Capitalogix

Why Analysis Is Often Flawed

Imagine thousands of researchers asked to analyze the market, or an event like a Fed Statement. Each is searching for a substantial answer. Trouble is, there's bias towards "substantial."

Is there really an "Answer"? Doesn't each tick, each move, produce new questions?

It's sometimes like a "Magic Eye" hidden picture. You are searching for the vision and all you see is nonsensical chaos. Yet when seen from the right perspective, and with the right focus, there is a higher order and the picture becomes clear.

Time plays a role here. Timeframe plays a role here. But so does knowing when the signal to noise ratio tells you not to pay attention. Sometimes noise is just noise.

I've been thinking about how the market whispers when to play offense, when to play defense, and when not to play at all.  What gives us a clue that something meaningful is happening?  Is it:

• Price Moves;
• Volume;
• When Some Moving Average is Above or Below Some Other;
• Sentiment
• Fundamental Data
• Technical Indicators?

As someone who's played this game for a long time, I'm not looking for magic bullets.  But if I wasn't willing to look, it would be difficult find.  So, model-building and testing will continue.  I'll share more as the picture comes into focus.

Americans Starting to Feel Gas Pains

Stratfor reports that car-loving Americans drove 11 billion fewer miles in March than they did a year earlier. The 4.3 percent decline is the first year-on-year decline since the 1979 oil shock, and the sharpest decline ever. From: A Record-Setting Change in Driving Habits.  Zogby says behavior is changing because of demand elasticity (big words for drive less if it costs more).

Oil prices have hit new highs and other commodity prices remain high. Obviously this is having an economic impact; but we should start seeing political and geopolitical impact. The first signs will be internal unrest and serious economic dislocations. The second will be interstate competition for resources.

From a trader's perspective, it is important to determine whether oil is topping in price. One aspect of that is the amount of oil at sea in tankers. Stratfor reports that tanker rates surged recently, but not consumption. Oil holders, at highs, put their cargo on ships to try to time their sale on the spot market. When a lot of people do that there is a hidden overhang of supply. Something to think about.

From a consumer's perspective, I'm amazed how often I hear people talk about the price of gas.  Here is an interesting way to compare prices.


GasBuddy has other features as well.  For example, here is a link to the lowest price found in Dallas.

A Better Copy Than the Original

ClipMate is a little piece of software that I didn't expect to think much of.
Someone recommended that I try it, and I did; but without much hope.
Instead, I find that it's a utility that I use dozens of times everyday.

The simple description is that ClipMate is a universal clipboard enhancement that works alongside the regular Windows Clipboard and remembers every piece of data (both text and graphics) that you cut, copy or screen-capture.  Once your data is saved in ClipMate, you can select an item and it is automatically placed back on the Clipboard or directly to wherever you select. 

The author of ClipMate has been updating this program for over 16 years, and clearly listens to user suggestions.  The result is mature product that does more than I could have imagined.

For example, within ClipMate you can view, print, edit, reformat, convert to upper/lower case, search, rename, and reorder Clip Items.

There are several "heavy lifting" features such as pasting multiple items all at once, using Templates, and lots of "clean-up" functions like spell-check, format stripping, removing extra line breaks, spaces and strange characters (I call this de-crappifying the document). All-in-all, it does a lot of things well.

It's a Clip Organizer Too:

Once you start using it to capture data, you're going to want to find and use it too.  ClipMate allows you to store your clips in different folders, or collections, based on how you work, and to set retention rules accordingly. I suspect that many users keep their most-commonly used data in their "Safe" collection, while others spread it out by topic, project, source, etc..  Personally, I have a section for "Templates" that I re-use, Quotes, Things to Purchase, Web Sites, Passwords, Humor, even graphic elements. 

Beyond basic organization, it is searchable; so I can find something that I saved, regardless of where I put it.

ClipMate can hold tens of thousands of items, and its SQL-based search engine can find them all quickly for you.  Even if you decide to do nothing special with your clips - you'll always have the last 1000 clips at you disposal, ready to paste wherever you need them.  When you're ready to use a "clip", just select it in ClipMate, and it's "loaded" onto the system clipboard, ready for pasting into any program.  And with many programs, you can now drag/drop the clip directly from ClipMate.

Try it; it's an incredibly useful tool that you'll use everyday.

Weekly Market Commentary from 5/23/08

Wow that was quick. The Dow lost 500 points this week, as oil continued to rise, housing continued its decline, and inflation and recession fears flared. No wonder the markets went down.

From a technical perspective, several markets also lost their trend support levels.  Adding insult to injury, not only did the markets fail to stay above their 200-Day moving averages ... most markets are now back under their 50-Day moving averages.

This is a daily chart of the S&P 500 Index with price just beneath the hotly contested 1400 level.  It shows that price broke below the uptrend from March (shown by the thick red diagonal line); but is resting just above the down-trend support line from October (the thick blue diagonal line).


We are now oversold no multiple time frames. However, we'll see how long it lasts.  Bulls are quick to point out that we went from overbought to oversold too quickly, with low volume, and not much re-testing.  Bears respond: that's the definition of weakness.

Of course, most market watchers were expecting a pull-back. As noted, the markets had run-up quite a bit and were facing their 200-Day moving averages. It's quite normal to stop there once you had such a long multi-month move upward. Also, the lack of negative sentiment deprived the rally of fuel. It will be interesting to see the Commitment of Traders data and new bull bear percentage when it comes out later this week.

Things that caught my eye this week:

• As traders shift to other platforms, NYSE Trading Falls to 7-Year Low, even though volume rises.
• Even at recent market highs,NYSE Short Interest Back Near Record Levels.
• European Central Bank President Says 'Shocks' Aren't Over for Economy'.
• Forbes had an article by Jason Goepfert warning to Beware Low Volume in Bear Markets.
• A Short-Seller publicly questioned Lehman's numbers.

This should be an interesting week; respond intelligently.

Evolution of the Cell Phone

With Apple's 3G next generation of iPhone rumored to launch in the next few weeks, I have to admit wanting one, sight un-seen.

We've seen a lot of changes since the first cell phones.  As a persistent early-adopter, this brought back a lot of memories.



Make sure you check-out the piece at the end with a peek into the future.

Ray Kurzweil wrote an interesting piece in the Washington Post called "Making the World a Billion Times Better."  It talks about the exponential progression of technology.

It sure makes a lot more sense in hindsight. 

It is exciting to think about what it means, going forward.  But, counter-intuitively, you often have to look back to know what to focus on.  You often can logically segment what happened in the past to see which pain-points, new capabilities, or paradigm-shifts triggered the leap to the next phase.  Once you understand the gating process, you can project forward.  Then the next steps come into focus.  And cycle starts fresh, again.

I've done this with the tools and techniques we use to trade.  The progression makes so much sense, now; even though it seemed so random as it happened.

It is fascinating to look back at how far we've come.  I'll bet you could do the same.  More importantly, no matter how far you've come to get here ... realize that sometime in the future, you can look back and smile as you realize how small the game was that you used to play.

What Do Bancruptcies Tell Us?

Bankruptcy lawyers in Texas have been busy recently.  Past cycles have shown a surge of Chapter 11 Bankruptcy Reorganizations as early indicator of the end of tough economic times. 

Makes sense though; Reorganization happens when someone wants to preserve an asset, but credit is tight.

So, it is just a data point, but if it was a football game, my guess is that we'd be in the third quarter.  What do you think?

Weekly Market Commentary from 5/16/08

Is The Bear Still Lurking?

Great market action for bulls recently.  If this has been a head-fake, it certainly was a convincing one.

The major US Equity Indices are all moving up to their 2008 highs - into their 200-day moving averages.

There has been a prolonged rally off the March lows, so you are going to hear lots of bearish predictors. It makes sense from the standpoint of price, time and logic.

Right?

For example:

1. We are now "overbought" and the rally is approaching the 61.8% Fibonacci Retracement level;
2. A re-test of the 50-Day moving average is a likely next move;
3. That the Put/Call ratio is too bullish, and so is dumb-money confidence levels;
4. The VIX is simply too low, and readings at these levels often precede big drops;
5. Consumer confidence levels are at dangerously low levels (add inflation, housing, and gas ...); and
6. We are still in that range-bound congestion area, and the longer we stay here the more we spend upside momentum.

But, you have to trade what the market brings you.  And the market has digested bad news well recently. More importantly, we know that markets don't have to trade logically.  So keep your eyes open and respond intelligently.

Here are some of the things I read this week.

• Hulbert sees several bullish indicators; here are two: Fosback's Recession Buy Indicator and
  Best Market-Timers Now Bullish.
• Good look at how breadth is supporting the recent rally in How to Gauge Market Strength.
• Bernanke is looking into what causes market manias in his Bubble Laboratory.
• Barrons had a nice piece on Doug Kass called Confessions of a Short Seller.
• Have you seen the video of Bill O'Reilly throwing a temper tantrum.

What is Your Intention?

Fear, greed and hope comprise the Bermuda Triangle of trading. Many dreams were battered or lost because of them.

In trading, my goal is to make and keep money, consistently. It isn't to be right, or clever, or even creative. Reducing human bias and error are benefits of using automated trading systems; and ultimately that helps us intelligently respond to the markets.

How does that apply to life?

Oh, a small question ...

A friend of mine called me this week to share a thought. He said that he was trying to stop simply responding automatically to situations. Instead, he was going to consciously focus on his "intention" before responding.

Imagine how different the world would occur to you if you brought "intention" into focus instead of mindlessly surrendering to your first feelings and actions.

My first reaction often is to ask "what is the best next step?" Perhaps you do something similar? On many levels that is a resourceful question. Yet, what would happen if, instead, you brought your intention into focus and asked what role you could play to best support that intention?

Your role directly affects the options you perceive.

Let me know how that works for you.

Travel IQ

Trip Advisor has an interesting game called Traveler IQ Challenge.

brought to you by TravelPod, the Web's Original Travel Blog ( A TripAdvisor Media Network member )

I thought it was fun. 

On a related note, here are some of my favorite Travel sites.

Farecast:  This site has lots of nice features.  This link shows cheap fares from a city.  The graphic to the right shows other features to look for on that page.  For example:

• when to travel (which days have the lowest fares), and
• where to travel (which cities have the best deals).

Kayak: Search 140+ travel sites at once to find and compare the cheapest fares from all sites together - great grids and filters to find what you are looking for fast.

Airfare Watchdog:  Up-to-date list of low fares from major airlines (including Southwest).  You can subscribe to alerts too.

Coupon to Buy Gas

If it wasn't so close to the truth, this would be funny.