Calm before the storm
- Thread starter kuldeep49
- Start date
A very interesting bit and a possibly good read for traders/investors and the likes.
THIS PIECE ATTRACTED MY ATTENTION AND HENCE AM POSTING THIS FOR READERS'
BENEFIT
Sriram
My reply: Capco Institute Bulletin *[Will better forecasters surface?]*
Tom Denham, Editor, European Financial Forecast Service, Elliott Wave
International 11-Oct-2006
Will better forecasters surface as big losses wash out careless
practitioners as implied by last week's Capco Institute Bulletin:
"Forecasting must be the best job in the world - but, perhaps not for much
longer"? I do not think so, because the issue with forecasting is not the
accuracy of practitioners, but their popular appeal.
In a rational world, things would be different, but this is not a rational
world. Investing is a highly emotional business. Most people ignore
dispassionate number crunchers, and you cannot gain the title of all-star
analyst if few people listen to you.
The analysts who say what people want to hear rise to the top and
unfortunately, the crowd is bullish at peaks and bearish at bottoms. Few
people will listen to a bearish forecast at peaks. In fact, the analysts who
get attention at tops are those who make the biggest bullish claims.
Forecasters are sometimes proven to be wrong on a grand scale and yet
survive to play the game another day. The reason the market place is so
forgiving is that the forecasts that fail most spectacularly are invariably
command performances.
Crowd psychology plays two important roles in shaping forecasts. It would
take a book to completely explain how and why, but let us see how far we can
get with the next few paragraphs.
Firstly, the hopes and the fears of the crowd influence the forecaster. The
cultured myth of analysts is that they are data-driven, independent
thinkers. However, independence is not human nature. Herding or playing
follow-the-leader is human nature. The consensus view exerts as much
influence on analysts as it does on everyone else.
Secondly, the crowd gives its attention to popular views and suppresses
unpopular views by inattention. The crowd does not seek contrary opinions.
In addition, few people are willing to question their own beliefs until
contrary evidence becomes substantial. When the evidence is modest, as it
tends to be at the point of trend changes in financial markets, most people
dismiss contrary opinion and favor the opinions of people who forecast
continuation of the 'mature' trend.
The complex nature of markets also contributes to shaping crowd favorites.
It works like this: evidence sometimes begins to shift from favoring trend
continuation to trend change, but the trend remains intact. Moreover,
sometimes evidence for the likelihood of a turn in the trend builds and
builds and then evaporates as the trend continues. An implacable forecaster
who stays focused on the established trend easily looks smarter than a
careful analyst who weighs all the evidence and makes fresh judgments on a
regular basis because the careful analyst anticipates turns that never
occur. Moreover, a single-minded analyst often tells a simple story and even
smart people find that attractive.
Some conclude that it is impossible to anticipate the future and that no
forecast is worthwhile because it is all guesswork. I understand the
frustration that makes this view seem true, but I am confident that the
forecasting profession will remain intact. People want to know what other
people think and the crowd will continually elect gurus to advise them. Some
days the crowd criticizes and belittles their gurus, but they will never
stop electing gurus to guide them. And the gurus who rise to the top will be
those who support the majority view. In other words, we cannot get rid of
the 'bad' forecasters who tell us to buy at tops without changing human
nature first.
Finally, I have a confession to make. I cannot be objective about
forecasting because I am a forecaster. However, I would offer that
objectivity is a fantasy anyway. In my opinion, everyone works from a
position of bias and subjectivity, though few will admit it. In my own case,
I know that the crowd and my unique personal experiences influence my views,
whether such knowledge leads me to different views or not
THIS PIECE ATTRACTED MY ATTENTION AND HENCE AM POSTING THIS FOR READERS'
BENEFIT
Sriram
My reply: Capco Institute Bulletin *[Will better forecasters surface?]*
Tom Denham, Editor, European Financial Forecast Service, Elliott Wave
International 11-Oct-2006
Will better forecasters surface as big losses wash out careless
practitioners as implied by last week's Capco Institute Bulletin:
"Forecasting must be the best job in the world - but, perhaps not for much
longer"? I do not think so, because the issue with forecasting is not the
accuracy of practitioners, but their popular appeal.
In a rational world, things would be different, but this is not a rational
world. Investing is a highly emotional business. Most people ignore
dispassionate number crunchers, and you cannot gain the title of all-star
analyst if few people listen to you.
The analysts who say what people want to hear rise to the top and
unfortunately, the crowd is bullish at peaks and bearish at bottoms. Few
people will listen to a bearish forecast at peaks. In fact, the analysts who
get attention at tops are those who make the biggest bullish claims.
Forecasters are sometimes proven to be wrong on a grand scale and yet
survive to play the game another day. The reason the market place is so
forgiving is that the forecasts that fail most spectacularly are invariably
command performances.
Crowd psychology plays two important roles in shaping forecasts. It would
take a book to completely explain how and why, but let us see how far we can
get with the next few paragraphs.
Firstly, the hopes and the fears of the crowd influence the forecaster. The
cultured myth of analysts is that they are data-driven, independent
thinkers. However, independence is not human nature. Herding or playing
follow-the-leader is human nature. The consensus view exerts as much
influence on analysts as it does on everyone else.
Secondly, the crowd gives its attention to popular views and suppresses
unpopular views by inattention. The crowd does not seek contrary opinions.
In addition, few people are willing to question their own beliefs until
contrary evidence becomes substantial. When the evidence is modest, as it
tends to be at the point of trend changes in financial markets, most people
dismiss contrary opinion and favor the opinions of people who forecast
continuation of the 'mature' trend.
The complex nature of markets also contributes to shaping crowd favorites.
It works like this: evidence sometimes begins to shift from favoring trend
continuation to trend change, but the trend remains intact. Moreover,
sometimes evidence for the likelihood of a turn in the trend builds and
builds and then evaporates as the trend continues. An implacable forecaster
who stays focused on the established trend easily looks smarter than a
careful analyst who weighs all the evidence and makes fresh judgments on a
regular basis because the careful analyst anticipates turns that never
occur. Moreover, a single-minded analyst often tells a simple story and even
smart people find that attractive.
Some conclude that it is impossible to anticipate the future and that no
forecast is worthwhile because it is all guesswork. I understand the
frustration that makes this view seem true, but I am confident that the
forecasting profession will remain intact. People want to know what other
people think and the crowd will continually elect gurus to advise them. Some
days the crowd criticizes and belittles their gurus, but they will never
stop electing gurus to guide them. And the gurus who rise to the top will be
those who support the majority view. In other words, we cannot get rid of
the 'bad' forecasters who tell us to buy at tops without changing human
nature first.
Finally, I have a confession to make. I cannot be objective about
forecasting because I am a forecaster. However, I would offer that
objectivity is a fantasy anyway. In my opinion, everyone works from a
position of bias and subjectivity, though few will admit it. In my own case,
I know that the crowd and my unique personal experiences influence my views,
whether such knowledge leads me to different views or not
I posted this on the 10th Oct:
On 11th a small wee minor correction took place but it was negated by Infosys results. In fact in a private conversation with another member, I mentioned that the long awaited correction had started. I was wrong.
Today, a partial breakout upwards has taken place. As I said 3610 was broken but 3640 remains intact. From the chart attached, one can see that the 20 EMA is a very strong support and till it is breached, the uptrend may continue. 3640, 3690, and finally 3770 are the targets on the upside. If a correction has to take place, the supports are at 3500, 3440, and 3400.
I came across this little piece at www.wow-india.com and I reproduce it below. I am not aware of how accurate it is but back checking on the charts for the last few years seems to corroborate it. One can draw one's own conclusions.
"HISTORY OF CYCLES REPEATING ITSELF... IN THE HISTORY OF LAST 30 YRS, ONLY 3 YRS OCTOBER HAS ENDED IN + VE ZONE. 27 YRS WAS CORRECTION AREA. LAST YEAR FII PULLED OUT HEAVILY BEFORE DIWALI, WHEN EVERYONE EXPECTED 13500-13700. SAME HAPPENING AGAIN IN TERMS OF EXPECTATIONS."
On 11th a small wee minor correction took place but it was negated by Infosys results. In fact in a private conversation with another member, I mentioned that the long awaited correction had started. I was wrong.
Today, a partial breakout upwards has taken place. As I said 3610 was broken but 3640 remains intact. From the chart attached, one can see that the 20 EMA is a very strong support and till it is breached, the uptrend may continue. 3640, 3690, and finally 3770 are the targets on the upside. If a correction has to take place, the supports are at 3500, 3440, and 3400.
I came across this little piece at www.wow-india.com and I reproduce it below. I am not aware of how accurate it is but back checking on the charts for the last few years seems to corroborate it. One can draw one's own conclusions.
"HISTORY OF CYCLES REPEATING ITSELF... IN THE HISTORY OF LAST 30 YRS, ONLY 3 YRS OCTOBER HAS ENDED IN + VE ZONE. 27 YRS WAS CORRECTION AREA. LAST YEAR FII PULLED OUT HEAVILY BEFORE DIWALI, WHEN EVERYONE EXPECTED 13500-13700. SAME HAPPENING AGAIN IN TERMS OF EXPECTATIONS."
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lol karthik 
.....this the story with most "predictors".Go both ways and claim victory whatever happens.
Avinash
.....this the story with most "predictors".Go both ways and claim victory whatever happens. Avinash
I really appreciate your work for this group...........i had predicted don't do trading between oct1 and oct 30,2006 because market will be more volatile in this period and may be because of that many people will burn their hands..........you may have seen one phase of the market beginning of this month.........lets see another phase of market at the end of month........hope you will be mature to understand the things...............i thought to intimate my friends so most of times trying to to give advance indication of stock market future............i had told that yesterday nifty will cross 3600 ......so it's happened it jumps by 46 points and again today it's crossed our next target 3650.........i understand the way u had replied.....better i will stop my reply to thread in this group.
Thanks
Softtouch.
Softtouch dear,ur posting or not posting is entirely ur prerogative,but u have given contrarian forecasts(i dont call them predictions) And u were categoric in saying markets will fall and saying dont screw ur happiness.
And one hand u want to credit and pat urself for forecasting 3650+.
What Karthik pointed out was obvious.
Personally speaking its good to see market breakout of trading range,everyone wants a trending and not a trading market.
Its good that u want to warn,but u wudnt want to confuse either.It will be best if u give levels on both sides and ppl shud match them and watchout.
Currently for me markets shudnt break 3626(on closing basis) for more upside.Down below 3626-3580-3550 below 3550 its again gone.
And dont take it personally.Whether it comes from me or anyone else.
Regards
Amit.
And u were categoric in saying markets will fall and saying dont screw ur happiness.And one hand u want to credit and pat urself for forecasting 3650+.
What Karthik pointed out was obvious.
Personally speaking its good to see market breakout of trading range,everyone wants a trending and not a trading market.
Its good that u want to warn,but u wudnt want to confuse either.It will be best if u give levels on both sides and ppl shud match them and watchout.
Currently for me markets shudnt break 3626(on closing basis) for more upside.Down below 3626-3580-3550 below 3550 its again gone.
And dont take it personally.Whether it comes from me or anyone else.
Regards
Amit.
Softtouch,
This thread was started to air one's views on the Nifty & the market in general. The more views are expressed by the members, the better understanding we gain. Your contributions are valuable. One can understand your words of caution earlier as there was apprehension all around due to divergences emerging between different technical indicators coupled with global uncertainty. Similarly, one can also appreciate your euphoria as the 3610 resistance was finally broken after being repeatedly tested during the recent days and this signalled the resumption of the uptrend. Do continue to share your views, I for one look forward to it & I'm sure the others do too.
As I write this nifty is nearing the 3690 resistance level (its at 3679). If it can successfully do that, we are on the home run to 3775!
Regards
Kuldeep
This thread was started to air one's views on the Nifty & the market in general. The more views are expressed by the members, the better understanding we gain. Your contributions are valuable. One can understand your words of caution earlier as there was apprehension all around due to divergences emerging between different technical indicators coupled with global uncertainty. Similarly, one can also appreciate your euphoria as the 3610 resistance was finally broken after being repeatedly tested during the recent days and this signalled the resumption of the uptrend. Do continue to share your views, I for one look forward to it & I'm sure the others do too.
As I write this nifty is nearing the 3690 resistance level (its at 3679). If it can successfully do that, we are on the home run to 3775!
Regards
Kuldeep
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