BAM Investor - Behavioral Analysis of Markets
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The BAM Model is:
"A Top-down Global
Macro Directional Model"
We search the entire globe for big-picture bullish and bearish themes before drilling-down into those markets in order to determine the best, most profitable investment opportunities available. The BAM model invests using ETF's (Exchange-Traded Funds) as a method for exploiting what it views to be the most bullish or bearish opportunities in stocks, stock indexes, bonds, futures, currencies, and commodities.
**While the BAM Model may appear diversified at times this is purely coincidental. We use the model to make directional bets and diversification is NEVER an investment goal. The portfolio is structured aggressively, and will always be positioned to capitalize on the model’s big-picture directional forecasts. (WE DO NOT HEDGE)
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Technical and Fundamental Analysis vs. Behavioral Analysis
When compared to Technical Analysis or Fundamental Analysis, Behavioral Analysis, I believe, creates significant value through its predictive, as opposed to reactive, nature. Most technical analysis tools follow current price action and generate indicators which provide buy and sell signals after price movement has already occurred.
The fact that technical support levels sometimes hold and sometimes do not, and the fact that an identical piece of fundamental news can be reacted to in a positive or negative manner on the same day, lends very little predictability to the use of technicals or fundamentals when trying to anticipate future directional movements in financial markets.
Although it is evident that important information as to the strength or weakness of a financial instrument can be gathered when support or resistance levels hold or fail (or when news events or earnings reports are interpreted as positive or negative) the ability for a technician to consistently predict price levels that will hold or fail and the ability of a fundamentalist to consistently predict when news will be construed as positive or negative, remains a challenge.
In both cases the ability to predict seems to hinge upon the individual analyst's skill in his particular market discipline and his years of experience in observing the markets.
Behavioral Analysis, by comparison, is predictive in nature and based on external laws of nature, which can be expected to "cause" traders to change their perception of current market conditions before they themselves have made a conscious decision to change their perception.
One tenet of B.A. is that "at a certain point in the future—hours, days, week, months, or even years from today—traders’ attitudes will shift from optimistic to pessimistic (or vice-a-versa) regardless of their current bias, bullish or bearish, and with that shift will come a price reversal in the market."
According to the BA model, price action follows predetermined patterns based exclusively on human emotion.
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