Guest View
User: Pass: | become a member
Posts Tagged ‘indicators’

On Reflexivity & Animal Spirits: What Moves the Market from Here?

Kent Thune’s wonderful blog The Financial Philosopher is not just a financial site, it’s a "learning experience."  I highly recommend that you visit him and read some of his latest inspirational articles, such as Get Busy Livin’ or Get Busy Dyin’To Embrace Death is to Embrace Life, and Entrepreneurs: Use Your Delusion, Sell the Illusion. – Ilene

On Reflexivity & Animal Spirits: What Moves the Market from Here?

ITAR-TASS 02: IRKUTSK REGION, RUSSIA. NOVEMBER 30, 2008. Early twentieth century German pendulum clock with a statuette of Mnemosyne, Greek goddess of memory, on display at the Clock Museum, Angarsk, Irkutsk Region, Russia. (Photo ITAR-TASS / Nikolai Ryutin) Photo via Newscom

Courtesy of Kent Thune, at The Financial Philosopher

Are capital markets leading economic indicators or do they provide fuel for a growing economy? Or is it both? Isn’t the function of capital markets to raise capital for the financing of corporate and government operations through the sale of securities (stocks and bonds)?

If the stock market is rising, would this not then create the economic condition it is "predicting" as an economic indicator? In the absence of government stimulus, might financial markets save themselves? If so, how? Can financial markets rise spontaneously or do they require a fundamental boost or outside stimulation?

Capital markets have many functions and their participants have numerous objectives; however, we may simplify them all into two basic categorical functions: 1) Passive and 2) Active. Depending upon economic conditions and variables, capital markets can play one or both rolls. Consider recent comments by George Soros (Hat tip to Captain Jack):

…financial markets do not play a purely passive role; they can also affect the so-called fundamentals they are supposed to reflect. These two functions that financial markets perform work in opposite directions. In the passive or cognitive function, the fundamentals are supposed to determine market prices. In the active or manipulative function market, prices find ways of influencing the fundamentals. When both functions operate at the same time, they interfere with each other. The supposedly independent variable of one function is the dependent variable of the other, so that neither function has a truly independent variable. As a result, neither market prices nor the underlying reality is fully determined. Both suffer from an element of uncertainty that cannot be quantified. I call the interaction between the two functions reflexivity…

Mr. Soros’ idea of reflexivity asserts, as he says, "that financial markets do not necessarily tend toward equilibrium; they can…
continue reading


Tags: , , , , , , ,




S&P 500: On a knife’s edge

S&P 500: On a knife’s edge

Courtesy of Prieur du Plessis, Investment Postcards from Cape Town

Last Thursday was a so-called 90% down-day for American stock markets (and many other bourses also recorded downward dynamics). A 90% down-day is defined as a day when downside volume equals 90% or more of the total upside plus downside volume and points lost equal 90% or more of the total points gained plus points lost. The historical record show that 90% down-days do not usually occur as a single incident on the bottom day of an important decline, but typically on a number of occasions throughout a major decline. As far as the very short term is concerned, 90% down-days are often followed by two- to seven-day bounces.

The stock market is on a knife’s edge at the moment as seen in the chart below, showing the long-term trend of the S&P 500 Index (green line) together with a simple 12-month rate of change (ROC) indicator (red line). Although monthly indicators are of little help when it comes to market timing, they do come in handy for defining the primary trend. An ROC line below zero depicts bear trends as experienced in 1990, 1994, 2000 to 2003, and in 2007. And 2010? With the ROC delicately perched just above the zero line, the primary trend is still bullish, but barely so.

Source: StockChart.com.

Regarding seasonality, I have done a short analysis of the historical pattern of monthly returns for the S&P 500 Index from 1950 to August 2010. The results are summarized in the graph below.

Source: Plexus Asset Management (based on data from I-Net Bridge).

As shown, the six-month period from May to October has historically been weaker than the period from November to April as seen in the average monthly return of 1.05% for the “good six months” compared with 0.25%% for the “bad six months”. Importantly, when considering individual months, September (-0.18%) and October (-0.19%) have historically been the only two negative months of the year. (A word of warning, though: one should take cognizance of seasonality but understand that it is not a stand-alone indicator and it is anybody’s guess whether a specific year will conform to the historical pattern.)

Where does this leave us at this juncture? Considering an array of indicators, we are somewhat in no-man’s land regarding whether the bull or bear will…
continue reading


Tags: , , , , ,




Fibozachi Forecast: Week of April 26th

Trading ideas for early next week. Courtesy of Fibozachi.

FF

  

Short Trade Candidates

GME: Gamestop (Short-Term to Intermediate-Term) 

Current Price25.22

Candlestick PatternsNone

 

After rallying for eight consecutive weeks, Gamestop appears due for a pullback that allows price to digest gains and consolidate before re-testing a wide band of horizontal resistance that spans 26 – 28.  With price quickly approaching resistance at 26.05, the chances of registering a multi-week swing high appear well above-average.  Last week’s narrow range (near doji) plotted alongside the highest weekly volume tally since the first week of January.  This type of high-volume ‘churn’ is a flashing yellow light, warning of possible inflection ahead.

 

EntryImmediate (with daily confirmation) or with a move below 24.77

Target (Short-Term)22.75

Target (Long-Term)21.11

Stop-Loss26.06 or higher

Potential Risk:  $1.29

Potential Reward (Short-Term)$2.02

Potential Reward (Long-Term)$3.66

Reward: Risk Ratio1.6  &  2.8

 

GME

 


WAT: Waters Corporation (Short-Term to Long-Term)

Current Price70.03

Candlestick PatternsDoji

 

Last week’s high-volume doji marked an end to WAT’s eleven week non-stop rally from 56 – 72 and now is an ideal time to begin looking the other way.  WAT appears primed to pullback towards 63 over the next few weeks, where even a bull flag would target 64 – 65 before inflecting.  An extended move would carry price down towards the previous swing low area of 56 – 57 from the first week of February.

 

EntryImmediate (with daily confirmation) or with a move below 68.36

Target (Short-Term)63.00

Target (Long-Term)57.00

Stop-Loss71.62 or higher

Potential Risk$3.26

Potential Reward (Short-Term)$5.36

Potential Reward (Long-Term)$11.36

Reward: Risk Ratio1.6  &  3.5

 

WAT

 


 

LINTA: Liberty Media Holdings (Intermediate-Term to Long-Term)

Current Price16.38

Candlestick PatternsDoji (Perfect)

 

LINTA has now registered back-to-back dojis up at a previous swing high, which is a specific trading setup that we scan across markets for each and every day.  While last week finally provided a bit of venting for Liberty’s eleven week monster rally, price popped back up at week’s end to close just a single penny lower for the week; some weekly…
continue reading


Tags: , , , , ,




THE BIG MONEY IS BULLISH WHILE SMALL MONEY IS BEARISH

THE BIG MONEY IS BULLISH WHILE SMALL MONEY IS BEARISH

Courtesy of The Pragmatic Capitalist  

Bear and bull sculptures outside the Frankfurt stock exchange

As a futures trader I routinely check the commitment of traders report released by the CFTC.  For those who aren’t familiar with the report it is a breakdown provided by the CTFC of each Tuesday’s open interest for market positions in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC.  It’s widely followed in trading circles and gives a glimpse into what the big money, commercial money and even the small money is doing with their positions.

What piqued my interest in this data were comments in Tuesday’s “Breakfast with Dave” by Gluskin Sheff’s David Rosenberg implying that the equity markets were overly bullish because the commitment of traders showed a net bullish position of 151,000 contracts.  Let’s put this in context, however.  (See here for the current allocation of large institutions – a much more useful indicator).

I have found over the years that the commitment of traders report tends to be a fairly weak short-term indicator.  In fact, the COT tends to be more useful in following the long-term trends of large institutions and where they are currently investing money.  Mr. Rosenberg’s implication that the current net bullish position should be seen as a contrarian sign is not necessarily true.  After all, big money moves prices and knowing where the big money is going is more often than not a good indicator of where to put your money as opposed to what to avoid.  But let’s go even further.

One of my favorite indicators is actually the reporting of small speculators in the CFTC’s report.  This shows us what the amateur and small-time futures traders are doing with their money.  I have found over the years that this is a fairly reliable contrarian indicator.  As you can see in the chart below these traders were net bullish in just 4 weeks over the last year.  The last time small traders were substantially net bullish was just before the market crumbled at the beginning of 2009.  But what is it telling us now? As of last week’s report it is showing the largest net short position since the week following the March 8th bottom.  In other words, small speculators were this…
continue reading


Tags: , , , , ,




 
 
 

Zero Hedge

Banking At The Box Office

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

While some are already neck deep in Black Friday-eve shopping, we hope more than a few will be relaxing at home watching a movie, dozing in a tryptophanic trance... we suggest the following in preparation for tomorrow's markets...

 

 

Source: Deutsche Bank

...

more from Tyler

Phil's Favorites

Irrational Exuberance - Descriptive Superlatives' Exhaustion Point Is Reached

Irrational Exuberance – Descriptive Superlatives' Exhaustion Point Is Reached

Courtesy of Pater Tenebrarum of Acting Man

Positioning Indicators at New Extremes

We are updating our suite of sentiment data again, mainly because it is so fascinating that a historically rarely seen bullish consensus has emerged – after a rally that has taken the SPXup by slightly over 210% from its low. Admittedly, a slew of such records has occurred in the course of the past year or so, and so far has not managed to derail the market in the slightest– in fact, since 2012, only a single correction has occurred that even deserves the designation “correction” (a...



more from Ilene

All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

more from David

Chart School

Michigan Consumer Sentiment for November Slightly Trims Its Strong Preliminary Reading

Courtesy of Doug Short.

The Final University of Michigan Consumer Sentiment for November came in at 88.8, a bit off the 89.4 preliminary reading but up from from the October Final of 86.9. As finaly readings go, this is a post-recession high and the highest level since July 2007, over seven years ago. Today's number came in below the Investing.com forecast of 90.2.

See the chart below for a long-term perspective on this widely watched indicator. I've highlighted recessions and included real GDP to help evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.


...



more from Chart School

Insider Scoop

Morgan Stanley: Nimble Storage Increased Its Market Four-Fold

Courtesy of Benzinga.

Nimble Storage Inc (NYSE: NMBL) reported its third quarter results on Tuesday after market close. The company reported a loss of $0.15 per share, slightly better than the $0.16 per share loss analysts were expecting, while revenue of $59.10 million was higher than the $57.75 million analysts were expecting.

In a note to clients on Wednesday, Katy Huberty of Morgan Stanley noted that the company “continues to disrupt the storage market” as new customer adoption doubled year-over-year, increasing its installed base to more than 4,300 customers.

The analyst also notes that international investments are “beginning to pay off” as revenue grew 135 percent from a year ago, contributing 20 percent of total revenue in the quarter.

However, Huberty singles out the addition of the Fibre Channel (FC) protocol. The analyst states that the company has now ex...



http://www.insidercow.com/ more from Insider

Sabrient

Sector Detector: Holiday fever takes hold of stock investors, but a pullback is needed

Courtesy of Sabrient Systems and Gradient Analytics

With warmer weather arriving to melt the early snowfall across much of the country, investors seem to be catching a severe case of holiday fever and positioning themselves for the seasonally bullish time of the year. And to give an added boost, both Europe and Asia provided more fuel for the bull’s fire last week with stimulus announcements, particularly China’s interest rate cut. Yes, all systems are go for U.S. equities as there really is no other game in town. But nothing goes up in a straight line, not even during the holidays, so a near-term market pullback would be a healthy way to prevent a steeper correction in January.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based Sector...



more from Sabrient

Digital Currencies

Bitcoin Mining

Bitcoin Mining

Courtesy of Global Economic Intersection

By Rod Garratt and Rosa Hayes - Liberty Street Economics, Federal Reserve Bank of New York

In June 2014, the mining pool Ghash.IO briefly controlled more than half of all mining power in the Bitcoin network, awakening fears that it might attempt to manipulate the blockchain, the public record of all Bitcoin transactions. Alarming headlines splattered the blogosphere. But should members of the Bitcoin community be worried?

Miners are members of the Bitcoin community who engage in a proce...



more from Bitcoin

OpTrader

Swing trading portfolio - week of November 25th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



more from OpTrader

Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's the Happy Thanksgiving Edition of Stock World Weekly!

Click on this link and sign in with your PSW user name and password. 

Picture via Pixabay.

...

more from SWW

Market Shadows

Official Moves in the Market Shadows' Virtual Portfolio

By Ilene 

I officially bought 250 shares of EZCH at $18.76 and sold 300 shares of IGT at $17.09 in Market Shadows' Virtual Portfolio yesterday (Fri. 11-21).

Click here for Thursday's post where I was thinking about buying EZCH. After further reading, I decided to add it to the virtual portfolio and to sell IGT and several other stocks, which we'll be saying goodbye to next week.

Notes

1. th...



more from Paul

Option Review

Yamana Gold call options sink

Yamana Gold call options sink

By Andrew Wilkinson at Interactive Brokers

A four-year low for the spot price of gold has had a devastating impact on Yamana Gold (Ticker: AUY), with shares in the name down at the lowest price in six years. Some option traders were especially keen to sell premium and appear to see few signs of a lasting rebound within the next five months. The price of gold suffered again Wednesday as the dollar strengthened and stock prices advanced. The post price of gold fell to $1145 adding further pain to share prices of gold miners. Shares in Yamana Gold tumbled to $3.62 and the lowest price since 2008 as call option sellers used the April expiration contract to write premium at the $5.00 strike. That strike is now 38% above the price of the stock. Premium writers took in around 16-cents per contract o...



more from Caitlin

Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



more from Pharmboy

Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




FeedTheBull - Top Stock market and Finance Sites



About Phil:

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...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>