On a given day it possible to read any number of current predictions, analyst recommendations on just where the futures and stock markets are headed. To be sure, you can usually find an analyst predicting an oncoming upward move in the market, and look somewhere else and find another analyst who predicts impending disaster. This is the nature of the financial business, and for most of my life I have had many good chuckles at the ranting and raving of this group of financial gurus.
I think it would be expedient to point out at this point, that market predictions, including the futures markets, are essentially predictions with a binary outcome. The futures market either goes up or the futures market goes down. Since the market rarely stays exactly the same, we will rule out this outcome as spurious. From the onset then, futures market prognosticators have a 50% potential to be right.
Nearly every market establishes some “hot” market gurus, whether it’s Robert Prechter, Granville, Gazarelli….they all have their fifteen minutes of fame and then fall into discredit when they fail to maintain the accurate predictions that catapult them into fame.
And I read many of the analysts every day, more for entertainment than anything else. Why? I think it helps to understand what is going on and the wide variety of interpretations of current financial events. Do I give the analyst any weight in my trading? Absolutely none.
I am a scalper, which means I am only interested in small movements in my futures trading style. I don’t care if the market is moving up or down, or even sideways. All I am interested in is entries into the market that can earn me a potential of at least two points, whether that is a short or long position is irrelevant to me. I am, in essence, a bottom feeder who waits for the crumbs to fall.
That being said, I also am a chaos theory believer. I have observed market predictions over and over fall to the side of the road….whether the predictor is a fundamentalist or technical trader. Quite simply, the market doesn’t listen to what people say…it is a psychological beast that acts, at time, as irrational as any human being you might imagine. You will hear all kinds of predictions today about this being a “dead cat bounce” and other claiming the worst is behind us, and still others predicting dire times…who is right? I have no idea, and neither do the predictors. As I have mentioned, since the outcome of any prediction is binary in nature, about half will be right and about half will be wrong. I find it odd, as much of my college and graduate degree course was in physics that we understand many of the intricacies of the atom, and how quantum mechanics works (which is truly one of the truly bizarre discoveries of our time)….but no one has found a working system in predicting the market, despite the fact that we have poured an inordinate amount of money and time into trying to understand the market.
I realize that my view is an unpopular one, and the screaming idiot who now enjoy tremendous popularity on market predictions (on MSNBC) would call me a heretic, but the overwhelming amount of scientific study, academic study, points to the absolute accuracy of chaos and fractal theory as the only valid trading viewpoint.
