Ask Rande

» JenL_3 - Great Discussion!

Appreciate the enlightening discussion already this morning on this thread. Especially liked Rande's explanation of Momentum Divergence. And Tony, thanks for asking the question.

As I type, the DOW is already above 9800! And I'm still looking for that 15% correction. Or will this be the week we hit DOW 10,000? But like you pointed out, Rande, no one can really predict what the market will do.....Jen

-- posted by JenL_3

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» RandeS - Jen,

Jen,

That doesn't stop us from trying -- Dow 11,000 by year-end!

-- posted by RandeS

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» Gene - Terrific Discussions

Tony/Rande/Kirk

These discussions have been extremely educational, interesting and I have enjoyed them very much. Who would have thought 2 months ago at the BB site, we would be seeing the Tony / Rande show - San Francisco Rande meets Brooklyn Tony!

I believe Rande and Kirk hit the nail on the head with "Observing BB's changing investment ideas" over the last 4 or 5 years. Maybe that is why some get upset and keep tying him back to something he said or advocated 1, 2 or 3 years ago. Hopefully we all show the ability to change when warranted.

I also believe that many more Americans than just "Day Traders" are taking matters into their own hands and investing directly into the market and will continue to do so. Leading the charge obviously, is the Internet and "democraticization" of the investment environment that the Net portends. Add to that also the American desire to "be better than average" - whether a fallacy or not and how much is another discussion. Combine that with some recently beginning to emerge disatisfaction with certain aspects of mutual funds ie: poor performance, taxable capital gains when one has built up a large postion and inability to fully control buying / selling at most advantageous times. Stir into it, the increasing financially knowledgeable consumer (or so we like to think we are!) and the future is looking very interesting. Notice how many "Financial Advisors" now advocate one should have a Index fund for a "Core" position then take some other portion for diversification or sector funds or just trying to "beat the average."

Just some thoughts.....Gene

-- posted by Gene

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» RandeS - Well, with the current uptick in gold and oil it looks like I'l

Well, with the current uptick in gold and oil it looks like I'll be lunching on my own words for awhile (at least) regarding commodities. Still of the belief that the fundamental trends in place will keep gold under $300 and oil in the low teens for some time to come, give or take a short-lived spike in either direction now and then. But then, the longer-term "fundamentals" have been known to be ignored for great stretches at a time, haven't they? And, sooner or later they change. Which, I suppose, gets back to our discussion over the futility of making prognostications in the first place.

-- posted by RandeS

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» matttheduck - predictions

nothing wrong with making them, as long as neither the prognosticator nor anyone else takes them too seriously (as sometimes happens at suite 101).

-- posted by matttheduck

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» TONYBRIG - Rande/Jake

Thanks!

Need to read this later when I have
more time/patience/smarts.

Please order that BOS that I suggested and
then let us know if there is more to it.
Referring to Divergence in each index.

BestofLuck!

-- posted by TONYBRIG

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» RandeS - Divergence, Momentum, Stochastic Oscillators, Entrails

Tony,

Silly me -- when you said "Bernstein" my first thought was of Sanford C. Bernstein, but then I should have known that a fundamentally-oriented firm like that probably wouldn't be issuing technical reports. Got the fax and let me say at the outset that I know very little about the inner-workings of TA. I do know that day traders rely almost exclusively on TA and this is evidently an important area for some.

It looks like Bernstein follows a classic stochastic oscillator model that compares weekly momentum with weekly highs, wherein divergence (uptrend in one, downtrend in another) is a bad thing. Bernstein's read on the market during February is one of "distribution." We talked about distribution over at BB some time back -- this happens when the "smart money" (institutions, wire houses, professionals, insiders, etc.) are net sellers and the public are net buyers. Prices fluctuate, in this scenario, between a rather narrow band until the distribution phase breaks sharply to the downside, where, of course, the "dumb money" is left without a chair when the music finally stops. One sign of a distribution phase is a marked increase in stock split announcements -- shares look more "affordable." Small investors gobble up the false "bargains" while the pros continue as net sellers, etc....

Looks like Mr. B is also quite bearish in general and recommends DCA into gold, among other things.

Again, some analysts look at "divergence" between two indicators that historically have trended alike as a warning sign. Others say, such analysis is a colossol waste of time. Whatever works. Anyway, here's a link that might be of some further use:

http://moneycentral.msn.com/articles/inv...

-- posted by RandeS

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» TONYBRIG - Thanks Rande

Have read and understand and will try to use
some of the ratios for comparing different
averages.

Yes Jake's indicators (stochastics) show divergence within an average. For instance the
Dow is shown near its high but Bearish Momentum
is shown also for the Dow. He wouldn't tell me
what indicators he uses specifically to plot the
Momentum divergence.
I believe tho it has to do with Volume and A/D
and probably lows/highs ratios etc.
His viewpoint as of last Thursday was very
Bearish and advised staying on the sidelines.
The general public is often psyched into thinking
all is great cause of the new Dow highs, which is
preposterous.
Now I dont know why it is so hard to find a good
complete definition all encompassing of Momentum
divergence as I am explaining. Will have to
search further as their exists a "Loose Screw"
in my head in this area.
Now here's the kicker:

What about leading indicators?
Such as the Trannies. Do you feel they are more
reliable then the lagging indicators?

Also what are the other leading indicators?

BestofLuck!

-- posted by TONYBRIG

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» RandeS - Tony,

Tony,

Should add that the momentum indicator on the chart in the fax doesn't appear to be a true stochastic oscillator in that it is a single trendline (moving average not included), but I suppose the principles of price and momentum divergence still apply. Now I'd better hurry up and finish my tea so I can check with the leaves at the bottom of my cup. See ya.

-- posted by RandeS

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» TONYBRIG - Such a great Salesman

I dont know enough to make an analysis here.
Would love to know the specifics of the
Divergences.
Volume I'm sure but then there is more.
To be fair need to investigate more.
Enjoyed reading your dissertation and all the
others these past few days.
Have some contrary opinions which I will voice
here tomorrow.
Tea leaves might not be a bad idea.

BestofLuck!

Now bout that horse in the 8th at Gulfstream....
................................

-- posted by TONYBRIG

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