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> You may be right, in which case you will agree that their analysis
> has no more foundation that the man who trades based on the high
> correlation of stocks to the Lakers vs. Portland results?
I reserve judgement on that point. It seems obvious to me that the
markets ARE interrelated. Clearly things like interest rates impact
stock prices. Clearly exchange rates impact dollar-denominated
commodities. Whether you can point to a clear causative "if X then
Y" relationship is another question, and one that I'm not qualified
to comment on.
> You'll agree that high correlation is the only requirement, not
> causation, and that therefore any high correlation is material for
> trading using this "intermarket" theory?
I think I'd agree with that. Causation is NOT required to trade
successfully. All that's required to trade successfully is a set of
rules that works often enough.
If I could prove to my satisfaction that crude oil prices were
strongly correlated to the diameter of pomegranates growing on
Cyprus, and I was satisfied that this correlation was likely to
continue, and I felt I could use this odd connection profitably, I'd
see no reason not to. If it feels good, do it. I don't have to
explain why. I just have to make a profit. That's a trader's job.
Now being an inquisitive sort, I might try to find out WHY such a
strange correlation existed. It might drive me a little bonkers if I
couldn't find a reason, and I might stop trading it just because the
whole damn thing made me crazy. But that doesn't mean it can't work.
OM, you seem to love to split philosophical hairs to the subatomic
level. Cool, glad you enjoy it. But you might remember that not
everybody shares your love of the pastime.
Gary
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