Tech Analysis on ETF, does it make sense?

R

Rooster1

As I understand it, the rational behind technical analysis is that it is tracking market psychology and/or institutional investment. Applying it to ETF's does not make sense to me because the ETFs are just a weighted average of the under lying stocks, each of which has its own dynamic. Said dynamics would cancel each other out, leaving nothing to study but random variation and general market sentiment. Please comment on whether you agree or disagree.
 
Quote from Rooster1:

As I understand it, the rational behind technical analysis is that it is tracking market psychology and/or institutional investment. Applying it to ETF's does not make sense to me because the ETFs are just a weighted average of the under lying stocks, each of which has its own dynamic. Said dynamics would cancel each other out, leaving nothing to study but random variation and general market sentiment. Please comment on whether you agree or disagree.
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No i dont think so. SPY follows the futures ES. The movement of an etf is not the result of individual movements of the underlying, if anything i would say the opposite is true to an extent. Trying to read an individual stock is complicated because it may just be mirroring market sentiment.
 
Quote from iamdom:

.... The movement of an etf is not the result of individual movements of the underlying, if anything i would say the opposite is true to an extent....
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Which brings me to my follow up question... given how influential ETFs are on individual stock prices, does technical analysis of individual stocks make a great deal of sense in 2013?
 
Have you seen what Apple can do to QQQ. Everything effects everything else, always has always will. If your asking whether this makes technical analysis useless, i would say no but it does complicate things.
 
Quote from iamdom:

No i dont think so. SPY follows the futures ES. The movement of an etf is not the result of individual movements of the underlying, if anything i would say the opposite is true to an extent. Trying to read an individual stock is complicated because it may just be mirroring market sentiment.
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SPY follows S&P 500.
ES follows S&P 500.
 
Quote from Rooster1:

As I understand it, the rational behind technical analysis is that it is tracking market psychology and/or institutional investment. Applying it to ETF's does not make sense to me because the ETFs are just a weighted average of the under lying stocks, each of which has its own dynamic. Said dynamics would cancel each other out, leaving nothing to study but random variation and general market sentiment. Please comment on whether you agree or disagree.
More...

SPY follows the S&P 500 index (1 /100).

If you use price based technical indicators, it does not matter what what to use them SPY or S&P 500 as result will be the same as their price trends are identical.

When it comes to the volume based technical indicators, in most cases you will have similar results, yet, in some cases S&P 500 analysis would be more recommended. Plus, S&P 500 could be more preferable as it has a group of breadth indicators (advance decline indicators) which cannot be applied to SPY (single stock).
 
ETF charts are no different than futures charts. They give a visual representation of where price has been over a given time frame.

Obviously different asset classes and indices have their own individual styles, but the charts of SPY, ES, and the SPX all move identically.
 
The most liquid ETFs track market indices. Then you use the same technical analysis with the underlying markets, be it equity or commodities.
 
Quote from RedSun:

The most liquid ETFs track market indices. Then you use the same technical analysis with the underlying markets, be it equity or commodities.
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back in the old days, we would track XLK against SPY and QQQ.
 
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