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Jose,
Your post is outrageous.
You have the gall to write, ?Again, the anonymous poster should take care not to make sweeping statements and confuse personal opinion & failed experience with facts.? And then you continue on with your own unsubstantiated sweeping statements such as: ?Every trading tool has its use, once understood. Whether one finds it or not, is another issue.? ? As if every technical analysis tool could be proven reliably profitable on a consistent basis. Not to mention your closing remark, which I interpreted in a decidedly insulting manor. Perhaps your comment was the result of your own personal confusion & failed experience?
You then take umbrage with the comment: ?Almost all TA tools are based on price and volume." because your narrow interpretation of this quote didn?t allow this to refer to indicators that used one of both of price and volume. Talk about making a mountain out of a mole hill.
As an introduction to your view on volume, you chose to open with the incendiary comment: ?The above statement shows a poor or simplistic understanding of volume.? This might have been excusable if you went to explain specifically where the previous poster had been in error. But you didn?t do this. You offered vague, sweeping statements on volume that, at first glance might suggest that you know something about volume but upon closer inspection communicate zero value. Your post was a complete waste of everyone?s time.
Jose, I am critical of your comments for a number of reasons: One, you hold yourself out to be a professional; you sell expensive tools and you offer your services as a consultant. And two, more that most other members here, I believe that you have the ability to write comments that are genuinely helpful. What is so amazing is that you choose so often to be insulting, a decidedly unprofessional behaviour and that so many of your posts are really devoid of value as you never present a testable hypothesis. You shout loudly that you are knowledgeable, but you sure make an effort to keep it hidden.
Cheers,
Cameron
Date: Sat, 10 Mar 2007 15:05:06 -0800To: equismetastock@xxxxxxxxxxxxxxxxxxx: josesilva22@xxxxxxxxxxxxx: Sat, 10 Mar 2007 23:04:33 +0000Subject: [EquisMetaStock Group] Re: ETF trading may cause Volume Indicator Problems
"Almost all TA tools are based on price and volume."Incorrect. The greater majority of indicators are based on price alone.The anonymous poster should take care not to confuse personal opinion with fact.> ...will have to change how they look at volume because the volume of> poorly performing stocks are going to rise also because the poorly> performing stocks will be bought as part of the ETF creation.The above statement shows a poor or simplistic understanding of volume.Bullish and Bearish volume are quite different beasts. Volume is related to price action, and cannot be analyzed separately from it.Volume has a different meaning depending on whether price is going up, peaking, going down, bottoming, going sideways, etc. Volume is not a simple stand-alone indicator - it needs to be analyzed in conjunction with price action.> It's not that traders need new TA tools. There are thousands of TA> tools and the vast majority have little or no value.Again, the anonymous poster should take care not to make sweeping statements and confuse personal opinion & failed experience with facts.Every trading tool has its use, once understood. Whether one finds it or not, is another issue.jose '-)http://www.metastocktools.com--- In equismetastock@xxxxxxxxxxxxxxx, superfragalist <no_reply@xxx> wrote:>> Personally, I like ETFs. I use them as asset allocation tools, and> occasionally I trade them. The lower volume ETFs are a little tricker> to trade. Most of the time, they should be bought and sold using limit> orders so there is no momentary price distortions caused by lag as the> specialists tries to buy the securities needed to create more shares> of the ETF. > > There can also be a large gap between the NAV and the market price of> an ETF. They are not perfectly matched to the market prices of the> underlying securities. The gap is often greater than the expenses of> the ETF and it can be positive or negative. Some ETFs trade more like> closed end mutual funds than they do index funds.> > My biggest complaint with ETFs is the lack
Fs have enough shares in retail accounts > available for shorting. Mutual funds, hedge funds and institutional> traders dry up the shorting market because they use the shares as> hedges. The ability to short sectors quickly and easily without the> uptick rule was one of the big advertising points of ETFs. > > In the past when I was trading ETFs more frequently and I wanted to> short many ETFs, I had to call the trading desk of my dealer and have> them borrow the shares from institutional accounts, rather than from> retail accounts. While that works, it also creates slippage issues in> fills. It's a real pain. Most individuals look at the ahares available> for shorting on a website, or call their brokerage and are told there> aren't any shares available for shorting. > > There are lots of ETFs coming out every month. Anyone who is> interested can track most of them on www.amex.com select ETFs from> the left column.> > In addition to finding out what a new ETF is all about, once they been> on the market for awhile, someone can scroll around on the amex site> and find a list of the shares that comprise any ETF. That creates> other kinds of trading opportunities.> > ETFs are quickly replacing basket trading. Many people will buy and> sell ETFs but they would not have created the same opportunities using> basket trading techniques. So from that perspective ETFs are> definitely changing things.> > What I was pointing out about the article and the volume issues is> traders need to be aware that ETF buying and selling causes the volume> of both the good and bad performing stocks in the ETF to rise the> same. On the surface this looks like a net zero impact, but it's not. > > Essentially as there are more ETFs and as ETF volume rises, traders> will have to change how they look at volume because the volume of> poorly performing stocks are going to rise also because the poorly> performing stocks will be bought as part of the ETF creation. The> volume of poorly performing stocks will be rising while the price is> falling. Th
presures may now be offset by the buying that is necessary to fulfill> ETF demand. Some may consider this a distortion in the demand for> weaker stocks. > > Volume today has a completely different meaning than it did 20 years> ago. Many TA volume tools were created 20 years ago. Data suppliers> like Reuters need to supply the actual up and down volume rather than> simply total volume. That would be a good place to start. > > Almost all TA tools are based on price and volume. There is only so> many ways to analyze price and volume. The information which can be> extracted from price and volume is limited. As volume becomes more> difficult to discern the usefulness of it may decline meaning that> most information will have to be extracted from price alone. > > The question is without rational gaps in the efficient market, or the> creation of distorted gaps that are hard to read, how much opportunity> will there be for in the future for individuals to profit from the> efficiency gaps?> > If these gaps close, then the market has reached random walk> territory. Most of the academic studies do not include data on the> current market. Often the studies are dated to the 1980's and 1990's.> ETFs weren't around then. > > Ten years from now, what will the new academic studies say? Financial> engineering is creating new products faster than individuals can learn> to use them and faster than academics can measure their impact on the> markets. > > It's not that traders need new TA tools. There are thousands of TA> tools and the vast majority have little or no value. Traders need> differentiatable data to apply the tools to, or create tools that use> the data effectively. On most services right now traders get to> download high, low, open and close price and total volume by bar. > > Is that going to be enough to make TA useful in the future, or will> the change in product and the expansion of the fund industry and> institutional buying and selling diminish the value of the tools?> > Will traders have to focus on the shares of c
al radar? How many companies will that be as> ETFs expand to cover every kind of basket someone can think of?> > > > > --- In equismetastock@xxxxxxxxxxxxxxx, "jawjahtek" <jawjahtek@> wrote:> >> > super,> > > > I agree that too many ETFs are being created and that narrow sector > > ETFs can distort some market sectors. > > However, I cannot tell from your post if you are against all ETFs > > and/or if you are a supporter of Random Walk theory.> > ETFs in market segments with significant market cap have little > > impact compared to institutions and hedge funds.> > And even the most ardent academic supporter of Random Walk thoery > > agrees that the original version of the theory is wrong.> > My take from the article cited below in that some ETFs in narrow > > market sectors are distorting volume as an indicator.> > But institutions and hedge funds have been causing the same > > distortions for years; why point out ETF impacts without mentioning > > the impacts of institutions and hedge funds.> > I'm sorry if this appears to be a rant; for some reason CNBC and some > > commentators have been ranting about ETFs during the latest market > > downturn even though ETFs had absolutely no impact on the computer > > glitch in the Dow.> > > > Ross> > > > > > --- In equismetastock@xxxxxxxxxxxxxxx, superfragalist <no_reply@> > > wrote:> > >> > > Anyone trading small caps might be interested in an article in > > today's> > > Wall Street Journal 3/9/2007 which discusses how ETF trading is> > > distorting volume and may hurt volume as a technical indicator. > > > > > > The article is in the Money Section. ETFs Build Presence in Shares> > > > > > http://users2.wsj.com/lmda/do/checkLogin?mg=wsj-users2&url=http%3A%> > 2F%2Fonline.wsj.com%2Farticle%2FSB117340540305631813.html%3Fmod%> > 3Dtodays_us_nonsub_money_and_investing> > > > > > Most people do not understand ETF volume, the impact ETF volume has > > on> > > individual share volume or individual share prices. They think ETFs> > > are priced on supply and demand and that ETF vol
inary stocks. In addition, there are differences in> > > how mark to market pricing is done on the trading exchanges. > > > > > > Vomund explains some of this in his book ETF Trading Strategies > > Revealed > > > > > > There are also articles that explain bits and pieces on the > > internet. > > > > > > Specialized, or sector ETFs, are having the same impact on stock> > > volume totals in individual shares in a sector or in a specialized> > > area like socially responsible stocks. As the specialized ETFs grow > > in> > > popularity so will their ability to distort the meaning of share> > > volume and share pricing. > > > > > > When an ETF fails to achieve enough trading volume to cover its > > costs,> > > the sponsor will liquidate it and cause the opposite volume issues > > to> > > the downside.> > > > > > All this will provide more support for Random Walk.
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