Wednesday, September 01, 2010

Why Numbers Matter: The Self-Fulfilling Prophecy



Andrew Horowitz and Terry Bradford ($100+ million in combined investment capital) discuss why the S&P500's 1040 is historically a make-or-break level for major market trends. Terry believes the market to be in an overall downtrend, and Andrew is just the host who tries to remain in the middle, and a real Mensch.

I sold all my stocks except 1 on Monday because I haven't really been able to see for the past couple days, but if I had let them keep going I would have been up four or five more percentage points, which is considerably large. The sale is one of the parts I'm still working on, the world being blurry doesn't help.

The best possible way to analyze human behavior is through quantifiable measurement. Of course humans drive the creation of data; the only way to accurately measure the size of the drive is through differentiating the data.

Since all stocks go up or down in price, I would say knowing which stock to buy is about 40% of the equation. Knowing when to buy it is another 30, knowing when to sell is another 30. After this I'm not gonna post this stuff anymore, obviously it brings up some weird animosity issues. I like a good debate but it can't begin with someone wanting to give me a "reality check," because the reality is, my first publicly-announced stock picks made a shitload of money this week.

7 comments:

cyrusfx said...

Macronomically speaking, it could very well be that things won't really start to improve with the economy until Feb or March 2013, when people begin to realize the world isn't coming to an end, or didn't come to an end last December.

Since the Mayans didn't specifically prophecise (sp.) anything about the world coming to an end, I would hope people wouldn't be so stupid, but again all our hopes and convictions tremble in their meaninglessness in the face of the Great Scoreboard.

cyrusfx said...

I know that first & double-commenting on my own post is gay, but:

I realize that the economy could go down or up for entirely different reasons and I could use their behavior to justify my own hypothesis and world-view, while still being incorrect in identifying the root causes of something.

The larger point is that self-fulfilling prophecies frequently confirm the importance of technical components of stocks.

Moving averages didn't necessarily mean anything until Billy Q. Billionaire decided they did and bought 1,000,000 shares of XYZ Weederies at $17.16 a share. For the sake of argument, he names that in his press release as a big factor in his purchasing decision (the 50-day MA crossed above the 200-day MA, signifying the stock is potentially cheap and at the beginning of an uptrend).

48 hours and 14 million traded shares later, and at a price of $20.00, the moving average cross meant everything.

It might mean nothing again in the future, but its not wise to deny the relevancy of technical indicators to the overall picture because they reflect hundreds of years of behavior analysis, and if their fruits are what the big money and brains is betting on, well, I just wouldn't want to go against that bet...

Huge Larry said...

I remain blissfully ignorant and uninvolved in the ongoing stock prediction flame war which has become the new cornerstone of The Cleansmanship.

cyrusfx said...

That's cool.

I was giving Kevin a chance to admit maybe he spoke prematurely about the irrelevancy of patterns and numbers in the market.

But unfortunately for me, I shut down a few days ago, so he doesn't have to respond.

cyrusfx said...

One other thing: this podcast was released on Sunday or Monday and the events they are discussing were played out again in the S&P500 on Tuesday and Wednesday, much like how one watches Old Faithful.

Yes, the significance of the 1040 could change in the future due to macro-factors, including a worsening economy or impending armageddon, but for now its very real.

Huge Larry said...

You have to trust a name like Horowitz when it comes to money. The pecuniary prowess which emanates from such a surname is enough to make a man loose his spaghetti factory.

cyrusfx said...

the other guy I listen to is Gregg Greenberg. he takes me beyond the headlines to explain what's really happening on Wall Street, or so he states at the beginning of each show.

once the heavy profits start to roll in i'm going to start calling dollars "Greenbergs."