Hi PB thanks for your post of charts. I ended up selling on the 29th which was a pretty good day and I received $1395USD. (Their bid ask is $73 on a coin - great business model buy from me tack on $73 and sell it a few minutes later to the next fellow!)
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It's the weekend and time for me to post.
I have been trying to think of what I might contribute to the forum.
I have decided on posting about the relative performance of gold and the ES.
I think that lately their has been a relationship and that perhaps someone has some ideas on whether we can use gold as a predictor of the ES is current area of 1250.
On some analysis I made last weekend 1259 came out as a key level for the ES. This past week 1258.50 has been the high so that target is met.Will the ES breakout or breakdown?
I doubt it will stay in current tight range for too much longer.
Weekend Plunge Scenario
It may be that a 'crisis' in the overseas markets starts a plunge in the ES.
Let's imagine the following scenario:There is a large drop in the overnight session on a weekend (e.g. 60pts plus), then the stops will get hit and program selling programs would kick in. If it closes much lower (e.g. on a Monday) to make big headlines in the paper, then you may see mom and pop retail investor say "no way am I in for another 58% haircut", and calling their broker to get them out of all equities.
Circuit breakers would do nothing but slow it down, I think. Certainly, the Fat FED will throw a ton of money at stopping this, but the gov't credibility is even less now than before the great crash of 2007. The crash of '07 wiped out 11 years of sp500 index gains (96 to 2007) .
But the real loss to the investor is much greater. Because the SP500 drops the losers and adds new winners into its index, it overstates the reality investors face. (Enron may have been there along with WorldCom's, NorthPoint Communications, Global Crossing, JDS Uniphase, XO Communications, and Covad Communications, Nortel and deleted from the index when their fall in market cap excluded them.) Taking them out of the index doesn't put the money back into the shareholders pocket.
The average investor may not be consciously aware of the poor performance of the equity markets due the enormous hype of the mutual fund industry, brokers and financial media - which promote blindly following mantras of "Buy and hold
[or 'just fall asleep sheep'].
Guaranteed notes if averaging 4% on the 15 year period of 1996 to 2010 give a compounded return of 1.80 or $66,700 to $120,000 (or $138,665 for 5%).
Finally had a chance to read this through. Very good observation here however, there's always alternatives to one's opinion on the potential catalysts of the market. For the sake of pure conversation, here are some alternatives to the 6 points made above.
- ZIRP did not fair well for Japan which included multiple government stimulus plans and large bank bailouts. Why would it be different here? Our current GDP's largest growth component is from government spending (deficit). Take that out and we are still in negative territory. How much more can the government spend? It will be interesting to see what the GOP does with the US debt ceiling.
- The Fed is and has always successfully created and popped asset bubbles. They are in it for themselves at the end of the day. We can currently see this with the devaluation of the USD. Sure the Fed can throw everything they have (our tax dollars) at keeping stocks up but the fact that stocks are still rising is just a distraction to our loss of purchasing power. Commodities are currently ripping higher and we are starting to see the effects in food, energy, etc. Which of course are not a part of core inflation which is always hilarious. A prime/extreme example of this is Zimbabwe's stock market back in 2007. Who cares if the stocks are going up when the value of the currency in which it's denominated in is losing value.
- True corporations have a large amount of cash however, they also have a large amount of leverage. The value of their real estate, equipment and other tangible assets have been losing value at an alarming pace. If corporations were to deploy the current cash they have, their leverage would increase even more. Which is why the record cash levels theory isn't true and one that is highly touted by sell-side analysts which is obviously a red flag. Additionally, changes made by the FASB have allowed corporations (mainly financial institutions) to continue to not write down certain troubled assets and hold assets in off balance sheet subsidiaries.
- Regarding China, people have been claiming it will collapse for quite some time. It hasn't happened yet but we shouldn't rule it out. But you're correct in saying it benefits the US when other countries do well economically but we also feel it when they don't (Euro crisis, etc.)
- Unemployment is merely a cause of a recession but it can make a recession worse.
- Markets can most certainly and often do continue in it's trend longer than one would expect or make sense. A short trade would only make sense if there is price and volume confirmation. The ES is continuing to skip along the 10 day MA. Definitely no short signal occurring here but the gist of the entire thread here is that this rally is highly correlated with the Fed's POMO activity.
2011 should be a very interesting year for all markets. Let's hope we can get some Vol back!
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Well, either way, you proved my point regardless. You can refute the arguments, but the fact remains that anyone shorting this have move up because they "think" that everything will collapse is merely trading on their belief. Even though you maybe right about all those things, what validates a short? You mentioned japan, how long did it take before the bubble burst. Is that indicative of our future? Anyones guess.
I've yet to see anyone make money based on a hunch, but i have seen people make money based on signals and patterns which have some sort of statistical outcome that could lead to potential profit.
All im trying to say is, i don't understand why people are shorting this(yet). Stock market could go higher for a few more months to even years before it tanks, and thats losses you have to endure just so you can prove your hunch right. So far, there are no fundamental or technical reason based on charts that warrant it.
You have to also understand, bubbles form when everybody throws in the towel, not when everybody expects it. I track volume alot, and today was more a short covering than initiative buying, because thats whats fueling the market right now, people on the wrong side of the market.
Side note: your leverage comment imo would only be in regards to financial institutions only. I don't really see other companies with this problem. Apple had record sales growth DURING the recession...lol Companies are doing well. Real estate however, could possibly be a drag, I agree. I see your from cali, which part? Southern, northern?
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All good points here. Definitely not trying to refute anything that you have stated but just wanted to present potential alternatives. I definitely respect what you have listed here and I think we are in agreement on what signifies a change in trend that would warrant a short at these levels.
As for corporate leverage, I got that information from the Fed's current Z1 statement. I would assume that's accurate but you're right about Apple. They have been resilient and able to even get unemployed people to buy their products in these times, lol!. I think they've done everything right so far and I personally love their products although I've never felt the need for an iPad. Just looks like a big iPhone which I already have. I also plan to dump my T3500 for a Mac Pro tower some point soon.
I agree that Real Estate will continue to have head winds. I feel that many areas here, (I live in San Diego), have not been through the ringer yet. Another interesting thing to watch is commercial real estate. If you have access to Bloomberg, you can see the updated watch list where companies or property owners have somewhere along the way failed certain loan covenants and are now in some sort of work out process. The list seems to be growing more and more. Obviously a lot of these entities are hotels but it's very surprising to see who else is on there.
In any event, I'm hoping 2011 will be a little more exciting than the last in terms of volatility.
Last edited by Private Banker; January 4th, 2011 at 12:55 PM.
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There are obviously a lot of reasons to be bullish this market:
1) It’s going up!
2) Bullish seasonality across multiple time frames, especially the January effect
3) Bullish bias after mid-term elections
4) Fed’s money printing is once again making it’s way into the market
“If a man has a strong faith, he can indulge in the luxury of skepticism”. Friedrich Nietzsche.
Aside from the fact, the only thing keeping the market up is the Fed, is the specter of the upcoming unemployment report, the foreclosure-gate settlement, China tightening, muni defaults and EU sovereign defaults. While these factors are merely potential disruptions that have yet to make an impact, they continue to loom over the market.
Additional skepticism is warranted by weakening market internals.There is a clear weakness developing among NASDAQ stocks where there are almost 10% less of stocks in strong weekly mark-up stage than among NYSE stocks. The other clear weakness developing is among small cap stocks, which are now lagging significantly in the weekly strong mark-up stage against their mid- and large-cap counterparts. The statistics for daily stages keeps deteriorating as well, with a declining percentage of stocks in positive stages under the 5-day moving average.
Logic also suggests that institutions are attempting to keep the buying programs busy most of the day so they can unload their longs.This fact is made evident by the Effective Volume Money Flow indicator, which reflects aggressive institutional selling into strength among a majority of sectors.
Depending on your time frame and strategy a short position may make more sense than a long position, as long as there is a pre-defined risk level. With the use of options, I have exposure to changes in volatility, and time decay, which affords me additional opportunities, beyond the mere directional play in the underlying. It also allows me alternative ways to react to signals, that may cause me to increase or decrease my exposure. This position which is essentially a mean reversion play, does not preclude me from trading futures, short-term, with a momentum /trend following strategy.
I don't look at this trading philosophy as a strategy that creates more risk, because my risk is always defined. I approach this way of trading as way of creating opportunity. I'll never forget sitting at home with a herniated cervical disk, long a bunch of bond calls, wishing I could be at work trading. But, then the unimaginable happened and LTCM blew up, and so did the premium on my calls. I was in the market, my risk was defined, and it lead to a very favorable outcome. Moral of the story...I never would have caught the move, if I wasn't in already.
Last edited by tigertrader; January 4th, 2011 at 12:23 PM.
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Yesterday saw a breakout to 1272.50 and then a retracement towards the close of the day.
Today started with an o/n gap of 5.75, a high of 1270 near the open and a slide to 1258.25. Now around 1260 (12:11CT) up a little from the low with FOMC minutes due soon.
Thought you should read this....
Tigertrader, if you know what your doing, then by all means do it. m don't know what strategy's you employ, and its none of my business.
Im just trying to help the newer traders here.
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