Newsgroups: comp.ai.genetic,comp.ai.neural-nets,misc.invest.futures,misc.invest.marketplace,misc.invest.misc,misc.invest.mutual-funds,misc.invest.options,misc.invest.stocks,misc.invest.technical
Path: cantaloupe.srv.cs.cmu.edu!nntp.club.cc.cmu.edu!goldenapple.srv.cs.cmu.edu!das-news2.harvard.edu!fas-news.harvard.edu!oitnews.harvard.edu!news.dfci.harvard.edu!camelot.ccs.neu.edu!news.mathworks.com!news.maxwell.syr.edu!news.bc.net!torn!kwon!watserv3.uwaterloo.ca!undergrad.math.uwaterloo.ca!eadengle
From: eadengle@dino.uwaterloo.ca (Ed Dengler)
Subject: Re: The Market is going UP, UP, and UP next week  :)
Sender: news@undergrad.math.uwaterloo.ca (news spool owner)
Message-ID: <E7MnuC.ICq@undergrad.math.uwaterloo.ca>
Date: Wed, 26 Mar 1997 01:51:47 GMT
References: <01bc3721$c2b017a0$3f28adce@default> <3335776b.3880118@news.demon.co.uk> <01bc37f3$057d2740$4228adce@default> <3336d4f9.2711752@news.demon.co.uk>
Nntp-Posting-Host: dino.uwaterloo.ca
Organization: University of Waterloo
Lines: 46
Xref: glinda.oz.cs.cmu.edu comp.ai.genetic:11304 comp.ai.neural-nets:36801

Greetings!

In article <3336d4f9.2711752@news.demon.co.uk>,
David Law <dave@gargoyles.demon.co.uk> wrote:
>On 24 Mar 1997 01:24:48 GMT, "WJH" <hollandw@concentric.net> wrote:
>
>>Dave,
>>
>>> That's really stupid to use a system which can't possibly take into
>>> account wether or not intrest rates will move on Tueday.
>>
>>All the relevant information is contained within closing prices...where's
>>your faith, brother???  :)
>
>So your saying a change in interest rates will make no difference to
>your prediction ? i.e the market will go up even if there's a 50 basis
>point rise ! <you'll need a lot of faith to believe that> 

Caveat: I haven't looked at the work, but I have studied technical analysis.

The entire basis of technical analysis is that all factors that affect a
company are included in the price changes that occur as the market changes.
Because the market is inefficient (in the sense that the price of a stock
may not stabilize to the "true" value for some time after events and
perceived future events, though this may be as short as a day).

Thus technical analysists attempt to make a profit by using tools that
can predict how the market will value a company the next day (or hour,
or week).  Now, if there was great fear that interest rates would go
up, and that this would affect the value of a stock, then chances are good
that the market will start affecting the price of the stock earlier than
the announcement.  This means that fundamental information such as an
interest rate change is reflected within the change of price, and so can
be ignored as extra input to the system.

It is interesting to note that the "true" technical analysist should
metaphorically lock themselves in a room and ignore news about the outside
world and the companies they are buying/selling.  The price tells all, and
thus any information relevant is reflected in the price.

The above use of neural networks seems to be nothing more
than using yet another statistical technique in an attempt to create
a technical analysis tool.

Ed

