Absolute Strategies: Options Index indicator topping point?

Wednesday, September 23, 2009

Options Index indicator topping point?

Quick post but this index is looking toppy. It has been pretty reliable confirming tops and bottoms previously. Something to watch out for...

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Investing Philosophy

I believe that at any given moment market prices are never fairly valued. Everyone has a different model with different expectations, but these models do not necessarily average out to a fair price. Often times models all incorporate the same wrong assumptions or some variant of (see any 2008 wall street analyst's earnings expectation). Also, many market participants buy and sell for reasons other than the future expectations of earnings, book value, or anything that has to do with a company's underlying fundamentals. An example of this is when a company gets added to or taken from a market index such as the S&P500. Many market participants must add or drop that security for the sole reason of its involvement in the underlying index; Nothing to do with fundamentals, just keeping up with a benchmark. Another example is specific company fundamentals don't necessarily change on a minute by minute basis, so why do share prices? Or, maybe a CEO sells his shares to buy a second home. Nothing at all to do with the company. These examples introduce the human factor to the markets. The human factor is the primary reason markets are inefficient. The human factor cannot be modeled because we are not always rational and we are always affected by our emotions, which cannot be modeled. I seek to take advantage of this thru technical analysis.

I believe in fundamental analysis to a point. I believe value investing using fundamental analysis can and does work over the long run. Value (conservative) investing should prevent you from buying a company that will go bust, and it should provide you with a reasonable expectation of an earnings stream. I suggest fundamental investing for the sole purpose of income generation (dividends) and not price appreciation, though. That is what technical analysis is for.

Disclaimer

This is not financial advice. This is my independent opinion and there is no guarantee as to the accuracy of the postings on this blog. Some of my friends and family have expressed an interest in what I am personally doing, and this blog is a way for me to easily share that with them. Nothing more; nothing less. Only you know what is best for you as far as your finances are concerned. None of this blog is to be used as recommendation or advice. It is strictly my personal opinion and personal trading plan. Absolute Stategies or any party associated with it shall not be deemed liable for any losses or damage that arises from the use of or reliance on this blog. The only certainty is that my views and scenarios will certainly change in the near future!

Absolute Strategies

Wednesday, September 23, 2009

Options Index indicator topping point?

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Absolute Strategies

Wednesday, September 23, 2009

Options Index indicator topping point?

No comments:

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Investing Philosophy

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Uniquie Visitors Since 06-08-09

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