Short term ternds experience more noise than long term ones

-> technical indicators are less effective

Examples of previous editions have been left deliberately to underscore the pt t
hat nothing
has really changed in the last 100Y
This is true because price action is a reflection of human nature.
Since 1970 the time horizon of all market participants has shrunk considerably.
As a result TA has become very popular to find Short term strat.
This may lead to disapointmnt as in my experience; there is a rough correlation
between
the reliability of a TA indicator and the time span being monitored
Mistakes are usually made by taking a position that goes against the main trend
TA shud be regarded as the art of assessing the tech position of a given udly
with the aid of several scientifically researched indicators
There is after all no substitute for independent thought.
Markets are essentiallw a reflection of people in action, and people can change
their minds

Major Technical Principle: TA deals with probabilities

...
TA can be broken down 3 areas:
- sentiment indicators
- flow of funds
- market structure indicators
Tech approach is based on the idea that the price is a reflection of mass psych
or the crowd in action.

Most of the time, price and TA measures rise and fal together, but toward the en
d of the trend, the paths of many of these indicators diverge from the price. Su
ch divergence offer sign of technical deterioration

Since tech. approach is based on the theory that price is a reflection of mass p
sychology, of the crowd in action, it attempts to forecast future price movement
s on the assumption that crowd psy moves between panic, fear, pessimism and conf
idence, excessive optimism and greed.
As discussed, TA is concerned with identifying these changes at an early stage,
since these swings in emotion take time to accomplish.
on the principle that once a trend is set in motion it will perpetuate itself.

...
Price movements are classed as
- primary (1-3Y)
 -> business cycles ususally last between 3-6Y,
-> so a primary trend (bull/bear) usually last 1-2Y
-> as building up takes longer than tearing down, bull markets usually l
asts longer than bear markets
- intermediate (6W-xM) -> countercyclical trends
- short term (3-4W) -> tend to be random (influenced by random news events) -> f
ar more difficult to identify
=> primary price action > intermediate price action > short term

All price movements have 1 thing in common: they are the reflection of the trend
in the hopes/fears/knowledge/optimism and greed of market participants. The tot
al sum of these emotions is expressed in the price level.
-> not what the stocks are worth but what people think they are worth.

Changes in the market usually precede changes in the economy by 6-9M, but someti
mes it can change:
in 1921 an 1929, the economy turned before the market did.

TA tries to identify turning points in the market's assessment of the trends in

the economy...
4 Dimensions of the market:
- price -> chg in prices reflect chg in investor attitude
- time -> measures the length of the cycle of investor psych.
- volume -> reflects the intensity of change in investor attitude
- breadth -> trend of the general market

Major Tech Principle: as a general rule, the longer the time span of the trend,
the easier it is to identify reversal.
A trading loss usually happens because a trader is positioned in a counter cycli
cal position against the main trend

Intraday trend: extremely short term movmts are much more influence by psycholog
y and instant reaction to news events

TA is the art of identifying trend reversal based on the weight of the evidence.
As in a law court, a trend is presumed innocent until proven guilty.
The art consist of combining these indicators into an overall picture and recogn
izing when that picture resembles
a market peak or bottom.
One simple but basic technique that has been underused is peak-and-valley progre
ssions
Periods of expansion generally last longer than periods of contraction, because
it takes longer to build smthg up
than to tear it down.