Predict Market Swings With Technical Analysis provides an understandable way to make sense of the unpredictable stock market, taking into account more complex theories, including chaos and contrarian approaches. Along with his expert advice, McDonald presents four investing paradoxes that will help investors make smarter decisions now and predict where the market is heading, using his proven theories.
Technical analysis often incites a certain type of criticism. The criticism is usually based on the idea that stock prices must reflect some real economic value, and since technical analysis measures data that are not economic, it can’t be measuring the really important information.
For example, how can a shrinking number of stocks making new highs signal an imminent market decline? What does that have to do with earnings or the economic picture? Don’t markets advance or decline for economic reasons?
The reason will have to be financial in nature. You will see in Chapter 3 that two numbers go into the equations to determine stock prices: dividends (earnings) and interest rates. The equations are in the form of fractions. The long trading range in the 1970s was created by the opposing action of two powerful forces: Ever-increasing earnings (primarily due to inflation) were being neutralized in the fractions by higher interest rates.
In a fraction, if you double both the numerator and denominator, you end up with the same result. These two forces were almost perfectly in balance during the 1970s, resulting in the long trading range of the 1970s.
- TRADING PRICE SWINGS
- A NEW STOCK MARKET MODEL
- FAIR VALUE: THE THEORY OF STACKING THE MONEY
- TECHNICAL ANALYSIS AND UNSTABLE MARKETS
- OF BABES, O’BUCS, AND CONTRARY OPINION
- PRICE PATTERNS, FRACTALS, AND MR. ELLIOTT
- TRADING RANGE MARKETS
- TRADING RANGE INVESTMENT STRATEGIES