Technical Analysis Introducion To Penn State (Smeal) Finance Faculty – Part 1

good evening this is the faculty presentation for Penn State University my name is Christian autumn going to be talking I hopefully try to convince some of you about the the viability of technical analysis if not convinced you perhaps just teach you a little bit about how it works and who knows maybe give you some intellectual ammunition for the next time that you get into an argument with technicians so obviously introduction to technical analysis first I'd like to thank every single one of you for coming here tonight with an open mind honestly when I sent out the invitations I was I was a pretty nervous to see about actually how many people actually reply as right here I quote from my dear friend and also very accomplished technician retired I think like 35 he said when I saw him about this presentation talking about technical analysis to professor's Wow if you a bulletproof vest you better wear it and that's Tom Bukowski and he's also statistician works a lot in the UM the area of making technical analysis more of an objective subject so a little bit about myself this is only my second semester here at Penn State so I haven't really gotten to meet most of you bottom my name is Chris I'm obviously an uppity market technician I only have one more semester until I graduate yeah the fresh transfer student and I've actually been teaching myself ta technical analysis since I was aged 17 I pretty much fell in love with it as soon as as soon as the Great Depression of the Great Recession hit some watching those enormous swings that were sometimes caused by news but other times just caused for the sake of being cause that's how I got into it currently I'm enrolled in the charter market technician program also called the CMT which is basically the technical equivalent of a scfa which I'm sure all you know about at this point I have there are three exams just like the cfa I finished my first in my second i finished my second back at the began last october and i'm scheduled to get my or do my third exam on May fifth and I'm not going to say pass it because I think it's gonna be pretty tough um anyway with my second exam just like the cfa im a series 86 certified or the correct word would be exempt and my specialist technical and obviously my schedule may fit okay so goals this evening first thing I want to do is suggest that I want to suggest that the main stock evaluation theories I'm going to just point off the main for that we generally hear in the news on CNBC in the other forms of media newspaper or whatever efficient market hypothesis random walk theory which I'm going to put on the same umbrella modern portfolio theory which is called extensively here at Penn State fundamental analysis which is taught a little bit here and then finally of course technical I want to suggest that each one of those four theories it's just a way of thinking and each way of thinking has its advantages it has its disadvantages each sphere has its downfalls nothing's really perfect that's actually the beauty of trying to analyze the market there is no single equation that can tell you what it's going to do it's some mixture of things then after that I want to talk about 80 market analysis which is a cornerstone of tech analysis most people when they think of ta they just think patterns but in a market analysis is an analysis of the interplay between say equity markets so stock markets domestic international commodity markets currency markets and bond Marcus you probably surprised that each one of them is very related to the other markets and they actually follow very reliable historical patterns in terms of peeking and troughing and with cycles and that kind of thing after that of course I want to address any questions about technical analysis you have its most of what you hear in the news frankly about technical analysis I think you hear a golden cross moving average support resistance there's so much more than that and I want to suggest a change to the academic curriculum or at least put it in your mind that I'm to make your students more well-rounded to make them more prepare for the for the job market add a little technical analysis in the curriculum add a little bit on a trading methods so those are the goals this evening so first every time that I start talking about this to Professor they'll say studies really don't say that it's it's really a good way of analyzing things so I want to address the empirical evidence against ITA first the first studies that they did were on ta and most of themselves apprentice sleep they basically just did linear auto correlation studies and it measures the correlation of historical prices to current prices that's what a technical analysis we just we predict the future based on historical price action based on historical patterns the studies showed that price changes were literally independent from previous price changes so that quote unquote was suppose that was suppose to nicks technical analysis as a fuel of study as a whole the thing they can only detect linear dependencies markets are not that simple i don't think that i don't think that many things that deal with mass psychology are that simple and actually um if you want to look into studies that did rely simply on linear auto correlation studies look at studies by a low McKinley and Edgar Peter stay I'm actually use things like neural networks multivariate solutions and actually have a book very academic needy good stuff that professors like that it's the book a not so random walk down Wall Street of course it was I think it was malkiel who wrote the first book so it was kind of like an academic reputation but on anyway they found that trends and patterns do in fact exist in markets I'm sorry I'm so biased i do want technical so i have to do some studies against random walks sorry for those that believe in it first it's assumed that with higher returns there must be higher risk always according to via the kappa model or i think that a couple of them deal with standard deviation as a risk risk factor and after that then came factor models studies that say low p/e stocks low PB stock's price-to-earnings price-to-book 10 outperform then another study invest with stocks with good earnings surprises with technical confirmation which that would be increases in volume so apple has great earnings the stock goes up four percent it's on high-volume there's probably going to be a persistence of that momentum as you see average annual return of thirty percent in four weeks that's pretty good without taking much more risk invest in stocks with high relative strength for intermediate timeframes this has actually been this is actually very studied relative strength analysis stocks that outperform tend to keep outperforming for how long about five years see strong trends have a tendency to reverse after about five years so if apples in the sky rocketed motion what reverses its going to reverse pretty hard but um simples this high relative strength sucks they 10 outperforming actually on there's a study that we had we had somebody come here on his name was Jeff spots and he runs i think it's called the prophecy fund it's a hedge fund and he actually was digging through some studies and found he took about the study about 50 different strategies and they're like investing low ppb stuff invest in high p/e of stocks and it's just all these different factor models and it came out in the end the top three the top three strategies number two was 12-month high relative strength versus its peers the number one was actually volume increase which actually if you dig into that deeper it actually showed that stocks that outperform most for the ones that had going after it what brings stocks up money what do institutions have money money demand higher stock prices now perform i think number three was i think it was p/e ratios it was actually something pretty fundamental okay so final one trading volume increases with priced momentum gives returns fifteen percent above buy-and-hold we can actually translate that to break out trigger okay so i gotta go back against the image red and walk again you can't do this in the theory if you're going to say that if you're going to say that to get higher returns you must take more risks and there's contradicting evidence you need you need to either stretch you need pretty much scrap of theory what happened when there's contradicting evidence for instance the price-to-book effect and the price-earnings the small-cap affect small caps an outperform large caps very prominent in the 80s they change the theory they said inherently small caps have a higher default risk inherently principal low priced books they have more risks and they actually change the theory to make it immune to contradicting evidence you can't do that in any rigid science you can't do that so actually this theory mixed EMH like it says it gets nervous scientific treason but then behavioral finance came out of it which came back with that like the palm of french models of pretty much going off of this stuff doing portfolios where you'd say let's buy the lowest ten percent PG stocks the highest and we'll short the heist temper sound PE stops and we'll see how those portfolios doing actually their website has all these model portfolios that have like momentum value probably relative strength they have a lot of them so factor models okay so part two the fear is each one random walk it's been great how much this one has been studied and it's actually really good how how much this is contributed to academics I mean cannot finance the bow ties when i say i denti i think it was the guy who put across efficient market hypothesis i think you want to go bail price right anyway um it works extremely well in vacuum it's been studied and it's pretty much supportive it's pretty well supported even though I disagree and all you you have the right to disagree with what I agree in or what I believe and it's no problem or an academic setting we can just have friendly debate and it also gives the average investor confidence in buying hold it basically says take the money index it you can be your own financial boss that's fantastic right yeah disadvantages it says nothing about extremely invest extremely successful investors like Warren Buffett Paul Tudor Jones uh jesse livermore all these people and like Peter Lynch is set it just says they're lucky they won't they will now perform forever they're going to crash and burn i don't know i don't i don't know how much longer i'll warrant has the crashing bar but for the past I think 82 years he's doing pretty well it doesn't really consideration speculative bubbles it just says that when new relevant information comes out that is the only time that price should change meaningfully any other price changes knowing this noise think about the 1920s late 1920s think about the dot-com bubble was all of that over evaluation back then was it really not over evaluation in a reflection of what really what the news and all information really set forth I really don't think so with p/e ratios of the sp500 more than double of their historical average on a quantitative measurement it was overvalued E&H says nothing about that it says that it can't happen at all times the price is fair even though markets can be overvalued for years months decades even and of course I argue they had to change the period to accommodate contradicting evidence which became too and finally the ill relevance to price movement versus news and I'm sure that I'm I'm sure that you can remember this or try to 1987 what happened that day anyone nothing it was essentially price movement down cause program trading to sell that brought prices down even further normal investors saw this price movement they sold it kept turning into a vicious circle negative bubble but um was there any news that day no actually 10 out the largest 13 us saath declines had really no relevant news that day Black Thursday or let's just say the entire two weeks of the crash and the great depression in 1929 did anything really happen back then you look in the news no not really there I think that the president bought like himself a vote I think that I think that they signed a law it wasn't like a tax or a tariff law I think it was that no they actually want to lower Tara but really nothing happened its price movement caused mass psychology masa herd behavior mass panic which caused more price movement there's my Modern Portfolio theory this location school up and its really good for like asset allocation is fantastic so like badges it's very mathematical it's very objective there's no really art to it it's a good topic and really quantifies the benefits of asset allocation diversification and there really wasn't a way to quantify this beforehand it was just I think in my in my finance 305 plus some there was there was we're talking about this portfolio that was invented back in like in bc's thousands of years ago that just said if I think it was a third of your money in real estate a third of your money in in the bank and the third of your money in a gold or something like that and it was just these naive strategies these rules of thumb modern portfolio theory they changed that forever it was fans sit and now it says that everyone can find their own model portfolio that's great and it also allows though want to plan for the future for their retirement he had expected returns and volatility now the disadvantages it's still buying is still buy and hold off theory which it makes investors hold during downturns nobody wants the hole during downturns I feel so bad for the broker that that said in the 1980s as the Japanese stock market was crashing he was saying no your japanese stocks are fine if they have an expected return of this don't worry we'll just hold on to it it never happened or the investor and say I'm in 2008 that his broker box Citigroup or bank of america and he was saying as he was looking at a ninety five percent loss in ninety percent loss the broker was saying to his client no don't worry don't fire me don't it's fine it'll go back up it always goes back up even though it doesn't and it didn't look at a price chart of a Citigroup it's absolutely depressing right now alright nevermind um so it still relies on that and there's no exit plan it's basically just if you have enough money and you want to retire here then you take it out then that kind of failed in the last 10 years as you see people aren't retired because they don't have the money like back in beyond 90s you want to retire fantastic but after the baby boom after everyone wanted to pull the money out mark at the same time you couldn't you didn't have enough money to retire anymore so there's no exit plan there's no real risk management plan aside from just eliminating a non systemic risk our weakness to use a standard deviation as a measure of risk think about this way if we have a sock and the legs a little brighter in here there we go if we're the stop it normally does this does a little pine or whatever and we say this risk is equal to five percent this guy he bought right here let's just say ten dollars suddenly they have fantastic earnings stock goes up to a 50 and pays out just because of that gap this person who just made five hundred percent on his stuff he loves it but because it went up that fast suddenly the risk is now thirty percent people think that risk is only risk of losses risk of gains there's no such thing if you want to give me five hundred percent return on my saw I'm fine with it that is not taking a risk if that happens to me if I make a five hundred percent return I'll say oh I need to get out that is risky I say wow what wow I feel good it's better you something like an ulcer index which actually measures drawdowns versus the point of buying and the duration of holding a loss that's what that's what's painful and take it for me and probably take it from all you it's very painful loss it's very painful whole lawson to make to see a loss get even greater and then expect to return phenomenon technical analysis predicting the future based on historical prices expected return you're doing the same exact thing you're predicting future returns based on past returns and panic markets and correlation unfortunately as I'm sure you saw in like two thousand eight or whatever in panic markets diversification gives you no benefit at all everything down going up at night goin sideways it might but when there's a crisis every market goes down everything okay so we have correlation there and then fundamental analysis it's good it's very us once again very objective way of analyzing the stock you do discount cash flow or estimate the free cash flow of a company and it's a rigid academic system which having a system in place is extremely important in making money in the market and you can apply to any stop and even if the stock doesn't have earnings there's other ways to do it you can do like even though in era cost per click it's pretty tough estimator eggs like that but there's always different things like you can price the book it gives you an exact price target which is pretty rare and most strategies and the CFA designation which is four fundamental analysts that is so respected I think it's probably the most respected of financial certification India in the investment industry disadvantages the growth rates are highly sensitive I know you know the equation it's I think do over R minus G if your G is off by one percent keep it might accidentally wind up doubling your stock target so you have to be spot-on with the growth that's pretty subjective unfortunately if you don't have access to top you the CEO of the company and looking at the company yourself you need amp you need to rely on other analysts growth rates so you got to go on yahoo finance and you just have to use someone else and hope that they're right a good bit of fundamental analysis brushes aside macroeconomic conditions it seems that the goal is less it's less make money but more find the best company so during like a 2008 recession no we're still buying or still find long-only and you can't use it for short-term even a relative valuation strategy you really can't use it for short-term like intraday you can't date radon and then finally I'm sorry I'm bias technical analysis it's a giant broad field but its biggest advantage which I will laser pointer on it it has an entry and an exit plan risk management is the key finger even if all fields of technical analysis even if random walk was right and all fields of technical analysis or wrong we have a risk management plan that's why we're better off we use other things we use probability theory to predict moves like that man Bukowski I was talking about he actually got probabilities that different price patterns would hit their targets or move in which ever direction you can use it to day trade you get price targets just like fundamental analysis and there's high demand for career sec nisshin's because it's definitely news but the thing is the only ones that really available and actually when I had my interviews they mentioned this to me the only ones that available are ones that taught themselves so they're very few available this is a greater this is a great opportunity for Penn State to be one of the first in line to send their students to become to to become technicians in an industry that is just looking for these this type of talent now of course on you drink water before I talk about all the disadvantage of technicals if you are a sling trader even if your long-term trader a trend follower you're going to have so many small losses you're going to hate it you're going to hate it so much I think that the typical technician that is successful thirty-five to forty percent of their trades they're right so what do you have to do make the winners big keep the loss of small some methods are very subjective is half art have science and some topics like elliott wave analysis which is a lot what I do they're extremely subjective it will seem subjective after you get used to it but at first glance they seem so subjective and you can almost conjure yourself to be right always looking after the fact there's in some of the things there's no reason that they work why if they why on earth should a sock that does this pattern which is called a heavy shoulders why on earth should they go down exactly the same distance as the height of the pattern so we predict price targets in pattern analysis why not really many explanations about that it's also difficult to explain it's tough to tell like it's tough to tell clients why are you buying this stock I drew a bunch of lines on it and of course there are technical now analysts who are successful that know much more about the much more about and they also like combine it with fundamental analysis so they can actually put their ideas in a much better fashion but if you say I draw I drew lines own charts it's not easily testable since some things are really subjective some methods are testable though I will talk about program training and optimization and finally it's emotionally exhausted taking taking a loss two-thirds of the time that's emotionally exhausted sometimes you might even have a streak of losses it's extremely emotionally exhausted learning how to manage your own emotions and become disciplined and watch the market put you so far into the ground and to try to keep you there and you try to get back up that's emotionally exhausted but when you do get up you'll be a next Paul Tudor Jones the next the next great traitor it's just part of learning and well so I want to talk oh yeah final thing and I was actually talking to someone from fidelity today he said one of the best things about technical analysis he said I can analyze 50 different stops in about 20 minutes analyze 50 different charge of about 20 minutes and I can give you an opinion now of course I spent more time on a certain stock at my guesses and probably be more correct but regardless show me 50 sucks I'll give you 50 by several recommendations 20 minutes like that nobby benefit doing DCs and digging through those income sheets even though some people like doing it takes a little while bottom line after everything has been said we're all nuts we're out of our minds random wat relies on this pristine on this pristine theory that has been refuted many times modern portfolio theory relies on expected returns to keep resuming fundamental analysis believes that a company is a company has an intrinsic value and it will grow forever technical analysis you're drawing lines on charts and doing ratios and momentum other times you're doing things that let's put it this way when I tell somebody I can trade a stock without even knowing its name they say on this but I can but each strategy has some advantages I don't need to put that out there okay quick words about risk i'm just going to all this up on the board and this is how this is how a friend put its in terms of what academia agrees with what they don't disagree with I think that the entire idea of being in the investment world is the manager risk I think that returns are cool but what were you care about most is risk losing line and MPT we call risk Sigma standard deviation which is the volatility of returns we call it then data which is the measurement of systemic risk we said the higher the beta the more risky higher the Sigma the more risky then after academia accepted that and the area with help of farm-fresh they accept the factor models and I might be in the wrong order so factor models what's that p teg p/e ratios low p/e ratios if everything else equal look lower risk stock has a lower p/e ratio IRA stock has a higher one all our things equal p EG lower the better lower the lower risk it is to investment price-to-book ratio the lower it is the lower risk is to invest in them then after that fundamental DCF models if the DCF model gives us an output price that is currently higher than the current price of stocks trading at its lower risk to investment right mr.

Bhagat writes up the fundamentals in here right cfa's that's right so it's all matter about this technicians we look at risk a different way we'll say will say price is relatively overbought or oversold versus other times if it's Oversoul and we do some other analysis it's low risk that's how we're that's how we're going to say that other things like see a trade will say okay if I make this trade those two results game theory time to results I can make twenty percent or I can lose two percent that's cool it's basically if I flip a coin lands on heads I get twenty bucks if it lands on tails I get two bucks and significant me a chance okay that's lower risk I'll do it so it's just different ways of looking at it and perhaps if I put it that way it's a little more easy to a little more easy to accept as a as a valid way of thinking so just in quick words about risk part 31 is technical analysis I probably parked on this many times already can read the slide for yourself essentially reading the result of supply and demand so tom demark he's a famous technician really a famous for making objective methods of analyzing and training he said technicians are parasites he said they can trade stock without knowing its name which I do all the time which many technicians do all the time and he said they'll see a trend and they'll ride it for no reason just because demand is high on that stop and they think demands going to stay he'll buy it that's what we do we analyze supply and demand and follow now what I went to end invited people from in there tues presentation from in their offices delivered my letters a lot of them they brought up about technical analysis they're like patterns patterns patterns patterns if you see one power might be something else patterns patterns patterns patterns patterns there's so much more technical analysis of that we have the technician versus the actual technician I he likes EMT or something the technician looks for price patterns doesn't have a risk management strategy finds a pattern buys it because he sees a pattern not because the pattern put out signal by the wing see the pattern gets a price target that's good he's got kind of a method no risk management plan if he's wrong nine al tenis he's a human being so he'll say I can't be wrong I will stay in it it'll go back up and no emotional control the real technician look surprised patterns key ratio levels looks for proportions and markets relative strengths creates formulas that quantify the relative strength of the stock plot cycles using like spectral analysis or a her store I think big one analyzes the macro trend so like a lot of tech nurses are top down people markets going up everything else is going on then maybe I should buy this stuff because everything else is going up and it looks like it's especially going outperform nls macro trend plus ratio how to reverse engineer targets there are a lot of formulas and technical analysis you would not believe how much math there is a new spreadsheet after spreadsheet after spreadsheet I do i do models too and it's a lot of math and you can actually like take these formulas and you can actually get price targets from them you can reverse-engineer them basically just do some really intense algebra and write a macro to do it I do that all the time now if you're more of a program quick trader which is between technician and upon you can create a trading system automated or not the one that I picture system that I do is not automated but it's still system most of my trades are the same exact I look for the same exact criteria same exact time frame and I follow the same exact strategy to the T don't violate don't mind like a plan but you can also do on Mabel's computer ones you can optimize them so like a backtest get the best strategy for the situation and there's special ways to test data and like out-of-sample data to try to get the best thing you can like neural networks genetic algorithms those kinds of things yeah technicians we know about that create an exit plan finally most important we follow strategy so that's the difference between the technician and the real technician examples and here it comes get ready to see your crazy how crazy we can be okay well first there was a day that um Apple went up to about I think it was they got up they opened at 5 10 they got up to 520 and then they closed below 500 I got my friends into an apple trade before and they were on extremely high margin they called me and they said he said what's happening what's happening what's happening I said hang on calm down this is the worst that can happen so i made this spreadsheet of on a momentum indicator I got a target off of it and then I got a target price off of this it was trading at about four 97 by the end of the day I said look don't worry the lowest this should get is 487 and if it gets lower you need to get out but if it gets too 487 don't worry about it that's the worst case scenario for writing and a calm down and apples it's about 600 right now and once again apple okay here's the the controversial analysis I love elliott wave this is elliott wave analysis we can get exact price targets we can get supporters instance levels as far as accuracy goes it's pretty accurate a good amount of the time and you can instead of instead of really using any way to predict what's going to happen it's better to predict what can't happen now i blatantly violated them this i said in his five your weekly chart i sent to my friends I got into apple I said it's going to run into a brick wall between 548 17 and 5 52 56 it just has to well I think I'll go up still after that they're like okay okay that's fine you're crazy the exact I was five 4817 that day maybe it was luck whatever it was they think I'm a magician now okay pattern train this is what you're probably familiar with this is symmetrical triangle and this pattern you would buy at the UH my laser pointer you would buy Oh goodbye right there at the breakout point and there's and you have a price target you have a risk management plan my risk management plan I believe was a break down to 200 day moving average so I bought it about 27 and I was expecting it to get to you take the higher the pattern projected off the top expected to get about 35 bucks that's actually where I hitched myself 35 bucks I use momentum to confirm the breakout and actually momentum broke out before the price did so I knew there'd be a buy signal coming by soon and then let's see earnings gap which was another technical confirmation and there's my risk management strategy probability analysis when I did this I said okay the probability of me hitting my price target of 35 bucks sixty-six percent in a bull market that's taken off historical studies so what i do i said my stop-loss 2444 my target Barry file risk/reward ratio wait the probabilities to it you get a good risk/reward ratio I think I always go over five the minimum is over three because if you make about thirty-five percent profitable trades you lose money on one out three of them it's technically impossible to make money if your ratios any lower think about so risk management strategy and all these lines they all have their own significance green or price target support level stop levels the the blues their major trend lines for the pattern and major levels to break through so you just have to have a risk management strategy in place next one risk management is doing management I bought right there I bought right there at about $105 hundred ten dollars he got down to 65 that's horrible imagine if you bought that for your client at 110 and he's set and you held onto is it went down 65 thank God I had to stop loss at a guys stop loss at about 105 so I got out with a four percent loss instead with forty percent loss risk management is good manager diverse analysis and I'm sure that you can relate to this right now this is goal this is the momentum of gold the greens that's going to be called bullish divergence we're like even though if the stocks going down if it's this is actually a measurement of the force of selling if the selling force is actually declining oil prices decline that means is going to be reversal exact opposite for a bearish divergence and buying pressure is decreasing as prices increasing that means where I have top or we will be soon I bought gold right here on this breakout it got up everything was fine and dandy the price got even higher and then that happened and then that happened feels bad but you can used to predict ops now some a little more relevant to you remember 2009 one two three four four signals that the bear market was over just because we did technical analysis just because we ran a couple equations crazy right and of course these red lines that just represents overbought and oversold notice that we're getting a little over ball right now the elliott wave okay I'm sorry I keep mentioning this I just love it so much and everyone they always laugh at me for doing it but um it's a method of plotting key ratios ratios dealing trying to predict the market via proportions of a time and price and actually the price target from this is 13,000 721 on the bell just remember that number and see if it gets there and I think time targets sometime this summer once again Elliott Wave that's the subjective one so it might be wrong it might be wrong so you don't trade alone on that just use it to keep in the back of your head and understand what the actual trend is understand what can't happen predicts or believe what should happen using conjunction with other things that's a very powerful tool program trading this is bad testing the golden krust which is if you listen to CNBC a lot the golden cross is when the the 50-day moving average crosses above the 20-day the death cross is one of the 50 crosses below the 200-day so I okay so 50 above the 200-day Goleman 50 below the 200-day def so I backed estimate actually turns out that um in large markets that don't really trend that much and but don't really try it i mean not gold since 2005 it outperforms a little bit and it actually has pretty low risk low us and deviation little ulcer index not too many losing trades and actually not that many trades at all so it's a pretty good strategy why is it work maybe because just a trend acceleration causes like the 50-day when it crosses above the 20 of the 200-day that's supposed to mean that we're in an uptrend and vice versa so you can actually optimize the backtest of strategies now something that might be very relevant on to today new era thinking I have the inflation and cyclically adjusted he's a moving average of earnings to press plus a 1 standard deviation volatility men or bowling your band notice when price gets above it watch out for a recession watch out for any recession watch out for a giant recession the price gets below it look out for recovery now where are we right now in the middle but let's think that a different way if we don't make this adjust for volatility we don't make it a new era a new era of growth we just plot an average with one standard deviation of all the data on both sides we're actually right on the upper rim of the average or still slightly overvalued so that's just another thing that we do last thing we do we love watch the institutional money that's how you make money institution make a lot of money to push the price for instance this is commitment of traders it turns out that small speculators large speculators they're dumb money they're almost always wrong commercials hedgers they're almost always right so what do we what can we do look what the commercials are doing we look at what the speculators are doing and we don't do with the speculator doing so currently at this it was is Treasury bond speculators were so whereas speculators a little while ago there we go large speculators they were so bearish on bonds what happened to bonds went up it's just like contrary indicators okay now to talk about intermarket and cyclical analysis this is why I actually wanted to talk to you and I just teach your little thingy perhaps you know using your class navy and teacher first markets in general and I've also mentioned this econ faculty they're driven by cycles we have the short term four year we have the secular fourteen sixteen year and then we have a long term k wave the contrack wave he was a Russian economist I believe goes along with major market movements and innovations and technologies shifts and world power economic power China's probably gonna be the next one so matrix kitchen cycles essentially every four years there's an economic slowdown and a recovery example example examples all these examples note that 2007-2008 housing crisis for about four years out right now so you might want to get ready for a little bit slow down coming up continue when there's a recession in these cycle troughs in order bonds will peak first stocks will peak second commodities will peak third on average stock speaks seven months before the actual recession the market is a discounting mechanism i will agree with the EMH people about that the market is a discounting mechanism so whatever is happening today it's digesting what's the markets going to do in seven months bonds usually peek a little bit before that a couple months it used to be a much longer term much longer term peak and actually with whatever the feds doing right now that might actually be a moot point and finally commodities they peak right before a recession think 2008 right before the recession I think it was July below prices people

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