Business and Market Valuation: Simplicity in the midst of Sophistications

I have spent much time learning both the fundamental and technical analysis on business and market valuation hoping to achieve the best investment outcome. My conclusion is...

Business and market valuation / investment decisions have to be grounded in fundamental socio-economic and financial analysis which gives us the probable right direction for the next 2 to 60 days (for short-term traders).

Frist of all, let me explain why I prefer 2- to 60-day trading.

It will be sheer luck for intraday traders to win most of the times, even if they trade with a sophisticated algorithm which they believe, have captured "all" the trading patterns/habits, the news and the fundamentals. Immediate signals (without due consideration of the fundamentals) are normally hard to interpret. High-frequency trading is just a good way to profit the platform service providers (Warren Buffet would probably agree to it).

Intraday traders may win if they are right on the news of high significance, such as the Fed interest rate decision or the Non-Farm Payroll (announced on the first Friday evening of every month for Asian investors). Nevertheless, the movement and/or the extent of the movement may very often be affected by the underlying fundamentals; for instance, US stock market fell 3% across the board within 3 hours after Fed Chair J. Powell spoke of a slowing rate cut in 2025 at the press conference on 18 Dec 2024 (19 Dec for Asian investors), the extend of which, I believe, is caused by the fundamental factors that are aligned with business and market valuation.

In addition, the best algorithm and artificial intelligence will not be able to capture all the factors affecting the trade in an 8- or 24-hour time frame. Not only are there many players in the market, but there are also "stakeholders" in the trade that may be able to "influence" the trade for a short-period of time, especially under "unexplained sudden movements" or when it is close to the cut-off point of a big-volume to-be-expired option. There isn't any ceteris paribus (other things being constant) condition to the multifaceted reality of "Everything Everywhere All at Once!" However, it will be much more difficult to influence the market on a 2- to 60-day time frame and it is also easier to forecast the market direction and valuation with much confidence within such a time frame under fundamental analysis.

If the investment horizon is more than 60 days, small investors may not be able to capitalize on their precious capital. For a 60-day turnover, investors may reinvest their capital 6 times in a year!

It does not mean that we should give up technical analysis altogether. Indeed, the actual entry points (especially for small investors) depend very much on technical analysis. For instance, there was a time where Heng Seng Index hovered between 16,500-18,000 and the fundamental analysts would deem it "cheap" to go in, but at what level that an investor may not be too worried about topping-up their capital in case it went further down before it commenced to ascend. Technical analysis will help in setting the entry points, the "target" and the "stop" levels.

Business and market valuation / investment are to see the heart (simplicity) of the matter in the midst of noises (sophistications).

(Note: This does not constitute business and market valuation or investment advice and does not have regard to the specific needs of any person who may receive it.)