Tuesday, December 02, 2008

More Downside for the Dow Could Be Ahead

The near term risk for the Dow is on the downside, says Adam Hewison of INO.com. In this free video, he describes the recent bounce as a classic Fibonacci retracement, where markets typically retrace 50-62% of their recent losses, before retesting new lows.

Regular readers know that traditionally, I have not been a big believer in heavy forms of technical analysis. However about a year ago, I adopted a simple entry and exit system based on basic technical cues after reading Winner Take All, by William Gallacher (which I'd highly recommend, by the way).

And I have to admit, I'm very grateful I did, because otherwise I would have been completely wiped out in the commodity crash that has taken place this year.

What is your experience with technical analysis? Do you view it as a critical component of your trading? I'd love to hear your thoughts in the comment section below.


joachin said...

i did get wiped out of the commodity crash, $3k in the corn and wheat bull decapitation.

Part of the losses can blame to tech analysis, or my over estimation of it, since i had a buyer attitude in every grain trade i did (about 14), I was betting on mini reversals which ended in what we all have seen.

Top speculators don't put much attention to technicals since most of them have not way o proving statistic significance; Some say that the only one with a true statistical edge is the head and shoulders. Trade Station has a very nice tool that identifies this pattern, some time this life will study it.

I do think technicals are good for understanding the market behavior, but not for getting an true edge for speculating.

Brett Owens said...

Yeah I got head faked on most of the false rallies that have happened since March also.

In Winner Take All, he makes the case that you should be long in a bull environment and short in a bear environment, to help frame how you use the technicals. I agree, but, it didn't work out well for us during this entire correction.

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