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Which to use for longterm trendline support---log scale or not?

If one uses the log scale for SPX from bottom in 2009 until now, the longterm trend has failed. Pring notes this. However, if one does not use the log scale option, the long term trend is intact as Fraser notes. Two different answers. Which scale is the correct way to assess using trendlines? thanks!

Answers

  • markdmarkd mod
    edited March 6
    I think the question answers itself. It depends who you ask.

    And what are the rules for drawing trend lines, anyway?

    When are you entitled to draw one? If there is more than one choice for a starting point, or an extension point, how do you choose, and why? And what is the rationale for why they should work, other than a few a carefully selected instances when, in hindsight, they appear to foretell a change in direction?

    If there are no consistent rules, and no explanation for why they should work, then they are just artistic lines that appeal to the eye - and whatever the artist's bias toward the market.

    Overall, it seems much more sensible to use price channels instead, where actual trading led to actual support or resistance.



  • gordgord admin
    Personally I use log scale for long term charts.

    Here's a post I made years ago which compares log vs liner with charts and explanations which I think you will find interesting.

    http://scan.stockcharts.com/discussion/comment/850/#Comment_850

    cheers Gord
  • markdmarkd mod
    edited March 8
    @gord - I agree that log charts show percentage changes more clearly. My question would be, how does that make a log trend line more informative (more "valid") than a linear trend line when the question is, has the trend been broken? I'm not defending linear over log trend lines - I'm just saying there doesn't seem to be a theoretical justification for choosing one over the other (or actually, using trend lines at all).
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