Re: [CANSLIM] Devil's Advocate: Why bother with fundamentals?

From: Spencer48@aol.com
Subject: Re: [CANSLIM] Devil's Advocate: Why bother with fundamentals?
Date: Wed, 19 Dec 2001 12:54:23 EST

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Katherine:

     You put it in a nutshell:  Technicals are a proxy for human psychology.  
Overbought/Oversold indicators imply that.  But then, one can wonder: why do 
OB/OS work one time but not another.  Because , I believe, human action is 
based, at least in the stock market, on two things:  Greed and Fear.  So, why 
the parabolic going up: Because stock pickers are greedy.  And why the 
parabolic going down:  Because no one wants to be left holding the bag.

     Thus when INVN made it's explosive parabolic assault to the top, it was 
logical:  Pickers didn't want to be left lingering on the ground (even those 
who don't know what "tomography technology" is).  They were greedy, thus, the 
rise.  As a matter of fact, Tom's alert that once an LLUR changes angles one 
should be wary of holding that stock suggests that.  As does one of WON's 
selling points, when he advises to sell if the stock makes a Very Prominent 
one day move (ie, it moves more-percentage wise-in one day than it has in 1 
month).

     What would be interesting would be to see if fund managers are also 
caught up in the Greed/Fear dichotomy.  And are they actually caught up in 
those two emotions, or are they just trying to exploit them?  

jans 


In a message dated 12/19/2001 11:55:46 AM Eastern Standard Time, 
kmalm@earthlink.net writes:

<< My gut feel on this is that technicals are a
 proxies for human action and reaction. In *most* cases, we can assume that
 people will react a certain way in a given circumstance. For example, when a
 stock in an underlying uptrend moves away from the intermediate term trend
 and starts to go too far too fast, we assume that there will be some people
 who will perceive it as "going too far too fast" and sell it or short it.
 That action brings the stock back to the underlying intermediate term trend.
 But nothing has changed fundamentally about the company in this short time
 period. It's just perception about price and the resulting supply/demand.

 But every once and a while, these things confound us. Just look at INVN
 recently. Did it make sense that it went parabolic? I don't think so. Did it
 continue to go up in price *despite* the fact that early in that parabolic
 rise we thought the probability that it could continue the move for another
 week was very low? >>

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