Capitalogix

Capitalogix Commentary for the Week of 03/29/10

Markets climb a wall of worry ... but I don't recall a bull run, like we've seen recently, with so much fear and loathing as a back-drop.

The U.S. equity markets have held-up remarkably well, and much better than I expected.

Yet, the Euro continues to struggle.  It is worth noting that  some traders believe that the Euro can be used to predict the S&P 500.  So, here is a daily chart showing that price is at the mid-line of the downwards sloping trend channel.

Here is a different way of looking at the Euro's woes.

Here is someone else betting against the Euro.

Jim Rogers Guarantees Another Recession.

George Soros' ex-partner at the Quantum Fund isn't afraid to share his thoughts.  In a recent CNBC interview, Jim says he doesn't pay attention to the Fed, and that he expects Western Currencies to be weak. However, many will focus on these comments: “Yes, we’re going to have another recession, I guarantee you … By 2012 say, it’s time for another recession, ... and the next time it’s going to be worse, because we’ve shot all of our bullets”. Here is the video.

For a different look at how the economy's recovery is doing, here is a look at consumer spending.

Is Consumer Spending a Reliable Leading Indicator of GDP?

The Consumer Metrics Institute produces a U.S. consumption index based on actual transaction data for a range of major discretionary purchases such as cars, houses, durable goods, and vacations. As such, this index was designed to react quickly to significant consumer spending changes in a number of different segments of economy.

As shown below, their 'Growth Index' has led changes in U.S. GDP reasonably well. Currently, it disagrees strongly with the upbeat story portrayed by other leading indicator indices.

I hope you have a good week.

Business Posts Moving the Markets that I Found Interesting This Week:

• Review of Hank Paulson's New Memoir from Inside the Crisis. (Slate)
• Apple Races to Strike Content Deals Ahead of iPad Release. (WSJ)
• Google's Failed Search for Business in China. (Economist)
• The Problematic Nature of New Short Selling Restrictions. (AdvancedTrading)
  
• New Exit Strategies For Venture Capitalists. (Forbes)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Pandora's New Business Model on Track for $100 Million This Year. (econsultancy)
• Brain Scans Could Be the Marketing Tool of the Future. (Duke)
• Video Game 'Console Killer' OnLive to Launch this June. (Newser)
• Orthorexia: Can Healthy Eating Be Labeled a Disorder? (Time)
• Futuristic Minority Report Computer Interface Makes A Real-Life Debut (Geek)
• More Posts with Lighter Ideas and Fun Links.

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• Leading Indicators and Breaking the Money Supply Log Jam (seekingalpha.com)
• Thoughts on Jim Rogers' Take on Greece, Euro (seekingalpha.com)
• Is the Government Understating the Severity of the Recession? (pragcap.com)
• China and the New American Manufacturing Paradigm (yelnick.typepad.com)

Will "Things" Use the Internet Better than People Do?

The terms "Internet of Things" and "System of Systems" are concepts that help to explain a great deal about what is happening, now, where the digital world meets the physical and intellectual.

In the video below, from IBM, you get a glimpse of it ...

Imagine if your alarm clock talked to your calendar and knows you need to catch the ferry in 1-1/2 hours to get to work, so it wakes you up. But, a half hour before it wakes you, it turned on the heater in your bathroom; and other sensors started your morning coffee and de-iced the windshield in your car.

Here are some excerpts from the film:

“Over the past century, but accelerating over the past couple of decades, we have seen the emergence of a kind of global data field. The planet itself – natural systems, human systems, and physical objects – have always generated an enormous amount of data, but we didn’t used to be able to hear it, to see it, or to capture it. Now we can because all of this stuff is now instrumented. And it’s all interconnected, so now we can actually have access to it. So, in effect, the planet has grown a central nervous system.

Look at that complex set of relationships among all of these complex systems. If we can actually begin to see the patterns in the data, then we have a much better chance of getting our arms around this. That’s where societies become more efficient, that’s where more innovation is sparked.

When we talk about a smarter planet, you can say that it has two dimensions. One is to be more efficient, less destructive, and to connect different aspects of life which do affect each other in more conscious, deliberate and intelligent ways. But the other is also to generate fundamentally new insights, new activity, and new forms of social relations. So you could look at the planet as an information, creation and transmission system, and the universe was hearing its information but we weren’t. But increasingly now we can, early days, baby steps days, but we can actually begin to hear the planet talking to us.”

This framework applies to many other things (for example, trading and markets).  Expect to hear more about this type of insight and automation.

Related articles by Zemanta

• Internet of Things Explained (Video) (readwriteweb.com)
• IBMs take on the Semantic web: A Video (rawstylus.wordpress.com)
• Are we ready for IBM's Smarter Planet? (news.cnet.com)
• Building A Smarter Planet (slideshare.net)
• Project Noah: Networked Organisms and Habitats (makezine.com)
• IBM CEO on Lessons & Opportunities in Internet of Things (readwriteweb.com)

Capitalogix Commentary for the Week of 03/22/10

March Madness is in full force.  What's a $ Trillion here, or a $ Trillion there?

A Look at the Markets.

Most people consider it "bullish" when markets go up 14 of 16 days.  That should make people happy, right?

Recently, though, I've had conversations with several "old-pro" traders who expressed a sense of frustration. They view the recent push higher with skepticism. Trading discipline is allowing them to make money on the upside, but it's not as satisfying as being "right".

What do the Charts Show?

Let's look beyond the obvious up-trend.  The following chart and video, from Brian Shannon's Alphatrends site, shows that price is now below the volume-weighted average price paid since Fed Decision to leave rates unchanged.

There is now a lot of support under our recent highs, so many expect the market to correct a little, then resume its move higher.

How Far Can the Rally Go?

On a basic level, the recent market rally shows that there's more buying demand than selling pressure. However, when there is little selling pressure, it doesn't take much demand to keep prices going higher.

At this point, the rally has gone on long enough that many of the participants who profited from the extended move up are now becoming defensive. 

Also, some trading relationships that tend to move together have decoupled. The following chart shows the recent weakness of the China Shanghai Index and the Euro in comparison to the U.S. Markets.

Some see the U.S. Market's continued relative strength as a precursor to a new leg of the bull market, while others see it as a temporary anomaly.

Adding to the bearish case is that several sentiment indicators show very little fear. The VIX is moving back to the extreme levels of complacency. Odd-lot shorts recorded a 13 week low, indicating that the "little guy" has virtually given up on shorting. Likewise, the lack of fear is downright scary when you look at CBOE's Equity Put-to-Call Ratio. These readings are contrary indicators, meaning they often occur at turning points in the market.

And with quad-witching expiration behind us, and an unpopular health-care issue in the news, the bears will have another chance to show their conviction ... or lack of it. 

We'll see what happens.  I hope you have a good week.

Business Posts Moving the Markets that I Found Interesting This Week:

• Nice Overview, Weighing the Decision on Health Legislation. (OldProf)
  
• Polls Show Only 27% Believe U.S. Heading in Right Direction. (Rasmussen)
• Federal Reserve Faces Challenges and Changes. (Atlantic)
• Pandit Sees Revival of Citi’s Fortunes. (FT)
• What Does the VIX Really Tell Us Here? (Minyanville)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Apple Selling 20,000 iPads Per Hour - that's $10 Million per hour. (BizInsider)
• Microsoft Launching Office 2010 this May. (Infoworld & ZDNet)
• Secret of a Happy Marriage? A Wife 27% Smarter Than Her Husband. (D-Minds)
• How March Madness Breaks Down ... Academically? (USNews)
• Were You Born to Be a Billionaire? (Forbes)
• More Posts with Lighter Ideas and Fun Links.

Related articles by Zemanta

• Will Consumer Demand Falter in Q2 ? (ritholtz.com)
• Kenneth Kales: You're the Economic Expert (huffingtonpost.com)
• Is a GDP Contraction Coming in the Second Quarter of 2010? (seekingalpha.com)
• Lessons learned from 25 years of forecasting the US economy (investmentpostcards.com)

A Reminder of Simple Truths

Here is a link to short video by Mac Anderson of Simple Truths.

It is a collection of quotes and simple truths set to music.  Hope you have a good week.

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• Worse Is Better, So Start Simple and Go from There [Quotables] (lifehacker.com)
• The Man Behind MacGyver: Swiss Army Knife or Duct Tape? [Interviews] (lifehacker.com)

Capitalogix Commentary for the Week of 03/15/10

Breadth Continues to Expand.

The Markets are showing signs of health and strength.  These charts, from Stockcharts.com, show the internal strength and breadth powering the move higher and supporting the current rally.

Here is an intra-day chart of the S&P 500 Index for the past three weeks. It is a modified version of something I saw on Breakpoint Trades' site.  It shows the decision-point; price has pulled-back to the trend-line. 

In bull markets, this is where Buyers tend to appear.  In contrast, Sellers probably see the bearish wedge and negative divergence as signs of waning momentum.  Add the potential sell-signal from over-bought stochastics, and we have an interesting set-up for next week.

Even if the markets sell-off from here, there are now a number of support levels close by.

The markets have continued to do well, what about the economy?  I think the Employment situation is a primary indicator.

We Stand Out - With Respect to the Severity of our Under-Employment Situation.

There is disagreement about whether the recent jobs number was a positive sign.  Some are focusing on the slowing decline; others are focusing on the continued weakness ... still others are focusing on the continued downwards adjustments.  Nonetheless, this chart makes something clear.  Compared to other recessions, the job losses (and lack of job gains), of this Recession are truly unprecedented.

Here is a different way to look at what that chart means.

Business Posts Moving the Markets that I Found Interesting This Week:

• A Gold Bubble? Sure, But Soros is Still In.(HedgeFundNet)
• Increasing M&A Transactions are a Positive Sign of Recovery.  (MSNBC)
• Betting It All On Growth - Will it Fix Unemployment, Deficits & the Credit Crisis? (WSJ)
• The Double-Dip Watch. (FT)
• What Warren Buffett's Annual Letter to Shareholders Didn't Say. (SeekingAlpha)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Leave it to Scientists - Happiness Ain't All it's Cracked Up to Be. (NewScientist)
• Why Great Companies Fail? (Forbes)
• Concern that Electrical Grid Infiltrated By Chinese & Russian Cyber-spies. (LastWatchDog)
• BioTech's Next Trick - Printing Body Parts. (The Economist)
• 'Tough Guy': Eight Miles of Mud, Barbed Wire, Broken Glass &Fire. (DailyMail)
• More Posts with Lighter Ideas and Fun Links.

Related articles by Zemanta

• Record Advance in S&P 500 Futures Shows Confidence in Economy (businessweek.com)
• U.S. Stocks Advance as Retail Sales Bolster Economic Optimism (businessweek.com)
• U.S. Stocks Fluctuate on Anniversary of 2009 Bear-Market Low (businessweek.com)
• Misleading Recovery Charts (outsidethebeltway.com)
• Sales Taxes Rising Nationwide (shoppingblog.com)
• The VIX Indicates an Imminent Move Down (seekingalpha.com)

A Peek at Your Future?

When I was a kid, Jet-Packs were a part of science fiction ... and cartoons. 

If you always wanted one, it appears that your wait is almost over.

On a side note, in the rush to the future, sometimes it makes sense to appreciate the things we are already "got right" and want to protect.

Related articles by Zemanta

• DARPA: Inventing this side of the impossible (newscientist.com)
• Learn to Fly a Jetpack. Yes, a Jetpack! (thebigmoney.com)
• Where The Hell Is My Flying Car? Hoverboards, Robots, And Other Things Movies Promised Us (PICTURES) (huffingtonpost.com)
• When science meets fiction (flanderstoday.eu)

Un-Plugged ... So You Can Hear the Talent.

Back to a Simpler Time ... and Sound.

I miss real music.  Recently, a lot of what's popular seems technologically-enhanced, over-produced, and auto-tuned.

That's why I like VH-1's Unplugged site.  It is showcases talent stripped of the pyrotechnics and glossy production. What's left are the artist and the art.

Here are a couple examples.

Daughtry.

VH1 TV Shows | Music Videos | Celebrity Photos | News & Gossip

Adam Lambert.

VH1 TV Shows | Music Videos | Celebrity Photos | News & Gossip

Sara Bareilles.

VH1 TV Shows | Music Videos | Celebrity Photos | News & Gossip

Finding Wisdom in Mountains of Data

In this video, Gary Flake demos Pivot, a new way to browse and arrange massive amounts of images and data online. Built on breakthrough Seadragon technology, it enables spectacular zooms in and out of web databases, and the discovery of patterns and links invisible in standard web browsing.

The big idea that this video demonstrates so well is that the whole of the data in which we consume is greater that the sum of the parts. And, instead of inducing information overload, new tools enable us to use information so that patterns pop and we can see trends that would otherwise be invisible.

If we can do that, then, instead of being trapped in data, we might actually extract information. And, instead of dealing just with information, we can tease out knowledge. And if we get the knowledge, then maybe even there's wisdom to be found.

Click here to view the transcript.

This tool, and others like it, will have massive impact on businesses and the scale of projects they undertake.

Related articles by Zemanta

• Making Sense of Mountains of Data (technologyreview.com)
• New from Live Labs: Pivot (liveside.net)
• The future of content navigation (mondaynote.com)
• Microsoft Pivot: from the wizards at Live Labs (blogs.msdn.com)

Capitalogix Commentary for the Week of 03/08/10

You know Unemployment is becoming part of the cultural zeitgeist when Spider-Man gets fired. 

Last week's employment report showed a fair number of other people got fired too.

Apparently, though, not many people cared, because the markets rallied anyway.

If you are interested, Barry Ritholtz put together a big picture look at employment charts. 

Signs of Strength.

The markets put on a show of strength this week, blasting through overhead resistance. The chart below shows the S&P 500 Index is approaching its recent highs, and now has two nice levels of support beneath it (marked by the light and dark green lines).

As long as price is above these levels, it seems prudent to use bull-market techniques. That means to expect buying on dips.

On the other hand, trading often induces paranoia. So, there is some part of me looking for the next areas that would trigger the most stop-losses. Coincidentally, this weekend I talked to a money manager who told me they were going to exit their short positions if the markets get above the recent highs (marked by the orange line). That seems like a pretty widely followed level.  So, a spike above that ... followed by a sharp reversal, might find some of the selling volume we've been missing lately.

Could We Possibly Still Be in a Bear Market?

A fresh view is often helpful. The next chart is not designed to be predictive. Instead, it simply provides an alternative context to view the recent price action in relation to historic market cycles.

Below is an inflation-adjusted overlay of three secular bear markets put together by Doug Short. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.

The nominal all-time high in the index occurred in October 2007, but when adjusted for inflation, the "real" all-time high for the S&P 500 occurred in March 2000.

There is a Lot of Deal-Making Going On.

Increased merger and acquisition activity and the freeing-up of corporate assets (usually measured by increased corporate spending) are both typically bullish signs.  Why?  Both indicate that decision-makers are optimistic (or at least projecting optimism). There's been quite a bit of evidence showing that this is happening on a global corporate scale and all the way down to the local level.

One thing holding-back the optimism is the lack of lending.  Here is a look at that.

Nonetheless, companies with cash are starting to use it.

Here's a story that is a bit humorous, though still shows those green shoots of growth.

In Kansas, the city of Topeka changed its name to Google. Supposedly part of a local effort to convince Google to make Topeka a test site for an ultra-fast Internet connection and set Topeka apart from other cities vying for Google's attention.

 

Hope you have a good week, even if you used to live in Topeka.

Business Posts Moving the Markets that I Found Interesting This Week:

• Greek Tragedy: Is This Just the First Act? (MoneyCentral)
• Bill Gross: How a Global Debt Crisis Trickles Down to Investors. (InvestmentNews)
• TiVo Patent Court Ruling Could Impact Other DVRs & their Stock.(USAToday)
• Hedge Funds Try 'Career Trade' Against Euro. (WSJ & NakedCapitalism)
• CBOE, CME Strike Deal on Volatility Indexes for Various Asset Classes. (Reuters)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• The Connection Between Google's Chinese Cyber Attackers & the U.S. Govt. (FastCompany)
• The 20 Patents Apple Hopes Will Crush Its Smartphone Competition. (BizInsider)
• Sign of the Times: Postal Service May Drop Saturday Delivery. (MSNBC)
• Facebook and Twitter Users Could Face Insurance Hikes. (Huffington Post)
• Analysts - Bronze Medal Leads To More Happiness Than Silver. (USAToday)
• More Posts with Lighter Ideas and Fun Links.

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• USDJPY Pulls Back From Near Extreme Levels with Daily Shorts Leaping 26% (dailyfx.com:80)
• Gold, Silver & Stock Indices on the Verge of Rolling Over? (benzinga.com)
• What next? Economists divided on the future (msnbc.msn.com)
• The Rebound: Numbers Tell Story of Market Recovery (abcnews.go.com)

Capitalogix Commentary for the Week of 03/01/10

The markets held-up well again this week despite lots of bad news on many fronts.  While there were several bouts of selling, each time buyers were there to prop things back up.

Here were some of the news items the market handled last week. 

• Housing had a tough week.  New home sales were the worst in nearly 50 years, while existing home sales dropped and average selling prices declined.
• Businesses are still feeling the recession as Initial Jobless Claims rose again, while orders and shipments of durable goods slipped.
• Consumer Confidence fell more than 18% according to the latest Conference Board Survey.

And then there is the economy and the deficit ...

So, let's use some technical analysis to see where the markets stand.

Three Views of the Market - and All Say the Same Thing.

Sometimes simple is better.  What follows is a top-down look at the Dow Jones Industrial Average.  It starts with a monthly chart for the bigger picture.  That is followed by a weekly chart, and then by a daily chart.  In all three the key level is just above where we are.

Here is the weekly chart.  It shows price re-testing the upwards sloping trend-line from below.

Here is the daily chart.  A sustained move above the orange line would be bullish.

Here is something else to watch.

Does the Euro Help Predict US Equity Market Moves?

This video suggests that the Euro is worth watching as an early indicator of likely movement in the U.S. Equity Indices (like the S&P 500 Index).

That is something I will keep an eye on to see how it works.  In the mean-time, here is a recent chart of the S&P 500 and the Euro.  It is showing a negative divergence because the Euro is continuing to show weakness while the S&P 500 rallied in February.

Time will tell.  Hope you have a good week.

Business Posts Moving the Markets that I Found Interesting This Week:

• Bernanke Reaffirms "Extended Period" of Low Rates. (NYTimes)
• Recovery Focus: Which Banks Are Worth Betting-On? (WSJ)
• U.S. New-Home Sales Drop 11.2% - to 1963 Levels. (WSJ)
• Intel, VCs Investing $3.5 Billion In U.S. Technologies. (InfoWeek)
• Economic Annual Report of the President - An Interesting Read. (White House)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Putting a Face to a Name: The Art of Motivating Employees. (Wharton)
• Sleepy Heads: How Rest Helps Memory & Prepares the Brain to Learn. (Economist)
• U.S. Would Lose Cyber-War Says Former Intelligence Chief. (InfoWeek)
• Get Ready Sports Fans, Pole Dancers Eye an Olympic Stage. (Newser)
• Why the Olympics Might Not Be Televised in 2014. (InfoWorld)
• More Posts with Lighter Ideas and Fun Links.