Oct

23

When confronted with new ideas, the Dailyspec acts like a collective doppelganger; a looming reminder to suspend judgement until empirical proof is provided. It forces one to rethink all that had previously been taken for granted, with inference supplanted by intellectual caution, and reification replaced by consilience. Even one's successes are called to task to insure they are reproducible and not a victim of post hoc fallacy.

These predispositions to incredulity may not sit well with the secular world nor one's mate; they are often misconstrued as pretentious or disputatious, but in the context of the list, polemic comments are neither deemed arbitrary nor argumentative, and a degree of doubt is always welcomed.

So, what's the schtik about candlesticks, and single-day signals, and other simple linear relationships? It's true that a lot of extremes have reversal days; so, the probability is a reversal will occur with an attendant price extreme. but, it does not tell you the probability of having an extreme and a sustained change in market trend-given that you have a reversal day.

These approaches are intoxicating to the contrarian, but in a momentum, algo, and QE driven market, they only serve as a rationale to prematurely exit a successful trend following trade.

Anatoly Veltman writes: 

One reversal bar (or candle) has proven to work better on Weekly than Daily charts. This is a very important note, as old technical analysis books glorified Daily reversal bars, "outside reversal". All of them implied Daily - and this just doesn't work in modern markets. But Weekly reversals do.

Someone will be expected to produce test results. Test results depend greatly on input, and on coding particular signal conditions. I'm afraid the test results we may hear on the list will not be based on proper signal conditions. I'm not aware of any one-dimensional signal that performs in today's markets, but unfortunately we'll likely hear back precisely that: a one-dimensional weekly bar reversal signal.
 


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