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Neil, these are excellent points.
It seems to me that these 'gambler indicators' are based on linear
methods and these indicators are attempting to model a non-linear
system.
Having said that, I have looked into fields of non-linear dynamics,
chaos and fractals. Unfortunately, I have been unable to establish any
relationship between theories of these fields and dynamics of markets in
general [shortcoming mine].
Recently, I came across the works of Henry D.I. Abarbanel of Institute
of Nonlinear Science in San Diego. Abarbanel has written a book titled
"Analysis of Observed Chaotic Data." This book has a target audience of
hard core academics and scientists in the fields of physics, mathematics
and other related sciences.
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