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This verbose and on again off again trader has been asked
to elaborate on this recent quote. The questioner won't be identified to
protect him from the potential humiliation such a question might elicit.
THE QUESTION:
"The bottom is a blown up part of the top"
----------------------------
THE ANSWER:
The question does not explicitly refer to markets, but given
that this yahoogroup is a trading group an answer will be framed within that
context of price behavior. Such as it is then, the picturesque words
"blown up" imply not just any bottom, but a significant bottom that traders lust
after for the potential rewards that come from playing it hard on the long
side. For surely a market that has treated a trader badly on the downside
certainly deserves its come upance on the upside with a max margin play.
Bottoms of this nature only come along once or twice in a lifetime and their
presence leaves graphic evidence on historical charts and unforgettable memories
that many dream of, few participate in, and many remain frozen
until the next top. One requirement to participate i and reap the rewards
of latter conversation is that your age be sufficient to live long enough to
tell your grandchildren how it was in the crash of 2001. Before a bottom
can be defined, a top must be defined for day one of trading history cannot
truly be defined as a bottom or top but in essence, the big bang that started it
all in an ever expanding proliferation of inked paper certificates. And
therein lies part of the problem, paper representing value, substance is
replaced by I.O.U promises and questionable valuations whose basis is generated
from psychological factors of greed battling fear. In addition to the
greed and fear determinant of the distance from top to bottom there is the
governmental force that derives parasitic revenue from seeing that the tops
keep rising intermittantly between periods of forced withdrawals. For if
the tops kept dropping, the masses would not be lulled into playing the game
with disposable, or even nondisposable income and liquidity for corporation
founding would suffer. Thus we have the somewhat variable cycle of tops
and bottoms such that it isn't obvious who or what is in control of the
scheme. Perhaps no one is at any one time and trends are random
fractals in different time frames. The tops are identified by massive
numbers of IPO's, extravagant valuations, sky high PE ratios, and the belief
that markets only move upward. Each top has its new genertion of suckers
and a smaller number of those who have learned to hang on to their wealth and
trade right. Thus, we have the intial big bang that has now become an
outlet for keeping hands out of the idle state and into the motion of buying and
selling. The addiction of making money from a simple strike of the
keyboard is a hard one to break. It increases and increases until the
highway patrolman says stop. Then come the aftershocks of the initial big
bang. PE's are blown out of unreality and put back on a course to reality,
sometimes with blinding speed, i.e. faster than a keystroke, faster than an
utterance of Sell into a jammed broadband network. Layoffs
accelerate. Earnings fall, prices fall, price charts now manifest the ski
slope architecture. Certificates are used as confetti for the parade
of men to the White House who influence the levels of tops and
bottoms. Forever after the periods of euphoria and depression are
here to stay as it is guaranteed in to be in the trading realm. So we must
have a begining, rising expectations,then a top, followed by a bottom which may
be higher or lower than the beginning price. The bottom is a part of
a blownup top because not all sectors of the blowup traverse the path to the
bottom. Some remain at the top and others rise to the top while the
majority head for bookvalue, as the growthrate premium has been stripped from
the valuation. The irrational behaviour that typically biases traditional
asset pricing and valuation models in normal times is reduced to a minimum at
bottoms. Now when the momentum of tons of paper hit the sidewalks of
WallStreet there is an earthquake felt round the globe. Such shocks and
aftershocks are measureable like price hitting support and bouncing in a
cascading price/time series of Gann, Elliot and Fibonacci
concepualizations. A more recent creation for this monitoring might be the
Danton Shockwave, although few speak of it. Thus ends the answer to the
question.
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