Thoughts about the markets, automated trading algorithms, artificial intelligence, and lots of other stuff

  • Capitalogix Commentary 10/18/10 – Are Expectations Priced In Yet

    Well, it is possible to dig out of a big hole.

    101016 Rescue Team Cartoon - Parker
    Bernanke Outlines 'Case for Further Action' to Spur Economy Forward.

    Fed Chair Ben Bernanke has some ideas about pumping more money into the flagging recovery to get us out of a different kind of hole.  In talks last week, he clearly presents the case for more action.

    • He predicts a weak recovery and continued high unemployment.
    • Bernanke talks about a mandate-consistent 2% inflation rate — further emphasizing this idea that the Fed will aggressively target positive inflation.
    Barry Ritholz posted a word cloud of the speech.  It speaks for itself.

    101016 Bernanke-speech
    You can read Bernanke's whole speech here.

    According to the WSJ, the Fed sent an even clearer message in its written remarks.  How? Bernanke used italics only four times in the report.  Do those four instances constitute a 'font of wisdom' message from the Fed chairman. Let's look at the message.

    First, Mr. Bernanke said the Fed takes its cues from two primary objectives: the "longer-run sustainable rate of unemployment" and the "mandate-consistent inflation rate." He later made clear what the Fed thinks about both right now: Inflation is "too low" and unemployment "too high."

    That makes further Quantitative Easing pretty much a given, to the relief of investors who have already priced it in with a 12% surge in the S&P 500 since late August.
    However, some commentators (like David Rosenberg) are skeptical about how much of the gain is priced-in already.  His message: Sell the news, Quantitative Easing will do more harm than good.

    Market Commentary

    Even though stocks are overextended after a seven week run, I have not yet seen compelling evidence of weakness that would signal the start of a correction or pullback.

    Nonetheless, I'm watching a few things closely.  For example, we are seeing some negative divergences in the banking and financial sectors.  They have not enjoyed the same success as the rest of the market over the last several weeks, and this may be telling us something.

    101016 Banking Index Under-Performing the Nasdaq

    On the other hand, the Nasdaq 100 Index (comprised of the large capitalization tech stocks) is leading the move higher. The recent strength in this index not only made a new 52-week high last week, it also hit levels not seen since late 2007.  Should the S&P 500 Index follow this leader, the short-term future looks good.

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

    Lighter Ideas and Fun Links that I Found Interesting This Week

    Related articles
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  • Capitalogix Commentary 10/18/10 – Are Expectations Priced In Yet

    Well, it is possible to dig out of a big hole.

    101016 Rescue Team Cartoon - Parker
    Bernanke Outlines 'Case for Further Action' to Spur Economy Forward.

    Fed Chair Ben Bernanke has some ideas about pumping more money into the flagging recovery to get us out of a different kind of hole.  In talks last week, he clearly presents the case for more action.

    • He predicts a weak recovery and continued high unemployment.
    • Bernanke talks about a mandate-consistent 2% inflation rate — further emphasizing this idea that the Fed will aggressively target positive inflation.
    Barry Ritholz posted a word cloud of the speech.  It speaks for itself.

    101016 Bernanke-speech
    You can read Bernanke's whole speech here.

    According to the WSJ, the Fed sent an even clearer message in its written remarks.  How? Bernanke used italics only four times in the report.  Do those four instances constitute a 'font of wisdom' message from the Fed chairman. Let's look at the message.

    First, Mr. Bernanke said the Fed takes its cues from two primary objectives: the "longer-run sustainable rate of unemployment" and the "mandate-consistent inflation rate." He later made clear what the Fed thinks about both right now: Inflation is "too low" and unemployment "too high."

    That makes further Quantitative Easing pretty much a given, to the relief of investors who have already priced it in with a 12% surge in the S&P 500 since late August.
    However, some commentators (like David Rosenberg) are skeptical about how much of the gain is priced-in already.  His message: Sell the news, Quantitative Easing will do more harm than good.

    Market Commentary

    Even though stocks are overextended after a seven week run, I have not yet seen compelling evidence of weakness that would signal the start of a correction or pullback.

    Nonetheless, I'm watching a few things closely.  For example, we are seeing some negative divergences in the banking and financial sectors.  They have not enjoyed the same success as the rest of the market over the last several weeks, and this may be telling us something.

    101016 Banking Index Under-Performing the Nasdaq

    On the other hand, the Nasdaq 100 Index (comprised of the large capitalization tech stocks) is leading the move higher. The recent strength in this index not only made a new 52-week high last week, it also hit levels not seen since late 2007.  Should the S&P 500 Index follow this leader, the short-term future looks good.

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

    Lighter Ideas and Fun Links that I Found Interesting This Week

    Related articles
    Enhanced by Zemanta

  • The Big Mac Index – A Feast of Burgernomics

    Bigger Big MacImage by Simon Miller via Flickr

    The Economist's Big Mac index seeks to make exchange-rate theory more digestible.  They say it is arguably the world's most accurate financial indicator to be based on a fast-food item.

    The Big Mac index is based on the theory of purchasing-power parity (PPP), according to which exchange rates should adjust to equalize the price of a basket of goods and services around the world. For them, the basket is a burger … a McDonald’s Big Mac.

    According to this measure, the most undervalued currency is the Chinese yuan, at 40% below its PPP rate.  In China, a McDonald’s Big Mac costs just 14.5 yuan on average, the equivalent of $2.18 at market exchange rates. In America, the same burger averages $3.71.

    The tensions caused by currency misalignments prompted Brazil’s finance minister to complain last month that his country was a potential casualty of a “currency war”. The Swiss, who avoid most wars, are in the thick of this one. Their franc is the most expensive currency on our list.

    The table below shows by how much, in Big Mac PPP terms, selected currencies were over- or undervalued.

    101016 Big Mac Index

    The index is supposed to give a guide to the direction in which currencies should, in theory, head in the long run. It is only a rough guide, because its price reflects non-tradable elements ­such as rent and labor. For that reason, it is probably least rough when comparing countries at roughly the same stage of development.

    Which Currencies Are Beating-Up On the Dollar?

    You know the dollar has been in freefall since the middle of the summer. BusinessInsider posted a chart, from Morgan Stanley, showing which currencies have appreciated the most since then.

    The big winner? The Swedish Krona. Note that the much-hyped yen is just in the middle of the pack.

    101016 Which Currencies Are Beating-Up On the Dollar

    Related articles
    Enhanced by Zemanta

  • The Big Mac Index – A Feast of Burgernomics

    Bigger Big MacImage by Simon Miller via Flickr

    The Economist's Big Mac index seeks to make exchange-rate theory more digestible.  They say it is arguably the world's most accurate financial indicator to be based on a fast-food item.

    The Big Mac index is based on the theory of purchasing-power parity (PPP), according to which exchange rates should adjust to equalize the price of a basket of goods and services around the world. For them, the basket is a burger … a McDonald’s Big Mac.

    According to this measure, the most undervalued currency is the Chinese yuan, at 40% below its PPP rate.  In China, a McDonald’s Big Mac costs just 14.5 yuan on average, the equivalent of $2.18 at market exchange rates. In America, the same burger averages $3.71.

    The tensions caused by currency misalignments prompted Brazil’s finance minister to complain last month that his country was a potential casualty of a “currency war”. The Swiss, who avoid most wars, are in the thick of this one. Their franc is the most expensive currency on our list.

    The table below shows by how much, in Big Mac PPP terms, selected currencies were over- or undervalued.

    101016 Big Mac Index

    The index is supposed to give a guide to the direction in which currencies should, in theory, head in the long run. It is only a rough guide, because its price reflects non-tradable elements ­such as rent and labor. For that reason, it is probably least rough when comparing countries at roughly the same stage of development.

    Which Currencies Are Beating-Up On the Dollar?

    You know the dollar has been in freefall since the middle of the summer. BusinessInsider posted a chart, from Morgan Stanley, showing which currencies have appreciated the most since then.

    The big winner? The Swedish Krona. Note that the much-hyped yen is just in the middle of the pack.

    101016 Which Currencies Are Beating-Up On the Dollar

    Related articles
    Enhanced by Zemanta

  • Sesame Street Parodies the Old Spice Ad with Grover

    Short, blue and furry could be the next tall, dark and handsome.

    Once again proving it's not just a show for kids, Sesame Street spoofs the wildly popular Old Spice ad.

    Grover preaches the importance of smelling like a monster and of using the word "on" correctly in the parody of the "Man Your Man Could Smell Like" ad featuring Isaiah Mustafa.

    Have a look at the spoof, and the commercial that inspired it.

    Here is the Sesame Street video.


     

    Here is the original video.


     

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  • Sesame Street Parodies the Old Spice Ad with Grover

    Short, blue and furry could be the next tall, dark and handsome.

    Once again proving it's not just a show for kids, Sesame Street spoofs the wildly popular Old Spice ad.

    Grover preaches the importance of smelling like a monster and of using the word "on" correctly in the parody of the "Man Your Man Could Smell Like" ad featuring Isaiah Mustafa.

    Have a look at the spoof, and the commercial that inspired it.

    Here is the Sesame Street video.


     

    Here is the original video.


     

    Enhanced by Zemanta

  • Laurel and Hardy Meet Santana

    This video has virtually nothing to do with business or trading, other than being creative.

    Still, smiling is good  … and laughing is better.  Hopefully, you will enjoy this as much as I did. 

    Watch Laurel and Hardy dance with Santana's "Oye Como Va" as the music track.  It fits surprisingly well.



     

     

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  • Laurel and Hardy Meet Santana

    This video has virtually nothing to do with business or trading, other than being creative.

    Still, smiling is good  … and laughing is better.  Hopefully, you will enjoy this as much as I did. 

    Watch Laurel and Hardy dance with Santana's "Oye Como Va" as the music track.  It fits surprisingly well.



     

     

    Enhanced by Zemanta

  • Capitalogix Commentary 10/11/10 – Until Sellers Get Bold

    Something's got to give – job growth and spending swing in the balance.

    101008 Economic Mood Swing Cartoon - Jeff Parker

    The job loss situation continues to get worse.  This is still one of the scariest charts I've seen.  And the numbers continue their trend of downward revisions.

     

    101008 Job Losses In Recessions
    Market Commentary.

    The markets continue higher despite concerns about the economy.  Remember, the markets do not reflect what is happening in the economy (nor are they supposed to).  Markets reflect the expectations and speculations about the markets themselves. 

    There is a lot of money sitting on the sidelines, and if we don't get selling pressure — then it doesn't take much to push things higher. 

    The S&P 500 Has Risen Back to Its Down-Trend Line.

    The bigger picture shows that the S&P 500 Index has rallied back up to the trend-line from its 2007 highs.  Bulls will likely feel more confident if price can stay above this level.

    101009 SP500 at Trend-Line

    How high can it go?  This is a likely area for Bears to try to sell.  Not only are we at overhead resistance, but the market is getting overbought.

    How Can You Measure Whether the Market Is Overbought?

    More than 88% of all stocks traded on the NYSE are above their 50-day moving average.  We have seen similar levels three times in 2010, all resulted in large sell-offs. 

    101008 Percent of Stocks Above 50-Day Average

    The push higher will continue until sellers get more bold.

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

    • Propelling the Profit Comeback – Big Earnings From Lower Revenue. (WSJ)
    • Wall Street’s Profit Engines Are Slowing Down. (NYTimes)
    • Bernanke Says Fed's Additional Asset Purchases Improve Economy. (Bloomberg)
    • Where Every Major Country Is in the Global Debt Cycle. (BusinessInsider)
    • Just Manic Enough – Seeking Perfect Entrepreneurs. (NYTimes)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

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  • Capitalogix Commentary 10/11/10 – Until Sellers Get Bold

    Something's got to give – job growth and spending swing in the balance.

    101008 Economic Mood Swing Cartoon - Jeff Parker

    The job loss situation continues to get worse.  This is still one of the scariest charts I've seen.  And the numbers continue their trend of downward revisions.

     

    101008 Job Losses In Recessions
    Market Commentary.

    The markets continue higher despite concerns about the economy.  Remember, the markets do not reflect what is happening in the economy (nor are they supposed to).  Markets reflect the expectations and speculations about the markets themselves. 

    There is a lot of money sitting on the sidelines, and if we don't get selling pressure — then it doesn't take much to push things higher. 

    The S&P 500 Has Risen Back to Its Down-Trend Line.

    The bigger picture shows that the S&P 500 Index has rallied back up to the trend-line from its 2007 highs.  Bulls will likely feel more confident if price can stay above this level.

    101009 SP500 at Trend-Line

    How high can it go?  This is a likely area for Bears to try to sell.  Not only are we at overhead resistance, but the market is getting overbought.

    How Can You Measure Whether the Market Is Overbought?

    More than 88% of all stocks traded on the NYSE are above their 50-day moving average.  We have seen similar levels three times in 2010, all resulted in large sell-offs. 

    101008 Percent of Stocks Above 50-Day Average

    The push higher will continue until sellers get more bold.

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

    • Propelling the Profit Comeback – Big Earnings From Lower Revenue. (WSJ)
    • Wall Street’s Profit Engines Are Slowing Down. (NYTimes)
    • Bernanke Says Fed's Additional Asset Purchases Improve Economy. (Bloomberg)
    • Where Every Major Country Is in the Global Debt Cycle. (BusinessInsider)
    • Just Manic Enough – Seeking Perfect Entrepreneurs. (NYTimes)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

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