I sometimes read this blog called ‘Slope of Hope’ by Tim Knight. Tim is a Silicon Valley guy who started a little business selling technical analysis charting software. Prophet charts or some such nonsense. I believe in TA but I think simple stuff works best, Support & Resistance, Relative Strength, Volume, etc. but none of the indicators/oscillators have any predictive value IMO. By far the most useless aspect of TA is ‘Elliot Wave Theory’, I won’t even bother explaining it if you’ve never heard of it, you’re better off that way.
In any event, Slope happens to be an extremely popular website. It caters to market Bears making it a great psychological attraction. There have been numerous studies in behavioral finance that individuals tend to gravitate to bearish scenarios much easier then bullish stories. One point I continue to harp upon is the importance in understanding human and behavioral tendencies. Prominently displayed on his site, even after writing the passage displayed below, is charts plotting the next ‘wave’ of some up/down cycle which is guaranteed to change the next day. The problem with EWT is that it has absolutely no statistical rigor applied to it and completely hindsight biased. Check out what Tim wrote:
As I sit here, watching gold and silver explode yet again to new highs, I can’t help but think of the tens of thousands of dollars in profits that I denied myself. And – - I really gotta say – - it just pounds a few more golden- and silver-plated nails into the coffin holding the body of my faith in Elliott Wave as a basis for forward-looking decisions. It’s all very cute and precious and lovely in retrospect, but for predictive value………..I’m really having grave doubts.
The posting is here. Guys, EWT is crap. There is something to say about cycles and patterns but EWT is utter crap….




