Cumulative TICK as well as Sentiment
Trading With TICK
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Wednesday, May 31, 2006
Tuesday, May 30, 2006
Monday, May 29, 2006
Info!! Iv Lessons I've Learned From Coaching Hedge Fund Portfolio Managers
As someone who industrial plant every bit a coach/psychologist amongst portfolio managers at hedge funds on a regular basis, I accept the chance to run across the concern from several unique angles. I notice that, for the most part, writings from trading coaches as well as psychologists don't capture much of my experience. Just every bit at that topographic point is a large gap betwixt what is written most successful trading techniques as well as the actual techniques employed yesteryear professional person traders, at that topographic point is a pregnant gap betwixt what is written most the success of traders as well as how success genuinely manifests itself inwards settings such every bit hedge funds. Here are 5 lessons I've learned from coaching hedge fund traders/portfolio managers that differ from the mutual wisdom inwards the magazines, seminars, as well as books.
1) Success is Individualized - Many writers as well as coaches, understandably, promote detail models of success, emphasizing mutual features of successful traders. While I produce mean value at that topographic point is a mutual *process* to developing expertise, the notion that successful portfolio managers accept a mutual laid upwards of personality features or trading approaches precisely does non agree H2O inwards the existent world. It's much to a greater extent than of import that portfolio managers empathise as well as operationalize what industrial plant for them than stand upwards for a preconceived model of success. What industrial plant inwards 1 laid upwards of strategies as well as markets may non inwards others; what industrial plant for 1 trader is non helpful for others;
2) The Game is Different - This should become without saying, but it is rarely acknowledged: portfolio management inwards the hedge fund context is a unlike procedure from trading inwards the prop theatre or retail context. As the holler suggests, much of the success of portfolio management comes from managing ideas as well as positions over time, amongst multiple ways of expressing as well as hedging each idea. Too, many of these ideas are relational (relative forcefulness based), non directional, as well as cutting across markets as well as property classes. This requires unlike cognition as well as science sets than trading inwards as well as out of private markets amongst a directional bias. In particular, I notice that writers plough over brusk shrift to the cognition gene of portfolio management expertise.
3) The Environment Matters - Many writings on traders attribute success to private trader characteristics (personality, mindset, etc) as well as plough over really picayune rear to the purpose of the surroundings inwards the success of portfolio managers. The research, platform, chance management, as well as managerial back upwards of traders thing quite a bit--so much as well as therefore that portfolio managers who are successful inwards 1 setting may neglect at to a greater extent than or less other despite employing like strategies. How a portfolio director is managed matters quite a bit, as well as this is poorly understood.
4) Success Starts at the Beginning - Even really large hedge funds as well as investment banks are surprisingly unscientific when it comes to the hiring process. Much of portfolio manager/trader success or failure precisely comes from putting the incorrect people into positions. Because a portfolio director has made coin over the final X years, does non necessarily hateful that they'll brand coin inwards a unlike setting, inwards unlike marketplace seat conditions, or inwards a unlike government of coin management. There is much to last said for the stand upwards for betwixt portfolio director as well as the hedge fund every bit a firm, all the same the stand upwards for is oft non good understood--even yesteryear the firms themselves.
It would last cracking if helping hedge fund managers succeed was every bit unproblematic every bit keeping them unemotional, every bit many writings suggest. The reality of the run I produce calendar week inwards as well as calendar week out is that success is far to a greater extent than a percentage of applying specific science sets to specific marketplace seat weather condition as well as cultivating/maintaining unique ways of viewing marketplace seat relationships that capture opportunity. One size fits all approaches to coaching are of really limited utility inwards the existent globe of coin management. It's all most helping professionals utilize the experience, skills, as well as resources at their fingertips inwards ways that run for them.
RELATED POST:
Coaching Professional Traders
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1) Success is Individualized - Many writers as well as coaches, understandably, promote detail models of success, emphasizing mutual features of successful traders. While I produce mean value at that topographic point is a mutual *process* to developing expertise, the notion that successful portfolio managers accept a mutual laid upwards of personality features or trading approaches precisely does non agree H2O inwards the existent world. It's much to a greater extent than of import that portfolio managers empathise as well as operationalize what industrial plant for them than stand upwards for a preconceived model of success. What industrial plant inwards 1 laid upwards of strategies as well as markets may non inwards others; what industrial plant for 1 trader is non helpful for others;
2) The Game is Different - This should become without saying, but it is rarely acknowledged: portfolio management inwards the hedge fund context is a unlike procedure from trading inwards the prop theatre or retail context. As the holler suggests, much of the success of portfolio management comes from managing ideas as well as positions over time, amongst multiple ways of expressing as well as hedging each idea. Too, many of these ideas are relational (relative forcefulness based), non directional, as well as cutting across markets as well as property classes. This requires unlike cognition as well as science sets than trading inwards as well as out of private markets amongst a directional bias. In particular, I notice that writers plough over brusk shrift to the cognition gene of portfolio management expertise.
3) The Environment Matters - Many writings on traders attribute success to private trader characteristics (personality, mindset, etc) as well as plough over really picayune rear to the purpose of the surroundings inwards the success of portfolio managers. The research, platform, chance management, as well as managerial back upwards of traders thing quite a bit--so much as well as therefore that portfolio managers who are successful inwards 1 setting may neglect at to a greater extent than or less other despite employing like strategies. How a portfolio director is managed matters quite a bit, as well as this is poorly understood.
4) Success Starts at the Beginning - Even really large hedge funds as well as investment banks are surprisingly unscientific when it comes to the hiring process. Much of portfolio manager/trader success or failure precisely comes from putting the incorrect people into positions. Because a portfolio director has made coin over the final X years, does non necessarily hateful that they'll brand coin inwards a unlike setting, inwards unlike marketplace seat conditions, or inwards a unlike government of coin management. There is much to last said for the stand upwards for betwixt portfolio director as well as the hedge fund every bit a firm, all the same the stand upwards for is oft non good understood--even yesteryear the firms themselves.
It would last cracking if helping hedge fund managers succeed was every bit unproblematic every bit keeping them unemotional, every bit many writings suggest. The reality of the run I produce calendar week inwards as well as calendar week out is that success is far to a greater extent than a percentage of applying specific science sets to specific marketplace seat weather condition as well as cultivating/maintaining unique ways of viewing marketplace seat relationships that capture opportunity. One size fits all approaches to coaching are of really limited utility inwards the existent globe of coin management. It's all most helping professionals utilize the experience, skills, as well as resources at their fingertips inwards ways that run for them.
RELATED POST:
Coaching Professional Traders
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Sunday, May 28, 2006
Info!! Technical Forcefulness Of A Weak Market
My stair out of technical forcefulness quantifies the trending direct of 5 highly weighted stocks for each of viii S&P 500 Index ($SPX) sectors. The technical forcefulness stair out varies from +500 (very potent uptrend) to -500 (very potent downtrend), amongst readings nearly naught indicating a lack of trend.
Here are how the sector readings are looking for the viii sectors:
MATERIALS: -460
INDUSTRIALS: -500
CONSUMER DISCRETIONARY: -440
CONSUMER STAPLES: -420
ENERGY: -80
HEALTH CARE: -160
FINANCIAL: -460
TECHNOLOGY: -400
This is 1 of the weakest laid upward of technical forcefulness readings I've encountered; it's typical of markets inwards which all stocks together with sectors--the expert amongst the bad--are existence punished. I volition locomote publishing a review of marketplace indicators hither on the weblog tomorrow; I'm likewise starting to run past times on rail of stocks together with themes *not* making novel lows hither amongst the wide market.
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Here are how the sector readings are looking for the viii sectors:
MATERIALS: -460
INDUSTRIALS: -500
CONSUMER DISCRETIONARY: -440
CONSUMER STAPLES: -420
ENERGY: -80
HEALTH CARE: -160
FINANCIAL: -460
TECHNOLOGY: -400
This is 1 of the weakest laid upward of technical forcefulness readings I've encountered; it's typical of markets inwards which all stocks together with sectors--the expert amongst the bad--are existence punished. I volition locomote publishing a review of marketplace indicators hither on the weblog tomorrow; I'm likewise starting to run past times on rail of stocks together with themes *not* making novel lows hither amongst the wide market.
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Saturday, May 27, 2006
Info!! On The Radar For The Coming Week
* Crosscurrents inwards Islamic Republic of Iran policy - a "relative value" approach to trading sector ETFs in addition to follows upwards amongst follows upwards his stock screening recommendations amongst a functioning evaluation.
* Perspective on the Bear - Barry Ritholtz asks, "What makes a deport market?"
* No Panic? - There convey been a give away of comments well-nigh the lack of upside inwards the VIX; my spider web log hits convey likewise non shown their customary pinnacle during marketplace bottoms. Quantifiable Edges examines the relatively depression put/call ratio in addition to implications.
* Good Reads - Exploiting manufacture momentum in addition to our brains prevarication to us.
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* Perspective on the Bear - Barry Ritholtz asks, "What makes a deport market?"
* No Panic? - There convey been a give away of comments well-nigh the lack of upside inwards the VIX; my spider web log hits convey likewise non shown their customary pinnacle during marketplace bottoms. Quantifiable Edges examines the relatively depression put/call ratio in addition to implications.
* Good Reads - Exploiting manufacture momentum in addition to our brains prevarication to us.
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Info!! Indicator Review For June 30Th
most recent indicator review institute continuing marketplace weakness and, in i lawsuit again, we've seen to a greater extent than of the same this by week. The adjusted Demand/Supply Index (top chart) in conclusion hitting the -30 degree that has been typical of intermediate-term marketplace lows over the by few years, which suggests a real oversold market. On the mode to that level, however, we've seen an expansion inwards the number of NYSE, ASE, in addition to NASDAQ stocks making fresh 65-day lows (middle chart) in addition to a breakdown inwards the advance-decline business specific to NYSE mutual stocks (bottom chart; credit to recent await at the market's technical strength institute that the weakness has affected close of the major sectors. Only 17% of S&P 500 Index ($SPX) stocks are trading higher upwards their 50-day moving averages; that number is solely 13% for NASDAQ 100 Index ($NDX) issues in addition to 3% for Dow Industrials ($DJI) shares. Small caps accept been stronger, amongst 22% of S&P 600 Index ($SML) stocks higher upwards their 50-day benchmarks.
Among NYSE mutual stocks, nosotros had 24 stocks making 52-week novel highs on Fri against 289 lows. That compares to over 300 novel lows at the March bottom in addition to over 700 at the Jan bottom. Large cap issues--particularly inwards the Dow--are much weaker instantly than at those 2 prior junctures, but we've seen around residuum line amid modest cap in addition to midcap shares. For example, nosotros had solely 52 novel annual lows amid S&P 400 midcap stocks ($MID) in addition to 65 amid S&P 600 modest caps. Both those numbers are good below their Jan in addition to March peaks.
The bottom business is that nosotros are at oversold levels that historically accept led to intermediate-term bottoms, but we're non yet seeing signs of buyer involvement inwards stocks. To the contrary, we've seen a steady weakening of the marketplace indicators. As long equally that's the case, it's been unsafe to displace to grab the market's falling knives.
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Among NYSE mutual stocks, nosotros had 24 stocks making 52-week novel highs on Fri against 289 lows. That compares to over 300 novel lows at the March bottom in addition to over 700 at the Jan bottom. Large cap issues--particularly inwards the Dow--are much weaker instantly than at those 2 prior junctures, but we've seen around residuum line amid modest cap in addition to midcap shares. For example, nosotros had solely 52 novel annual lows amid S&P 400 midcap stocks ($MID) in addition to 65 amid S&P 600 modest caps. Both those numbers are good below their Jan in addition to March peaks.
The bottom business is that nosotros are at oversold levels that historically accept led to intermediate-term bottoms, but we're non yet seeing signs of buyer involvement inwards stocks. To the contrary, we've seen a steady weakening of the marketplace indicators. As long equally that's the case, it's been unsafe to displace to grab the market's falling knives.
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Friday, May 26, 2006
Info!! Coaching Hedge Fund Portfolio Managers: Bursting The Myths Of Trading Psychology
In my recent post, I passed along four things that I lead maintain learned from serving equally a trading rider vehicle for hedge fund portfolio managers. This post takes a dissimilar perspective, identifying several trading psychology "truths" that I lead maintain had to unlearn equally a trial of working alongside experienced professionals. Here are a few myths I've had to dump along the way:
1) Success is Largely a Function of Psychology - Simply non true. The portfolio director mostly has a kernel strategy that is implemented inwards dissimilar markets and/or across dissimilar instruments. This agency juggling large amounts of data over fourth dimension in addition to viewing markets multidimensionally for opportunity, extracting themes from the relative movements of national markets in addition to property classes. Success is a business office of information, creative thinking alongside that information, a deep agreement of what moves markets, in addition to sense alongside dissimilar marketplace seat conditions. Only when those are introduce does psychology matter.
2) Influenza A virus subtype H5N1 Good Trader Is One Who Makes Large Returns - Those who brand large returns alongside large risks are tomorrow's casualties. In the hedge fund world, y'all lose investors if y'all cannot rein inwards risk. It's the mightiness to generate consistent, pregnant risk-adjusted returns--not exactly large absolute returns--that matters inwards the long run. Successful portfolio managers don't exactly await at daily profitability. They actively evaluate the correlations amidst their positions, their levels of risk, in addition to their shifting horizons of risk/reward.
3) Execution Is a Huge Part of Success - When y'all lead maintain hundreds of millions of dollars or to a greater extent than to invest, y'all don't exactly click a mouse in addition to displace into a full-sized position. You scale into positions over fourth dimension then equally to non disrupt markets in addition to then equally to obtain expert prices. Similarly, y'all can't exactly conk many positions all straightaway when y'all lead maintain large portfolios, especially when some of your positions are inwards markets that lead maintain express liquidity. This is where the administration component subdivision of portfolio administration becomes crucial.
4) Opportunity is Limited - There are enough of markets to invest inwards if y'all lead maintain fifteen i 1000 1000 dollars. It is to a greater extent than challenging to notice opportunities for fifteen billion dollars. Firms are inwards a constant race to notice novel markets, novel spheres of opportunity. This lies behind the evolution of the latest quantitative trading models in addition to the evolution of frontier investment opportunities. For a daytrader, markets are e'er moving in addition to there's e'er a merchandise unopen to the corner. Not then inwards the larger Blue Planet of coin management. Much of the long-term success of large hedge funds hinges on their mightiness to force the chance envelope in addition to cultivate novel sources of edge.
I sometimes have shipping service from traders yell for me how they tin interruption into the hedge fund world. Success at portfolio administration is non exactly a larger version of success at trading private markets directionally. It's a dissimilar game, alongside a dissimilar idea process. Not many traders acquire that and, sadly, neither create many would-be coaches.
RELATED POSTS:
Three Myths of Trading Psychology
Resilience in addition to Success
.
1) Success is Largely a Function of Psychology - Simply non true. The portfolio director mostly has a kernel strategy that is implemented inwards dissimilar markets and/or across dissimilar instruments. This agency juggling large amounts of data over fourth dimension in addition to viewing markets multidimensionally for opportunity, extracting themes from the relative movements of national markets in addition to property classes. Success is a business office of information, creative thinking alongside that information, a deep agreement of what moves markets, in addition to sense alongside dissimilar marketplace seat conditions. Only when those are introduce does psychology matter.
2) Influenza A virus subtype H5N1 Good Trader Is One Who Makes Large Returns - Those who brand large returns alongside large risks are tomorrow's casualties. In the hedge fund world, y'all lose investors if y'all cannot rein inwards risk. It's the mightiness to generate consistent, pregnant risk-adjusted returns--not exactly large absolute returns--that matters inwards the long run. Successful portfolio managers don't exactly await at daily profitability. They actively evaluate the correlations amidst their positions, their levels of risk, in addition to their shifting horizons of risk/reward.
3) Execution Is a Huge Part of Success - When y'all lead maintain hundreds of millions of dollars or to a greater extent than to invest, y'all don't exactly click a mouse in addition to displace into a full-sized position. You scale into positions over fourth dimension then equally to non disrupt markets in addition to then equally to obtain expert prices. Similarly, y'all can't exactly conk many positions all straightaway when y'all lead maintain large portfolios, especially when some of your positions are inwards markets that lead maintain express liquidity. This is where the administration component subdivision of portfolio administration becomes crucial.
4) Opportunity is Limited - There are enough of markets to invest inwards if y'all lead maintain fifteen i 1000 1000 dollars. It is to a greater extent than challenging to notice opportunities for fifteen billion dollars. Firms are inwards a constant race to notice novel markets, novel spheres of opportunity. This lies behind the evolution of the latest quantitative trading models in addition to the evolution of frontier investment opportunities. For a daytrader, markets are e'er moving in addition to there's e'er a merchandise unopen to the corner. Not then inwards the larger Blue Planet of coin management. Much of the long-term success of large hedge funds hinges on their mightiness to force the chance envelope in addition to cultivate novel sources of edge.
I sometimes have shipping service from traders yell for me how they tin interruption into the hedge fund world. Success at portfolio administration is non exactly a larger version of success at trading private markets directionally. It's a dissimilar game, alongside a dissimilar idea process. Not many traders acquire that and, sadly, neither create many would-be coaches.
RELATED POSTS:
Three Myths of Trading Psychology
Resilience in addition to Success
.
Thursday, May 25, 2006
Wednesday, May 24, 2006
Info!! Views On Markets As Well As Traders
* Influenza A virus subtype H5N1 Philosophy of Coaching - Brief therapy perspectives on changing the patterns that remove on our trading.
* When History Doesn't Repeat - The recent spider web log post was quite applicable to Wednesday's trading: bullish expectations, bearish marketplace behavior. Seeing when markets deviate from their historical scripts itself becomes a useful indicator.
* Twittering Away - Suppose mortal was to warning you lot when credible articles on market-moving themes look online, notify you lot of economical reports due out for the trading day, together with summarize indicators that capture the trace together with weakness of the market--and suppose The Big Picture asks if the pundits are also optimistic, or if Earth is also gloomy.
* Triple Bottom? - Trader Mike finds this together with other worthy topics GlobeTrader offers odd insight into the dynamics of missing trades.
* Being Prepared - Ray Barros, amongst Great trading lesson from Brian Shannon.
* Market Wisdom - Chris Perruna offers choice quotes from Bernard Baruch.
* Messy Market - WSJ MarketBeat notes the beating inwards the coal sector together with cross-currents on a downwards day.
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* When History Doesn't Repeat - The recent spider web log post was quite applicable to Wednesday's trading: bullish expectations, bearish marketplace behavior. Seeing when markets deviate from their historical scripts itself becomes a useful indicator.
* Twittering Away - Suppose mortal was to warning you lot when credible articles on market-moving themes look online, notify you lot of economical reports due out for the trading day, together with summarize indicators that capture the trace together with weakness of the market--and suppose The Big Picture asks if the pundits are also optimistic, or if Earth is also gloomy.
* Triple Bottom? - Trader Mike finds this together with other worthy topics GlobeTrader offers odd insight into the dynamics of missing trades.
* Being Prepared - Ray Barros, amongst Great trading lesson from Brian Shannon.
* Market Wisdom - Chris Perruna offers choice quotes from Bernard Baruch.
* Messy Market - WSJ MarketBeat notes the beating inwards the coal sector together with cross-currents on a downwards day.
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Tuesday, May 23, 2006
Monday, May 22, 2006
Info!! Proprietary Trading Firms, Arcades, In Addition To Scams
I've received several emails lately inwards which traders asked me most joining proprietary firms that offering preparation for really high fees (many thousands of dollars/euros). The traders desire to know, "Are these firms legitimate?"
I accept really sincere doubts.
A proprietary trading theatre is 1 inwards which yous merchandise the working capital missive of the alphabet of the theatre inwards telephone substitution for a separate of profits. An arcade is a theatre inwards which yous merchandise your ain capital, only the companionship provides the trading infrastructure, including fellow member commissions/fees. At an arcade, yous pay for the overhead/commissions only move out on your profits. Prop firms tin move expert options for traders who lack sufficient working capital missive of the alphabet for a meaningful account; arcades tin move expert options for successful traders who create goodness from the lower overhead associated amongst economies of scale. Both options offering access to other traders, which tin move a benefit.
A theatre that charges for preparation amongst the hope of trading proprietary working capital missive of the alphabet sounds similar a scam. It reminds me of modeling "agencies" that accuse for classes amongst the hope of contracts that never materialize. They brand their coin from the preparation fees, non from splitting fees amongst successful professionals.
At the really least, if you're considering such an arrangement, practise due diligence together with brand certain that the theatre tin seat yous inwards comport on amongst traders who accept completed the preparation together with are immediately trading prop working capital missive of the alphabet for a living. If they can't create that, yous for certain know yous accept a scam. But let's confront it: if a theatre was successful inwards preparation traders together with was confident of their success, they'd brand enough of coin from the earnings splits. They wouldn't demand to beak traders into huge preparation fees amongst pretty promises.
And, really, is a several calendar week course of written report going to plough a beginner into a successful trader? Caveat emptor.
RELATED POST:
Joining a Prop Firm
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I accept really sincere doubts.
A proprietary trading theatre is 1 inwards which yous merchandise the working capital missive of the alphabet of the theatre inwards telephone substitution for a separate of profits. An arcade is a theatre inwards which yous merchandise your ain capital, only the companionship provides the trading infrastructure, including fellow member commissions/fees. At an arcade, yous pay for the overhead/commissions only move out on your profits. Prop firms tin move expert options for traders who lack sufficient working capital missive of the alphabet for a meaningful account; arcades tin move expert options for successful traders who create goodness from the lower overhead associated amongst economies of scale. Both options offering access to other traders, which tin move a benefit.
A theatre that charges for preparation amongst the hope of trading proprietary working capital missive of the alphabet sounds similar a scam. It reminds me of modeling "agencies" that accuse for classes amongst the hope of contracts that never materialize. They brand their coin from the preparation fees, non from splitting fees amongst successful professionals.
At the really least, if you're considering such an arrangement, practise due diligence together with brand certain that the theatre tin seat yous inwards comport on amongst traders who accept completed the preparation together with are immediately trading prop working capital missive of the alphabet for a living. If they can't create that, yous for certain know yous accept a scam. But let's confront it: if a theatre was successful inwards preparation traders together with was confident of their success, they'd brand enough of coin from the earnings splits. They wouldn't demand to beak traders into huge preparation fees amongst pretty promises.
And, really, is a several calendar week course of written report going to plough a beginner into a successful trader? Caveat emptor.
RELATED POST:
Joining a Prop Firm
.
Info!! Fear, No Panic, At The Marketplace Rank Disco
The Dow has been moving to deport marketplace lows together with the release of NYSE mutual stocks making fresh 52-week lows has taken out its March peak, but then far investors appear to endure seeing this equally to a greater extent than credit-related sin than tragedy. I've mentioned inward the by that at that topographic point hit got been spikes inward traffic on this weblog at recent intermediate-term lows (August, November, January, March). No such spike has yet occurred during the marketplace drop.
OK, mayhap it's but summertime doldrums inward weblog traffic. Maybe my readership has deserted me at the altar of the blogosphere. Still, let's expression upwards the information amongst a feel of poise together with rationality. As the nautical chart inward a higher house notes, the American Association of Individual Investors poll has besides shown spikes at those prior marketplace bottoms. We're instantly seeing an tiptop of bears inward the poll inward a higher house the 50% level, but the bearishness is to a greater extent than muted than inward Jan or March.
We're besides non seeing the Jan or March levels of bearishness inward the equity put/call ratio, together with for sure no panic has striking the disco inward the VIX, which remains below the 30+ grade seen at those prior marketplace lows.
Perhaps we'll yet successfully examination the March lows inward the S&P 500 Index and, technically nosotros tin endure saved together with pour the champagne. For now, however, I banking concern annotation the continued turn down inward the advance-decline business of NYSE mutual stocks to novel deport lows together with the continued turn down inward the cumulative NYSE TICK together with I'll stick amongst poise together with rationality: my door remains closed.
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Sunday, May 21, 2006
Info!! Message From The Materials Sector?
It was hard to non honor the swoon inward the coal sector (KOL; pinkish work above) this by week, fifty-fifty every bit materials stocks convey been inward steady retreat (XLB; bluish line).
Wasn't it only inward May that the materials sector was making bull marketplace highs, ascent to a greater extent than than 50% from its 2006 lows? Back inward May, nosotros saw over 85% of materials stocks trading higher upward their 50-day moving averages. At present, that is downwards to 7%. Over 70% of the sector's issues were trading higher upward their 200-day moving averages since May; at in 1 trial exclusively 21% are higher upward that benchmark. That's quite a retreat.
Notably, the advance-decline work specific to the XLB stocks has moved from a bull marketplace highs inward May to 15+ calendar month lows at present.
Back inward May, voracious increment inward the emerging economies was the floor behind the commodities-linked materials stocks. Now, amongst stock markets inward Bharat together with mainland People's Republic of China inward hasty retreat, markets may endure pricing inward the effects of a global recession.
This shift from an emerging markets increment floor to a really global recession subject has of import implications for commodities markets also every bit rates together with equities. Inflation has been making the headlines, fanning concerns over key banking venture charge per unit of measurement hikes, but falling materials shares may endure foretelling a real dissimilar economical future.
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Saturday, May 20, 2006
Info!! Weakness Begetting Weakness
As I was putting together my indicator review for the calendar week (which I'll post service tomorrow AM), I noticed how consistent the recent stock marketplace weakness has been:
* For half dozen consecutive sessions, nosotros convey had over 2500 stocks across the NYSE, ASE, in addition to NASDAQ making fresh 20-day lows. The highest publish of 20-day highs over that menstruum was 410.
* We convey had to a greater extent than stocks making 20-day lows than 20-day highs for twenty consecutive sessions.
I intend it's fair to nation that a rigid stock marketplace is 1 inwards which, over time, nosotros encounter to a greater extent than stocks making fresh 20-day highs than lows. Influenza A virus subtype H5N1 weak marketplace is 1 inwards which the publish of stocks making fresh lows outnumbers the publish making highs.
Above nosotros encounter the S&P 500 Index (SPY; bluish line) plotted against a cumulative business of novel 20-day highs minus lows from 2004 to the present. We tin halt encounter that the electrical flow marketplace forcefulness topped out inwards July, ahead of the Oct toll peak. We tin halt likewise encounter that the marketplace has been weakening since that time: the cumulative business of highs minus lows continues to fall.
One Definition of a deport marketplace is 1 inwards which lower prices neglect to attract buyers, leading to withal lower prices. If yous peruse the indicator reviews from the by several weeks, that is what nosotros convey been seeing.
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Friday, May 19, 2006
Info!! Indicator Review For July 7Th
Last week's indicator review noted that nosotros were oversold, but that indicators were weakening together with it was unsafe to endeavor to grab the falling knives. That turned out to endure pretty skilful advice, every bit nosotros became fifty-fifty to a greater extent than oversold (top chart)--reaching levels seen at recent intermediate-term marketplace bottoms--but continued to encounter an expansion of stocks making novel lows (middle chart). Buying sentiment, every bit measured past times the cumulative TICK (bottom chart) remains nowhere to endure seen, every bit bounces convey led to reversals. In short, the weak marketplace has larn weaker. Traders looking for signs of capitulation inwards the commons indicators convey been frustrated; it's been a grinding refuse rather than a sudden panic.
The advance-decline lines specific to NYSE mutual stocks together with S&P 500 issues convey both moved to comport marketplace lows this past times week. We've likewise seen an expansion inwards the number of stocks making fresh 52-week lows. The over-300 novel lows alongside NYSE mutual stocks eclipsed the March level, though the 90+ novel lows alongside S&P 500 stocks rest beneath the peaks from Jan together with March (though soundless expanding). Only 14% of NYSE stocks are trading higher upwardly their 50-day moving averages, likewise quite an oversold grade commensurate with recent intermediate-term marketplace bottoms.
When markets brand a bottom, nosotros similar to encounter divergences together with a narrowing of participation to the downside. Recently, however, the reverse has been the case. Sectors that had been strong, such every bit materials, convey joined the downside together with the modest caps, which had been showing relative strength, convey been quite weak of late. Indeed, entirely 14% of S&P 600 modest cap issues are trading higher upwardly their 50-day moving averages, downwards from 70% inwards May; a grade similar to the marketplace overall, every bit noted above.
With the widening number of issues making novel lows, the falling advance-decline lines, together with the weak sentiment/TICK, I in 1 trial once to a greater extent than am non inclined to endeavor to alternative the bottom. We're overdue for a bounce, together with we're at oversold levels that convey been associated with marketplace rallies. Until nosotros encounter only about stabilization alongside the housing together with banking issues, however, I suspect it volition endure hard to sustain whatever such rallies. As always, I volition endure updating many of these indicators inwards my daily Twitter posts, along with links to posts together with articles on marketplace moving themes.
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The advance-decline lines specific to NYSE mutual stocks together with S&P 500 issues convey both moved to comport marketplace lows this past times week. We've likewise seen an expansion inwards the number of stocks making fresh 52-week lows. The over-300 novel lows alongside NYSE mutual stocks eclipsed the March level, though the 90+ novel lows alongside S&P 500 stocks rest beneath the peaks from Jan together with March (though soundless expanding). Only 14% of NYSE stocks are trading higher upwardly their 50-day moving averages, likewise quite an oversold grade commensurate with recent intermediate-term marketplace bottoms.
When markets brand a bottom, nosotros similar to encounter divergences together with a narrowing of participation to the downside. Recently, however, the reverse has been the case. Sectors that had been strong, such every bit materials, convey joined the downside together with the modest caps, which had been showing relative strength, convey been quite weak of late. Indeed, entirely 14% of S&P 600 modest cap issues are trading higher upwardly their 50-day moving averages, downwards from 70% inwards May; a grade similar to the marketplace overall, every bit noted above.
With the widening number of issues making novel lows, the falling advance-decline lines, together with the weak sentiment/TICK, I in 1 trial once to a greater extent than am non inclined to endeavor to alternative the bottom. We're overdue for a bounce, together with we're at oversold levels that convey been associated with marketplace rallies. Until nosotros encounter only about stabilization alongside the housing together with banking issues, however, I suspect it volition endure hard to sustain whatever such rallies. As always, I volition endure updating many of these indicators inwards my daily Twitter posts, along with links to posts together with articles on marketplace moving themes.
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Thursday, May 18, 2006
Info!! 3 Themes I'm Tracking Inward The Stock Market
Is the stock marketplace probable to accept out its previous day's highs? Are nosotros probable to exam or intermission the prior day's lows? These are the questions I typically inquire during the opening minutes of trading. As the twenty-four hours unfolds, I sentinel short-term reckon (NYSE TICK, Market Delta) in addition to the behaviour of diverse marketplace sectors to handicap the odds of making diverse moves during the day.
Lately, much of the odds direct keep boiled downward to whether the marketplace is trading inwards what I telephone squall upwards "recession mode" or "recovery mode". In recession mode, at that topographic point is risk-aversion alongside stocks; inwards recovery trend nosotros encounter get produce hunting alongside the hardest hitting sectors. The 3 themes I've institute nearly helpful inwards tracking these modes are:
* Performance of the Financial Sector Relative to the Broad Market - I await at the banking sector ($BKX), the S&P 500 fiscal sector (XLF), in addition to private stocks that direct keep been vulnerable (LEH, MER, C, FNM). When the fiscal stocks are weak, the marketplace is inwards its risk-averse, recession trend in addition to I anticipate selling inwards the wide market;
* Performance of the Housing Sector Relative to the Broad Market - I await at the homebuilders ($HGX), simply too regional banks (KRE), every bit those direct keep exposure to loans to struggling housing developers. When the housing sector is weak, the marketplace is risk-averse in addition to anticipating farther recession.
* Performance of Consumer Staples Sector Relative to the Consumer Discretionary Sector - When the marketplace is anticipating recession in addition to inwards its risk-averse mode, nosotros encounter coin going into the to a greater extent than recession-resistant staples stocks (XLP) in addition to away from the discretionaries (XLY).
Today all 3 themes kicked into their risk-averse, recessionary modes. That was a corking enjoin for the day's direction. I suspect these themes volition too attention us position whatever eventual turnaround inwards this weak market. As long every bit traders in addition to investors anticipate farther bad intelligence in addition to losses from banking in addition to housing, however, they volition remain defensive--and that poses pressures for the residue of the stock market.
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Lately, much of the odds direct keep boiled downward to whether the marketplace is trading inwards what I telephone squall upwards "recession mode" or "recovery mode". In recession mode, at that topographic point is risk-aversion alongside stocks; inwards recovery trend nosotros encounter get produce hunting alongside the hardest hitting sectors. The 3 themes I've institute nearly helpful inwards tracking these modes are:
* Performance of the Financial Sector Relative to the Broad Market - I await at the banking sector ($BKX), the S&P 500 fiscal sector (XLF), in addition to private stocks that direct keep been vulnerable (LEH, MER, C, FNM). When the fiscal stocks are weak, the marketplace is inwards its risk-averse, recession trend in addition to I anticipate selling inwards the wide market;
* Performance of the Housing Sector Relative to the Broad Market - I await at the homebuilders ($HGX), simply too regional banks (KRE), every bit those direct keep exposure to loans to struggling housing developers. When the housing sector is weak, the marketplace is risk-averse in addition to anticipating farther recession.
* Performance of Consumer Staples Sector Relative to the Consumer Discretionary Sector - When the marketplace is anticipating recession in addition to inwards its risk-averse mode, nosotros encounter coin going into the to a greater extent than recession-resistant staples stocks (XLP) in addition to away from the discretionaries (XLY).
Today all 3 themes kicked into their risk-averse, recessionary modes. That was a corking enjoin for the day's direction. I suspect these themes volition too attention us position whatever eventual turnaround inwards this weak market. As long every bit traders in addition to investors anticipate farther bad intelligence in addition to losses from banking in addition to housing, however, they volition remain defensive--and that poses pressures for the residue of the stock market.
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Wednesday, May 17, 2006
Info!! The Psychology Of Profitability
the forecaster I wrote almost recently, which illustrated the touching of volatility on returns. (Both forecasters are Self-Inflicted Trading Problems
What Contributes to Profitability?
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What Contributes to Profitability?
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Info!! Preparing For Deport Stearns Ii?
Thanks to an warning reader for this heads upwards on Fed Chair Bernanke's recent vocalism communication posted to the FRB website. I institute this portion of the vocalism communication specially interesting:
In general, our organisation relies on marketplace dependent to constrain leverage too risk-taking past times financial firms, supplemented past times prudential oversight when authorities guarantees (such equally deposit insurance) or risks to full general financial stability are involved. However, the enormous losses too writedowns taken at financial institutions around the the world since August, equally good equally the run on Bear Stearns, demonstrate that, inwards this episode, neither marketplace dependent nor regulatory oversight succeeded inwards limiting leverage too risk-taking sufficiently to save financial stability.
What this suggests is a probable consensus amid the Fed, Treasury, too Congress that marketplace dependent (i.e., costless markets) is non plenty to ensure financial stability, too the electrical flow grade of rule is non sufficient to ensure stability. It is non accidental that this vocalism communication was titled, "Financial Regulation too Financial Stability."
So what would this new, enhanced regulatory regime hold off like? The Chair continues:
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In general, our organisation relies on marketplace dependent to constrain leverage too risk-taking past times financial firms, supplemented past times prudential oversight when authorities guarantees (such equally deposit insurance) or risks to full general financial stability are involved. However, the enormous losses too writedowns taken at financial institutions around the the world since August, equally good equally the run on Bear Stearns, demonstrate that, inwards this episode, neither marketplace dependent nor regulatory oversight succeeded inwards limiting leverage too risk-taking sufficiently to save financial stability.
What this suggests is a probable consensus amid the Fed, Treasury, too Congress that marketplace dependent (i.e., costless markets) is non plenty to ensure financial stability, too the electrical flow grade of rule is non sufficient to ensure stability. It is non accidental that this vocalism communication was titled, "Financial Regulation too Financial Stability."
So what would this new, enhanced regulatory regime hold off like? The Chair continues:
As portion of its review of how best to growth financial stability, too equally has been suggested past times Secretary Paulson, the Congress may wishing to visit whether novel tools are needed for ensuring an orderly liquidation of a systemically of import securities theater that is on the verge of bankruptcy, together amongst a to a greater extent than formal physical care for for deciding when to utilisation those tools. Because the resolution of a failing securities theater powerfulness have got financial implications, it would move appropriate for the Treasury to have got a leading role inwards whatever such process, inwards consultation amongst the firm's regulator too other authorities.
The details of whatever such tools too of the associated decisionmaking physical care for require to a greater extent than study. As Chairman Bair lately pointed out, ane possible model is the physical care for currently inwards house nether the Federal Deposit Insurance Corporation Improvement Act (FDICIA) for dealing amongst insolvent commercial banks. The FDICIA procedures laissez passer on the Federal Deposit Insurance Corporation (FDIC) the say-so to act equally a receiver for an insolvent depository financial establishment too to laid a brace depository financial establishment to facilitate an orderly liquidation of the firm. Influenza A virus subtype H5N1 brace depository financial establishment say-so is an of import machinery for minimizing populace losses from authorities intervention spell imposing losses on shareholders too unsecured creditors, thereby limiting moral jeopardy too mitigating whatever adverse behaviour upon of authorities intervention on marketplace discipline.
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Tuesday, May 16, 2006
Info!! Wednesday Perspectives On Markets In Addition To Trading
* Peak Oil - I've been reading the majority three themes worth tracking inward the electrical current market. Note how all 3 behaved during yesterday's reversal together with breakout: they choke on to endure worth tracking. There are many ways of next the themes; banker's complaint how Kirk is tracking many of them. On a dissimilar note, depository fiscal establishment jibe out Kirk's observation re: the importance of stepping exterior your comfort zone. We can't grow if we're e'er doing the same things; our anxiety sometimes points the means to our greatest development.
* Bipolar Markets - the importance of merchandise sizing from the Proprietary Trader blog.
* Poker Perspectives - Nice to bring Don Miller back; here's his views on poker together with trading.
* Good Reading - this interesting article on the challenges of serving every mo a therapist to the wealthy.
* Trading together with Market Views - I discovery the Greenfaucet site offers a position out of writers together with marketplace perspectives; worth a look.
* Trading From the Tape - MySMP offers merely about perspectives on trading alongside information from the fourth dimension together with sales window. See likewise their views on trading breakouts.
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* Bipolar Markets - the importance of merchandise sizing from the Proprietary Trader blog.
* Poker Perspectives - Nice to bring Don Miller back; here's his views on poker together with trading.
* Good Reading - this interesting article on the challenges of serving every mo a therapist to the wealthy.
* Trading together with Market Views - I discovery the Greenfaucet site offers a position out of writers together with marketplace perspectives; worth a look.
* Trading From the Tape - MySMP offers merely about perspectives on trading alongside information from the fourth dimension together with sales window. See likewise their views on trading breakouts.
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Monday, May 15, 2006
Info!! Unraveling The Mysteries Of The Idiot Wave
While rummaging through my attic, I discovered a collection of one-time manuscripts from Robert Nudnik Idiot, a physiologist as well as researcher into natural phenomena as well as the movements of stock markets. It was during physician Idiot's enquiry that he made a surprising discovery: the recurrence of the publish 10 inwards all human bodies he studied. With amazing regularity, each human trunk had 10 fingers, divided into ii groups of five. Not content to settle on this discovery, physician Idiot proceeded to written report the feet of his subjects. He was amazed to notice the same designing of 10 repeated inwards ii groups of 5 toes.
Gradually, the grouping of 10 into sets of five--the Idiot Wave--became the topic of the skillful Doctor's written report of natural phenomena. In religion, physician Idiot constitute that the tablets of Moses contained 10 commandments, alongside 5 on each side. He every bit good constitute that David Letterman invariably constructed his lists inwards groups of ten, alongside a commercial interruption inwards the middle. The Idiot Wave, it appears, is an organizing regulation for all of nature.
In an earth-shattering discovery, physician Idiot constitute that many of import marketplace turning points bring occurred 10 years apart, such every bit the marketplace lows of 1977 as well as 1987, alongside a "dividing low" at 1982, 5 years between. This human relationship of 10 every bit good appears to move fractal, occurring across fourth dimension frames. Last week, for instance, nosotros saw an of import marketplace turning indicate at 10 AM inwards New York as well as roughly other 1 at 10 AM inwards Los Angeles as well as 5 PM inwards London.
With considerable written report of physician Idiot's manuscripts, it is straightaway possible to unravel the secrets of the stock marketplace as well as utilise Idiot Wave principles to all forms of trading as well as investment. The habitation written report course of written report I'm developing volition learn y'all everything y'all require to know to merchandise Idiot style. It volition move available for $10,000, which you'll move able to pay inwards ii evenly-spaced installments of $5000. It's amazing how oftentimes that designing shows up...
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Gradually, the grouping of 10 into sets of five--the Idiot Wave--became the topic of the skillful Doctor's written report of natural phenomena. In religion, physician Idiot constitute that the tablets of Moses contained 10 commandments, alongside 5 on each side. He every bit good constitute that David Letterman invariably constructed his lists inwards groups of ten, alongside a commercial interruption inwards the middle. The Idiot Wave, it appears, is an organizing regulation for all of nature.
In an earth-shattering discovery, physician Idiot constitute that many of import marketplace turning points bring occurred 10 years apart, such every bit the marketplace lows of 1977 as well as 1987, alongside a "dividing low" at 1982, 5 years between. This human relationship of 10 every bit good appears to move fractal, occurring across fourth dimension frames. Last week, for instance, nosotros saw an of import marketplace turning indicate at 10 AM inwards New York as well as roughly other 1 at 10 AM inwards Los Angeles as well as 5 PM inwards London.
With considerable written report of physician Idiot's manuscripts, it is straightaway possible to unravel the secrets of the stock marketplace as well as utilise Idiot Wave principles to all forms of trading as well as investment. The habitation written report course of written report I'm developing volition learn y'all everything y'all require to know to merchandise Idiot style. It volition move available for $10,000, which you'll move able to pay inwards ii evenly-spaced installments of $5000. It's amazing how oftentimes that designing shows up...
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Sunday, May 14, 2006
Saturday, May 13, 2006
Info!! A Few Stock Marketplace Perspectives
as noted recently.
* Not a Good Decade for Stocks So Far: I took a await at the returns of the CPI-adjusted Dow Jones Industrial Average from 2000 to the present. The nominal Dow is downward around 200 points--about 2%. On an inflation-adjusted basis, however, the Dow is downward 23%. As a hedge against inflation, stocks convey non been cutting it. With housing forthwith retracing the gains of the by several years, 2 of import pillars of wealth accumulation look to convey toppled.
* Not Much Discretionary Income: With stocks in addition to housing inwards retreat in addition to to a greater extent than income going to basics such every bit nutrient in addition to gasoline, it's non surprising that consumer discretionary stocks (bottom chart) convey been making novel lows. As yous tin meet from the advance-decline business specific to the S&P 500 issues inwards the consumer discretionary sector (XLY), it's been a steady downtrend.
* Relative Sector Strength: Here are several S&P 500 sectors in addition to the percentages of their stocks that are higher upwards their 200-day moving averages:
The credit province of affairs in addition to recessionary surroundings are clearly weighing on fiscal in addition to consumer discretionary shares, respectively.
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* Not a Good Decade for Stocks So Far: I took a await at the returns of the CPI-adjusted Dow Jones Industrial Average from 2000 to the present. The nominal Dow is downward around 200 points--about 2%. On an inflation-adjusted basis, however, the Dow is downward 23%. As a hedge against inflation, stocks convey non been cutting it. With housing forthwith retracing the gains of the by several years, 2 of import pillars of wealth accumulation look to convey toppled.
* Not Much Discretionary Income: With stocks in addition to housing inwards retreat in addition to to a greater extent than income going to basics such every bit nutrient in addition to gasoline, it's non surprising that consumer discretionary stocks (bottom chart) convey been making novel lows. As yous tin meet from the advance-decline business specific to the S&P 500 issues inwards the consumer discretionary sector (XLY), it's been a steady downtrend.
* Relative Sector Strength: Here are several S&P 500 sectors in addition to the percentages of their stocks that are higher upwards their 200-day moving averages:
CONSUMER DISCRETIONARY - 11%
CONSUMER STAPLES - 29%
ENERGY - 87%
FINANCIAL - 9%
HEALTH CARE - 38%
INDUSTRIAL - 24%
MATERIALS - 31%
TECHNOLOGY - 20%
UTILITIES - 48%
CONSUMER STAPLES - 29%
ENERGY - 87%
FINANCIAL - 9%
HEALTH CARE - 38%
INDUSTRIAL - 24%
MATERIALS - 31%
TECHNOLOGY - 20%
UTILITIES - 48%
The credit province of affairs in addition to recessionary surroundings are clearly weighing on fiscal in addition to consumer discretionary shares, respectively.
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Friday, May 12, 2006
Info!! Adapting To Shifts Inward Marketplace Regimes
weekend reviews of data I watch nearly pertinent to the effect of whether the stock marketplace is strengthening or weakening. I update about of the information nearly of import to my ain trading each weekday morn Weakness Leading to Weakness
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Thursday, May 11, 2006
Info!! Non Also Big To Fail: Tracking A Decade Of Negative Stock Marketplace Put Returns
recently pointed out how the Dow Jones Industrial Average ($DJI) is downwards nearly 23% over the final decade on a existent (inflation-adjusted) basis.
Here nosotros run across the Dow adjusted for changes inwards the value of the dollar via the the U.S.A. Dollar Index. While the nominal Dow is alone downwards a few pct over the final decade, on a constant dollar basis, the Dow is downwards nearly 13%. While the pundits quibble over whether or non we're inwards a behaviour marketplace based upon the measure of a 20% decline, it's clear that--on a dollar-adjusted basis--we are downwards closer to 30% simply inwards the final year. Indeed, we're non too then far from testing the dollar-adjusted lows of 1998 too 2003.
We ask heed nearly bailouts of fiscal institutions too how taxpayers volition convey to "bear the burden". One burden borne yesteryear taxpayers is created when an economic scheme laden amongst debt papers it over amongst a weak currency. That creates an implicit revenue enhancement on everything from nutrient to gasoline. It also weighs on the existent returns of fiscal assets.
Over the yesteryear decade, the the U.S.A. dollar index has moved from a fleck over 100 to nearly 72. The flip side of beingness equally good big to neglect is beingness equally good pocket-sized to bail. So far, there's no bailout inwards sight for the private investor/consumer.
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Here nosotros run across the Dow adjusted for changes inwards the value of the dollar via the the U.S.A. Dollar Index. While the nominal Dow is alone downwards a few pct over the final decade, on a constant dollar basis, the Dow is downwards nearly 13%. While the pundits quibble over whether or non we're inwards a behaviour marketplace based upon the measure of a 20% decline, it's clear that--on a dollar-adjusted basis--we are downwards closer to 30% simply inwards the final year. Indeed, we're non too then far from testing the dollar-adjusted lows of 1998 too 2003.
We ask heed nearly bailouts of fiscal institutions too how taxpayers volition convey to "bear the burden". One burden borne yesteryear taxpayers is created when an economic scheme laden amongst debt papers it over amongst a weak currency. That creates an implicit revenue enhancement on everything from nutrient to gasoline. It also weighs on the existent returns of fiscal assets.
Over the yesteryear decade, the the U.S.A. dollar index has moved from a fleck over 100 to nearly 72. The flip side of beingness equally good big to neglect is beingness equally good pocket-sized to bail. So far, there's no bailout inwards sight for the private investor/consumer.
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Wednesday, May 10, 2006
Info!! Banking On Bailouts: How Many Indymacs Are Out There?
In what has been billed the third-largest banking concern failure on record, IndyMac Bank has been taken over past times federal regulators. According to a weekend Wall St. Journal story, the bank's collapse volition cost the Federal Deposit Insurance Corp. betwixt $4 billion in addition to $8 billion. That would exhaust over 10% of the entire deposit insurance fund of the FDIC.
That eye-opening statistic led me to wonder how many to a greater extent than IndyMac banks powerfulness last lurking inwards the wings. We had around alarm to the gravity of IndyMac's province of affairs exactly past times next its stock price, every bit shares moved from over $10 early on inwards the yr to nether $2 past times May. Perhaps year-to-date stock surgery powerfulness alarm us to other candidates for seizure--and farther challenges for the FDIC.
With the handle of information from the splendid Barchart site, I tracked the year-to-date surgery of every publicly traded banking concern in addition to savings in addition to loan institution. I especially focused on 2 groups of companies: those that conduct keep enjoyed a ascent stock marketplace pose surgery year-to-date in addition to those that conduct keep severely underperformed the market. I measured this latter grouping inwards 2 ways: those that autumn into the lowest 20% of year-to-date performers across all NYSE, NASDAQ, in addition to ASE issues in addition to those that autumn into the lowest 10%. Mr. Market is alerting us to the possibility of an IndyMac-like demise for this latter group, the bulk of which are downwardly to a greater extent than than 60% on the year.
Interestingly, I constitute 33 banks in addition to savings in addition to loan institutions that are upward year-to-date inwards their stock marketplace pose performance. They are outperforming the wide stock market, in addition to they are trouncing their sector peers. Many are yielding 3% or to a greater extent than in addition to conduct keep enjoyed enterprise earnings growth. I took it upon myself to expect upward a few annual reports for these fiscal institutions. All seem to conduct keep conservative lending practices, amongst no subprime residential loans in addition to no major occupation loans to overextended existent estate developers.
Many of these high performing banks are located inwards decidedly unsexy areas where in that location was no existent estate boom. Two of the banks, for example, are located inwards my onetime hometowns of Syracuse in addition to Ithaca, NY. More than 10 of the banks were located inwards the Northeast; exclusively ane was inwards the West.
The banking concern in addition to savings in addition to loan stocks falling into the bottom 20% of all marketplace pose performers were far to a greater extent than numerous: in that location were 113 inwards all. Of these, 45 are severe laggards, falling into the bottom 10% of marketplace pose performers. Interestingly, close one-half of these are located inwards the West in addition to Southeast regions of the country: 2 of the hotter existent estate markets during the boom. And the large regional banks? Seven autumn into the underperforming category; 2 inwards the lowest group. None are upward on the year.
The housing crisis does non seem to last over in addition to nevertheless the marketplace pose is already warning us of at to the lowest degree 45 banks inwards straits potentially similar to IndyMac. Many to a greater extent than of the grouping of 113 may bring together that listing every bit the housing province of affairs unfolds, particularly amid smaller banks. Meanwhile, I respect on the Bankrate site that many of the banks offering the juiciest CD rates are those on my listing of stock marketplace pose handbasket cases. It's understandable that they want/need to heighten capital, but if the banks cannot fund those juicy returns, it volition exclusively last a larger telephone phone on FDIC funds. That is a demand that the FDIC is ill-prepared to meet, given its historically depression reserve ratio, raising the unpleasant prospect of bailing out the regulators.
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That eye-opening statistic led me to wonder how many to a greater extent than IndyMac banks powerfulness last lurking inwards the wings. We had around alarm to the gravity of IndyMac's province of affairs exactly past times next its stock price, every bit shares moved from over $10 early on inwards the yr to nether $2 past times May. Perhaps year-to-date stock surgery powerfulness alarm us to other candidates for seizure--and farther challenges for the FDIC.
With the handle of information from the splendid Barchart site, I tracked the year-to-date surgery of every publicly traded banking concern in addition to savings in addition to loan institution. I especially focused on 2 groups of companies: those that conduct keep enjoyed a ascent stock marketplace pose surgery year-to-date in addition to those that conduct keep severely underperformed the market. I measured this latter grouping inwards 2 ways: those that autumn into the lowest 20% of year-to-date performers across all NYSE, NASDAQ, in addition to ASE issues in addition to those that autumn into the lowest 10%. Mr. Market is alerting us to the possibility of an IndyMac-like demise for this latter group, the bulk of which are downwardly to a greater extent than than 60% on the year.
Interestingly, I constitute 33 banks in addition to savings in addition to loan institutions that are upward year-to-date inwards their stock marketplace pose performance. They are outperforming the wide stock market, in addition to they are trouncing their sector peers. Many are yielding 3% or to a greater extent than in addition to conduct keep enjoyed enterprise earnings growth. I took it upon myself to expect upward a few annual reports for these fiscal institutions. All seem to conduct keep conservative lending practices, amongst no subprime residential loans in addition to no major occupation loans to overextended existent estate developers.
Many of these high performing banks are located inwards decidedly unsexy areas where in that location was no existent estate boom. Two of the banks, for example, are located inwards my onetime hometowns of Syracuse in addition to Ithaca, NY. More than 10 of the banks were located inwards the Northeast; exclusively ane was inwards the West.
The banking concern in addition to savings in addition to loan stocks falling into the bottom 20% of all marketplace pose performers were far to a greater extent than numerous: in that location were 113 inwards all. Of these, 45 are severe laggards, falling into the bottom 10% of marketplace pose performers. Interestingly, close one-half of these are located inwards the West in addition to Southeast regions of the country: 2 of the hotter existent estate markets during the boom. And the large regional banks? Seven autumn into the underperforming category; 2 inwards the lowest group. None are upward on the year.
The housing crisis does non seem to last over in addition to nevertheless the marketplace pose is already warning us of at to the lowest degree 45 banks inwards straits potentially similar to IndyMac. Many to a greater extent than of the grouping of 113 may bring together that listing every bit the housing province of affairs unfolds, particularly amid smaller banks. Meanwhile, I respect on the Bankrate site that many of the banks offering the juiciest CD rates are those on my listing of stock marketplace pose handbasket cases. It's understandable that they want/need to heighten capital, but if the banks cannot fund those juicy returns, it volition exclusively last a larger telephone phone on FDIC funds. That is a demand that the FDIC is ill-prepared to meet, given its historically depression reserve ratio, raising the unpleasant prospect of bailing out the regulators.
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Monday, May 8, 2006
Info!! Indicator Review For July 14Th
Last week's indicator review noted that it was unwise to engage inwards bottom picking, given the expanding weakness across the bulk of indicators. That proved to move a audio policy, every 2d nosotros striking fresh send marketplace position cost lows during the week. Three of the nearly of import themes leading the marketplace position continued to signal to weakness, together with a heads upwardly from the Chair alerted us to regime intervention--first amongst IndyMac, together with then amongst Fannie together with Freddie. The concluding large intervention--with Bear Stearns--stemmed a marketplace position spend upwardly inwards March together with led to a respectable rally. Might that move the illustration this fourth dimension around every 2d well?
Interestingly, every 2d the Fed made its intentions known, the indicators remained weak, simply stopped getting weaker. As nosotros continued to brand cost lows into Fri inwards the S&P 500 large cap stocks ($SPX), the Russell 2000 pocket-sized cap issues held to a higher house their lows from early on inwards the week. This was reflected across a attain of indicators: on Friday, the number of stocks making 65-day highs minus lows held to a higher house the levels from Mon (top chart); the advance-decline trouble specific to NYSE mutual stocks (middle chart; credit to As I noted on Friday, if this departure is meaningful, nosotros should come across practiced buying off the lows early on this week. So far, nosotros are seeing a bounce inwards stock index futures every 2d I write this, inwards reply to the Treasury's back upwardly of the GSEs. I volition sentry the financial/banking together with housing stocks specially closely to come across if the regime actions stalk the selling inwards these nearly vulnerable sectors. Also maintain an oculus on the consumer discretionary sector (XLY), which has borne the brunt of the market's recessionary expectations. Given the resilience of the indicators belatedly inwards the week, it would non surprise me to come across some abrupt short-covering ahead, especially amid these beaten downwardly sectors. If that is going to happen, nosotros should come across some sustained positive activeness inwards the NYSE TICK; I'll move updating that indicator shortly. And, every 2d always, I'll move updating some of my favorite indicators daily via the Twitter app, along amongst links to timely posts on fundamental marketplace position themes.
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Interestingly, every 2d the Fed made its intentions known, the indicators remained weak, simply stopped getting weaker. As nosotros continued to brand cost lows into Fri inwards the S&P 500 large cap stocks ($SPX), the Russell 2000 pocket-sized cap issues held to a higher house their lows from early on inwards the week. This was reflected across a attain of indicators: on Friday, the number of stocks making 65-day highs minus lows held to a higher house the levels from Mon (top chart); the advance-decline trouble specific to NYSE mutual stocks (middle chart; credit to As I noted on Friday, if this departure is meaningful, nosotros should come across practiced buying off the lows early on this week. So far, nosotros are seeing a bounce inwards stock index futures every 2d I write this, inwards reply to the Treasury's back upwardly of the GSEs. I volition sentry the financial/banking together with housing stocks specially closely to come across if the regime actions stalk the selling inwards these nearly vulnerable sectors. Also maintain an oculus on the consumer discretionary sector (XLY), which has borne the brunt of the market's recessionary expectations. Given the resilience of the indicators belatedly inwards the week, it would non surprise me to come across some abrupt short-covering ahead, especially amid these beaten downwardly sectors. If that is going to happen, nosotros should come across some sustained positive activeness inwards the NYSE TICK; I'll move updating that indicator shortly. And, every 2d always, I'll move updating some of my favorite indicators daily via the Twitter app, along amongst links to timely posts on fundamental marketplace position themes.
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Sunday, May 7, 2006
Info!! A Regional Banking Concern Collapse: No Moral Peril Here
continued banking concern weakness together with the realization that funds idea secure may non autumn inside FDIC insurance limits later on all, nosotros may run into depositors besides equally shareholders flee from the fiscal hazards that accrue inwards the absence of moral ones.
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Info!! Keeping Opened Upwards Minds Inwards Roiling Markets: Overcoming Endowment Effects Inwards Trading
Noting that smaller cap stocks held upwards reasonably good belatedly final week together with seeing that nosotros had a prissy overnight bounce inwards stocks thank yous to the annunciation of the government's innovation to back upwards FNM together with FRE, I was leaning to the long side at the laid about of the day. I didn't bring an overnight order together with decided to permit the marketplace verbalize for itself i time trading commenced.
As yous tin sack come across from the distribution of the NYSE TICK above, sellers dominated from the outset. Many to a greater extent than stocks were transacting at their bid cost than at their offers. The blue, five-period moving average of the TICK (which is scaled at left) spent essentially the entire solar daytime below the zilch (pink) line. That is quite unusual. Just seeing that extreme distribution of real-time thought was plenty to continue me out of trouble. My hypothesis close the day's activity was wrong; seeing that quickly--and having the mental flexibility to admit it--was fundamental to the day's success.
Once we're inwards a large position, it is to a greater extent than hard to keep that mental flexibility. Part One, Part Two, Part Three
Attribution together with Bias Among Traders
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As yous tin sack come across from the distribution of the NYSE TICK above, sellers dominated from the outset. Many to a greater extent than stocks were transacting at their bid cost than at their offers. The blue, five-period moving average of the TICK (which is scaled at left) spent essentially the entire solar daytime below the zilch (pink) line. That is quite unusual. Just seeing that extreme distribution of real-time thought was plenty to continue me out of trouble. My hypothesis close the day's activity was wrong; seeing that quickly--and having the mental flexibility to admit it--was fundamental to the day's success.
Once we're inwards a large position, it is to a greater extent than hard to keep that mental flexibility. Part One, Part Two, Part Three
Attribution together with Bias Among Traders
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Saturday, May 6, 2006
Info!! Is Gilded An Effective Hedge Against The U.S. Dollar?
With the recent crisis amid financial institutions promising farther economical weakness as well as an expansion of financial deficits, the turn down inwards the U.S. dollar (blue describe of piece of occupation above) has gotten the attending of traders as well as investors. I've been hearing item utter of hedging this dollar weakness through the buy of gilded every bit an option currency. But is gilded an effective dollar hedge?
There's no denying its recent appeal. Over the concluding 3 trading sessions, book inwards the gilded ETF (GLD) has risen to over xx meg shares each day. That's easily twice the average book over the concluding few months as well as the highest three-day total since the Bear Stearns crisis inwards March.
As the nautical chart to a higher house indicates, since 2005 gilded (pink line) as well as the U.S. Dollar Index (blue line) convey been traversing contrary paths. The correlation of daily changes inwards gilded as well as USDX was -.31 from January, 2005 through June, 2007. Since that time, it has soared to -.54. Over a quarter of the daily variance inwards the U.S. dollar as well as gilded has been shared, suggesting that it has, indeed, been a sort of hedge.
When I went dorsum to November, 1985--the kickoff dates for which I convey both U.S. Dollar Index as well as cash gilded data--I flora that the correlation of daily toll changes betwixt the ii has been -.26. That led me to surmise that the electrical flow correlation powerfulness endure historically high.
What I flora was that the correlation of daily toll changes inwards gilded as well as the dollar from January, 1986 through December, 2002 was -.20. Since the start out of 2003, that correlation has to a greater extent than than doubled to -.43. Interestingly, the menses of the correlation's expansion has too been a menses inwards which the U.S. dollar has fallen past times to a greater extent than than 28% to modern lows.
The information advise that, since the marked weakness inwards the U.S. dollar, gilded has increased its move every bit an effective dollar hedge. Given the surge of involvement inwards gilded during March as well as straight off inwards the concluding few days, it wouldn't surprise me if participation inwards the gilded marketplace too emerges every bit a sort of persuasion indicator for the dollar.
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Friday, May 5, 2006
Info!! Trading Psychology, Tax-Free Bonds In Addition To Geography, In Addition To More
this post in addition to pointed out that nosotros are seeing the same blueprint repeated at present. Indeed, equity pose book has right away exceeded equity telephone telephone book for vii consecutive trading sessions, a province of affairs that inwards the recent yesteryear has been associated alongside marketplace bounces.
* Tax-Free Bond Pricing yesteryear Geography - I took a expression at iv Vanguard state-specific long-term, tax-free bond funds. Two are from formerly hot existent estate regions, California (VCITX) in addition to Florida (VFLTX), in addition to 2 are from the northeast, Massachusetts (VMATX) in addition to New York (VNYTX), which has experienced less boom/bust. Recall that I constitute banking concern functioning weakest inwards the West in addition to Southeast. Since July of 2007 (chart at top), we've seen the weakest toll functioning amid the tax-free funds inwards California. Florida in addition to California tax-free bonds inwards the funds are yielding near xx solid set down points to a greater extent than than bonds from N.Y. in addition to Massachusetts for bonds of like duration. Should housing in addition to economical slowdown progress to the indicate of threatening the budgets of municipalities, I would expression these divergences to widen.
* Changing Expectations - Note the rally of short-term Treasury Federal Reserve notation prices (SHY) to multi-week highs. We've seen two-year notes lose something on the guild of xxx solid set down points inwards only the final 2 trading sessions, a huge deed for that market. This suggests quite a shift inwards rates watch from inflationary concerns (and anticipation of Fed tightening) to recessionary concerns (and anticipation of growing economical weakness).
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* Tax-Free Bond Pricing yesteryear Geography - I took a expression at iv Vanguard state-specific long-term, tax-free bond funds. Two are from formerly hot existent estate regions, California (VCITX) in addition to Florida (VFLTX), in addition to 2 are from the northeast, Massachusetts (VMATX) in addition to New York (VNYTX), which has experienced less boom/bust. Recall that I constitute banking concern functioning weakest inwards the West in addition to Southeast. Since July of 2007 (chart at top), we've seen the weakest toll functioning amid the tax-free funds inwards California. Florida in addition to California tax-free bonds inwards the funds are yielding near xx solid set down points to a greater extent than than bonds from N.Y. in addition to Massachusetts for bonds of like duration. Should housing in addition to economical slowdown progress to the indicate of threatening the budgets of municipalities, I would expression these divergences to widen.
* Changing Expectations - Note the rally of short-term Treasury Federal Reserve notation prices (SHY) to multi-week highs. We've seen two-year notes lose something on the guild of xxx solid set down points inwards only the final 2 trading sessions, a huge deed for that market. This suggests quite a shift inwards rates watch from inflationary concerns (and anticipation of Fed tightening) to recessionary concerns (and anticipation of growing economical weakness).
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Thursday, May 4, 2006
Info!! Tracking A Rigid Stock Market
I late showed what the distribution of the NYSE TICK looks similar on a real weak day. Wed gave us an chance to run into how the TICK behaves on an peculiarly potent day. The blueish work represents a five-period moving average, too we're looking at how the work behaves relative to the horizontal pink, cipher work (scale for the moving average of TICK is at left). We tin run into the rising gradient of the moving average work too the fashion inwards which the work stayed inwards a higher house cipher throughout piece of cake morning time too all afternoon. Add to that the forcefulness inwards the leading themes we've been tracking, equally noted inwards the morning time Twitter post, too it made for an fantabulous trading day.
Wednesday, May 3, 2006
Info!! Trading Breakouts Together With Other Marketplace Themes
very potent NYSE TICK days. As I noted multiple marketplace themes, it gains credence. Check out this a give-and-take cloud for the Fed chair.
* Tracking Blogs - I nonetheless intend Great quote from Brian at AlphaTrends.
* Last Frontier? - Thanks to an alarm reader inwards South Africa for this link to an article on Africa equally the concluding investment frontier.
* Trading for a Living - An interesting formula on how much working capital missive of the alphabet traders need from The Proprietary Trader.
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* Tracking Blogs - I nonetheless intend Great quote from Brian at AlphaTrends.
* Last Frontier? - Thanks to an alarm reader inwards South Africa for this link to an article on Africa equally the concluding investment frontier.
* Trading for a Living - An interesting formula on how much working capital missive of the alphabet traders need from The Proprietary Trader.
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Tuesday, May 2, 2006
Info!! Preferred Stocks: Anything Exactly Dull
this 2002 article from Forbes titled "Dull is Good: Preferred Stocks". As the charts for 2 preferred stock ETFs higher upwards depict, preferred stocks bring been anything merely irksome inwards recent weeks.
The argue for this, as Index Universe points out, is that the bulk of preferred shares are issued yesteryear companies inwards the fiscal sector. As the banks as well as other fiscal issues bring cratered as well as and hence bounced sharply higher, their preferred shares bring followed suit. The charts for PFF (PowerShares Financial Preferred Portfolio ETF; tiptop chart) as well as PGF (iShares S&P United States of America Preferred Stock Index Fund ETF; bottom chart) exhibit a considerable book spike inwards recent sessions, every bit investors bring questioned the viability of banks as well as worried nearly associated risks of default.
Among the tiptop holdings for PFF are preferred shares inwards Ford Motor, Citigroup, Countrywide, as well as J.P. Morgan Chase. Among tiptop holdings for PGF are preferred shares inwards Barclays, Citigroup, Credit Suisse, Merrill Lynch, as well as Wachovia. If investors idea those preferred dividends were secure, we'd come across a lot less volatility inwards those shares than inwards the mutual stock. When preferred shares autumn 25% inwards a affair of days, we're either seeing the buying chance of a lifetime or an efficient marketplace pricing inwards worse things to come for these companies.
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The argue for this, as Index Universe points out, is that the bulk of preferred shares are issued yesteryear companies inwards the fiscal sector. As the banks as well as other fiscal issues bring cratered as well as and hence bounced sharply higher, their preferred shares bring followed suit. The charts for PFF (PowerShares Financial Preferred Portfolio ETF; tiptop chart) as well as PGF (iShares S&P United States of America Preferred Stock Index Fund ETF; bottom chart) exhibit a considerable book spike inwards recent sessions, every bit investors bring questioned the viability of banks as well as worried nearly associated risks of default.
Among the tiptop holdings for PFF are preferred shares inwards Ford Motor, Citigroup, Countrywide, as well as J.P. Morgan Chase. Among tiptop holdings for PGF are preferred shares inwards Barclays, Citigroup, Credit Suisse, Merrill Lynch, as well as Wachovia. If investors idea those preferred dividends were secure, we'd come across a lot less volatility inwards those shares than inwards the mutual stock. When preferred shares autumn 25% inwards a affair of days, we're either seeing the buying chance of a lifetime or an efficient marketplace pricing inwards worse things to come for these companies.
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Info!! Forex Trading Expo
Just a quick regime notation for whatever readers that mightiness last assist the Forex Trading Expo inwards Las Vegas, September 12-13, 2008. I'll last a keynote speaker on Sabbatum the 13th as well as volition last merely about much of the twelfth for anyone who would similar to choke acquainted. The program includes exhibits as well as educational sessions, along amongst the keynote addresses. It volition last held at the Mandalay Bay Resort, as well as thus at that spot should last enough to produce when you're non assist sessions!
My keynote address volition address some of the topics from the novel book, focusing on how traders tin effectively omnibus themselves. Do driblet me a trouble if y'all excogitation on attending; my e-mail address is on the spider web log page inwards the department "About Me".
Brett
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My keynote address volition address some of the topics from the novel book, focusing on how traders tin effectively omnibus themselves. Do driblet me a trouble if y'all excogitation on attending; my e-mail address is on the spider web log page inwards the department "About Me".
Brett
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Monday, May 1, 2006
Info!! Crude Volatility As Well As Marketplace Lay Psychology Perspectives For A Weekend
Great historical study of how cost patterns evolve over fourth dimension inward the stock market.
* Extreme Negative Sentiment This Past Week - Interesting observations from Richard Peterson's blog, which covers both trader as well as marketplace position psychology.
* Hope Comes at a Cost - Great historical study of how cost patterns evolve over fourth dimension inward the stock market.
* Extreme Negative Sentiment This Past Week - finds a worthwhile edge.
* Thanks - For the continued positive comments on the Twitter posts, which accept expanded to include links to fundamental marketplace position themes, summary of marketplace position indicators, upcoming economical reports, as well as occasional marketplace position observations.
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* Extreme Negative Sentiment This Past Week - Interesting observations from Richard Peterson's blog, which covers both trader as well as marketplace position psychology.
* Hope Comes at a Cost - Great historical study of how cost patterns evolve over fourth dimension inward the stock market.
* Extreme Negative Sentiment This Past Week - finds a worthwhile edge.
* Thanks - For the continued positive comments on the Twitter posts, which accept expanded to include links to fundamental marketplace position themes, summary of marketplace position indicators, upcoming economical reports, as well as occasional marketplace position observations.
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