Archive for the ‘Educational’ Category
Why This Market Is Very, Very Dangerous…Its All One Big Liquidity Trade
Wednesday, July 14th, 2010
After looking at the graphs below it doesn’t take long to see that all the markets are correlating and acting like one trade. Typically, when this happens we tend to see a major stock market correction. This is not a timing indicator and I am not suggesting that it happens tomorrow. My point is that this is not the time to be taking a tremendous amount of risk especially unhedged risk.
Take a look for yourselves and you’ll notice that stocks are the most correlated they’ve been since 1987. You might also note that the last time we got this correlated was…yep you guessed it, 2008 which was just before the onslaught of the global credit crisis. As far as I’m concerned you’ve been warned!!!
Source: Wall Street Journal
Source: Wall Street Journal
Source: Bianco Research
Posted in Educational, Market Predictions, Market Psychology, Research | No Comments »
Secular Bear Markets and How This One Stacks Up
Monday, July 12th, 2010
This is a great chart from The Chart Store that shows the last 3 secular bear markets. They also make the assumption that this is the 4th which I agree with. There are a few things to take note of that are especially important on this chart. The first is that the bottoms usually come after 165 months and we are only at 124 months so far and the second is that it usually takes at least 260 months before we make a new high which means we probably have at least another 10 years before we can expect to see new highs on the stock market on an inflation adjusted basis.
Source: The Chart Store
Posted in Educational, Research | No Comments »
Stimulus Will Fail Like It Always Does
Saturday, July 10th, 2010
Posted in Economics, Educational | No Comments »
Buffett recounts the best advice he’s ever received
Thursday, July 8th, 2010
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Abell, Koppel Discuss Their Profitable Short-term Trading Methods
Tuesday, July 6th, 2010
I came across a good article that I wanted to share:
Abell, Koppel Discuss Their Profitable Short-term Trading Methods
No short-term trading system is perfect. However, having and using a system is critical for short-term trading success, say Howard Abell and Bob Koppel.
“A successful short-term trading system must be profitable, consistent, and personal–conforming to the unique psychological and methodological needs of the individual,” they said.Abell is chief operating officer for Innergame Division and author of “The Day Trader’s Advantage” and “The Insider’s Edge.”
Koppel has authored “The Intuitive Trader” and is president of Innergame Division, which is a professional and institutional brokerage and trader execution services division of Rand Financial–a Chicago-based futures commission merchant with clearing representation worldwide.Innergame Division is also associated with the MooreResearchCenter, based in Eugene, Ore. Steve Moore is the proprietor.
Together, they have created the Innergame Partners/Moore Research, Inc. (IPMR) Trading Approach.
The trading method has the following tenets:
• Patience Is Your EdgeThe edge of the floor trader is buying the bid and selling the offer. This is an unreasonable expectation for off-the-floor day- and swing-traders. However, there are other ways to maintain an edge. Patience and preparation serve to create an edge that helps build and conserve equity. Knowing what you expect the market to do and waiting patiently for the market to come to you-in other words, to meet your expectations–gives you that edge.
• Good Daytraders and Swing Trades Result from High Percentage of “Set-ups”
Each day must be viewed in a larger context, which might be one day to two weeks of market action. Understanding how markets “set up” to make predictable moves and anticipating these moves through the set-up is a valuable key to success.
• Anticipating Market Opportunities In most instances, waiting for the market to demonstrate what appears to be a trading opportunity will result in entering too late for maximum profits.
• Predetermined Buy and Sell Areas Must Be ExecutedFor those traders who have difficulty “pulling the trigger,” putting resting orders in the market will get you into or out of the trade.
• Trade One Set-Up per Market Day Overtrading comes from indecision and anxiety. By setting your sights on one good set-up in a market, you avoid trading your emotions.
• Ignore the Noise, Follow the Signal Much of what a market does during the day can be considered noise–that is, market action without meaning. Hanging on every tick can be a wearisome and misleading chore. You must eliminate your reactions to the noise and follow the essential signals.
• Take “Fast-Market” or Climax Condition Profits In day- or swing-trading it is a good idea to exit a profitable trade if the market climaxes on heavy tick volume or “fast-market” conditions. It is a high probability that the high or low of the day is being made at this time. If the market hits your resting entry orders under these conditions, expect immediate profits or be alert for another wave in the same direction.
• Abandon Dull or Non-Performing Markets If you find yourself in a market that is very dull–look elsewhere. Time is scarce and watching a dull market drains energy.Koppel and Abell made their presentation to traders attending the Technical Analysis Group (TAG XVIII) meeting in New Orleans late last week.
Source: Trader Planet
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Time For A Bounce?
Tuesday, July 6th, 2010
Whenever I see articles in the New York Times that are extremely bearish we are usually in for a bounce even if it is short term. In Friday’s edition this article appeared:
A Market Forecast That Says ‘Take Cover’
WITH the stock market lurching again, plenty of investors are nervous, and some are downright bearish. Then there’s Robert Prechter, the market forecaster and social theorist, who is in another league entirely.
Mr. Prechter is convinced that we have entered a market decline of staggering proportions — perhaps the biggest of the last 300 years.
In a series of phone conversations and e-mail exchanges last week, he said that no other forecaster was likely to accept his reasoning, which is based on his version of the Elliott Wave theory — a technical approach to market analysis that he embraces with evangelical fervor.
Originating in the writings of Ralph Nelson Elliott, an obscure accountant who found repetitive patterns, or “fractals,” in the stock market of the 1930s and ’40s, the theory suggests that an epic downswing is under way, Mr. Prechter said. But he argued that even skeptical investors should take his advice seriously.
“I’m saying: ‘Winter is coming. Buy a coat,’ ” he said. “Other people are advising people to stay naked. If I’m wrong, you’re not hurt. If they’re wrong, you’re dead. It’s pretty benign advice to opt for safety for a while.”
His advice: individual investors should move completely out of the market and hold cash and cash equivalents, like Treasury bills, for years to come. (For traders with a fair amount of skill and willingness to embrace risk, he suggests other alternatives, like shorting the market or making bets on volatility.) But ultimately, “the decline will lead to one of the best investment opportunities ever,” he said.
Buy-and-hold stock investors will be devastated in a crash much worse than the declines of 2008 and early 2009 or the worst years of the Great Depression or the Panic of 1873, he predicted.
For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people “from buying stocks for 100 years,” he said. This time, he said, “If I’m right, it will be such a shock that people will be telling their grandkids many years from now, ‘Don’t touch stocks.’ ”
The Dow, which now stands at 9,686.48, is likely to fall well below 1,000 over perhaps five or six years as a grand market cycle comes to an end, he said. That unraveling, combined with a depression and deflation, will make anyone holding cash “extremely grateful for their prudence.”
Mr. Prechter is hardly the only market hand to advocate prudence now, but nearly everyone else foresees a much rosier future, once current difficulties are past.
For example, Ralph J. Acampora, a market analyst with more than 40 years of experience, said he moved entirely out of stocks and into cash late last month. Now a partner at Alverita, a wealth management firm in New York, he said recent setbacks suggested that the market would drop another 10 or 15 percent, probably until September or October, before resuming another “meaningful rally.”
Over the next several years Mr. Acampora expects an “old normal market,” characterized by relatively short-lived swings that will provide many opportunities for smart investors — one that resembles the markets of the 1960s and 70s. “I’ve lived through it,” he said.
Like Mr. Prechter, he is a past president of the Market Technicians Association, the leading organization of technical market analysts, and he said that his colleague has done “some very good work.” But Mr. Acampora doesn’t agree with Mr. Prechter’s long-term theories, either intellectually or emotionally.
The “mathematics don’t work,” Mr. Acampora said, because such a big decline would imply that individual stocks would need to trade at unrealistically low levels. Furthermore, he said, “I don’t want to agree with him, because if he’s right, we’ve basically got to go to the mountains with a gun and some soup cans, because it’s all over.”
Still, on a “near-term” basis, he said, “We’re probably saying the same thing.”
Similarly, Larry Berman, who co-founded ETF Capital Management in Toronto and recently ended his term as the president of the technicians association, says he sees a “classic” short-term negative market trend developing now. But he doesn’t use the Elliott Wave theory, saying Mr. Prechter is trying to “measure the market in decades, which is too long a time frame for practical trading purposes or for risk management.”
Source: The New York Times
While I tend to agree with Prechter, although I am not as bearish as he is, this should produce a short term market bounce. Let’s see how long it lasts…
Posted in Educational, Market Predictions, Market Psychology | No Comments »
Naseem Taleb: Bank Balance Sheets Still Bad
Monday, June 14th, 2010
Posted in Educational, Market Psychology | No Comments »
European TARP and 3 Ugly Technical Set-Ups-Is This Time Different??
Wednesday, May 12th, 2010
Monday’s European version of our “TARP” reminds me of recent history…
The announcement of the US “TARP” was the beginning of the major decline that we saw in September 2008. Is this time going to be different?
There are also three technical set-ups that trouble me and I think that they point to lower equities in the short term:
1. Monday was the 3rd largest gap up ever recorded for the S&P. Take a look at how the other two played out…coincidentally they both happened during the 2008 bear market. Also, Monday was Europe’s version of the TARP.
2. The advance decline ratio on Monday was a ridiculous 18 to 1 and the only time it has been that high in the past 2o years was October 13, 2008 when it hit 19 to 1. And, you can see from the above chart how that market played out…
3. We have had several mini crashes like this one we experienced last Thursday in history and all of them either followed through to the downside or at least retested the crash low. Check out the charts:
4/4/2000 is the closest in terms of chart set-ups to this mini-crash that we just experienced last Thursday. That was the beginning of 2000 bear market. It remains to be seen how this one plays out but odds favor at least a retest of the low of last Thursday.
And, as always I could be wrong. Remember to always trade with stops. The global central governments are printing and spending so much money that equities may continue higher…we shall soon see…
Posted in Educational, Trading | 1 Comment »
Goldman Sachs CEO and Chairman on Charlie Rose
Wednesday, May 5th, 2010
Lloyd Blankfein Interview on Charlie Rose:
Click to Watch
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