http://www.foxnews.com/leisure/2012/10/24/scottish-brewer-unveils-brewmeister-armageddon-world-strongest-proof-beer/
I'm only interested in buying much higher, or much lower.
NLY - Off 100 points lost in the dow overnight, I exited NLY on the morning pop. Can't just sit here and watch the gain evaporate to this silliness plus there are other bargains in the making.
Ritholtz - Agreed, this guy is worth considering. Thanks for the post.
If Hussman (the 'academic' who positions for the big picture), and Ritholtz (the trader with 'street cred' who calls every twist and turn) are now on the same page, what are the odds they're right? Add to the mix the one trader we follow who insists we have at least a year before the 'great collapse.' Rule number one dictates we listen carefully here.
Big Dave keeps pointing out internal weakness and sectors rolling over. Yesterday he said he tends to be early, but all but one service pick is a short.
I recall past election seasons where markets just held on or started to break down as the election happened. Think Clinton and the doozy, Bush. Not a prediction (I already voted) but if O wins then the righties will tighty, and if Rmoney wins austerity will pretty much guarantee some form of recession. I then filter that through earnings and Ritholtz who is one of the more logical and common sense managers out there, plus he has some great people working for him. I'd look forward to a 30% discount.
Ritholtz: - End of cyclical bull - Raised our cash levels to 25% (huh? Still long) - A regular earnings and revenue shortfall driven recession, with equity markets at risk for a 20-30% correction.
I think TOF's picking us some good ones and there are others out there to be found such as AGO, need to watch them closely.
REDF - Moving in our direction, gun sights on $2.7 ?
I still have difficulty comprehending the "gonna go to war" theorem, more like abbreviated peacekeeping missions as necessary.
Yeah, if there is no clear daily direction it's probably best to do nothing. No edge. The futs last night were a little ominous, but you know how that goes. Too obvious.
I like the Deron IBB short though, Landry discussed it a couple days ago.
I'd take the other side of the Hussman / Ritholz argument. Hussman has been wrong for a very long time and I stopped following Ritholz a long time ago due to a lack of value (in my opinion).
I would place as my team Jeff Saut, Mike Santoli and Don Hays who are all pretty positive on the market. We'll have to set up a cage match to see who's right!
And again, I really base my analysis on the valuation of individual stocks, not the market and it's really not hard to find good stocks, unlike in 2007 before the bear. So, we both could be right in that the market goes down, but many stocks go up.
by the way, now that Santoli is with Yahoo Finance, he is tweeting his articles, so probably worth following.
No need for a cage fight- that happens every day, and Hussman has been battered for sure. I'm just trying to game the odds of a rebound in his performance.
"And again, I really base my analysis on the valuation of individual stocks, not the market and it's really not hard to find good stocks, unlike in 2007 before the bear. So, we both could be right in that the market goes down, but many stocks go up."
I agree with this. in terms of the overall market let's keep this in mind: every time we pull back 5% we get calls that we're heading into a recession. it might be the case but in general i'd rather look for opportunities. there are things that are working out there. stocks with a focus on domestic activity have been performing very well (i.e., ETH, PIR, TOL, etc) since the last recession bell was tolled in May 2012 and August 2011. In fact, most of those would be total kick ass returns for anyone. So in periods of extreme negativity (and we're inching that way) I'd rather be focused keenly on what could rally hard. I don't think technology leads for a while. Doesn't mean some stocks within tech won't lead.
Also, let's take a look at where we are since the peaks in the rally since 2009: April 2010 to now: 2.5 years > 14% Gain April 2011 to now: 1.5 years > 2% Gain
While earnings could stall out for the entire market, I wouldn't exactly call this a highly inflated market. Sure we have rallied over 100% since March 2009. However, we're still at the same level we were at in the fall of 1999 and over 10% below the all time peaks in 2000 and 2007. So maybe we're heading into a recession but with the excessive pessimism spread throughout the media and blogs and with stocks going nowhere for the past 13 years I just find myself much more inclined to look for opportunities than curl up in a ball and hide in the corner. Can valuations get cheaper? Absolutely. But at some point we will have Europe out of a recession and a normalized housing market growth and when those two things happen earnings will be significantly higher than they are now. S&P earnings of $150? Why not. What would the S&P be at then? Would people be willing to pay 18 times earnings?
As you know I read BC with a good degree of caution, but this paragraph caught my eye yesterday. I usually reac BC to see what Geoff and Deron are looking at because they tend to dovetail nicely with Landry's system. I totally ignore fundamentals. They work for many but when the market has weak technicals everyone forgets fundamentals and they sell anyway. Price is what matters.
"If investing based on corporate fundamentals was a better tool, as it was some 30 years ago, then I would be predisposed to building support systems to help that way. But markets change in character and, while trading is trading, unchanged over the years for people like Vad and Deron, we portfolio managers have to adapt to whatever factors are changing the price that affects the stocks of companies we hold."
CC - It all depends on time frame. If you are talking the next month or so then yeah sure fundamentals mean shit. But when the S&P drops 20% like it did last fall there was clearly support there for a reason. My answer is fundamentally stocks were very cheap.
Fundamentals are a great tool to get you to buy panic and sell euphoria as well. If a stock is cheap enough, you just buy it and know it will almost always work out in the end. Similarly, you just sell it when you don't see much more upside, even though the stock might be going up.
It's kind of funny how close you end up being to the bottom or top. Not often the exact point, but usually pretty good. It's the fundamentals buyers that change trends for sure (no-one else will).
By the way, I've been thinking about this for a while now but I think we need to focus even more on fundamentals now for good reason: everyone is a technical trader. How many blogs do you read that focus exclusively on technicals? How many of these blogs take a dump on fundamentals because they supposedly don't work? Isn't that the definition of near term bias? Technicals are all the rage right now and most stock shows focus largely on them. Here is the support area and here is the resistance area. This stock is forming this pattern which when triggered will result in a move to here. Look at stock twits. Most of those posts are technical in nature. I think that technical analysis could have reached its nirvana and become a difficult tool to use to make money going forward.
It's always best to be looking where other people aren't. Was talking with someone the other day about 2 stocks, ORI and BRCD.
ORI is a mid-sized P&C company that has been around for around 100 years, paid dividends for 70, increased them for 25. Stock is cheap because they are running off a Mortgage insurance business and, even though it is separately incorporated and the company is not putting money into it, GAAP makes them include the results. The net is that it shows an accounting loss, even though the ongoing business is quite profitable and is 50% - 70% undervalued relative to other companies. And it has 1 analyst following it, so no-one knows the story and it is almost certainly going to be a good money maker.
BRCD may be a fine tech company, but there are 27 analysts on the company. How do we as individual investors compete against that level of expertise? We can't, so you can either technically trade it or stay away.
It does pay to follow under analyzed stocks. The problem being, it's hard to get fundamental information on some of the small players, while everyone follows something like AAPL or INTC. How can anyone get an edge on something well covered?
One reason I am attracted to TFO's YRCW trade is he looks at fundamentals and I see a basing chart. Using both is a better edge. The trouble I have with fundamentals is they are so easy to fudge while a chart is a history of sentiment. I just believe stocks are bought and sold on emotion. That doesn't mean technical traders don't have to take some heat and wait like fundamental investors do.
I was just making cookies and thinking about TA. You know, there are as many types of TA as fundamental analysis. Some of it everyone here uses on a nearly daily basis, ie: QQQ is right at the 200 dma or this or that is below the 50 or 200 dma. But there are forms of TA like Landry uses that are looking at tracks of emotion. 'Those who bought here may want to sell if it drops below here', or those who got shaken out here may want to re-enter if it rises to here' type of TA. Some people, for example use candles because they have learned to interpret that they indicate buying or selling, weakness or strength, just as Landry uses simple bar charts to read the same thing. This week we've had several days start strong and then sell off by the close, all clearly visible on a ST chart, a daily bar chart or daily candle chart. Vad uses ST candle charts with volume to scalp. TA isn't voodoo, it's simply the tracks of emotion. I don't buy too much into the support is here, break out here type of TA made popular on TV, but learning how to read a bar chart has been very helpful to me.
A change in trend is always a 'process.' Traders will fight the realization all the way down to the point where it becomes obvious (in retrospect). The same way bears fought the rally for two years.
yep i agree 2nd. but it won't fail. i just bought some SPY calls (tiny amount) expiring today to play this potential. we shall see. if it happens could be a 20 bagger...if not i lose $1,500.
NLY - I'm not sure how this one's valuation can be called crazy, the div is over 12%, company announced buyback(makes sense when trading below book). Hard to determine which way book is moving, could likely be down if NYL isn't replacing MBS's as they are refinanced.
You might say the monkey wrench is the FED's MBS purchases have stepped up it's competitive role with agency REIT's like NLY.
NLY may wait till near the end of the FED's QE period to buy back, or if/when they determine that book has bottomed.
Refinancings have been on a roll, so perhaps the FED realizes REITs have reduced incentive to buy new issues at these rates?
I'll look into this over the weekend to see if I can discover which way the wind is really blowing, or if it's just more of the same hot air BS we constantly contend with.
CP, I should not have said the valuation is crazy as valuing stocks like this is complex and I really have't looked at it in much detail.
To me it looks just like they are borrowing short and lending long, which got a lot of companies into huge trouble in previous cycles, but there could be a lot more to this stock than I know.
Still holding the IBB short from yesterday, up 1.30%. Still short the Q's with QID. Not up as much but if I were going to short now it would be those indices looking to catch up, the rusty or the P's.
Right. Aren't we all sophisticated enough by now to know some of the worst criminals on record have alter egos that overflow with kindness? And in fact, that very character is what allows some of them to blindside authorities and get away with the things they do?
"I think that technical analysis could have reached its nirvana and become a difficult tool to use to make money going forward."
Yep. Smart creators of the black box algos have programmed in all the patterns that human traders are looking for, and those algos are now routinely screwing up the human traders (faking them out). But we have pointed out many times on this blog that the "second-level TA" seems to work pretty well -- you just need to be patient enough to see a pattern develop, then to wait for that pattern to break and then reverse shortly after that. THEN we have a low-risk entry, since all followers of TA 101 have been shaken out, and computers will now take the stock the other way.
Wow - people really do not have faith in stocks. But that is a good thing as it means there will be more people to sell to later - from EPFR:
In the past week, investors pulled the most money out of U.S. stock funds at any point in more than a year, an indication that many still harbor deep concerns about the global economy, according to data from EPFR Global.
U.S stock funds suffered outflows of $9.04 billion in the week ended Oct. 24, the most money redeemed from those funds since last November.
Meanwhile, bond funds continued to reign supreme, taking in $9.4 billion during the period. EPFR said that was the most new money ever taken in by bond funds in a single week.
Concerns about U.S. stocks are running so high that even European bonds are starting to look good to investors.
Investors gave a record-high $2.26 billion in new money to funds that hold European bonds. Up until the past week, those funds had only taken in $1.55 billion in new money this year.
I'm of the opinion that to make my year in 2013, all I need to do is wait for a drop, then buy. One trade. No way I have the patience for that scenario, but it's feasible.
Here's something interesting for traders like you 2nd:
The best time during the past 61 years to enter North American equity markets has been at the opening of trade on October 28 . This year, the optimal date is the opening of trade this Monday, October 29.
How does the entry point look this year?
Thackray’s 2012 Investor’s Guide notes that the best period to own U.S. equities during the past 61 years has been from October 28 to May 5. A $10,000 investment in the S&P 500 Index purchased each year on October 28 since 1950 and sold each year on May 5 during the past 60 periods increased in value to $1,057,851 by May 5, 2011. The trade was profitable in 53 of the past 61 periods. In contrast, a $10,000 investment in the S&P 500 index purchased each year on May 6 and sold each year on October 27 fell in value to $6,862. Calculations did not include dividends or commission costs.
The main reason for the period of seasonal strength is a response by equity markets to a series of positive annual recurring events from late October to early May. Annual recurring events include transactions for tax purposes, anticipation of quarterly and annual corporate reports, the timing of analyst opinion changes, key economic reports, and special holidays, including the U.S. Thanksgiving holiday and the Christmas holiday.
The beginning of the period of seasonal strength at the end of October typically happens just after a majority of S&P 500 companies have reported third quarter results. Prior to the end of October during the third quarter earnings report period, U.S. equity markets have a history of exceptional volatility. This year was no exception.
Negative return indicated in the data during the May 6 to October 27 periods does not imply a “Sell in May, go away” strategy . “Sell in May and go away” is a myth. The S&P 500 Index has gained in 38 out of the past 61 periods and the TSX Composite has advanced in 20 of the past 35 periods. However, gains were modest and the losses were higher relative to the period of seasonal strength. The May 6 to October 27 periods is plagued by higher volatility and fewer annual recurring events that influence equity markets.
The October 28 entry date for the annual seasonal trade is an average date. The optimal date to enter the trade each year is fine-tuned using short term momentum indicators. The optimal date normally occurs on the average date plus or minus three weeks. Last year, the optimal entry date was October 5.
What about this October? Short-term momentum indicators for the S&P 500 index and TSX composite index already are oversold, but have yet to show signs of bottoming. A trigger recording a momentum buy signal is likely to occur during the next few days.
Year-end “window dressing” by U.S. mutual fund companies could have an impact on U.S. equity markets this year. Most major mutual fund companies have a fiscal year end on October 31. Managers of these funds frequently add best performing equities prior to November in order to “pretty up” their portfolio for unit holder reporting purposes. Net result is a positive bias in equity markets during the last four trading days of October.
Thackray’s 2012 Investor’s Guide notes that the last four trading days in October have recorded an exceptional return on investment in U.S. equity markets . Average return per period from 1950 to 2010 for the S&P 500 Index was 1.0 per cent. Moreover, the first three trading days in November have provided above average returns.
Given current short-term oversold condition in the U.S. equity market, chances of a successful trade this year starting this Friday and continuing to November 5 are above average.
"Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend and step off before it is discredited." -George Soros
The older I get, the more I recognize statements like Soros' as ones I could make myself on any number of topics. The problem lies in capitalizing on these things. By the time we've had sufficient experience to make pronouncements like that, most future opportunities based on them have evaporated. The fact is, luck plays a very large role when it comes to being able to utter lines like that> they 'sound slick,' but of little value to those listening. It does reveal a great deal about Soros, however, and how he made his money.
with the weight it plays in the indices you could make the argument that this pullback in the markets is due in large part to apple. apple is down about 15%.
Proprietary Seasonal Rotation Investment Strategy •HAC uses a proprietary, seasonal rotation investment strategy developed by research analysts Don Vialoux/Brooke Thackray/Jon Vialoux. The strategy’s core position consists of broad markets at seasonally favourable times of the year and money market securities at seasonally unfavourable times of the year. The strategy allocates from the core portfolio to various sectors when those sectors offer favourable opportunities. Rotating a portfolio in anticipation of these opportunities is designed to deliver returns that are superior to a static investment in broad markets. As seasonal periods are never the same, this investment strategy is supported by additional fundamental and technical analysis
May not be as bad as it looks as TSX is only up about 5% this year - not nearly as much as the US.
Plus, these Joivain guys have not had a great track record running funds, but point taken - this seasonal stuff cannot be the major factor in determining your investment approach.
Come on, guys. When it comes to predicting market direction, the fact is everyone is wrong. The only ones who get it right, end up right due to chance. I really believe that. What saves us is cutting losses when we're wrong.
Is the stock market a casino? Totally. That doesn't stop me from playing. But I credit luck for most of my gains. And discipline for keeping my losses small.
Of course, no brokerage will admit to any of the above. Because the majority of investors would probably respond by leaving the casino.
"This movie is a stark portrayal of life among a group of heroin addicts who hang out in "Needle Park" in New York City. Played against this setting is a low-key love story between Bobby, a young addict and small-time hustler, and Helen, a homeless girl who finds in her relationship with Bobby the stability she craves. She becomes addicted too, and life goes downhill for them both as their addiction deepens, eventually leading to a series of betrayals. But, in spite of it all, the relationship between Bobby and Helen endures."
"Come on, guys. When it comes to predicting market direction, the fact is everyone is wrong. The only ones who get it right, end up right due to chance. I really believe that. What saves us is cutting losses when we're wrong. "
I think it's an absolute waste of time and energy focusing on the economy and the entire market. The one thing I consistently pay some attention to is if we're above or below the 200 DMA. I've gotten into trouble too many times micromanaging my trades because I get so scared about the market. The most money I've made is from catching stocks that are "hot"...i.e., the sector is heating up, there is a fundamental reason or catalyst for more gains, volume is picking up, or the stock is in a pullback after a nice move higher but valuation and the story still looks sound. Basically it comes down to crafting a scenario in my head as to why I might see other people getting themselves involved with the stock. I think it's important to focus on those things with individual stocks and completely ignore the media and the overall market. Turning off CNBC or the radio and doing some quality thinking and research ends up being far more beneficial for me.
It is hard enough to try and figure out if an individual stock should move up or down, let alone the whole market. 2002 is the best example where the market went down 22% and value guys like Hussman were up 13%. Worrying about the market cost you large that year.
After I sold the SPY calls I also trimmed a tiny bit of my YRCW at $7 and put that into MLNX at $73.5 I believe. I am only looking to trade that into the $80s to $90.
Thanks for the Ritholtz link, Craig. His thinking always makes sense to me.
ReplyDeleteThis morning's action already feels like stormy weather. That buy pulse came in out of nowhere.
ReplyDeleteI suspect overnight futures were the 'tell' re where we close today. Down.
ReplyDeleteWhich probably means we close higher.
DeleteWhich is why I have no interest in trading today.
DeleteWeak hands have been taken out. Market's going after the more die-hard bulls.
ReplyDeleteNLY - Off 100 points lost in the dow overnight, I exited NLY on the morning pop. Can't just sit here and watch the gain evaporate to this silliness plus there are other bargains in the making.
ReplyDeleteRitholtz - Agreed, this guy is worth considering. Thanks for the post.
I think NLY is one of the riskiest stocks out there and trading at crazy valuations due to the yield chasers.
Deleteit is well run, but I think we see a big drop at some point.
Yeah, normally NLY recovers from disturbance responses more quickly.
DeleteI'm curious though, how you define crazy valuation, the dividend is over 12% and it's trading below book value.
DeleteIf Hussman (the 'academic' who positions for the big picture), and Ritholtz (the trader with 'street cred' who calls every twist and turn) are now on the same page, what are the odds they're right? Add to the mix the one trader we follow who insists we have at least a year before the 'great collapse.' Rule number one dictates we listen carefully here.
ReplyDeleteBig Dave keeps pointing out internal weakness and sectors rolling over. Yesterday he said he tends to be early, but all but one service pick is a short.
DeleteI recall past election seasons where markets just held on or started to break down as the election happened. Think Clinton and the doozy, Bush. Not a prediction (I already voted) but if O wins then the righties will tighty, and if Rmoney wins austerity will pretty much guarantee some form of recession. I then filter that through earnings and Ritholtz who is one of the more logical and common sense managers out there, plus he has some great people working for him. I'd look forward to a 30% discount.
Ritholtz:
ReplyDelete- End of cyclical bull
- Raised our cash levels to 25% (huh? Still long)
- A regular earnings and revenue shortfall driven recession, with equity markets at risk for a 20-30% correction.
I think TOF's picking us some good ones and there are others out there to be found such as AGO, need to watch them closely.
REDF - Moving in our direction, gun sights on $2.7 ?
I still have difficulty comprehending the "gonna go to war" theorem, more like abbreviated peacekeeping missions as necessary.
CSTR - Great CC, or what?
ReplyDeleteYeah, if there is no clear daily direction it's probably best to do nothing. No edge.
ReplyDeleteThe futs last night were a little ominous, but you know how that goes. Too obvious.
I like the Deron IBB short though, Landry discussed it a couple days ago.
i agree if you're looking to day trade and have no feel then it's best to enjoy the weather. the market will be here on monday....
DeleteDang, shoulda' shorted the pop...
ReplyDeleteIMO, AAPL's resilience is all short-covering. When that ends, watch out.
ReplyDeleteI'd agree with that - AAPL is quite risky.
DeleteI'd take the other side of the Hussman / Ritholz argument. Hussman has been wrong for a very long time and I stopped following Ritholz a long time ago due to a lack of value (in my opinion).
ReplyDeleteI would place as my team Jeff Saut, Mike Santoli and Don Hays who are all pretty positive on the market. We'll have to set up a cage match to see who's right!
And again, I really base my analysis on the valuation of individual stocks, not the market and it's really not hard to find good stocks, unlike in 2007 before the bear. So, we both could be right in that the market goes down, but many stocks go up.
by the way, now that Santoli is with Yahoo Finance, he is tweeting his articles, so probably worth following.
No need for a cage fight- that happens every day, and Hussman has been battered for sure. I'm just trying to game the odds of a rebound in his performance.
Delete"And again, I really base my analysis on the valuation of individual stocks, not the market and it's really not hard to find good stocks, unlike in 2007 before the bear. So, we both could be right in that the market goes down, but many stocks go up."
DeleteI agree with this. in terms of the overall market let's keep this in mind: every time we pull back 5% we get calls that we're heading into a recession. it might be the case but in general i'd rather look for opportunities. there are things that are working out there. stocks with a focus on domestic activity have been performing very well (i.e., ETH, PIR, TOL, etc) since the last recession bell was tolled in May 2012 and August 2011. In fact, most of those would be total kick ass returns for anyone. So in periods of extreme negativity (and we're inching that way) I'd rather be focused keenly on what could rally hard. I don't think technology leads for a while. Doesn't mean some stocks within tech won't lead.
Also, let's take a look at where we are since the peaks in the rally since 2009:
April 2010 to now: 2.5 years > 14% Gain
April 2011 to now: 1.5 years > 2% Gain
While earnings could stall out for the entire market, I wouldn't exactly call this a highly inflated market. Sure we have rallied over 100% since March 2009. However, we're still at the same level we were at in the fall of 1999 and over 10% below the all time peaks in 2000 and 2007. So maybe we're heading into a recession but with the excessive pessimism spread throughout the media and blogs and with stocks going nowhere for the past 13 years I just find myself much more inclined to look for opportunities than curl up in a ball and hide in the corner. Can valuations get cheaper? Absolutely. But at some point we will have Europe out of a recession and a normalized housing market growth and when those two things happen earnings will be significantly higher than they are now. S&P earnings of $150? Why not. What would the S&P be at then? Would people be willing to pay 18 times earnings?
As you know I read BC with a good degree of caution, but this paragraph caught my eye yesterday. I usually reac BC to see what Geoff and Deron are looking at because they tend to dovetail nicely with Landry's system. I totally ignore fundamentals. They work for many but when the market has weak technicals everyone forgets fundamentals and they sell anyway. Price is what matters.
Delete"If investing based on corporate fundamentals was a better tool, as it was some 30 years ago, then I would be predisposed to building support systems to help that way. But markets change in character and, while trading is trading, unchanged over the years for people like Vad and Deron, we portfolio managers have to adapt to whatever factors are changing the price that affects the stocks of companies we hold."
CC - It all depends on time frame. If you are talking the next month or so then yeah sure fundamentals mean shit. But when the S&P drops 20% like it did last fall there was clearly support there for a reason. My answer is fundamentally stocks were very cheap.
DeleteFundamentals are a great tool to get you to buy panic and sell euphoria as well. If a stock is cheap enough, you just buy it and know it will almost always work out in the end. Similarly, you just sell it when you don't see much more upside, even though the stock might be going up.
DeleteIt's kind of funny how close you end up being to the bottom or top. Not often the exact point, but usually pretty good. It's the fundamentals buyers that change trends for sure (no-one else will).
By the way, I've been thinking about this for a while now but I think we need to focus even more on fundamentals now for good reason: everyone is a technical trader. How many blogs do you read that focus exclusively on technicals? How many of these blogs take a dump on fundamentals because they supposedly don't work? Isn't that the definition of near term bias? Technicals are all the rage right now and most stock shows focus largely on them. Here is the support area and here is the resistance area. This stock is forming this pattern which when triggered will result in a move to here. Look at stock twits. Most of those posts are technical in nature. I think that technical analysis could have reached its nirvana and become a difficult tool to use to make money going forward.
ReplyDeleteIt's always best to be looking where other people aren't. Was talking with someone the other day about 2 stocks, ORI and BRCD.
DeleteORI is a mid-sized P&C company that has been around for around 100 years, paid dividends for 70, increased them for 25. Stock is cheap because they are running off a Mortgage insurance business and, even though it is separately incorporated and the company is not putting money into it, GAAP makes them include the results. The net is that it shows an accounting loss, even though the ongoing business is quite profitable and is 50% - 70% undervalued relative to other companies. And it has 1 analyst following it, so no-one knows the story and it is almost certainly going to be a good money maker.
BRCD may be a fine tech company, but there are 27 analysts on the company. How do we as individual investors compete against that level of expertise? We can't, so you can either technically trade it or stay away.
It does pay to follow under analyzed stocks. The problem being, it's hard to get fundamental information on some of the small players, while everyone follows something like AAPL or INTC. How can anyone get an edge on something well covered?
DeleteOne reason I am attracted to TFO's YRCW trade is he looks at fundamentals and I see a basing chart. Using both is a better edge. The trouble I have with fundamentals is they are so easy to fudge while a chart is a history of sentiment. I just believe stocks are bought and sold on emotion. That doesn't mean technical traders don't have to take some heat and wait like fundamental investors do.
Fundamentals - Good point, they matter on a longer time horizon.
DeleteI was just making cookies and thinking about TA. You know, there are as many types of TA as fundamental analysis. Some of it everyone here uses on a nearly daily basis, ie: QQQ is right at the 200 dma or this or that is below the 50 or 200 dma. But there are forms of TA like Landry uses that are looking at tracks of emotion. 'Those who bought here may want to sell if it drops below here', or those who got shaken out here may want to re-enter if it rises to here' type of TA. Some people, for example use candles because they have learned to interpret that they indicate buying or selling, weakness or strength, just as Landry uses simple bar charts to read the same thing. This week we've had several days start strong and then sell off by the close, all clearly visible on a ST chart, a daily bar chart or daily candle chart. Vad uses ST candle charts with volume to scalp. TA isn't voodoo, it's simply the tracks of emotion. I don't buy too much into the support is here, break out here type of TA made popular on TV, but learning how to read a bar chart has been very helpful to me.
DeleteCC - Well put. I would add 'market profile' to your list. Have learned much from better understanding of this view from sources like
Deletehttp://shadowtrader.net/blog/ and https://twitter.com/verniman
over the past few months.
A change in trend is always a 'process.' Traders will fight the realization all the way down to the point where it becomes obvious (in retrospect). The same way bears fought the rally for two years.
ReplyDeleteWill 1400 hold? I guess it does, for the time being.
ReplyDeleteNasdaq right at the 200 DMA.
ReplyDeleteThe way AAPL held 609 last night reminded me of the way FB 'held' its offer price on opening day.
ReplyDeleterallies hard into the close
ReplyDeleteScary dip, then BANG-ZOOM! ;)
DeleteGGB - This one's lookin' like a good day trade entry, except my downside target somewhere under $8 hasn't been met.
That certainly would be what bulls are hoping for. Which means if it fails to materialize, it's even more bearish.
Deleteyep i agree 2nd. but it won't fail. i just bought some SPY calls (tiny amount) expiring today to play this potential. we shall see. if it happens could be a 20 bagger...if not i lose $1,500.
DeleteI admire anyone who backs up his take with skin in the game.
DeleteLooking good.
Deleteso far so good. they're up 287%
Deletethat doesn't mean sh*t til i sell tho.
DeleteDamn, bro. They must be up +500% now?
DeleteNLY - I'm not sure how this one's valuation can be called crazy, the div is over 12%, company announced buyback(makes sense when trading below book). Hard to determine which way book is moving, could likely be down if NYL isn't replacing MBS's as they are refinanced.
ReplyDeleteYou might say the monkey wrench is the FED's MBS purchases have stepped up it's competitive role with agency REIT's like NLY.
NLY may wait till near the end of the FED's QE period to buy back, or if/when they determine that book has bottomed.
Refinancings have been on a roll, so perhaps the FED realizes REITs have reduced incentive to buy new issues at these rates?
I'll look into this over the weekend to see if I can discover which way the wind is really blowing, or if it's just more of the same hot air BS we constantly contend with.
CP, I should not have said the valuation is crazy as valuing stocks like this is complex and I really have't looked at it in much detail.
DeleteTo me it looks just like they are borrowing short and lending long, which got a lot of companies into huge trouble in previous cycles, but there could be a lot more to this stock than I know.
So let's please keep bouncing ideas off one another, it's a very healthy process.
ReplyDeleteStill holding the IBB short from yesterday, up 1.30%. Still short the Q's with QID. Not up as much but if I were going to short now it would be those indices looking to catch up, the rusty or the P's.
ReplyDeletehttp://www.marketwatch.com/story/gupta-a-good-man-who-did-bad-things-2012-10-26?link=MW_story_investinginsight
ReplyDeleteRight. Aren't we all sophisticated enough by now to know some of the worst criminals on record have alter egos that overflow with kindness? And in fact, that very character is what allows some of them to blindside authorities and get away with the things they do?
http://www.newyorker.com/online/blogs/borowitzreport/2012/10/gop-split-over-whether-to-emphasize-misogyny-or-racism.html?mbid=nl_Borowitz%20(39)
ReplyDeleteThe GOP is a sorry, selfish mess.
Delete"I think that technical analysis could have reached its nirvana and become a difficult tool to use to make money going forward."
ReplyDeleteYep. Smart creators of the black box algos have programmed in all the patterns that human traders are looking for, and those algos are now routinely screwing up the human traders (faking them out). But we have pointed out many times on this blog that the "second-level TA" seems to work pretty well -- you just need to be patient enough to see a pattern develop, then to wait for that pattern to break and then reverse shortly after that. THEN we have a low-risk entry, since all followers of TA 101 have been shaken out, and computers will now take the stock the other way.
Cashed in 1/3 of my calls at a cool 7 bagger. wow.
ReplyDeleteCash 'em in, bro. Walk away.
Deleteyeah i did. made trip the other ones. not a bad trade. was up $10k at one point but ended up $4k.
DeleteAwesome! That's $1500 x 7, right? That would be TOO MUCH cognac for me to drink! :)
DeleteDavid - I wish I sold it at the highs...it WOULD HAVE been that. can't complain though. Walked away with about 3.5 times my money i think...
DeleteThe thrills of expiration day option trading - congrats!
ReplyDeleteWow - people really do not have faith in stocks. But that is a good thing as it means there will be more people to sell to later - from EPFR:
ReplyDeleteIn the past week, investors pulled the most money out of U.S. stock funds at any point in more than a year, an indication that many still harbor deep concerns about the global economy, according to data from EPFR Global.
U.S stock funds suffered outflows of $9.04 billion in the week ended Oct. 24, the most money redeemed from those funds since last November.
Meanwhile, bond funds continued to reign supreme, taking in $9.4 billion during the period. EPFR said that was the most new money ever taken in by bond funds in a single week.
Concerns about U.S. stocks are running so high that even European bonds are starting to look good to investors.
Investors gave a record-high $2.26 billion in new money to funds that hold European bonds. Up until the past week, those funds had only taken in $1.55 billion in new money this year.
I guess their giving Ugg's away for free...:)
ReplyDeleteI'm of the opinion that to make my year in 2013, all I need to do is wait for a drop, then buy. One trade. No way I have the patience for that scenario, but it's feasible.
ReplyDeleteHere's something interesting for traders like you 2nd:
ReplyDeleteThe best time during the past 61 years to enter North American equity markets has been at the opening of trade on October 28 . This year, the optimal date is the opening of trade this Monday, October 29.
How does the entry point look this year?
Thackray’s 2012 Investor’s Guide notes that the best period to own U.S. equities during the past 61 years has been from October 28 to May 5. A $10,000 investment in the S&P 500 Index purchased each year on October 28 since 1950 and sold each year on May 5 during the past 60 periods increased in value to $1,057,851 by May 5, 2011. The trade was profitable in 53 of the past 61 periods. In contrast, a $10,000 investment in the S&P 500 index purchased each year on May 6 and sold each year on October 27 fell in value to $6,862. Calculations did not include dividends or commission costs.
The main reason for the period of seasonal strength is a response by equity markets to a series of positive annual recurring events from late October to early May. Annual recurring events include transactions for tax purposes, anticipation of quarterly and annual corporate reports, the timing of analyst opinion changes, key economic reports, and special holidays, including the U.S. Thanksgiving holiday and the Christmas holiday.
The beginning of the period of seasonal strength at the end of October typically happens just after a majority of S&P 500 companies have reported third quarter results. Prior to the end of October during the third quarter earnings report period, U.S. equity markets have a history of exceptional volatility. This year was no exception.
Negative return indicated in the data during the May 6 to October 27 periods does not imply a “Sell in May, go away” strategy . “Sell in May and go away” is a myth. The S&P 500 Index has gained in 38 out of the past 61 periods and the TSX Composite has advanced in 20 of the past 35 periods. However, gains were modest and the losses were higher relative to the period of seasonal strength. The May 6 to October 27 periods is plagued by higher volatility and fewer annual recurring events that influence equity markets.
The October 28 entry date for the annual seasonal trade is an average date. The optimal date to enter the trade each year is fine-tuned using short term momentum indicators. The optimal date normally occurs on the average date plus or minus three weeks. Last year, the optimal entry date was October 5.
What about this October? Short-term momentum indicators for the S&P 500 index and TSX composite index already are oversold, but have yet to show signs of bottoming. A trigger recording a momentum buy signal is likely to occur during the next few days.
Year-end “window dressing” by U.S. mutual fund companies could have an impact on U.S. equity markets this year. Most major mutual fund companies have a fiscal year end on October 31. Managers of these funds frequently add best performing equities prior to November in order to “pretty up” their portfolio for unit holder reporting purposes. Net result is a positive bias in equity markets during the last four trading days of October.
Thackray’s 2012 Investor’s Guide notes that the last four trading days in October have recorded an exceptional return on investment in U.S. equity markets . Average return per period from 1950 to 2010 for the S&P 500 Index was 1.0 per cent. Moreover, the first three trading days in November have provided above average returns.
Given current short-term oversold condition in the U.S. equity market, chances of a successful trade this year starting this Friday and continuing to November 5 are above average.
Thanks for the post, BB. I'm certainly hoping my 'market map' continues to play out. We'll see.
DeleteIVV long at 142
ReplyDeleteNice discussion today fundy vs techy.
$10k is a nice round figure, too bad you couldn't catch it there but very nice trade to end the week anyway, TOF!
ReplyDeleteA little at a time...
Interesting in view of today's discussion.....
ReplyDelete"Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend and step off before it is discredited." -George Soros
The older I get, the more I recognize statements like Soros' as ones I could make myself on any number of topics. The problem lies in capitalizing on these things. By the time we've had sufficient experience to make pronouncements like that, most future opportunities based on them have evaporated. The fact is, luck plays a very large role when it comes to being able to utter lines like that> they 'sound slick,' but of little value to those listening. It does reveal a great deal about Soros, however, and how he made his money.
DeleteThe Alchemy of Finance was a good read on Soros.
Delete"Tom Demark saying this may be an island reversal and puts 1480 back in play on news over the weekend and we are on our way to new highs."
ReplyDeleteNot exactly sure what this means, but certainly sounds good and Demark is a well respected technicican I believe.
with the weight it plays in the indices you could make the argument that this pullback in the markets is due in large part to apple. apple is down about 15%.
DeleteWe broke 150 and 200 dma's, traders at least cover any shorts and aggressive traders could try going long.
DeleteAlot of traders will just cover and short the bounce vs buy the dip.
I may go long AAPL monday and do not quite understand why QCOM has been slammed.
Thackray’s 2012 Investor’s Guide
ReplyDeleteHere is an ETF on his method. 3.9% YTD
http://jovian.transmissionmedia.ca/fundprofile.aspx?fund=HAC&lang=en
DeleteInvestment Highlights
Proprietary Seasonal Rotation Investment Strategy
•HAC uses a proprietary, seasonal rotation investment strategy developed by research analysts Don Vialoux/Brooke Thackray/Jon Vialoux. The strategy’s core position consists of broad markets at seasonally favourable times of the year and money market securities at seasonally unfavourable times of the year. The strategy allocates from the core portfolio to various sectors when those sectors offer favourable opportunities. Rotating a portfolio in anticipation of these opportunities is designed to deliver returns that are superior to a static investment in broad markets. As seasonal periods are never the same, this investment strategy is supported by additional fundamental and technical analysis
BTW, I'm not disputing the OCT to May cycle, I think its valid. It's just that the overall system in the book may be suspect if its YTD is just 3.9%
DeleteMay not be as bad as it looks as TSX is only up about 5% this year - not nearly as much as the US.
DeletePlus, these Joivain guys have not had a great track record running funds, but point taken - this seasonal stuff cannot be the major factor in determining your investment approach.
Did not know that fund related to TSX, thanks BB.
DeleteKiss of death?
ReplyDelete"Stocks Set to Rise Regardless of Who Wins Election, Technical Analysis Shows @ Fox Business"
Amazing though that Fox can bring themselves this far center.
Come on, guys. When it comes to predicting market direction, the fact is everyone is wrong. The only ones who get it right, end up right due to chance. I really believe that. What saves us is cutting losses when we're wrong.
ReplyDeleteIs the stock market a casino? Totally. That doesn't stop me from playing. But I credit luck for most of my gains. And discipline for keeping my losses small.
Of course, no brokerage will admit to any of the above. Because the majority of investors would probably respond by leaving the casino.
Watching 'Panic in Needle Park' on NFLX. Al Pacino, 1970. Filmed entirely in NYC.
ReplyDeleteThe clothes, the hair, the cars. They really can't duplicate that stuff these days even with really good wardrobe assistants and set designers.
Deletesounds like a good one
Delete"This movie is a stark portrayal of life among a group of heroin addicts who hang out in "Needle Park" in New York City. Played against this setting is a low-key love story between Bobby, a young addict and small-time hustler, and Helen, a homeless girl who finds in her relationship with Bobby the stability she craves. She becomes addicted too, and life goes downhill for them both as their addiction deepens, eventually leading to a series of betrayals. But, in spite of it all, the relationship between Bobby and Helen endures."
http://www.imdb.com/title/tt0067549/
7.1 rating is solid.
"Come on, guys. When it comes to predicting market direction, the fact is everyone is wrong. The only ones who get it right, end up right due to chance. I really believe that. What saves us is cutting losses when we're wrong. "
ReplyDeleteI think it's an absolute waste of time and energy focusing on the economy and the entire market. The one thing I consistently pay some attention to is if we're above or below the 200 DMA. I've gotten into trouble too many times micromanaging my trades because I get so scared about the market. The most money I've made is from catching stocks that are "hot"...i.e., the sector is heating up, there is a fundamental reason or catalyst for more gains, volume is picking up, or the stock is in a pullback after a nice move higher but valuation and the story still looks sound. Basically it comes down to crafting a scenario in my head as to why I might see other people getting themselves involved with the stock. I think it's important to focus on those things with individual stocks and completely ignore the media and the overall market. Turning off CNBC or the radio and doing some quality thinking and research ends up being far more beneficial for me.
It is hard enough to try and figure out if an individual stock should move up or down, let alone the whole market. 2002 is the best example where the market went down 22% and value guys like Hussman were up 13%. Worrying about the market cost you large that year.
DeleteAfter I sold the SPY calls I also trimmed a tiny bit of my YRCW at $7 and put that into MLNX at $73.5 I believe. I am only looking to trade that into the $80s to $90.
ReplyDeletenew post
ReplyDelete