at all. The S&P rallied because it was at the bottom of an S&R range. Granted you can't pull up that info on a EURUSD chart, but if you pull up an S&P chart you certainly can. With tightly correlating markets like these you have to extend your TA a bit. |
I will make my main point here.
Price does not not rally because it was at the bottom of a range. In fact, price does not "do" anything. It merely reflects human behavior. It helps me to humanize the market, give it psychological tendencies, and put people behind the movement of price. Either way, you must think in terms of supply and demand. Ranges exist because of a fight between bulls and bears; buyers and sellers. When a range hits the bottom, then bounces, it did so as a reaction to buyers entering the markets overcoming the sellers. It is not the "range" or "S/R" that caused the sellers to be bought. It is the buyers that bought out the sellers, thus forming the bottom of this range. The range then becomes a product of supply and demand. It shows a historical battle of two sides.
Now, there is a good chance that there were a great many people who saw the support and a range forming, and therefore decided to buy at the bottom of it. This is technical analysis, and it shows some nature of psychology in the markets. Technical traders can easily justify entering the market at the bottom of a range, however, to be able to stop the downward movement, buy up all of the sellers, and reverse supply and demand takes incredible orderflow, much of which technical traders cannot account for. Just a hint, who do you think benefits from the widespread assumption that technical information holds enough weight to be considered a superior cause of market movement? I wonder. Now, I am sure there are times that sole technical analysis can move markets in areas like this, but I believe those times are few and far between.
So, if technical traders are not often responsible for the reversals of market direction, then perhaps the data on a chart does not carry as much weight as we often assume. Or at the least, maybe we are thinking too concretely about how important a support or resistance line is.
Quote:
| Personally I'm not a fan of the term "technical analysis" at all. It has come to mean indicator analysis, and that's usually what people do. Even basic S&R is usually reduced to an indicator, or just a line on a screen. I prefer "market analysis" as better a term. |
Technical analysis is the study of what is happening on a chart. However distorted you make it (ie with indicators), it is still technical analysis.
Quote:
| At some point when the market rallies enough the current correlation will unwind. Equities rally, people sell dollars, the dollar will lose value, people buy more equities, the market will rebound, and the dollar will rally back as people invest in US-based business again (sell native currency, buy dollars, build factory, repeat). It's all just phases of the financial moon. |
Again, it is just shifts of supply and demand. In order to capitalize on supply and demand shifts, if would benefit you to not think inside of technical and fundamental boxes (my point way back at the beginning of the thread). Instead, ask yourself who exactly has the power to shift supply and demand. And then, what reason would they have to make such a shift anyway? Kudos to anyone in this thread who can answer those questions correctly.
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