- In Trade Chatter
- Last Updated: 14 November 2012
- By LA Little
The three basic inputs to technical analysis are time, price and volume. Price gets lots of attention, volume some and time very little. The difficulty with time is that the intervals, for the most part, continue to change. Sure there's lots of work that examines it and cyclical behavior in general but putting your finger on a good algorithm to incorporate time into the equation is hard. I have done a lot of work with mean-time-to-failure of trends and have found some value in that but even there its more about probabilities of trend continuance which, until it is at an extreme (new or old trends), it isn't all that valuable. Time is an issue right now with this market. The setup on Friday was for a bounce. The first two days of this week saw attempts to do just that but both were foiled. The longer the market can't lift the more probable that it won't. I don't have hard numbers showing that, just a lot of trading experience.
It's too early to give up and assume a bounce can't take place and its definitely way too soon to assume that the bull market is dead and over, but there are times when you have to step back, draw some lines in the sand and say to yourself if they step over this or that line, then the probabilities that the run is done has a lot more credence.
Its a precarious time and though a bounce remains in the cards, so far it keeps getting slapped down. If that happens enough, then down becomes more probable than up short term.