Archive for June, 2009

Todays Charts and some observations

By , 11 June, 2009, No Comment
ESU9

ESU9

I am sure everyone remembered to roll to the Sept. contract today. The market roller coastered around the chart and various economic entities debated the validity of the economic data the government has released of late.

Over at Financial Armageddon, there is an interesting article from a fellow who claims the nation’s books are grossly understating the current unemployment figures, money supply…just about everything, once you get reading the article. His claim goes something like…”the country would be flat on it’s belly if we weren’t using doctored numbers…”

I’ve never been much of a conspiracy theory kind of guy, so I find his declaration of “all things government” to be a bit hard to swallow. On the other hand, another study showed the government subsequent revisions to economic data were usually negative, that is, the revisions usually put the economy in a less positive position than the initial release. Of course, you could argue coincidence. But I’ve never been too big on consistent coincidences, either.

So I suppose the truth lies somewhere between these extreme views. The government has changed the methodology it uses to measure the countries unemployment and GDP, and by in large, the new formulations tend to understate the seriousness of the current problems.

Sheesh, sometimes the entire business wears me out.

As an aside, I have been wondering what the difference in Bernie Madoff’s Ponzi scheme and the credit default Ponzi scheme AIG has saddled us with. Think about it….AIG did not have the assets to repay, nor was it even close, the entirety of the credit default swaps it issued….kinda of like Madoff, when you think about it. Only we gave AIG billions of dollars to straighten things out, we gonna give Madoff lots of years to straighten things out…in the pokey.

Where in the Hell are we in this ongoing mess?

By , 10 June, 2009, No Comment

I was listening to Dr. Roubini on a PBS clip last night and he believes we have averted the possibility of a depression. Hmmm….I decided that was some good news, I think.

As of late, though, I have felt manipulated by the powers-that-be (and you can decide just who the powers-that-be actually might be) as we have had this tremendous run-up in stock prices while unemployment has continued to march straight upward. Good Grief…the government’s official number is 9.45%, and some economists are squabbling that the calculation is artificially low, and if we used a non-manipulated formula for unemployment, say the one we used in 1982, the number would be much higher. And then there is the foreclosure issue…

The rate of foreclosures has also marched steadily upward, which would indicate that people do not have the money to pay for their homes. Or perhaps, they do not find it financially expedient to pay their homes and are diverting their funds to savings or some other investment vehicle, which I find highly unlikely.

The credit markets are broken, with the government guaranteeing everything from car manufacturer loans to bank accounts, to….well, you name it.

My point is simple: The stock market is disconnected from the economic health of the country. Granted, the VIX has stopped oscillating like a seismograph needle in 8.4 earthquake, but the markets, of late, would have you believing that everything is honky-dory.

I don’t feel honky-dory. No, the footing on the path I am walking feels loose and very sketchy.

With the amount of money we have pumped into the economy, a great deal of the looming disaster has been put off, but has it been put off forever, or have just put it off for another ten years?

In the past, countries that have inflated their M1 and pumped the kind of stimulus money into their economies have had a nasty dust-up with inflation, and that worries me. Where are we headed with inflation? I have this niggling that there is inflation out there waiting…at least it ought to be waiting.

No, none of the current economic data makes sense to me, there are too many asymmetric variables to account for to let me breath deep and comfortably.

Is financial television making us crazy?

By , 9 June, 2009, 1 Comment

By Barry Ritholtz – June 8th, 2009, 9:30AM

Over the past 5 years, I have appeared on various Financial TV shows over a 100 times. But I am also a huge consumer of financial news, in print, on the web, radio, and of course, TV. Being on both sides of the camera gives me a fairly good perspective on what does and doesn’t work on TV. I also have some strong ideas as to what is good and bad TV in terms of providing a social utility, being part of the democratic process, etc.

Indeed, this is a longstanding interest of mine. Over the weekend, I referenced the current Columbia Journalism Review (CJR) issue that focused on the role of the media in the credit crisis, stock market and economic collapse (CJR on CNBC, WSJ & Business Press). This area has long interested me (hence, our media panel at TBP conference). But I was surprised this post generated 100 comments from readers.

One emailer challenged me on CJR’s CNBC piece: “Its easy to complain, but what would you do to “fix” Financial Television?”

Challenge accepted. Here are my general suggestions as to how to “fix” what needs repair on not just CNBC, but all FinTV.

>
How to Fix Financial Television

1. Stop Yelling. Stop interrupting. Stop Talking Over Each Other: This is not Jerry Springer, its serious business. People’s retirement and investments are at stake. Please treat it that way.

2. Bring us People We Don’t Have Access to. What various FinTV channels do really well is when they bring us long, thoughtful interviews with the likes of Warren Buffett, WIlliam Ackman, David Einhorn, and others. People we wouldn’t ordinarily have access to. Example: This morning, CNBC had on James Rickard. More of this please.

3. S – L – O – W D – O – W – N

4. Risk: All traders must appreciate the potential downside of trades. So too, must FinTV. Explain stop losses. Understand Risk/Reward. Recognize there are periods when Buy & Hold is a jumbo loser.

5. Lose the Octobox. Fire whoever came up with the Decabox. ‘Nuff said.

6. Separate the Signal from the Noise. Understand that most of the day-to-day action is simply noise. Look at a long term chart, you can barely see 9187 or 9/11. If those major events get lost in the long term trend, what does the intraday jags, kinks and reversals mean? Very little. Recognize that not every data release, slice of news, or rumor is at all significant. Stop treating them as if they were.

7. Fact Check: An awful lot of things on air get stated with authority and confidence. Much of them are little more than junk or pop myths. Why is it that the more dubious a proposition is, the greater the confidence the speaker seems to muster? Consider fact checking as much of the statements that are made on air as possible, and making frequent corrections.

8. Accountability is important: I am astounded at some of the money losing hacks that are various shows again and again. These are the “articulate incompetants” to use Bennett Goodspeed’’s phrase. Why not keep track of the records of guests — and let the viewers know how their past few calls have been. Are they Perma-bulls or bears? Are their stock picks awful? Are they reliable money makers? If not, let us know. (Of course, the better question is, if not, why even have them on?)

9. Bring Back Louis Rukeyser: Not the man, but rather, his style. Wall $treet Week — Rukeyser hosted it from 1970 to 2005 — was plain-spoken, thoughtful and accessible. Quiet, contemplative, discussions, with intelligent market participants, revealing helpful information. The investing public would appreciate something of that sort — again.

10. Sound FX: What is with all the bizarre sound effects every time a screen changes? Its financial news, not a video game. Kill ‘em.

11. Embed your video (on your own website or YouTube) instead of using WMP. At long last, thank you.

12. Investigative Pieces: David Faber seems to have a monopoly on deep, long thoughtful analyses. Be they on Wal-Mart, the credit crisis, whatever, his long format work is a highlight of CNBC. More of these, please.

13. Most stock picks are losers. That’s normal, but the audience does not realize this. A big part of the challenge is informing the viewer that finding the biog winners is a low probability, high outcome event. As in a baseball, a 350 hitter is a star. Explain this to your audience.

14. Stop the Bull/Bear Debate: This is a vast over-simplification of the market, and often does not serve the audience well. There are nuances and variables that get lost when you reduce everything to black and white.

15. Partisanship: Leave your personal politics at home. Viewers don’t care what most of you think.

16. Respect the Audience: We are adults. Treat us that way.

An interesting day, to say the least

By , 8 June, 2009, No Comment
emini trading dow trading

emini trading dow trading

What a day we had, the market fell out of bed from the onset, as economists squabbled over what the “real” unemployment numbers should be. No matter how you look at it, they ain’t good, so to speak. And at the end of the day the financials staged what I would call a miracle rally and drove the Dow into positive territory. There any number of theories being floated as the the nature of this late rise in price, and they range from conspiratorial to fundamental. Heck, I’m just a scalper, I want to stay in the trend.

The late day rallyy was a hard one to stay in as it made no sense, so there was a constant compulsion to pull out with a large gain, but the thing just kept going up, and up, and up. One of the oddest last minute moves I’ve seen. Then again, these are odd times…so what should I expect?

Another easy set up today

By , 4 June, 2009, No Comment
YM trade

YM trade

This was an interesting trade, as the price bounced a third time off the bottom of a short support line, all the indicators, which I have circled, turned to indicate executing a long position. It turned out to be a good trade. The DecisionBar software, which is not shown, all indicated a long trade one bar later. Also notice how I took my profits one bar too soon, the indicators were beginning to flatten out and I felt I was somewhere near the top. This was a fun trade to watch play out.

A Fairly Typical Trade Today

By , 3 June, 2009, No Comment

I thought I would share with you the first trade of the day today, as it is fairly typical of the trades I look to enter. You can see at point A we had a close below an intermediate line of support I had been tracking. I took 5 short looking for a breakdown. As you can see, I had to endure a little flack at the beginning and feared I would get stopped out, but the market finally cooperated and broke down nicely and I exited at point B with a nice gain of about 20 points on the YM. I like to go short in these situations and have a high level of success. An interesting trade.

Subscribe in a reader

Price Movement, Momentum Oscillators and the "Trend is Your Friend"

By , 2 June, 2009, No Comment
Any trade in the futures market has essentially a binary outcome, the market either goes up or the market goes down. Of course, I am aware of the fact that you might well argue that the market stays the same and claim an anti-binary bias, but the fact of the matter is the market seldom, if ever, stays the same. Price movement is constant, especially in the scalping style of trading.

The problem arises with oscillators, which essentially measure market momentum. We are all aware that the price can easily, and often does, decline during a period of time that momentum oscillators show postive momentum. This is a constant problem traders face when trading with momentum based oscillators. We all want to trade with the trend, and I have a personal trading style that precludes any counter-trend trades. My psche simply can’t endure the relative success/failure rate on counter-trend trades. I will also freely admit that counter-trend trades can often be among the most profitable trades you can make. The problem arises when you take into consideration the relative failure rate, and/or false indications in the change of the trend. That being said, I usually strike an 89 period simple average line on my trading charts and ignore all trades above or below this line. It is a simple way to stay with the trend. It is a bit primitive, though.

As a general rule, I like to trade 233 tick charts, which, I realize, is a bit faster moving than some individuals prefer to proceed, but I have grown quite accustomed to idiosyncrasies of this chart configuration and usually profit handsomely for the information gleaned from tick charts. You can get a great idea as to the current volume in the market by how fast the bars fill. So I generally don’t chart volume, but glean the velocity of the market by the pace at which the bars fill. Incidently, I am a candlestick guy, for no particular reason other than I have always traded candlesticks.

But let us return to the inherent flaws in momentum oscillators in discerning price movement. Again, I reiterate that momentum in the market can appear to be positive, whiile the price is actually falling. This is a situation that often results in losing trades, and endless frustration for the trader. After all, one reasons that if the market is in an upward swing, how in the heck does the price action suddently veer to the negative?

The realization is a simple one: Price momentum and price action do not always have a positive correlation. Now this is a difficult, often impossible, concept for some traders to conceptualize.

My answer to the problem is a fairly simple one. I use dual time frame oscillators to chart my trades? On the one hand, I use a longer time frame oscillator to get a feel for the overall momentum of the market, and a shorter term oscillator to determine the the actual price action in the market. I have experimented for years with different settings to achieve optimal results, and for scalping I have become comfortable with a 60 period look back on the longer term oscillator and a 15 period look back on the shorter term oscillator. In effect, I get a good guage on both the momentum of the market and the price action in the market,

One quick note: I can notice when the momentum is falling and the price is falling and find it easier to pick up on trend reversals. While the system is not foolproof, it gives the trader an accurate picture of what is actually occuring in the market, and good information if he or she decides that taking that all-to-risky counter-trend trade has a decent probability for success. Myself, I usually wait until the trend has really changed before I jump into a trade, but great money, some of the best money, can be made for those who are not of the faint-of-heart and can bring themselves to trade against the trend.

The keep point of this discussion is simple: Momentum oscillators are essentially flawed because they are not great indicators of price action. Trade in a dual time frame setting and increase your chances for success in trend reversals.

Subscribe in a reader
Page 2 of 2«12
Easy AdSense by Unreal