Yesterday’s long term chart from UBS’ Peter Lee started a conversation with a friend who is a (pure) technical trader about long term trend lines.
Some of the more bearish technical traders use a trend line that connects the 1929 low and the 1943 low — projected forward 60 years, it forecasts SPX 400.
That trend derived forecast has several problems: First, its so old, that small errors are greatly magnified. Like a satellite off by a few degree, by the time it reaches Pluto its nowhere near where its supposed to be. Same issue with projecting out decades. Also, the post-1929 lows might be considered aberrational.
Perhaps most importantly, trend lines are validated by the number of touches they make — the more the better — and so tagging not only 1942 (and near ’49), but ’73, ’82 and 2009 increases the validity of the trend line.
Funny thing is, I found a chart that does that — again, by UBS Peter Lee:
2011 Technical Market Outlook
Peter Lee – Chief Technical Strategist
Wealth Management Research
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.