Morning Call [8:04am ET] It’s about time we seriously consider and take actions to stop the destruction of private wealth caused by the politicians we elect. I say, if you can’t beat them, join them; profit from the next great depression as many people did in the 1930’s.
To me the issue is straightforward: continue to elect people who support government deficits and debt, and personally hedge that decision by withdrawing from the securities markets and invest in precious metals bullion and coins.
Yes, I find the following news rather disconcerting. Fraser Institute, Canada's leading public policy think-tank, has reported that the federal government's $47.2 billion Economic Action Plan, contributed little to Canada's economic turnaround in 2009.
"With the Canadian economy now recovering, it is critical to measure government attempts to stimulate the economy and determine their effect. What we now see is that the stimulus packages put in place by Canadian governments in 2009 created massive government deficits, resulting in increased debt while contributing little to the economic turnaround," the Fraser Institute senior economist said.
Fifteen hundred dollars for every man, woman and child in the country sent down the drain in a year. That’s unacceptable. It’s also going to be denied by the reprobates who were sent to Ottawa to serve and protect, not destroy.
What really is disturbing is that among G-8 countries, the politicians of Canada and Germany are best of breed as proven over the past generation of budget management versus wealth destruction caused by government. I wonder what the Fraser Institute would say about the other countries, which are much worse. It certainly wouldn’t be good news.
In any case, we independent traders may have little control over our elected representatives, but at least we can take action that protects our wealth. Some people may argue that by withdrawing from capital markets, we are putting ourselves out of work. My response would be that we are paying for any jobs a bankrupt system creates; the income is merely a return of capital. What is needed is to create wealth through building economic assets, i.e., using land and labor and capital to build new goods and services that buyers will pay enough to result in profits that after taxes amount to something more than inflation, enough to compensate for the contributions we make and the risks we take.
But for some reason, politicians don’t see it that way; they think that adding debt creates wealth, but it doesn’t because waste, inefficiency, destruction, and so forth, the amount of the debt will exceed the asset. Creating wealth is a job for the private sector, people who understand double entry bookkeeping and know that assets equal liabilities plus equity, and that when assets fall short of liabilities, there is negative equity. I mean this is really not rocket science. Yet, politicians who must run their household budgets on that same principle suddenly combine to create legislation that results in deficits and debt the people cannot afford. Is it stupidity, greed, or hunger for power, or all three that makes them act the way they do? Whatever it is, we have to get it stopped somehow.
We can start by assigning a precious metal value to each candidate for election. We can then decide to either vote for people who are in it for the gold or those who will allow the private sector to do its job.
There are, I regret to say, many of us who now believe there is a growing movement among politicians who are in it for the gold who would pass legislation to once again prohibit the people in their domain from owning gold. Yes, I believe that “Power tends to corrupt, and absolute power corrupts absolutely,” so we need to take steps to defend ourselves. One way is to invest in the shares of companies that are mining or developing mines of precious metals in jurisdictions that will not confiscate their production. I’m working on a list of candidates.
In markets this morning, for two hours following 5:30am ET, the US Dollar was moved from about 80.96 to 81.18, which put some pressure on the gold and silver prices. Silver dropped from 16.95 to 16.72, and gold from above 1103 to a low of 1094.63 in the spot market. Support is being tested for the precious metals and the $USD is looking for any weakness in the resistance level at about 81.50. Should the $USD move above 81.50, which appears unlikely today, then there will be a much lower low price established in the recent price series for precious metals. I believe a burst about an 81.50 Dollar would push gold to an ultimate cycle low of about 990. If that scenario were to be playing out, I will be seeking to buy the shares of precious metal miners and developers with production outside the US and Canada, preferably the smaller companies.
Have a great day. As long as you stay focused on the price action, and actively manage your portfolio, whatever happens in the capitols of the world’s financial powers is manageable. There is no reason to get caught up in the political talk of the day. The elections will come soon enough.
CTA Trading Desk Post-Close Report
Following through on Monday’s intraday reversal to the upside, the equity market chugged steadily higher all session long, a resurgent semiconductor sector (SMH +2.29%) leading the way. The S&P has now reached the first resistance zone (SPX 1170 to 1180, closing at 1174.18 +0.72%) and with the end of the quarter looming, many traders are wondering if the under-invested money managers trailing the popular averages are going to be forced to aggressively add to long positions over the next few days. Given the paucity of volume, an urge to splurge on the buy side could cause a mini upside panic.
And Messrs Geithner and Bernanke are probably thinking, “nothing wrong with that” -- except that the seeds of the last crisis were sown by a loose monetary policy, rates artificially suppressed, effectively forcing investors into real estate and the equity market during the housing boom. With the price of basic necessities rising, people couldn’t accept 1% rates on their money market accounts (a negative real rate of return after inflation was factored in). Low rates encouraged taking on more debt to leverage up returns. Now, is the US about to repeat the same mistake, only on a much grander scale, buying their own debt to keep rates absurdly low?
Traders must weigh the risks and rewards of large long exposure, a position they feel forced into simply because prices are rising. All of us should be striving for a high risk-adjusted rate of return, which is totally different from total or absolute returns.
With option premiums relatively inexpensive at present, we believe it makes sense to use at-the-money calls to speculate on further upside, simultaneously taking some risk off the table and selling some long stock positions.
In other words, book some profits, participate on further upside if the upside moon-shot continues, with losses modest as the cost is simply the price of the call option. This is a reasonable strategy that traders can use to effectively grow their capital while the risks of blindly going all-in do not pass the sniff test.
Have a great evening.
Comments
Re: Bill Cara’s Blog for March 23, 2010
I had the opportunity, yesterday, to talk to my friends daughter, who is 15 and autistic.. We chatted about the different things, and I asked her what she thought about all that was going on with the world... She answered with two words, " Greed and Power "... no further comment.
Cara 100 Ratings Changes
Good morning.
IBM - RBC Resumes Coverage with a Sector Perform
NOK - Wunderlich Initiates Coverage with a Buy
Bill's target for gold and questiuon on GDXJ
Thanks for the info. This confirms my analysis. Even though I think dollar could go higher, possibly approaching 2009 highs. TA on $USD looks very bullish with the 50/200 DMA crossover.
Is GDXJ a good instrument for gold juniors? Anyone uses it?
Today's Blog
Bill,
I agree with your assessment of our situation — totally! I look forward to your list of candidates too. I hope there will be real change.
But, as usual, I cannot be optimistic that lasting change will occur here in the US unless we can change the political system. A tough proposition.
Congress is in total control. They make the rules which determine our future, but most importantly they control theirs as well. We may elect a few honest and ethical individuals, but in the past they soon realize the futility of trying to buck this long-entrenched setup. They may put on a show of opposite views on specific issues, but they are united in taking care of each other first.
While the guy in the White House can certainly make things worse, he can do little to make things better for all. He is most useful as a "lightening rod" drawing attention away from the elite few who run the country and benefit the most.
At times, because I read so many opinions here with which I agree, I think things must soon change. Then I hear people I've known for decades who live here in the Midwest, in a city of 150,000, with a current unemployment of over 20%, who have been untouched personally. They think things are "...not as bad as reported." They point to a 60% stock market gain as a sure sign things are going to be OK.
The propaganda machine is in full court press and seems to be working.
Must we get to the point we everyone is destitute? Do we need to see a 1960s type of rioting in the streets to get real change?
Cara 100 Update (Final)
CAT - Avondale Initiates Coverage with a Market Outperform. PT = $70
ORCL - price target raised at Barclays to $29 from $27 ahead of 3Q10 results. 2010 and 2011 EPS estimates set at $1.61 and $1.92, respectively. Maintain Overweight rating.
Them are fighting words..
09:46 (GR) Austria Fin Min Proell: Have not ruled out removing Greece from Eurozone, the Greek budget deficit is a 'huge problem' and challange for all of EU
(GR) Reportedly German CDU member has stated that France would need to go it alone were it to support Greece
- Has asked Chancellor Merkel to resist calls to provide aid for Greece at EU meetings later in the week
SOHU
Added some more SOHU this morning at $54.60. SOHU is the 3rd or 4th biggest player in the China search market and with GOOG gone I think SOHU could benefit.
Osisko
anybody here own the stock and if so, what do you make of the Brett Resources announcement? positive or negative development?
Quants bidding the Ags' early...
.......
Most Obvious Short: AMZN
Not only because it hasn't done anything lately, but also because the iPad could potential crush their Kindle and internet book downloads business, reducing the premium people will pay for their shares. I think it will close the gap from the fall.
Dow Jones U.S. Real Estate Index
RSI's getting frothy for the top 10 components as of yesterday's close. All are mildly in the red today.
Ticker Last RSI7d RSI7w RSI7m Zone (estimate)
SPG * 84.97 71.43 76.07 72.15 Distribution Zone (for 1 days)
VNO * 75.87 81.44 77.74 64.96
PSA * 91.79 80.57 80.88 74.4 Distribution Zone (for 7 days)
NLY * 18.60 62.77 63.7 63.12
BXP * 76.26 76.36 80.3 66.53
EQR * 39.65 75.17 85.21 72.18 Distribution Zone (for 7 days)
HST * 13.91 85.66 78.78 69.03 Sell alert (trig. 2 days ago [on 2010-03-19 at $13.55, +2.66% chg], after a 1 day DZ)
HCP * 33.98 80.09 76.96 71.88 Distribution Zone (for 3 days)
VTR * 47.41 72.92 72.25 78.25 Distribution Zone (for 5 days)
AVB * 88.05 71.45 78.31 70.93 Distribution Zone (for 5 days)
Maybe This will be the Week.... housing stats were really ugly
hosts are arguing with one another on cnbc, Timmy is talking, and Kudlow is teed-off !
Re: Most Obvious Short: AMZN
Team,
The road is littered with the graves of traders that have tried to short AMZN. PE means nothing for this company. There has to be lower hanging fruit out there to short.
Good luck.
Bob
Monster job search - stress survey
I stand by my cash position. until people feel there is potential for career growth/better future, and they "feel" they can upgrade their standard of living, this is going nowhere.
http://bit.ly/bkERt3
80% surveyed of 1100 people, say they are more stressed than usual or constantly stressed to the point of panic in re to job search. Thank you Obamanomics!
Re: Most Obvious Short: AMZN
I hear you. I'd be interested in seeing what percentage of total revenues and profits the Kindle made up. They had a monopoly on the e reader for a little while there and the iPad is coming out soon...I figured that would be enough of a negative for the stock to go down $15.
S&P500
S&P500 companies, no. of overbought/no. of oversold
daily: 192/15
weekly: 218/3
monthly: 157/1
Yikes.
F: nowhere on big volume
I see Ford going nowhere on big volume. Other discretionary and retail also now underperforming SPX. With the good news in retail released in this mornings ICSC report, perhaps traders are selling the news here, unloading positions to bagholders at the top?
FD: short Ford (just today)
SOKF
Breaking out here...a ton of volume went through the past two days, pushing the stock right through the $4.25 resistance.
Investing in gold and miners
This is on topic in regards to Bill's post today. This is an Mutual Fund called Toqueville and the fund manager is John Hathaway who can be heard on King World News pretty regularly. As a matter of factr he was just on Saturday.
http://www.kingworldnews.com/kingworldnews/Broadca...
The US ticker symbol is TGLDX. Take a look at this company that has a great track record. I do hold a small position in it and add to it when I am not buying the real thing. This is not a buy and trade vehicle. There is a 6 month commitment or a 2% early withdrawal penalty. DYOD
Re: Most Obvious Short: AMZN
I just gave AMZN a quick glance and it sure seems like it wants to fill that gap back to 95. It has basically traded in a Darvas box between 146 and 114. It is right in the middle of the range right now. For myself I don't see a trade. If I was looking for a breakdown I would wait for a break below 115 with a hard stop just above 120. My target would be the 95 area. 100 would probably put up round number resistence and I would be tempted to sell around there. Hope other community members comment on this. Please. Personally though I would not trade AMZN just because it is in the news so much and its such a rah rah stock. I like quiet companies out of the news.
Bob
Germany, France agree on IMF for Greece
"Germany, France agree on IMF Aid for Greece, Official Says": http://www.bloomberg.com/apps/news?pid=20601087&si...
I think this is the type of development that Bill said would tend to decrease the value of the dollar.
Re: SOKF
Nice call on that one TOF! What's your target? Picked some up in the 3.90-4.00 range when you shared the report etc the other week. Need to keep myself from selling the winners too soon... Really nice volume today and yesterday.
KC
Re: Most Obvious Short: AMZN
The entire retail sector is extremely over valued. I sat on the sidelines and watched stocks like SHLD, AMZN, TIF mushroom. We would have to see a massive recovery to justify these valuations. Has anyone noticed the RTH is almost back to the pre-correction levels. The problem with shorting is the margin interest. its 20% to short SHLD. The day of reckoning is coming sooner than people think. I think most people who are still long are picking nickels off the track with the train coming. The problem is when you finally see the train it will be too late. After the great depression, peoples attitudes & behaviors changed. Whatever happens to "don't buy it unless you can afford two" I have yet too see anything resembling adjustments in behavior. Until that happens I highly doubt we have seen "the bottom". The holders of these equities are going to learn an expensive lesson.
Re: Germany, France agree on IMF for Greece
readingcoach -
Bloomberg is just getting a few quotes leading up the the EU summit on March 25 suggesting Merkel and Sarkosy are united in seeking IMF help. No new news really just posturing for an IMF bailout to avoid an EU funding debacle.
Re: SOKF
I'll probably wait until earnings and decide if I should sell some. If the stock is up to around $6.50 then I might have to pull some off the table. The business model is excellent, though, and there really is no reason to sell right now. They just doubled their locations over the past year and they're only trading at like 6 times their current EPS run rate of $0.68/share. Earnings grew over 80% last quarter versus the prior year. Valuation seems really cheap to me even with a discount applied because it's an OTC stock based in China.
Time (not) to go short ?
I see the threads on shorting F and AMZN and why the SP500 is frothy. Wonder if this is all too early - the price action on the SPY is not convincing enough to be short. Sure we dont have higher highs and higher lows (pattern broken in last few days), but neither do we have a convincing lower highs and lower lows. Besides, Bill's 1160 target has been taken out on the upside.
SOHU
Stopped out at $54.10. Looks like BIDU is taking all of the glory.
Re: Germany, France agree on IMF for Greece
I don't know how many of you follow Black Swan Capital free newsletter, http://www.blackswantrading.com/
but they swear Euro will reach parity with dollar by the time Europe is out of the woods. This is the same guy who said since spring 2009 that dollar would go up and it did indeed. His arguments do make sense. He is also very vocal about the China bubble, but has no opinion on POG.
Re: Time (not) to go short ?
Oh joe, you're probably right. I'm often too early on these things. :)
I just saw a goodly amount of distribution, a failure to take out a previous high, and a beginning of underperformance w.r.t. the consumer stocks in the face of good retail news.
Re: Germany, France agree on IMF for Greece
If I have understood it correctly from the media in the EU, Merkel and Sarkozy are now chatting intensively and trying to find a deal before the start of the EU meeting this week.
Merkel seems to have lowered her guard against the EU bailing out Greece, but that does not imply that Germany will be of much help. I have seen several polls in Germany where where more than 80% of the German people are saying NO.
The saying from Merkel is that the IMF could give the Greeks a financial injection that should be extended by optional bilateral loans from EMU countries.
AMZN
Short at $128.55. My thinking is the iPad will hurt sales of the Kindle and Amazon's book download business, which will cause earnings multiples to be contracted. I'm looking at $110 to $115 as a downside target.
Re: Time (not) to go short ?
I think it is getting closer. Daily RSI started falling and weekly crossed 70. Sentiment declined from extreme though, so there could be a few more pops up.
I am praying for patience........
not so easy...
Re: Germany, France agree on IMF for Greece
Use:http://www.newsnow.co.uk/
European Council President Herman Van Rompuy is considering convening, before the 25-26 March meeting of heads of state and government, a summit of the eurozone countries to try to work out a solution to the question of helping Greece. "This is a foreseeable solution and he is considering it," said his spokesman,
This is not a "done deal".
VXX RSI update.
VXX now has a monthly RSI 7 of ZERO. Has anyone ever seen a zero on the triple RSI screen before?
Bob
the 13 day weighted average and 20 day bollinger
points have exactly matched today in Mon... will have to watch the money flow and macd very closely.....
Re: VXX RSI update.
Wow... I sure haven't... But - it doesn't mean VXX can't go lower
Re: VXX RSI update.
I know, descending triangle on the Minute chart. A take out of 21.70. Look out below.
Bob
AMZN
Some thoughts on AMZN vs QQQQ. AMZN sales in 2009 were $24.5B. Some estimates for kindle sales at $266M for 2009, or 1.08%. This from a pro AMZN site that said AMZN was "unlikely to have any competition for its Kindle" (!). Now, you would think that margins should be higher for the Kindle than AMZN's regular business (non electronics).
Barclay estimates that if AMZN were to drop its e-book/Kindle market share from 60% all the way to 25% its impact on revenue would be ~2.0% (http://shockedinvestor.blogspot.com/2010/03/impact...), if and when iPad makes a dent. Today QQQQ is significantly more overbought than AMZN.
Re: Germany, France agree on IMF for Greece
Since the U.S. contribution to the IMF is over 17%, I guess we now have a dog in that fight. Great that the Greeks can borrow at 3.4% and arbitrage the 30 year Bund! No more olives in my martinis.
Re: VXX RSI update.
... aaand, here we go...
Let me post what I said in trading room yesterday, edited for the most glaring mistypes:
[12:26] {Threei} market is frozen solid,
[12:26] {Threei} and you know when we used to see this pattern almost every day?
[12:26] {Threei} during this relentless uptrend.
[12:27] {Threei} There is a very good chance, IMO, that this endless grind up resumes.
[12:27] {Threei} Every red day, as few as we had them, gives so much hope to bears,
[12:27] {Threei} you can hear these screams from everywhere "ah it's over, market reverses"
[12:27] {Threei} Can't be that easy and that obvious,
[12:28] {Threei} not until they give up and accept that any pullback is nothing more than pullback to go long on,
[12:28] {Threei} that's when they will cover last shorts, if any left,
[12:28] {Threei} hit buy buttons no matter what the price,
[12:29] {Threei} cause market to spike uncontrollably
[12:29] {Threei} and that will be the end of it
Today so far goes along with that, and IMO it's far from over.
Re: AMZN
Yeah I'm beginning to think this was a bad trade. I honestly don't know why I bother trading when I do significantly better "investing". I just don't have a knack for the ins and outs of trading. I've made far more money buying undervalued companies and holding them for at least a few weeks / months.
Re: VXX RSI update.
I think that's a good technical viewpoint Vad.
From a fundamental viewpoint, I think the thing that will cause the end of it will be the (temporary) end of money printing, somewhere. Either China, or the Fed. Allegedly the Fed stops end of March. With no constant supply of fresh money, I'm guessing the steady upward pressure will cease, and "the real market" will come back again. Whatever that is. We might even have a correction.
But for now, dip buying continues in my favorite sector, retail. Its back on track to outperform once again today. Even homebuilders are seeing some life.
Re: VXX RSI update.
I couldn't agree more.
Re: SOHU
As frustrated as it may be, the price actions on BIDU, and GOOG, etc are all hypes (sentiment+speculation), nothing based on fundamental, at least for now. TCEHY & SOHU, SNDA should all have benefited. But, they aren't popular stocks. GOOG has bigger business yet traded below BIDU. It's insane. GS has a price tag for $675! This probably benefited the Chineses Government Officials who "might" have shares in BIDU. The best thing GOOG can do is to short BIDU and use the cash to do a stock buy-back or cash divident. Just a wishful thinking :)
Re: SOHU
"GOOG has bigger business yet traded below BIDU. It's insane."
Stock price alone can't be used for such comparison, gotta account for shares outstanding... Market cap for GOOG is 172.2B, BIDU - merely 20.71B, so yes - market does reflect the fact that Google's business is much larger
Re: VXX RSI update.
So we are having the polar opposite of the famous 70s slow and ordely meltdown. 1/2 point day after day. Then when it reversed, biggest bullmarket in history. What will happen when the meltup reverses?
Bob,
Vad, I'm available for substitute SETUP caller. You know where to find me :).
Re: SOHU
I completely disagree. GOOG has a tremendous business and business model. So too does BIDU. BIDU's valuation looks silly but the potential is there for significant growth.
Re: VXX RSI update.
"I'm guessing the steady upward pressure will cease"
I think of it more like a vacuum above (i.e., lack of selling, or lack of better investments) sucking up stocks.
However, I have a feeling that this little breakout in the last US hour today was the end of this little two day rally rather than the beginning of something more. I would not be surprised to see a gap down in Europe tomorrow, which would of course be bought in the US open as usual.
AMZN
Closed my short at $129.22 after seeing how much of a small amount of their total sales comes from Kindles/e-books. Dumb trade...
USU - Back from the dead
Hi All - This one should be tradable in the morning. After the close ----Mar 23, 2010 -- USEC Inc. and the Department of Energy (DOE) today announced an agreement to provide $45 million in funding to USEC to fund on-going American Centrifuge technology demonstration and manufacturing activities. USEC will match the DOE funding on a 50-50 cost-share basis. The work will support approximately 355 highly skilled jobs, primarily in Ohio, Tennessee, and West Virginia. Must be some Obama bucks for a health care cooperation. Happy Trading
Re: AMZN
Team, hope I didn't affect your conviction on that trade. I should shut my mouth. That brings up a dilemma on the board. When should we and when shouldn't we discuss a trade? I try to comment only before someone is in a position. Is that a good protocol?
Bob
Re: SOHU / BIDU
OK. My bad. That was a sloppy comment. Valuation was more to my point. Here are some simple, quick Stats (from S&P Stock report):
BIDU
revenue 2009 - 650M,
(my) projected 2010 rev. - 1.21B (650M*1.4 + 300M from GOOG's market share)
total asset - 902M,
Market Cap - 20.5B, ($594.88 * 34.5M shares)
Market Cap/Asset: 22.73
Market cap/2010 revenue: 16.94
PEG: 1.44
Beta: 1.75
PE: >> 50
GOOG 2009
revenue - 23.65B,
total asset - 40.49B,
Market Cap - 133.9B, ($549 * 243.9M shares)
Market Cap/Asset ratio: 3.3
Market Cap/Revenue 2009: 5.66
PEG: 0.9
Forward PE: ~17.47
APPL 2009
revenue - 42.9 B
total asset - 47.5B
Mkt Cap (3/23/2010)- 207.1B
Mkt cap/revenue: 4.827
Assuming zero growth at GOOG, BIDU with an 40% projected growth rate is still priced ~3x of GOOG. I don't know if the Chinese's internet market will continue to grow at 40% from here on. Tencent Holding downgraded their outlook for future internet growth last week.
(There are better # than revenue to use, e.g. net income, price/sale, price/book. This is just a quick, home-cook calculation).
Re: AMZN
NO, don't worry...I'm a big boy. I didn't have enough conviction on that trade. I'm sticking to the longer term trades...doing much much better on those.
re: Bill's post-close report
"and with the end of the quarter looming, many traders are wondering if the under-invested money managers trailing the popular averages are going to be forced to aggressively add to long positions over the next few days."
No real question, could just be an example of the propaganda in the media, but...just a week or two ago we're hearing about the extremely low cash levels in mutual funds, so where is the money coming from to invest?
Update from last week
Last week I reported I had moved some money out of energy (XLE) and put it to work in real estate by adding MPG the largest holding company of comercial property in downtown LA and a second company with upscale hotels FCH. Yesterday FCH was reported as a top 50 movers with 7.5% gains and today MPG added 32.58% after reporting out the year. The remaining XLE added 0.49% today. Then why do I feel I did not do enough?
Re: VXX RSI update.
[12:26] {Threei} market is frozen solid,
[12:26] {Threei} and you know when we used to see this pattern almost every day?
[12:26] {Threei} during this relentless uptrend.
[12:27] {Threei} There is a very good chance, IMO, that this endless grind up resumes.
[12:27] {Threei} Every red day, as few as we had them, gives so much hope to bears,
[12:27] {Threei} you can hear these screams from everywhere "ah it's over, market reverses"
[12:27] {Threei} Can't be that easy and that obvious,
[12:28] {Threei} not until they give up and accept that any pullback is nothing more than pullback to go long on,
[12:28] {Threei} that's when they will cover last shorts, if any left,
[12:28] {Threei} hit buy buttons no matter what the price,
[12:29] {Threei} cause market to spike uncontrollably
[12:29] {Threei} and that will be the end of it
Vad- That's so 'evilishly-looking,' I think you're right.
;)
Re: VXX RSI update.
By the way, the screams I hear when the market reverses aren't quite the same as the ones you describe...
Re: VXX RSI update. Monthly is not correct
"VXX now has a monthly RSI 7 of ZERO. Has anyone ever seen a zero on the triple RSI screen before?
Bob"
Yes I've seen it before, usually when there is an error in the calculation or not enough data to properly do the calculation. The VXX started back around Jan last year so there is very little monthly data, about 12 or 13 months. If I look at he error bugging section at the bottom of the RSI tool, I see that Korvus uses 19 data points to calc any of the RSI 7 values and I see lots of zeros in the data stream for the monthly RSI data.
Thus I would assume the "Zero" value reported for VXX monthly RSI-7 is not correct based on faulty and limited input data. If I check StockCharts they have the value around 8 and similar values for the weekly and daily numbers. (note the two are never exactly the same but usually close)
I always find when you see something unusual, its best to check it out, before assuming its correct. Just my 2 cents on the subject.
Volume
I took snapshots of the weekly indexes. If I remember correctly, and that is always an issue, March 2007 was when the "financial crisis" first pushed its way to the front burner, where mortgage companies were beginning to fail. As can be seen, just to the right of the left-most, blue vertical line, coinciding with the largest weekly drop in the indexes since 2002. The right-most blue vertical is, of course, the march 2009 bottom.
Now, along the volume axis is plotted a 50 week moving average. I placed a horizontal line at the intersection of the axis and the inception of the crisis.
In the SPY, volume still seems to be running at 2x the pre-crisis level.
Having done it for the Qs a different story arises, volume has dropped off below the crisis inception level in the last 5 weeks.
For the DIA, the 50 ma is still above the march 2007 level, however volume has been dropping continuously.
So, a few questions come to mind: What is "normal" volume for a post-crisis (perhaps intra-crisis would be more appropos)market?
Of what is that volume composed: by whom, or what, is the trading being done and what instruments are being traded? (are we seeing a higher proportion of trading in the various index and leveraged etf's (one would think...)?
The next earnings season starts in earnest in a couple of weeks, are we seeing a pause before?
I think teamonfuego made an interesting point: Has the deleveraging of margin levels, if they have truly taken place, affected the volumes? When was Paulson pleading for leverage extensions?
Anyway...
Trends and reversals - yes, again
My post earlier today and probably couple more on this topic earlier plus trading log where I said "DOW 11K seems inevitable" provoked an e-mail I want to answer here. I already described the concept of going with trend as conscious choice of being right many times and wrong once vs. being wrong many times and right once. Seems pretty straightforward and simple to me, but there is something about this concept that angers some. I don't get it but...
Once again you issued this challange (sic!) by calling for an uptrend to continue. Well, this time I will take it and I will beat you. This is the END of UP move - market will NOT go to 11,000. This is the TOP. I can't believe how stubborn you are. You are wrong if you think it can go any higher, with all indicators screaming top and ultrashorts THIS low. I WILL be right, and you will be WRONG.
OK... dear Challenger, of course you will be right. If not this time, then the next. If not you, then the next top caller. And of course I will be wrong - this time or next.. BY DESIGN. Get it? I made a deliberate choice of letting the market take me where it wants, time and time again, on each pause or pullback - I am trusting the current instead of fighting it... and you are calling me stubborn? Me? Not all those who, just as you now, insisted on being short on each pause of pullback or even simply on each new high?
Do realize: if it were you who insisted on market reversal during last 12 months, let's say on 10 pauses, you would be already 10 times wrong (or bankrupt if you insisted on holding short position). I am not trying to outguess or outsmart or out-stubborn the market - you are. If you continued issuing challenges all these times and finally hit that one time when it turned out THE top - would you seriously consider yourself a winner, with such ratio of losses vs wins?
Now, if it were others who tried to short it and you stayed long or waited on a sideline till this moment, and only now took your shot at it and got it right - well, I concede that I can not do that. Neither can anyone I've ever seen, met, heard of or read - on a consistent basis. Thus, my choice again is: to stay with trend until I am wrong - as you said, I WILL be wrong once, when the top finally comes. I just am not trying to guess when it happens. Nor, by the way, do I issue challenges. I simply express my view, not expecting anyone to agree, disagree, argue or take it as a reason for a fight.
I skipped a few nuggets in your e-mail that show anger. I don't know why my personal take on the market direction makes you angry - you can't seriously expect the world to have unified, and similar to yours, opinion, can you? I suspect the reason for the anger is having losing position or being burnt on it before. Hope it's not the case. Anyway, here is my suggestion: relax, remove yourself from emotions and think of humility and arrogance. Letting the market tell you what happens next is humility. Thinking that you know better is arrogance.
NLS
Considering opening up a position again...what's the saying, rinse and repeat?
Re: VXX RSI update. Monthly is not correct
With the VXX at 21.46 last a/hrs trade at 19:59:
VXX monthly RSI 7 is 45.36
My chart shows it has traded for 15 months.
For the record, Weekly RSI 7 is 13.93; Daily is 14.30
Viva Bolsa!
Surely, but quietly, and correct me if I'm wrong, but Mexico's Bolsa Exchange became, today, the first Global Stock Exchange to surpass their 2007 top. I've noticed a relative strength in the Peso for some time now but hadn't really paid much attention to their stock exchange. So, that's Canada, Mexico, and now, the US, showing considerable leadership in global equity markets and currency exchanges. Hmmm...
edit: No wait. I forgot about Chile which, with it's fertilizer, agriculture, and metals strength, busted their 2007 top awhile ago. So maybe Mexico is #2?
http://www.bloomberg.com/markets/stocks/wei_region...
Re: VXX RSI update. Monthly is not correct
Hi Seamus, yes its an interesting subject / discussion with many opinions, and various sites do take a few liberties in how they calculate these numbers. Particularly for indicators that involve running averages in the calc as the RSI does.
I agree the VXX has traded for 15 months, however most would ignore the one trading day in Jan 2009, thus the first monthly gain loss could not be calculated until the end of March 2009. Also as March 2010 is still an incomplete month many would not use it as yet. In any case most use it as just a relative indicator rather than an absolute number.
How did you calc the Monthly RSI-7 at 45.36 , I can't seem to verify that one anywhere, maybe I'll have to go to the excel spreadsheet and do the calcs myself.
Thanks for the input, I'm always trying to learn more.
Re: Trends and reversals - yes, again
Thanks for the explanation Vad. For those of us who have not quite yet achieved your sublime state, its a good reminder that its important to first
a) figure out what kind of market you are in, and then
b) make trades appropriate to that market.
Just in case we've forgotten, we are not in a range-bound market, we're in a trending market. And at least so far (the past 12 months or so) that trend is up.
You can say it's a bear market rally, or a suckers rally, or whatever, but the trend is definitely up. What's more, you can make use of that information to help you calculate the odds of a particular trade working out.
To me, the market seems detached from fundamentals. This makes me more nervous to go long. Perhaps this is similar to what happened in 1999/2000. How long can something like this go on? Seems like, quite a while. So far it's been an entire year!
I must admit, I'm 100% guilty of waiting for this thing to end too. I know it's not helpful to my trading, but my feeling is much the same as in 1999 - this stuff is based on fiction, and it will not end well.
But in the meantime, shorting against the trend seems like a way to either get stopped out a whole lot, lose a lot of option premium every month, or have large (and growing) red columns in your position statement every month. That's neither fun, nor profitable.
Bill suggests you wait for a lower high before shorting. That's the sign of a trend change. I think many were perhaps hoping that 1150 would prove to be the high (the VIX climbed appropriately as 1150 neared) but after breaking through to 1170, its pretty clear the trend is still up. A bunch of put holders lost a lot on that one.
Another CTAB trader, I forget which one, suggested that you should never try and get the top (or bottom) tick. Its just too expensive. Wait to see one of those reversal patterns (like a failure to exceed a previous high), let someone else get the top tick, and then go short. And waiting for the sector to change trend and support you in your short is helpful too.
Re: Trends and reversals - yes, again
Well, just to add fuel to the fire: multi-time frame pivot analysis shows no significant resistance until almost 120 on the spy...I can smell the bear meat burning :)
Re: Trends and reversals - yes, again
Poor Vad. Gets no respect. Ya panimiyu, conyeska.
MISTER MARKET does as he pleases. My old mentor beat into my head that "Timing isn't everything. It's the ONLY thing." Maestro, we ruv you...
Kudos e Udacha.
Re: Trends and reversals - yes, again
Its good to hear shark attack is live and well.
Bob
Re: Trends and reversals - yes, again
Dave,
I'd prefer to continue discussion in tomorrow's blog, so I'll post this and retire till morning :)
Good post but there are a few things I'd like to "challenge" (sheesh, I grow to hate the word):
1. "To me, the market seems detached from fundamentals."
I don't really know what that means. Can anyone indicate any single moment when the market is anchored in fundamentals? How to measure it? Do people even agree on fundamentals? Why, if such moment even exists, would the market moved until fundamentals change? Who would ever buy or sell anything if fundamentals were figured out and defined the "right" price of the market? And, if someone sold or bought something for some other reasons (needed pocket money for instance), wouldn't it immediately remove the market from that "right" price?
2. "this stuff is based on fiction"
Again... fiction? Any market movement is based on the balance of buying and selling power/motivation, on decisions made for various reasons, on opinions about what reality is, what others are doing and going to do, how zillion of economic/financial/political scenarios are going to unfold. Who is the judge who knows what reality is and what fiction is? How does he define that? Does he possess the ability to figure all that out?
3. "and it will not end well."
As in, market will drop? First, yes of course - any upward movement sooner or later resolves in reversal and consequent downward movement - whether it was based on reality or fiction, fundamentals or perception. And second, why is market drop labeled as "bad"? Both up and down are necessary parts of market cycle, they are not good or bad as day and night are not...
There.. how's that for, ummm, a challenge? :)
How strange the behaviour of people in response to given stimuli
I continue to float along with paper trading, as like others here I have bad days and attempt to impose my own will on the trade I enter - which costs me. I look to have this thinking thoroughly stamped out by end of summer.
Sim ain't the same as live trading, but as a practice in technique it does bare fruit. After a chat with Vad yesterday over the margin practices and learning of the controls the broker has in place to stem trader's loss, I upped somewhat the max. amount I use for total trading. End result - 1st day of $500 finish.
When I started with Vad in November I had a daily profit target for 1st year trading of $100 a day, or a doubling of a 25k account. I cautiously continue to up this target.
I too had a preference for shorting, with mixed results. Since having begun uni studies again in March, I have been trading more consistently. I'm guessing from an interview in "The Intuitive Trader" that working the analytical side of brain before commencing trading is helping me to avoid over-rationalising the trade.
JMTCW
Nearly 200 apartments sold out overnight in Shanghai
SHANGHAI - Nearly 200 apartments in Hangzhou in East China's Zhejiang province sold out overnight on Monday - another signal that property in urban China continues to be in hot demand.
The 188 apartments, developed by Hong Kong-listed Greentown China Holdings Ltd, are between 230 and 330 sqare meters, and have an average price of 45,000 yuan ($6,600) per sq m, said an unnamed sales representative of the company. They sit in the heart of New Town Qianjiang, just a few blocks away from Qiantang River, where Hangzhou's future central business district will be built.
http://www.chinadaily.com.cn/china/2010-03/24/cont...
From discussions with the Canadians in our group, I would suggest that Shanghai now roundly beats Lake Geneva and Vancouver Island (Bahama Islands too?) in housing cost. Blow that bubble.