Session 11: Technical Analysis

Summary

The speaker explores the world of technical indicators in stock trading, acknowledging skepticism but recognizing their value for some investors. They categorize indicators into contrarian, momentum, smart investor, and mystical force-based approaches. The talk emphasizes understanding the behavioral basis of each indicator, testing their effectiveness, managing trading costs, and finding the right holding period for successful investment strategies.

Takeaways

• 😀 Technical analysis is based on the belief that stock prices reflect all available information and tend to move in trends.
• 🧐 The speaker is skeptical of technical indicators but acknowledges their effectiveness for some investors.
• 📉 Market overreactions are a common belief, suggesting that markets often overreact to news, leading to potential reversals.
• 📈 Odd lot trading, mutual fund cash positions, and investment advisor sentiment are examples of contrarian indicators used to exploit market overreactions.
• 📊 Normalized P/E ratios, market breadth, support and resistance lines, and moving averages are indicators used to detect shifts in demand and supply.
• 🌟 Momentum indicators like relative strength and trend lines are used to identify and follow market trends.
• 📊 Trading volume in conjunction with price can provide additional insights into market momentum.
• 🤓 'Smart money' indicators, such as specialist short sales and insider trading, are based on the assumption that certain investors have superior information.
• 🌀 Theories like Elliott Wave and Dow Theory suggest markets are influenced by mystical cycles and patterns, independent of fundamentals.
• ⚠️ It's important to understand the behavioral assumptions behind a technical indicator before using it.
• 📝 Testing and verification are crucial when evaluating the effectiveness of a technical indicator.
• 💰 Consideration of trading costs and time horizons is essential for successful implementation of technical indicators in a trading strategy.

Q & A

What is the foundation of technical analysis according to the script?

The foundation of technical analysis is the belief that stock prices are determined by demand and supply, and that these prices tend to move in trends which persist for periods of time. Technical analysts also believe that by using technical indicators, they can detect shifts in demand and supply before they happen.

What is the main assumption that differentiates technical analysis from the random walk theory?

The main assumption that differentiates technical analysis from the random walk theory is that technical analysts believe stock prices move in trends, while random walk theorists do not believe in the existence of such trends.

What is the concept of 'odd lot trading' as a technical indicator?

Odd lot trading is a measure that looks at the buying patterns of small individual investors who are more prone to overreacting to news. If there is a significant increase in odd lot trading, it might suggest an overreaction to good or bad news, and a contrarian investor might consider selling the stock.

How do cash positions in equity mutual funds relate to technical indicators?

Equity mutual funds holding cash instead of being fully invested can be an indicator of market sentiment. If mutual funds hold a lot of cash, it might suggest a collective bearish outlook, and a contrarian investor might choose to buy stocks in such a scenario.

What is the significance of investment advisor sentiment in technical analysis?

Investment advisor sentiment is used as a contrarian indicator. If a high percentage of investment advisors are bullish, it might be a signal to sell stocks, as it is assumed that the majority might be overreacting for the wrong reasons.

What is the purpose of using normalized P/E ratios as a technical indicator?

Normalized P/E ratios are used to detect if stocks are trading at a higher multiple of earnings than the historical norm. If they are, it might indicate that the stocks are overpriced, and a technical analyst might decide to sell.

What does the 'breadth of the market' refer to and how is it used in technical analysis?

The breadth of the market refers to the number of stocks advancing compared to the number declining over a given period. A broad market indicates a healthy trend, while a narrow market where a few stocks are driving the index up might be less bullish.

What is the significance of support and resistance lines in technical analysis?

Support and resistance lines are horizontal lines on a stock chart that represent significant price levels where the stock has historically had trouble moving above (resistance) or below (support). Breaking through these lines can signal a shift in demand and supply.

How do moving averages serve as technical indicators?

Moving averages smooth out price data over a specific period and can indicate the trend direction. A stock moving above a moving average might be seen as bullish, while moving below it could be bearish.

What role does trading volume play in conjunction with price indicators in technical analysis?

Trading volume, when used in conjunction with price indicators, can provide insights into the strength of a price movement. A sudden surge in volume with a price increase might signal a strong shift in demand and supply.

What are 'smart investor indicators' and how do they work in technical analysis?

Smart investor indicators are based on the actions of investors who are believed to have superior knowledge or insight, such as specialists on the New York Stock Exchange or company insiders. Following their actions can provide clues about market sentiment and potential shifts in demand and supply.

What are the mystical forces indicators in technical analysis and how do they differ from other indicators?

Mystical forces indicators, such as the Elliott Wave or Dow Theory, suggest that markets are driven by underlying patterns or cycles that are independent of fundamentals. They differ from other indicators as they are based on historical patterns rather than current market data or investor behavior.

What are some suggestions for using technical indicators effectively?

To use technical indicators effectively, one should understand the behavioral basis behind the indicator, verify its effectiveness through testing, manage trading costs, and ensure the holding period is appropriate for the indicator's time horizon.

Outlines

00:00

🤔 Skepticism and the Foundations of Technical Analysis

The speaker begins with an admission of skepticism towards technical indicators and price patterns but acknowledges their potential efficacy. They set the stage for a discussion on technical analysis, highlighting its foundational belief in the influence of demand and supply on stock prices. The speaker also addresses the role of both rational and irrational factors in shaping market dynamics. A key point is the technical analyst's belief in trends and the possibility of predicting shifts in demand and supply before they occur, which is central to the value creation in technical analysis. The speaker then introduces the concept of categorizing technical indicators based on the presumption of market rationality that they exploit.

05:01

🔄 Exploiting Market Overreactions with Contrarian Indicators

This paragraph delves into the first set of technical indicators that aim to exploit the market's tendency to overreact to news, both good and bad. The speaker references psychological studies and behavioral finance research to support the existence of market overreactions. They provide three examples of such indicators: odd lot trading, which assumes small investors are prone to overreacting; mutual fund cash positions, suggesting that high cash levels indicate bearish sentiment among mutual funds; and investment advisor sentiment, where a high bullish percentage among advisors is a contrarian sell signal. The common thread is using the behavior of typical investors as a contrarian indicator to make trading decisions.

10:02

📊 Detecting Shifts in Demand and Supply with Fundamental Indicators

The speaker moves on to the second set of technical indicators designed to anticipate shifts in market demand and supply. They discuss the use of normalized P/E ratios to determine if stocks are over or undervalued relative to their historical earnings multiples. The breadth of the market, support and resistance lines, moving averages, and changes in trading volume are all cited as tools to detect such shifts. The emphasis is on using fundamental indicators to identify market trends and potential turning points, with the understanding that these indicators can signal changes in the broader market dynamics.

15:03

🚀 Harnessing Market Momentum with Momentum Indicators

In this section, the speaker discusses the third set of technical indicators that are based on the concept of market momentum, where stocks tend to continue in the direction of their recent movement. They introduce the Relative Strength Index (RSI) as a momentum indicator, along with trend lines and the significance of trading volume in conjunction with price movements. The speaker suggests that stocks with high price momentum and high trading volume are stronger momentum picks, while those with low trading volume may be less reliable. The paragraph underscores the importance of detecting and riding market momentum to make informed trading decisions.

🧙‍♂️ Following the 'Smart Money' with Smart Investor Indicators

The fourth paragraph explores technical indicators that rely on the actions of 'smart money' or knowledgeable investors to predict market movements. The speaker mentions specialist short sales on the New York Stock Exchange and insider trading as examples of such indicators. The assumption is that these insiders have superior information and their trading activities can signal future market trends. However, the speaker also points out the limitations, such as the legality of insider trading and the delayed information from SEC filings, which may affect the reliability of these indicators.

🌀 The Mystical Forces of Market Movements

The final paragraph addresses the fifth set of technical indicators, which are based on the belief that markets are influenced by mystical or cyclical forces, such as the Elliott Wave theory and the Doubt theory. These indicators suggest that historical patterns and cycles can predict market movements, independent of fundamental analysis. The speaker expresses some skepticism about these indicators due to their reliance on abstract concepts rather than concrete data. They conclude by emphasizing the importance of understanding the behavioral assumptions behind any technical indicator and being disciplined in testing and applying them within an investment strategy.

📝 Conclusion and Advice on Using Technical Indicators

In conclusion, the speaker summarizes the various types of technical indicators discussed and offers advice for investors considering their use. They stress the importance of understanding the behavioral basis of each indicator, verifying their effectiveness through testing, managing trading costs, and finding the right time horizon for each strategy. The speaker also cautions against blindly following technical indicators without a clear rationale and encourages investors to be disciplined and strategic in their approach to using these tools in their investment decisions.

Keywords

💡Technical Indicators

Technical indicators are tools used by traders to analyze past price movements and predict future price trends. They are essential to technical analysis, which involves studying market data to make investment decisions. Examples from the script include measures like the odd lot trading measure and mutual fund cash positions.

💡Market Overreaction

Market overreaction refers to the tendency of stock prices to react excessively to news, resulting in significant price movements followed by corrections. This concept is crucial for certain technical indicators that aim to exploit these overreactions for profit. The script mentions psychological studies and behavioral finance research supporting this phenomenon.

💡Contrarian Investing

Contrarian investing is a strategy that involves going against prevailing market trends. Investors who use this approach believe that the majority is often wrong, so they buy when others sell and sell when others buy. The script provides examples such as the odd lot trading measure and mutual fund cash positions.

💡Demand and Supply

Demand and supply refer to the fundamental economic forces that determine the price of stocks. Technical analysts believe that prices are set by these forces, influenced by both rational and irrational factors. The script discusses how technical indicators aim to detect shifts in demand and supply before they occur.

💡Momentum

Momentum in stock trading refers to the tendency of stocks to continue moving in the same direction for a period of time. Momentum indicators help traders identify stocks that are likely to keep rising or falling. The script mentions relative strength as a common momentum indicator.

💡Support and Resistance Lines

Support and resistance lines are key concepts in technical analysis that represent price levels where a stock tends to stop and reverse its direction. Support lines indicate levels where buying interest is strong enough to prevent the price from falling further, while resistance lines indicate levels where selling interest is strong enough to prevent the price from rising further. The script explains how breaking these lines can signal significant market shifts.

💡Moving Averages

Moving averages are a type of technical indicator that smooth out price data to identify trends over a specific period. They are used to detect shifts in demand and supply. The script mentions that moving averages can indicate bullish or bearish signals depending on whether the stock price moves above or below these averages.

💡Volume

Volume refers to the number of shares traded in a stock over a specific period. Changes in volume can indicate shifts in demand and supply, providing insights into potential price movements. The script highlights how trading volume, combined with price indicators, can be a powerful tool for detecting market changes.

💡Insider Trading

Insider trading involves buying or selling stocks based on confidential information not available to the public. While illegal insider trading is prohibited, legal insider trading data from SEC filings can provide valuable insights. The script discusses how following insiders' buying and selling activities can be used as a technical indicator.

💡Behavioral Assumptions

Behavioral assumptions refer to the underlying beliefs about market participants' behavior that justify the use of technical indicators. For instance, the belief that individual investors overreact to news is a behavioral assumption that supports the odd lot trading measure. The script emphasizes the importance of understanding these assumptions when using technical indicators.

Highlights

Technical analysis assumes that prices are set by demand and supply, which is influenced by both rational and irrational factors.

Technical analysts believe that stock prices tend to move in trends which persist for periods of time.

The key to making money with technical analysis is detecting shifts in demand and supply before they happen using technical indicators.

Technical indicators can be categorized into buckets based on their underlying behavioral assumptions.

One assumption is that markets overreact to news, both good and bad, and this can be exploited for trading opportunities.

Contrarian indicators include odd lot trading, mutual fund cash positions, and investment advisor bullishness.

Odd lot trading is used as a contrarian indicator assuming small investors overreact to news.

High mutual fund cash positions indicate bearishness and can be used as a signal to buy stocks.

Investment advisor bullishness is used as a contrarian signal to sell stocks.

Normalized P/E ratios and market breadth are used to detect shifts in demand and supply.

Support and resistance lines are key technical indicators for predicting price movements.

Moving averages help detect shifts in demand and supply and are commonly used in technical analysis.

Momentum indicators, such as relative strength, help identify stocks that are likely to continue their current trends.

Volume indicators, combined with price movements, can provide additional insights into market momentum.

Some technical indicators rely on tracking the actions of perceived 'smart' investors, such as specialists and insiders.

Elliott Wave and Dow Theory are examples of technical indicators based on the idea that markets are driven by long-term cycles.

It's important to understand the behavioral basis of any technical indicator and verify its effectiveness through testing.

Effective use of technical indicators requires timely trading and controlling trading costs.

Transcripts

hi welcome back I'm a skeptic when it

comes to technical indicators price

patterns charts volume indicators but

that doesn't mean they don't work now

there are people out there very good at

using them to seemingly detect what will

happen to stock prices in the future so

setting aside skepticism for the moment

I'd like to look at the indicators that

get used up there and look at the basis

or try to categorize them at least on

why the people who use them may think

they work so let's set the table when

you look at the foundations of technical

analysis it's straightforward it the

technical analysts of people who believe

in technical analysis believe that

prices set by demand and supply who

disagree with that they'd also argue

that supply and demand is set by new

individually said by lots of factors

some rational and some irrational and

then markets continually weigh all these

factors that again is beyond questioning

I think everybody would agree that there

are factors in your rational and

irrational the drive supply and demand

the third assumption is what sets

technical analysis are far from the

random Walker's technical analysts

believe that stock prices tend to move

in trends which persist for periods of

time a random walk Walker on the other

hand doesn't believe that but that's the

basis for technical analysis and finally

and this I think is a key part of

technical analysis that the key to

making money is not just understanding

demand and supply but getting ahead of

shifts in demand and supply that

technical indicators can allow you to

detect those shifts before they happen

that again that is I think that the

driver of value creation in technical

analysis see that's what I'd like to do

there are hundreds and hundreds of

technical indicators out there I don't

know I'm not even familiar with many of

them but I'd like to start putting the

technical indicators that I'm familiar

with into buckets and as you start

seeing other technical indicators I

think it's well worth the effort of

putting them into buckets

what am I talking about every set of

technical indicators is built on some

presumption of more

to rationality that marketed rationality

is what you're trying to exploit with

that technical indicator and Midas will

be open about what your behavior what

behavior component you're building on

with the technical indicator so let's

cut to the chase here's the first one

there is substantial evidence and a lot

of people have believed that markets

overreact they overreact to good news

and they overreact to bad news and this

is backed up both both by psychological

studies and behavioral finance research

in markets so let's say you believe that

markets do overreact and the evidence

you sure to point it up is when you see

extreme movements in stock prices you

often see movements back in the other

direction if you remember the last

session or two sessions ago we talked

about the negative serial correlation in

very long period returns and the bigger

the drop or the increase in stock prices

the bigger the the reversal seems to be

of course the skeptic might say if

that's in fact the case that that

markets not overreacting why are there

more contrarian investors out there and

why are they able to push the price back

working why is that our drift in the

price now and if if in fact there's

overreaction is it or is it more

prevalent with some kinds of information

than others is it for instance more

likely with an acquisition announcement

and with an Onix announcement or are

there no differences so that's what

technical indicate the first set of

technical indicators look at its ways to

take advantage of market overreaction

and here are three examples there is a

measure called the odd lot trading

measure basically look at it before

brokerage houses before online brokerage

became became par for the course if you

went through a traditional broker there

was a big deal you made about whether

you bought me even lot or an odd lot

even lords are lots of a hundred shares

of peace odd lords or shares of

thirty-five forty fifty five ships

if you assume that odd lots are bought

by small individual investors and you

further assume that individual those

small individual investors are more

prone to overreacting and these are

assumptions I'm not I'm not agreeing

with any of these statements then here's

what you could do you could look for a

jump in our law trading and argue that

if there's a lot of odd lot buying of a

stock that you should be selling that

stuff because those are lot of traders

after all are more likely to get over

enthused about good news and so no and

buy too much after good news itself too

much after bad news

so outlaw trading becomes a kind of

stand-in for the man on the street the

individual investor and with the

assumption that that investor is more

likely to be the overreacting the second

actually moves up the spectrum it looks

at cash positions and mutual funds

equity mutual funds if you look at

equity mutual funds in theory these

these mutual funds tell you that they're

going to invest all the money they get

from you in stocks but in practice they

don't most of them hold some of the

money you send them in cash why did they

do it partly for know partly because

they can't have everything invested all

the time but also because they are they

take market timing positions in other

words if they're bullish about markets

they will try to get you cash into the

market right away if they're bearish

they will actually hold the money as

cash so here's a second or a second

technical trading rule that's a

contrarian draw you look at the mutual

fund cash position if the mutual fund

cash position is high that means mutual

funds shall be are are collectively

bearish right you do the exact opposite

mutual funds of bearers you'd think that

that you basically go out and buy stocks

of mutual funds of bullets you go out

and sell stocks again effectively as

saying mutual funds are my stand-in for

the typical investor they're far more

likely to be overreacting

to be doing the wrong thing I'm gonna do

the exact opposite and here's the third

technical trading rule that's built on

contrarian investing investment if there

are investment advisors out there who

put out newsletters and there are

studies there are actually surveys that

look at the bullish and bearish

proportions

investment advisors so here again here's

what you do you look at the percentage

of investment advisors or bullish if

that number is really high you sell

stocks why because most investors are

bullish and you assume that investors

overreact then they're being bullish for

the wrong reason so you sell when

they're buying and buy when they're

selling but in all three what you're

trying to do is get a standard for the

typical investor and go against the

typical investor contrarian

technical trading rules here's the

second set of trade technical indicators

I want to look at the second title set

of technical indicators try to detect

shifts in demand and supply before they

have it so for instance there are there

are people who look at normalize p/e

ratios what is that basically they look

at the average earnings over time and

look at what multiple of earning stocks

are trading at right now here's the rule

they use if stocks are trading at a much

higher multiple of earnings and the

historic norm that that smoothed out

line that you see in there is there then

they're over price they sell below

they're under priced again you are

trying to detect shifts in demand and

supply using some fundamental indicators

something that you can point to and say

hey that tells me that that something is

going to change so here are measures of

technical indicators right essentially

you could look at the breadth of the

market what is the breadth of the

markets the number of stocks that

advance on any given period a day a week

a month relative to the number of stocks

are declined so the higher the number of

stocks that go up relative the number

the broader the market how is that used

if you have enough movement in the

market that is not accompanied by

breadth in other words markets have the

overall index goes up but it's being

caused by a few stocks jumping in price

rather than a bunch of the vast

proportion of stocks going up that is

less bullish then as price increase it's

accompanied by a broad market similarly

a drop in the market that's caused by

just three or four stocks is less

dangerous than one that's caused by 70

percent of stocks dropping at about the

same time the second is support and

resistance lines Europe talked of this

all the time from charters a stock

that's at 28 50 29 29 25 goes through

the $30 mark which is viewed as a major

resistance line that's mute as a bullish

sign that you've gone through a

resistance line on the other hand if you

have a stock that's dropped in price

from 31 to 27 to twenty five to twenty

three but it stayed above 20 for a long

time but then it drops below 20 the fact

that a drop below that $20 the support

line is viewed as a bearish indicator

again it did there the Assumption here

is when you go through a resistance line

a drop through a support line something

happens in the market and demand supply

line shift so when you go go below the

$20 no support line effectively you see

a whole bunch of selling supposedly

coming into the market causing the stock

to go down even more moving averages

have been a favored device for people

who want to detect shifts in demand and

supply but the argument again is of a

stock moves above a moving average for

over the last 52 weeks 26 weeks and

different Indic different charges use

different indicators that is viewed as a

bullish sign or a bearish sign depending

on whether the stock moves above a

moving average line or below moving

average line and finally shits in volume

are often you also used in conjunction

with price indicators as measures of are

we seeing a shift in demand and supply a

sudden surge in volume is often viewed

as a sign that something is changing

under the surface even if prices are not

changing so the first set of indicators

are contrarian indicators you're looking

for ways to go gates for the typical

investor whether it's a mutual fund an

individual investor or or a newsletter

writer is is thinking the second set of

indicators are indicators that tried

to get ahead of demand and supply ships

in demands of life the third set of

indicators build on something we talked

about a couple of sessions before which

is the force of momentum markets of

momentum and stocks go up they tend to

keep going up and stocks go down they

tend to keep going down and the

evidences we saw is fairly strong at

least over certain time plates one year

period six-month time periods they get

weaker as you go to longer time periods

if you believe there's market momentum

then you're going to be looking for

momentum indicators one of the oldest

and most widely is momentum indicators

is called relative strength sounds fancy

but here's what you do you take the

price now you divide by the price six

months ago so stocks that have gone up

the most will have the highest relative

strength so if you're a believer in

momentum you're going to go with the

stock so that the highest relative

strength and you sell those stocks which

have the most the lowest relative

strength where the price has gone down

relative to the historical price you can

also use trend lines where essentially

you try to fit lines through graphs and

you see how your stock is behaving

relative to a trend line and if you

notice a trend line that's upward

sloping that sign up that's a sign of

momentum so even if the stock is zigzags

if there's a positive trend line it's

viewed as a sign of momentum that's good

news whereas the tendrán trend line is

downward sloping it's bad news so

essentially again you're looking for

measures that will let you detect when

there's momentum in a stock and write

that momentum the hidden weapon or the

secret weapon for many analysts has

become trading volume which in

conjunction with momentum might give you

even more information so if you look at

stocks which have price momentum and

high trading volume it looks like

they're even better momentum picks and

stocks with high price momentum but low

trading volumes so by combining price

and volume you might actually be able to

get much more important technical

indicators and one of the nice things

about the last twenty years is the data

that is available in volume has become

much richer you can do things with

trading volume you could not have done

two decades ago three decades ago

the fourth group of technical indicators

you look for somebody that you believe

is smarter than you are somebody who's a

guru investor somebody can lead the way

somebody who knows more than you do and

you try to do what they're doing here a

couple of examples of smart investor

indicators one is specialists on the New

York Stock Exchange the people on the

floor who supposedly know more than you

are I about demand and supply and the

stuff so in fact as an indicator called

specialist short sales where you can see

which dog specialists are selling short

on and how much so essentially if if you

buy into the notion that experts know

more than you do and specialists are

your experts if they're selling short

you're gonna sell as well so this so

specialist short sales becomes an

indicator as to when you should be

getting out of the market you could also

look at insiders and companies insiders

of course are defined by the SEC did

include not just managers but directors

and and people are all more than 5% of

stock now your argument might be that

those insiders know a great deal more

about the company than you do and you

probably be right so you could track

what they're doing by looking at what

they're buying or selling then you might

try then you might do the same some

they're buying you buy the only problem

is the only data we have an insider

buying and selling comes from the

filings and insiders make with the SEC

but those filings almost by definition

cannot be based on information because

that'd be like illegal insider trading

so the problem with using the the

insider buying and selling that you get

from the SEC filings is you're getting a

subset of insiders who are legal

insiders what you'd really like to get

your hands on is those illegal insider

buying and selling but that of course is

difficult to do though you could track

trading volume maybe you can get ahead

of the game so that's a fourth factor

which brings me to the fifth and final

set of technical indicators and these

make me a little queasy because these

are the indicators that argue that

markets are driven by mystical forces

that cause prices to move

certain ways of a very long time periods

so for instance you have the Elliott

Wave which actually looks at waves and

markets and it it breaks them down into

into various sizes and it tells you

where in a good wave you are it's an

amazingly intricate process I have no

idea what what underlies the process

other than the fact that seems to be

suggesting that history that that

historical wave is a much stronger

factor than any fundamentals you got the

doubt theory which also argues that

markets have these big movements over

time and those movements happen no

matter what the fundamentals are and

from here you also have less less well

known waves and cycles that drive

markets but to the extent that you do

believe that markets are governed by the

by the Stars and by external forces you

might in fact decide to use those

technical indicators so as I said this

is just a small subset of those

technical indicators out there and I

don't begrudge those people who feel

that these technical indicators give

them a leg up and investing if you in

fact decide to go down this route and

use technical indicators here are some

of the suggestions I would have first is

be very clear on the behavioral basis

for why you think a technical indicator

works in other words don't just use a

technical indicator because it looks

good on paper or is delivered returns in

the past step back and ask what is it

I'm assuming about market behavior that

would lead me to believe that this

indicator is gonna let me get ahead of

the game

second when somebody says the technical

indicator works don't take them at their

word verify test it out see if and in

fact work we've talked a few sessions

ago about how to test any kind of market

indicator beat the market scheme

technical indicators paper to the same

test third if you're going to use a

technical indicator to trade you you

almost always have to trade quickly

which means your cost will be higher you

have to make sure that you keep that

balance right that you take it that you

trade quickly enough without letting

your cost get out of control and here's

the follow up most technical trading

rules even once with that work require

that you're holding period be just set

right

I call this the Goldilocks phenomenon

which means view in some some technical

indicators we hold this off for two

weeks you make money but if you hold it

for four and a half you lose money so

you got to be very disciplined about

figuring out what those write them or

time horizons aren't sticking with them

and finally and this was related to the

timely trading you've got the controlled

trading costs because the nature of

technical indicators is you will trade a

lot more than everybody else and we've

talked about trading costs and not just

in terms of brokerage costs but in terms

of price impact in terms of bid-ask

spreads and also in terms of the taxes

tax costs they create for you you got to

make sure the returns you make from your

trading strategy exceed all those costs

so in summary there are lots and lots of

technical indicators out there some of

them actually work but if you find a

technical indicator that works dig

deeper look to see what kind of

behavioral assumption underlies that

indicator and be comfortable with that

are you willing to characterize the

market the way that indicator

characterizes the market but I wish you

the very best with your next technical

indicator in and incorporating it into

your investment strategy thank you for

listening