Rubber Band Signals

If it was once a fortnight, once a week or once a day, it would have been nice. But signals and signal generators have no religion. If you need a signal, the market has it; for any market, for anytime. And, if you are not going to sue (challenge) the signal, it could come stamped with 100 per cent accuracy.
Signals have become like a rubber band. You can stretch them for any time frame and from any side; long or short. But this creates conflict, on one side the society can generate so many signals, and on the other hand it barely outperforms the market. This is the reason passive indices claim, “What good is active anyway?” We live in the times of limited Alpha (risk adjusted return) but unlimited signals.
We punish politicians, punish insiders, punish scamsters, but how ethical are we ‘the signal society’ which seeks and delivers signals. “Please give us a signal, don’t explain us cycles, history, perspectives, risk; just tell us what to do, buy or sell?” Now that the markets have moved sideways for years, how happy are we triggering?
Okay, what should the signal society do? What can it do better? Can we simplify? How can it bring objectivity? Apart from building signal systems that work across asset classes, signals that can be indexed, signals that also assume lower risk, we can relook at the whole signal generation process, the big picture view.
Since we are looking at the same elephant, the rubber band can be viewed differently. If the market is indeed a rubber band, speculators, investors and other market participants pull the band at extremes. The best performers see consistent interest as they move higher. While the worst performers continue to see continued selling pressure as speculators suppress price and investors exit, tired of waiting for a reversal.
You can read the complete article in Business Standard

Mukul Pal, is a Chartered Market Technician, MBA Finance and a member of the reputed Market Technicians Association (MTA). He has more than a decade of Capital Market experience dealing with derivatives and global assets. He has worked for Bombay Stock  Exchange, multinational Banks and brokerage houses in leading research positions before starting on his own in 2005. He is the President of the MTA Central and Eastern European Chapter.