Saturday, March 14, 2015

Resonse to anon comment on DJIA chart

In the comments section of this post an anon commenter left the following question:

Almost five months ago, this is how you saw things.

Would you care to comment on this?

Thank you

Here is the model from that post.  Clearly this did not work out as modeled.  Of course, I figured this out pretty quickly but I was still not happy that I had given it such high odds.

The thing about this was that it was widely touted to be an ending diagonal.  Since that time, I formulated my own proprietary EW addendum that I call WX which means that wedges are either 3rds or Cs.  So while some waves do end with wedges, it is only those that are, in total, C waves.  The fact that this is not part of the EW rules does not mean it is wrong - I have invented many useful things in my life (with 23 US patent grants to prove it).  But the EW community has never heard of CWT (Captain's Wedge Theory) and I now assert that it is why the whole ending diagonal thing has been such a hit and miss-tery to the EW chartist for so long.

So, if that wedge was a 3rd then we should have subsequently seen a 4th and then a 5th.  That does indeed seem to have occurred as you can see in the current snapshot below.  Whether that 5th wave up was "a" top or "the" top remains to be seen but I think the odds are high that it was "the" top because of rising interest rates, the cut off of QE due to the fed's acknowledgment of income inequality, and the growing problem of police being murdered.  In other words, the heads are all worried about the pitchfork revolution which, if they don't change their ways, will be fought with AR15s.  That is a serious thing and I think Yellen does not want to get dragged into the streets and killed.  So it is time to take the foot off the necks of the people for awhile and that means Wall St must fall.

Having said that, I do want to address the tone of the comment because it might indicate that the commenter doesn't really "get it" yet.  He/she might be making the mistake of putting all market timing prognosticators into the same bucket.  And if one person is thinking that, how many more?

You see, when someone just randomly calls a top or a bottom without using a model for guidance, that comment is the kind of thing you typically get when the call goes wrong.  It's as if the commenter wanted to show that "yeah you don't know that much, do you"?  This is not a cut to the commenter!  It is herding nature to do that I am just as "guilty" of it (if that word can be applied to acting out one's nature...) as anyone else.

But I do want to point out a major difference between what I do and what people like Cramer do.  Cramer will just say "buy buy buy", toot his horns, play some sound effects and then tell you he likes the CEO's strategy or some other such BS "fundamental" and that is the sum total of his call.  If it goes against him there is no sell trigger, no nothing.  Just be patient forever as the shares keep going against you.  My systematic approach to using the EW principle does not do this.  Those using it know when the model is wrong.  Note I did not say "when EW is wrong".  In retrospect I always find the chart to comply with the rules.  But at almost any stage in the development of a wave there are several possibilities.  I think the right analogy is to wonder if the pro blackjack player who splits a pair of aces was an idiot for not getting a 10 and a queen as the next two cards.  In fact, he was only playing the odds and that is all you can do when gambling.

Nobody can predict the future with perfect accuracy!  The man does not exist who can do this.  And so those who expect it are living in a sort of fantasy world.  I have been nothing if not clear on this fact.  I know very little about the so called fundamentals of most of the companies and commodities I post on.  This in many cases is by design because those so called fundamentals often lead you to the wrong conclusion about where the share price is going whereas the EW model, properly interpreted, will do a much better job of suggesting the likely future(s) for a given issue.  Still, it's just all odds based.  You cannot tell for sure what a wild animal (or a herd of them) will do under a certain circumstance!!  If you doubt this, just ask Roy Horn about it.  The saving grace of my system is that you do know very quickly when the herd makes a move that breaks the expected behavior pattern.  If that happens, you bail first and ask questions later.

Bottom line, it is a waste of time to pull up a 6 month old post and ask for comment on it.  It shows ignorance on the part of the commenter more than anything else.  Again, this is not a slam, just a statement of fact.  It is no crime to be ignorant, we all are that in many ways.  So again, no offense meant to the commenter.  I have explained all of this before but I know there are a lot of new faces showing up here each week so I'm sure I will have to explain it again if I continue writing this blog going forward.


Anonymous said...

Imho, the commenter actually does "get it". What's the difference if you use a model for guidance, if the end result is as incorrect as "The back bite has been administered and this bull is dead"? Herding nature to point out what's obvious? You called out the top and got it wrong, your inventions and patents notwithstanding. Don't be so defensive Captain. You blew the call. Anyone who bought TVIX or any shorting strategy based upon this thinking that they were "getting rich because of our understanding", and feeling a tinge of guilt because "most people are getting fucked", got fucked. No offense, You're not the first to incorrectly call a market top. Humility, Captain, not hubris.

Proverbs 16:18

Regards, An avid fan

The Captain said...

I understand your positions. Anyone who failed to use stops as recommended consistently in my posts would have similar feelings. Models are not certainties and I got that model wrong. The high level statements will still turn out to be correct, probably sooner rather than later.

I also think you mistake my post with me being defensive when in fact the goal was to be instructive. Again, I understand. The written word is too terse to communicate what I'm saying very well. But I also know that saying this will not change perception.

In any case, thanks for your comment.

Anonymous said...

Not the written word, per se, but the sparing use of the written word.

General Grammer

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