by ilene - September 12th, 2011 11:33 pm
Courtesy of Joshua M Brown, The Reformed Broker
One of the toughest calls to make here is whether or not we’ve got enough negativity in these S&P 500 levels yet. The answer is that we’re probably almost there in terms of apathy and disgust for stocks, but valuations aren’t yet alarmingly cheap and there is some difficulty in determining whether Europe has gotten close enough to the abyss to drop the big money bomb on it’s problems just yet. The washout, in my opinion, is still out there somewhere…
I dropped in on the CNBC Street Signs gang for a live taping from New Jersey today, we talked about this very subject and Hedgeye’s Keith McCullough was also in the mix. Enjoy!
by Chart School - May 12th, 2011 8:49 pm
By Elliott Wave International
Jeffrey Kennedy brings more than 15 years of experience to his position as Elliott Wave International’s Senior Analyst and trading instructor. He knows firsthand how hard it can be to get simple explanations of a trading method that works — so he shares his knowledge with his subscribers each month in the Trader’s Classroom lessons.
Here’s an excerpt from The Best of Trader’s Classroom, a free 45-page eBook that gives you the 14 most critical lessons every trader should know. Download the full eBook free here.
Every trader, every analyst and every technician has favorite techniques to use when trading. But where traditional technical studies fall short, the Wave Principle kicks in to show high-probability price targets. Just as important, it can distinguish high-probability trade setups from the ones that traders should ignore.
Where Technical Studies Fall Short
There are three categories of technical studies: trend-following indicators, oscillators and sentiment indicators. Trend-following indicators include moving averages, Moving Average Convergence-Divergence (MACD) and Directional Movement Index (ADX). A few of the more popular oscillators many traders use today are Stochastics, Rate-of-Change and the Commodity Channel Index (CCI). Sentiment indicators include Put-Call ratios and Commitment of Traders report data.
Technical studies like these do a good job of illuminating the way for traders, yet they each fall short for one major reason: they limit the scope of a trader’s understanding of current price action and how it relates to the overall picture of a market. For example, let’s say the MACD reading in XYZ stock is positive, indicating the trend is up. That’s useful information, but wouldn’t it be more useful if it could also help to answer these questions: Is this a new trend or an old trend? If the trend is up, how far will it go? Most technical studies simply don’t reveal pertinent information such as the maturity of a trend and a definable price target — but the Wave Principle does.
How Does the Wave Principle Improve Trading?
Here are five ways the Wave Principle improves trading:
1. Identifies Trend
The Wave Principle identifies the direction of the dominant trend. A five-wave advance identifies the overall trend as up. Conversely, a five-wave decline determines that the larger trend is down. Why is this information important? Because it is easier to trade in the direction
Non-Manufacturing ISM Plunges Below Prediction of All 73 Economists, New Orders Collapse, Prices Firm; Did Rosenberg Capitulate at the Top?
by ilene - May 4th, 2011 2:14 pm
Courtesy of Mish
The April 2011 Non-Manufacturing ISM plunged 4.5 points to 52.8 from 57.3 The drop was below expected range of all 73 economists in a Bloomberg ISM Survey.
The range of economists’ forecasts in the Bloomberg survey was 54.5 to 59 with the median forecast up a tick to 57.4.
Tellingly, new orders collapsed by 11.4 points from 64.1 to 52.7. Employment, one of the weaker measures and up only 8 consecutive months fell to 51.9. One more reasonably bad month and services employment will contract.
Please consider the April 2011 Non-Manufacturing ISM Report On Business®
Economic activity in the non-manufacturing sector grew in April for the 17th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.
click on chart for sharper image
The 12 industries reporting growth of new orders in April — listed in order — are: Management of Companies & Support Services; Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Mining; Real Estate, Rental & Leasing; Wholesale Trade; Information; Health Care & Social Assistance; Public Administration; Construction; Other Services; and Educational Services. The four industries reporting contraction of new orders in April are: Finance & Insurance; Retail Trade; Professional, Scientific & Technical Services; and Utilities.
Twelve industries reported increased employment, five industries reported decreased employment, and one industry reported unchanged employment compared to March.
The industries reporting an increase in employment in April — listed in order — are: Arts, Entertainment & Recreation; Mining; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Other Services; Information; Construction; Accommodation & Food Services; Finance & Insurance; Public Administration; Wholesale Trade; and Transportation & Warehousing. The industries reporting a reduction in employment in April are: Real Estate, Rental & Leasing; Educational Services; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Utilities.
For the second consecutive month, all 18 non-manufacturing industries reported an increase in prices paid, in the following order: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Arts, Entertainment & Recreation; Construction; Wholesale Trade; Accommodation & Food Services; Finance & Insurance; Transportation & Warehousing; Real Estate, Rental & Leasing; Management of Companies & Support Services; Educational Services; Professional, Scientific & Technical Services; Retail Trade; Public Administration; Information; Health Care & Social Assistance; and Other Services.
ISM Prices Firm, What About Profits?
by ilene - March 20th, 2011 6:45 pm
Complexity researchers who study the behavior of stock markets may have identified a signal that precedes crashes.
They say the telltale sign is a measure of co-movement, or the likelihood of stocks to move in the same direction. When a market is healthy, co-movement is low. But in the months and years before a crash, co-movement seems to grow.
Regardless of whether stock prices go up or down or stay the same, they do so in tandem. People are copying each other, and a small nudge can send everyone in the same direction. The system appears primed for collapse.
“One of the most important things happening now is that economists are trying to understand, what is systemic risk? When is the entire system vulnerable to disaster? Our results show that we have a direct, unambiguous measure of that vulnerability,” said Yaneer Bar-Yam, president of the New England Complex Systems Institute.
Seen through an econophysicist’s eyes, a stock market panic is an avalanche.
Bar-Yam’s findings, released Feb. 13 on arXiv, are part of an emerging research field known as econophysics. It applies to economics insights from the physical world, especially from systems in which networks of interacting units produce radical collective behaviors.
Heated water turning to gas is one such behavior, known technically as a phase transition. Another is snow gathering into an avalanche. Seen through an econophysicist’s eyes, a stock market panic is an avalanche, too.
Keep reading here: Possible Early Warning Sign for Market Crashes | Wired Science | Wired.com.
by Sabrient - March 18th, 2011 4:01 pm
My heater’s broke and I’m so tired
I need some fuel to build a fire (actually need something that cools heat down)
The girl next door (Tokyo), her lights are out, yeah
The landlord’s gone, I’m down and out
It’s cold gin (option) time again
You know it’ll always win – KISS
The tragic developments in Japan took center stage this past week and our hearts go out to everyone in Japan, and everyone who is touched by this catastrophic event.
Prior to the earthquake and tsunami, the VIRTUAL Dark Horse Hedge virtual portfolio was positioned with a 70% Long / 30% Short tilt. We are now considering moving to a 50% / 50% balance. We will most likely do that, assuming no material change in the world events, by adding to our short positions next week. In the meantime, we have two option positions which are expiring today and we wanted to add to the review we began last week. (Click here for our first four long positions reviewed a week ago.)
Radware Ltd (RDWR): On November 11, 2010 we added Radware (RDWR) to the virtual portfolio using Phil’s Buy/Write strategy. At that time RDWR was trading at $33.39 and we added half the shares we wanted (100) and sold the March $35 2011 call and March $35 2011 put to complete the buy/write. On December 7, 2010 when the stock traded up to $40, we rolled the call out to the Jan $35 2012 call, which we sold for $9. We kept the March $35 2011 put we had already sold for $5.10. The put (as 65-70% of options do) will expire worthless today yielding a $5.10 profit. At this time, we believe it is prudent to hold the shares, currently trading at $35.56, and the Jan $35 2012 call.
Xyratex (XRTX): On December 20, 2010 we added Xyratex (XRTX) using the buy/write strategy and acquiring half the shares we wanted exposure to and selling March $15 calls and puts for a net $3.60. XRTX is trading at $11.14 today on expiration day, so the call side will expire worthless ($1.80 profit) and the puts will be exercised – the
by Sabrient - March 9th, 2011 2:42 pm
With February and the most of earnings season passing, we decided to "stand up and be counted" with a summary article on the VIRTUAL Dark Horse Traders’ Hedge (DHH) virtual portfolio.
Our mission has been to generate absolute returns through the use of a tilted Long/Short strategy that remains market neutral, but with a partial bias towards momentum (as defined by measuring the S&P 500 relative to its 50 and 200 day Moving Averages). We have been tilted to the long side since October 2010.
Over the long term, reasons for using such a strategy include being positioned to take advantage of both bull and bear runs. As evidenced by the near zero returns of the market over the last 10 years, buy-and-hold strategies are majorly flawed. The market also teaches hard lessons to those who attempt to predict direction, and has forced many retail investors to reconsider their strategies after being pounded in 2001 and 2008.
Alpha is a measure of a return over and above a benchmark index’s return, and Beta is a measure of the virtual portfolio’s performance as it is correlated to movements of the market. With DHH, we strive to optimize Alpha while minimizing Beta to protect our virtual portfolio in up and down markets. Beta is reduced by holding both Long and Short positions and using a rules-based approach to determine which stocks have the best chacteristics to benefit when the market is rising, and conversely to determine which stocks are most apt to perform poorly when the market is falling. In other words, we want to be long stocks of the best companies and short stocks of the worst companies – we want to identify the "tails" of a market, index, sector or basket of stocks.
by ilene - February 28th, 2011 4:02 pm
Bernie Madoff: The Market Is A Whole Rigged Job, And There’s No Chance That Investors Have In This Market
Courtesy of Timothy Naegele
Convicted swindler and consummate narcissist Bernard Madoff is serving a 150-year sentence at the Federal Correctional Institution in Butner, North Carolina for his $65 billion Ponzi scheme. He was interviewed by New York Magazine, and its terrific article states in pertinent part:
From the beginning, Madoff . . . had a chip on his shoulder, along with a certain contempt for the industry he’d chosen. “It was always a business where you had to have an edge, and the little guy never got a break. The institutions controlled everything,” he said in a voice surprisingly thick with emotion. “I realized from a very early stage that the market is a whole rigged job. There’s no chance that investors have in this market.”
. . .
At first, Madoff ground out a modest but steady income on the scraps of business tossed his way by Goldman Sachs and Bear Stearns, action that was too much trouble and too little profit for them. “I was perfectly happy to take the crumbs,” he said. Madoff was a market-maker, a middleman between those who wanted to buy and sell small quantities of mostly bonds—odd lots. “It was a riskless business,” he said. “You made the spread,” buying at one price and selling at a higher one, and in those days the spreads could be substantial, 50 or 75 cents or even a dollar a share. Madoff increased his profits by trading on the side.
. . .
Madoff wanted to grow his trading business, and a good way to do that was to expand his market-making business. But that meant going up against the New York Stock Exchange, the heart of the club. At the NYSE, a few firms controlled market-making, executing most large trades while getting rich on the spread. Madoff was one of the first to see that technology could match buyers and sellers more efficiently and cheaply than a human trader shouting orders amid a blizzard of paper on the floor of the exchange. By 1970, Madoff had hired his brother, Peter,
by ilene - February 27th, 2011 8:22 am
Here’s the latest edition of Stock World Weekly: Irresistible Forces Meet Immovable Objects. - Ilene
On Saturday, February 27, the Security Council of the United Nations (UN) voted unanimously to institute sanctions on Libya, including travel bans and freezing the assets of Muammar al-Gaddafi and others associated with his regime. Protests have dragged into their twelfth day, and protestors refuse to yield in the face of utterly horrific retaliation by Gaddafi’s loyal forces. U.S. ambassador to the UN, Susan Rice said, “When atrocities are committed against innocents, the international community must act with one voice – and tonight it has.”
The Telegraph reported over the weekend that Gaddafi apparently made good on his threats to trigger a civil war, using irregular forces largely composed of hired mercenaries to launch a counterattack against protesters. “Anywhere we go there is danger,” said one woman, a 28-year-old mother of four who asked not to be named. “All we want is food and fresh water for our children but it is impossible to find. Security is the only concern of the authorities.”
An accurate report of the death toll is impossible to obtain at this time, but on Wednesday, Italy’s Foreign Minister, Franco Frattini said, “We believe that the estimates of about 1,000 are credible.” The situation in Libya has deteriorated since then. Multiple stories coming in from all over the country have cited dozens to hundreds of casualties in each city. It appears that Libya has slipped into the abyss of complete social breakdown and civil war.
This is just one example of the tide of popular unrest that has been unleashed in the wake of the Federal Reserve’s and other central banks’ inflationary policies. The chart below shows the U.S. Adjusted Monetary Base increasing from $1.75Tn in 2009, to $2.0Tn in 2010, and now nearing $2.3Tn, an increase of $300Bn in just two months! This represents an increase of 35% in less than 18 months. (The U.S. Monetary Base is the total amount of currency that is circulating in the hands of the public or in the commercial bank deposits held in reserves of member banks of the Federal Reserve System.)
by ilene - February 16th, 2011 3:07 pm
Courtesy of Jesse’s Cafe Americain
As Ozzie Osbourne says, "All Aboard!" lol
The good news is that it will not be as straight down as this.
Keep your hands and head inside the train at all times.
Don’t worry. Trust in Ben and Tim.
And meanwhile in the Mideast…
Note: Most people think of stocks as the be all and end all of dollar financial assets. In the case of a burst of inflation or a hyperinflation, the equity market will soar for a time, although its gains will be illusory. So stocks are an insurance but not so much as you might expect if that is the outcome. Try not to get in front of it, as phony as you might think it may be. But the stock market is of much less consequence as compared to the bonds and currency markets. It is the three card monte to the bond and currency numbers rackets. The stock markets are the pretty lights and buildings that the tourists stare at while the carnies pick their pockets.
|"Higher and Higher. What Could Go Wrong?"|
|"What a Beautiful View At the Top. We’re the King of the World."|
|"Who Could Have Foreseen This? Remain Calm. All Is Well."|
And if the Fed should make a mistake, the efficient electronic trading markets are designed to be self-correcting.
by ilene - February 14th, 2011 1:09 pm
Courtesy of Joshua Brown, The Reformed Broker