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Whilst I agree with everything you say, there is one aspect that seems to be often overlooked by market participants. The price action itself. I believe this is a form of analysis, long discarded, that in my view says more about the emotional state of a market than any fundamental or technical analysis can. Irrational behaviour can last a moment, possibly a day or two and will subsequently reversed. A rout that lasts 3 weeks (4 if we take the top of the week of 07/18) has deeper roots. As always, history will tell us why. There are instances when deep corrections were subsequently reversed fairly quickly. The crash of '87 or '98 spring to mind. But in both instances, there was a catalyst for the reversals. Similar bullets have been used more than once since 2009 with little 'real' economic impact. Does anyone seriously believe that QE3 will do the trick? Too many events around the world, and i'm talking economic events (which differe from area to area) not to mention social ones seem to be aligning to create the perfect storm. If we're lucky, the changes will be gradual but the Pied Piper will eventually need to be paid. How long can we postpone?

Kent @ The Financial Philosopher

I agree, Leone, and I believe that chaos is a part of order. To clarify, what appears to be irrational or random now, is actually a small part of the overall order of life--it is nature...

J Romick

Leone and Kent, the price action should be part of the order. Does it tell more or less, I don't know. But check out the portfolios maintained on this site: a simple 6 assets (no surviability etc., simple US stocks, foreign stocks, emerging stocks, real estate, commodity, bonds) price momentum portfolios perform so well, does it mean price action tell a lot? Efficient market hypothesis (EMH) says prices say it all. See this http://www.myplaniq.com/LTISystem/f401k_view.action?ID=1,148

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About Kent Thune

  • Kent Thune is a wealth manager, a writer and a philosopher... Read More


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