An excerpt from an email from Arnie to the LinnSoft Yahoo Group on 03/26/02

He he. Great question.

No, stats and indicators don't lie. But you have to ask the right question and interpret the answer properly. Like when the King of Persia was considering invading Greece. He went to the Delphic Oracle and asked if his invasion would be successful. The oracle told him he would destroy a great army. So he invaded. Unfortunately for him, the army he destroyed was his own. He didn't know the oracle well enough to know that she had an ironic sense of humor.

Stats and indicators tell you what happened in the past. Unfortunately, they have no ability to predict the future. You can flip a coin one hundred times, and develop all the stats and indicators you want, but the next flip is still going to be 50-50 and no stat or indicator will tell you differently. (Unless, of course, it's come up heads 100 times in a row, then I'd be a little suspicious of the coin, or who's doing the flipping). But the market is a human endeavor, so there are events which will increase or decrease the probability of future events. That is what stats and indicators will help with. They will alert you to possibilities and mathematical odds. Like counting cards in Black Jack. Unless there is only one card left in the deck, all you know are the "probabilities" of getting the card you need. Stats and indicators will tell you how something has performed in the past, and generally there is a good probability that it will continue to perform that way in the future.

But sometimes things change. The change in the market from bullish to bearish, and from high volatility to low volatility, have lessened or eradicated the value of many indicators, and statistics that were valid for almost 10 years, may be completely invalid for the past year.

Arnie