How Investors Get Suckered Time After Time
by Chart School - September 16th, 2010 1:07 pm
Dr. Paul viewed David Rosenberg’s chart picked up by Clusterstock as the "chart of the day" yesterday (posted here, with comments by Edward Harrison) and Paul concluded that this is not a good time to start buying gold. Obviously, with the rise in gold prices over the last decade, there was a great decade-long trade opportunity. But prices go up and down, and past performance does not dictate future results. - Ilene
How Investors Get Suckered Time After Time
Courtesy of Dr. Paul Price at Beating Buffett
The following chart was published on Clusterstock yesterday with commentary explaining how this proved that stocks were no longer a good place to invest…
As the S&P 500 was the only major asset class to have shown negative results over the past 10-years, they felt it was obvious that Gold, Long-term Bonds and Commodities would continue to be the best place for the next decade. In other wordsthe conclusion was that new money should be allocated to whatever had just finished going up the most!
I hear ads for gold every day shouting that, “I invested in gold 10 years ago and it’s the best decision I ever made.” “Gold has tripled since 2000. Get in now for the move to $3000 /oz.”
How many times have you made great profits buying something that just finished tripling? How did your real estate purchase in 2006 work out using that reasoning?
The same ‘Gold Bug’ ads were running in 1979 – 1980 sucking people in right at the top as Gold briefly broke through $800 /oz. for the first time. The second chart shows the disastrous results for those who took the bait.
See the longer-term chart below to learn that it took about 30 years for Gold to regain its 1980 highs (without adjusting for inflation). Even at this week’s new all-time nominal high Gold is still well below the old peak. So much for Gold as an inflation hedge.
I look at the first chart presented and draw the opposite conclusion from the Clusterstock article. If stocks suffered through 10 years of negative returns they might be quite cheap considering all the revenue, earnings and book value growth that took place.
I’d be avoiding…
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DiggHow Investors Get Suckered Time After Time
by ilene - September 16th, 2010 1:04 pm
Dr. Paul viewed David Rosenberg’s chart picked up by Clusterstock as the "chart of the day" yesterday (posted here, with comments by Edward Harrison) and Paul concluded that this is not a good time to start buying gold. Obviously, with the rise in gold prices over the last decade, there was a great decade-long trade opportunity. But prices go up and down, and past performance does not dictate future results. - Ilene
How Investors Get Suckered Time After Time
Courtesy of Dr. Paul Price at Beating Buffett
The following chart was published on Clusterstock yesterday with commentary explaining how this proved that stocks were no longer a good place to invest…
As the S&P 500 was the only major asset class to have shown negative results over the past 10-years, they felt it was obvious that Gold, Long-term Bonds and Commodities would continue to be the best place for the next decade. In other wordsthe conclusion was that new money should be allocated to whatever had just finished going up the most!
I hear ads for gold every day shouting that, “I invested in gold 10 years ago and it’s the best decision I ever made.” “Gold has tripled since 2000. Get in now for the move to $3000 /oz.”
How many times have you made great profits buying something that just finished tripling? How did your real estate purchase in 2006 work out using that reasoning?
The same ‘Gold Bug’ ads were running in 1979 – 1980 sucking people in right at the top as Gold briefly broke through $800 /oz. for the first time. The second chart shows the disastrous results for those who took the bait.
See the longer-term chart below to learn that it took about 30 years for Gold to regain its 1980 highs (without adjusting for inflation). Even at this week’s new all-time nominal high Gold is still well below the old peak. So much for Gold as an inflation hedge.
I look at the first chart presented and draw the opposite conclusion from the Clusterstock article. If stocks suffered through 10 years of negative returns they might be quite cheap considering all the revenue, earnings and book value growth that took place.
I’d be avoiding bonds and…
Daily Market Commentary: Strong Gains
by Chart School - September 13th, 2010 9:28 pm
Fallond Stock Picks liking the rally… – Ilene
Daily Market Commentary: Strong Gains
The week started with morning gaps which held and pushed on with a close that marked the day’s highs. These gaps in themselves may prove to be measuring gaps, which sets a positive tone for the next couple of weeks ahead. The S&P even managed to break its 200-day MA, leaving August highs as the next target.
via StockCharts.com
The Nasdaq similarly pushed beyond its 200-day MA and did so on higher volume accumulation. There is a case for a break of the three-and-a-half month consolidation too.
via StockCharts.com
The Russell 2000 also managed to clear resistance with a gap and break of 200-day MA; June-July reaction highs are next.
via StockCharts.com
The Nasdaq 100 went a step further and closed above the August reaction high (a very positive development)
via StockCharts.com
Even the semiconductors offered potential by re-engaging the bear trap; a close above 331 (just 4 points away) will confirm.
via StockCharts.com
So, a very positive day to follow a positive Friday. The concerns from Thursday’s bearish black candlesticks have been eliminated and there is a good chance this is the start of another 1-2 weeks of gains.
The “Real” Mega-Bears
by Chart School - August 14th, 2010 6:43 pm
The "Real" Mega-Bears
Courtesy of Doug Short
It’s time again for the weekend update of our "Real" Mega-Bears, an inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.
This chart is consistent with my preference for real (inflation-adjusted) analysis of long-term market behavior. The nominal all-time high in the index occurred in October 2007, but when we adjust for inflation, the "real" all-time high for the S&P 500 occurred in March 2000.
Here is a nominal version to help clarify the impact of inflation and deflation, which varied significantly across these three markets.
Note: These charts are not intended as a forecast but rather as a way to study the today’s market in relation to historic market cycles.
“It’s Not A Market, It’s An HFT ‘Crop Circle’ Crime Scene” – Further Evidence Of Quote Stuffing Manipulation By HFT
by ilene - July 31st, 2010 6:40 am
"It’s Not A Market, It’s An HFT ‘Crop Circle’ Crime Scene" – Further Evidence Of Quote Stuffing Manipulation By HFT
Courtesy of Tyler Durden
Recently we posted a required reading analysis by Nanex in which the market trading analytics firm presented irrefutable evidence of quote stuffing by HFT algorithms in tens of stocks, in which thousands of cancelled quotes would reappear each second with a definitive periodicity and regularity, around the time of the May 6 flash crash. Aside from the fact that it is illegal to indicate a quote without a trade intent, this form of quote stuffing is in fact manipulative when conducted by HFT repeaters in specific "shapes" as it actually moves the NBBO actively higher or lower, in cases pushing the bid/offer range up to 10% higher without even one trade ever having occurred, simply by masking a big block order which other algos interpret as bid interest and pull all offers progressively or step function higher (or vice versa, although we have rarely if ever seen the walking down of a stock over the past 18 months). It is as if the HFT lobby has been given the green light by the powers that be that it is safe to activate merely the bid-size quote stuffing algorithms, and not worry: the fact that the market is so one sided in its quote stuffing patterns is sufficient reason to worry of a concerted effort to push stocks higher, initiated from the very top, and effected by not only the Primary Dealer community but by the end-market "liquidity providers."
Today, courtesy of Nanex we demonstrate that this type of illegal stock manipulation continues rampant to this very day, and the SEC still fails acknowledge that it is precisely the HFT market participants that persist in destabilizing stock prices, which have given up responding to fundamentals and merely move up or down based on quote stuffing interventions by those who plead innocence and claim to only be providing liquidity. Well take a look at the millions in fake, and thus illegal, bids demonstrated below and tell us just how any of this manipulation is "providing liquidity" – the second the patterns break, the algos responsible for the churn pattern disappear, thus eliminating numerous levels of so called bid liquidity below the NBBO: break enough patterns and you have another flash crash…
Charting The -1.0 Correlation Between Stock Prices And Volume
by ilene - July 27th, 2010 7:04 pm
Charting The -1.000 Correlation Between Stock Prices And Volume
Courtesy of Tyler Durden
In our day and age, when implied correlation is approaching 1 with each passing day, and when nuanced relationships are ignored, as every correlation somehow immediately becomes causation only to be invalidated, chewed out and left for dead, there is one certain and virtually guaranteed statistical relationship left, that not only persists day after day but has now become its own self-fulfilling prophecy. We speak of course of the (inverse) correlation between stock prices and volume: i.e., "volume up, stocks down; volume down, stocks up." Rinse, repeat, over and over and over. Rarely has this correlation been as pronounced (although we have been discussing it for well over a year) as over the past 12 weeks. Behold.
What this means is that any distributions only occur to the downside, and that the second retail gets suckered into stocks once again, for whatever reason, the selling pressure will again materialize as the algo decides to take advantage of the "sidelined" money and be a better seller into every bid.
A Review of Our 3 Favorite Leading Stock Market Indicators
by ilene - July 27th, 2010 6:45 pm
A Review of Our 3 Favorite Leading Stock Market Indicators
Courtesy of Brett Owens at The Contrary Investing Report
These days we are keeping a keen eye on markets that have been reliable leading indicators of the stock market. Since 2004 or so, markets have become quite interrelated, creating a lot of interesting relationships in markets that previously had little or no correlation.
The correlation of course peaked during the 2007-2009 downturn, when EVERYTHING dropped by about 50% (except for US Treasuries and the US Dollar). I still believe that was the market tipping its hand, showing a glimpse of an even worse crash to come.
When that crash would (finally) start was something we took at look at this January, when we analyzed the Top 3 Investment Themes to Watch in 2010. On March 29th, just weeks before US equities topped, we revisited the charts of some key leading indicators, and concluded that the reflation rally was perhaps on its last legs:
These non-confirmations could be ominous bearish divergences, indicating the reflation rally is on it’s last legs. The rally appears tired, but is not over yet.
Since it appears that this conclusion was, thus far at least, correct, I’d like to revisit some of our favorite charts – taking a long term perspective – to see were we are at.
Crude Oil – Trading Sideways
Crude caught my eye on Friday when I saw a headline that it was making two-month highs. Taking a longer term view of crude oil, it’s performance looks less impressive:
Crude oil rallied fast and furiously to retake about half of its 2008 losses. It has since stalled. (Source: …
Understanding Robert Prechter’s ‘Slope of Hope’
by ilene - July 16th, 2010 8:03 pm
Whatever you might say of Robert Prechter, one thing he isn’t is ambiguous. – Ilene
Understanding Robert Prechter’s ‘Slope of Hope’
Courtesy of Elliott Wave International
Almost everybody who follows financial markets has heard about climbing the "wall of worry": the time when prices head up bullishly, but no one quite believes in the rally, so there’s more worry about a fall than a rise.
What’s the opposite condition in the market?
Bob Prechter named it the "slope of hope," meaning that as prices head down, no one wants to believe the market really has turned bearish, so there’s more hope for a rise than fear of a fall.
The market has been rising recently, following a bearish decline from late April through the end of June, which makes now the perfect time to learn more about the slope of hope.
* * * * *
Excerpted from The Elliott Wave Theorist by Robert Prechter, published June 18, 2010
According to polls, economists are virtually unanimous in the view that the “Great Recession” is over and a recovery is in progress, even though “full employment will take time,” etc. Yet mortgage writing has just plunged to a new low for the cycle (see Figure 1), and housing starts and permits just had their biggest percentage monthly drop since January 1991, which was at the end of a Primary-degree recession. But the latest “recession” supposedly ended a year ago. How can housing activity make new lows this far into a recovery? The answer is in the subtitle to Conquer the Crash, which includes the word depression. The subtleties in economic performance continue to suggest that it “was” not a “recession.” It is a depression, moving forward, in punctuated fashion, slowly but inexorably.
Despite this outlook, keep in mind what The Elliott Wave Theorist said last month: “Even though the market is about to begin its greatest decline ever, the era of hope is not quite finished.” For as long as another year and a half, there will be rallies, fixes, hopes and reasons to believe in recovery. Our name for this phase of a bear market is the Slope of Hope. This portion of the decline lasts until the center of the wave, where investors stop estimating upside potential and start being concerned with downside potential. Economists in the aggregate will probably not recognize that a depression is in force until 2012 or…
SP 500 September Futures Daily Chart
by Chart School - July 13th, 2010 5:54 pm
SP 500 September Futures Daily Chart
Courtesy of JESSE’S CAFÉ AMÉRICAIN
Stocks were rallying today on optimism about earnings based on last night’s results from Alcoa and CSX.
After hours tonight Intel announced better than expected earnings and raised its forecasts. This caused the futures to gap open when they resumed trading. Here is what they look like now, after hours.
This has been a wicked rally off the lows. It *might* be getting towards a short term top, possibly tomorrow, but I would not want to get in front of it. Wait and see how the rally progresses.
SP Futures and Gold Daily Charts at 2:30 PM EDT: Smoke and Mirrors
by ilene - June 21st, 2010 3:32 pm
SP Futures and Gold Daily Charts at 2:30 PM EDT: Smoke and Mirrors
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The spike in the overnight futures based on the vague assurances from China to revalue the yuan higher, a strictly political move to pre-empt the discussion at the upcoming G20 meeting, was a way to justify a classic ‘wash and rinse’ in the price, and bring in some coin for the needy Wall Street banks.
This is the method by which the moral hazard of bailing out the Too Big Banks has provoked the unintended consequence of strangling the economy and the very markets which the bailouts were intended to save (at least on the storyboard). They are unable to make their expected outsized returns using conventional business means, so they must resort to soft control frauds, generating market inefficiencies to support their unsustainable existance. They ought to have been broken up and liquidated where necessary.
As I suggested last night, the spike higher was utterly artificial, and worth fading to the short side. But while it stays above the trendline now around 1110 I would not lean on it too hard, since the threat of a snapback rally in the last hour is always there on these thin volumes. If it breaks down, we are probably heading down to the 1060 support in a roundabout way.
There is also an FOMC rate decision coming up on the 23rd, Wednesday, so we will see some artificial action around that. It is also the day that GTU closes its shelf offering which should take some of the pressure off the unit price.
As a reminder this is the option expiration week (June 24th) for gold and silver July contracts at the COMEX. Even so, the pullback in the price of gold is well within the range of the handle. Short term it is relatively easy to manipulate the price within a certain range of the primary trend, given the current state of regulatory capture at the CFTC. At some point the primary trend will take a much steeper slope as we head towards a commercial failure to deliver. But no one can accuse the people in New York and Washington of long term thinking when there are short term profits to be made, and campaign contributions to be pocketed.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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