But most market players follow the trend. They sell when the VIX is
high and, thus, portends a declining market. A bullish consensus is
indicated by low volatility. Thus, low VIX readings signal the time to
buy. Whether this is more than superstition or a mere gut reaction
remains to be seen.
It is the work of theoreticians of finance. Alas, they are consumed by
mutual rubbishing and dogmatic thinking. The few that wander out of the
ivory tower and actually bother to ask economic players what they think
and do - and why - are much derided. It is a dismal scene, devoid of
volatile creativity.
The Friendly Trend
By: Dr. Sam Vaknin
Also published by United Press International (UPI)
The authors of a paper published by NBER on March 2000 and titled "The
Foundations of Technical Analysis" - Andrew Lo, Harry Mamaysky, and
Jiang Wang - claim that:
"Technical analysis, also known as 'charting', has been part of
financial practice for many decades, but this discipline has not
received the same level of academic scrutiny and acceptance as more
traditional approaches such as fundamental analysis.
One of the main obstacles is the highly subjective nature of technical
analysis - the presence of geometric shapes in historical price charts
is often in the eyes of the beholder.
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