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

  • Tonight’s Gonna Be a Good Night … in the Market

    The length and staying power of the recent market rally says something about how crowds work, and why the majority of traders are often wrong at turning points in the market. 
    The following video makes the same point, a different way. 

    This video was filmed during a live taping
    of Oprah. It shows the Black-Eyed Peas,
    performing "I Gotta Feeling". It starts with a lone dancer (and I suspect some of it was planned). Yet, it
    is fascinating to watch what happens when other people feel the urge to
    get in on the fun … and it doesn't take long until the animal spirits spread through the mob.

    Pretty cool … 

    Here is the original version of that music video.


    Related Info.

  • Tonight’s Gonna Be a Good Night … in the Market

    The length and staying power of the recent market rally says something about how crowds work, and why the majority of traders are often wrong at turning points in the market. 
    The following video makes the same point, a different way. 

    This video was filmed during a live taping
    of Oprah. It shows the Black-Eyed Peas,
    performing "I Gotta Feeling". It starts with a lone dancer (and I suspect some of it was planned). Yet, it
    is fascinating to watch what happens when other people feel the urge to
    get in on the fun … and it doesn't take long until the animal spirits spread through the mob.

    Pretty cool … 

    Here is the original version of that music video.


    Related Info.

  • Capitalogix Commentary 01/10/10

    Now that the New Year is here, everyone has to get back to work.

    100110 New Year's Resolutions Cartoon

    What About the Markets?

    The rally continues.  While volume hasn't been that impressive, price continues higher.

    After taking a break, the Financial Sector has picked-up some relative strength and is leading the market higher.

    100109 Financial Sector Showing Good Relative Strength

    Unemployment Still Factors Into the Equation.

    The jobs number came in worse than expected, with continued cuts and unemployment still above 10%.  Yet, the market reacted better than I expected to that news.

    100109 Current Economic Signs Cartoon

    Joking aside, here is an interactive graphic to dive a little deeper into these numbers.  Click on the picture to change the settings yourself.

    091220 Interactive Jobless Rate Visualization

    Efficient Market Hypothesis: The Meltdown’s Biggest Casualty

    Here is a video from BigThink about whether the market is as efficient as some economic theory paints it to be.  Alan Greenspan said he was shocked "that market players turned out not to be able to take care of their own interests."  Perhaps the takeaway of the recent crisis is that individual players (pursuing individual interests), collectively, will not always create an outcome which is good for the collective (or even for those individual players). Consequently, Chrystia Freeland, U.S. Managing Editor of the Financial Times, argues that the Markets needs someone or something to protect the collective interests and outcome.

    Now for something a little lighter …

    Here is a Preview of Next Year's Review.

    100109 Chappatte 2010 Review Preview

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

    • Ten 'BreakOut!' Business Ideas Of 2009. (Forbes)
    • Four Reasons to Remain Wary About an Economic Recovery. (WSJ)
    • Will U.S. Home-Sales Data Temper Belief in the Government's Powers? (WSJ)
    • John Mauldin's 2010 Forecast – The Year of Uncertainty. (InvestorsInsight)
    • Decade Over – Here are 10 Huge Questions that Remain. (Forbes)
    • Comprehensive List of 2010 Investment Predictions & Outlooks. (PragCap)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

  • Capitalogix Commentary 01/10/10

    Now that the New Year is here, everyone has to get back to work.

    100110 New Year's Resolutions Cartoon

    What About the Markets?

    The rally continues.  While volume hasn't been that impressive, price continues higher.

    After taking a break, the Financial Sector has picked-up some relative strength and is leading the market higher.

    100109 Financial Sector Showing Good Relative Strength

    Unemployment Still Factors Into the Equation.

    The jobs number came in worse than expected, with continued cuts and unemployment still above 10%.  Yet, the market reacted better than I expected to that news.

    100109 Current Economic Signs Cartoon

    Joking aside, here is an interactive graphic to dive a little deeper into these numbers.  Click on the picture to change the settings yourself.

    091220 Interactive Jobless Rate Visualization

    Efficient Market Hypothesis: The Meltdown’s Biggest Casualty

    Here is a video from BigThink about whether the market is as efficient as some economic theory paints it to be.  Alan Greenspan said he was shocked "that market players turned out not to be able to take care of their own interests."  Perhaps the takeaway of the recent crisis is that individual players (pursuing individual interests), collectively, will not always create an outcome which is good for the collective (or even for those individual players). Consequently, Chrystia Freeland, U.S. Managing Editor of the Financial Times, argues that the Markets needs someone or something to protect the collective interests and outcome.

    Now for something a little lighter …

    Here is a Preview of Next Year's Review.

    100109 Chappatte 2010 Review Preview

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

    • Ten 'BreakOut!' Business Ideas Of 2009. (Forbes)
    • Four Reasons to Remain Wary About an Economic Recovery. (WSJ)
    • Will U.S. Home-Sales Data Temper Belief in the Government's Powers? (WSJ)
    • John Mauldin's 2010 Forecast – The Year of Uncertainty. (InvestorsInsight)
    • Decade Over – Here are 10 Huge Questions that Remain. (Forbes)
    • Comprehensive List of 2010 Investment Predictions & Outlooks. (PragCap)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

  • Waving Goodbye to Last Year

    As you start making progress on your New Year's Resolutions and 2010, I thought I'd share these two videos to put last year in perspective and chronicle some of its happenings.

    One of the new technologies to generate a buzz last year was Google Wave. Even if you don't understand what it can do, you can appreciate how it's used here.

    Finally, JibJab brings a little humor its retrospective.

    Best Wishes and Good Luck in 2010.

  • Waving Goodbye to Last Year

    As you start making progress on your New Year's Resolutions and 2010, I thought I'd share these two videos to put last year in perspective and chronicle some of its happenings.

    One of the new technologies to generate a buzz last year was Google Wave. Even if you don't understand what it can do, you can appreciate how it's used here.

    Finally, JibJab brings a little humor its retrospective.

    Best Wishes and Good Luck in 2010.

  • Tap the Knowledge of People in Your Network

    Have you ever had a question that you just didn't know who to ask? There's a new website designed to help you. 

    Aardvark is a new kind of tool that lets you tap into the knowledge and experience of friends and friends-of-friends.  Think of it as a crowd-sourced (or human powered) knowledge engine. However, instead of just storing the answers, it tries to figure-out who to ask your question to in your network of contacts.

    100109 Aardvark Answers

    Send Aardvark a question (from the web, email, Twitter, IM, or iPhone) and you’ll get a quick, helpful response.

    I was a little skeptical; however, when I tried it, I got good answers very quickly. Finally, a business use for social networks (other than marketing).

    I recommend that you give it a try.

    Other Resources.

  • Tap the Knowledge of People in Your Network

    Have you ever had a question that you just didn't know who to ask? There's a new website designed to help you. 

    Aardvark is a new kind of tool that lets you tap into the knowledge and experience of friends and friends-of-friends.  Think of it as a crowd-sourced (or human powered) knowledge engine. However, instead of just storing the answers, it tries to figure-out who to ask your question to in your network of contacts.

    100109 Aardvark Answers

    Send Aardvark a question (from the web, email, Twitter, IM, or iPhone) and you’ll get a quick, helpful response.

    I was a little skeptical; however, when I tried it, I got good answers very quickly. Finally, a business use for social networks (other than marketing).

    I recommend that you give it a try.

    Other Resources.

  • Capitalogix Commentary 01/03/10

    The rally continues.

    Individual Investors Enter the New Year with Confidence.

    The weekly sentiment survey done by the American Association of Individual Investors (AAII) measures the percentage of individual investors (who take the survey) that are bullish, neutral and bearish.

    The chart below shows that retail investors are getting quite confident and that the percent of bearish investors is unusually low.  While that sounds positive, typically, this is a contrary indicator.  Said a different way, turning points often happen at confidence extremes.  Consequently, traders watch for bearish moves to happen at this level of bullish sentiment.

     091231 Bears Running for the Exits

    Consensus in the marketplace is rare.  If everyone truly believed the same thing, no one would take the other side of your trade.  However, when investors behave as a herd, it is usually because they are emotional about something. And, as we know, greed and fear are the most prevalent emotions in the market.

    • Major market tops are typically accompanied by extreme levels of bullish euphoria.  The crowd grows frenzied with greed — its enthusiastic lust makes stocks attractive at any price.
    • Major market bottoms are characterized by widespread pessimism and despair.  Here, a fear-induced panic makes most issues less attractive — regardless of price or value.

    Contrarian analysis, of course, is based on the simple notion that the majority is rarely right about the stock market's direction, especially at market turning points.

    Do Headlines Signal the End of Trends?

    Likewise, conventional wisdom holds that magazine cover stories are contrary indicators – by the time a success or failure reaches the cover page of a major publication, the story is so well known as to be completely reflected in the market.  While simplistic, the magazine cover indicator now has the support of recent academic research. This research found that cover story headlines on Business Week, Fortune and Forbes tended to indicate that the mood (bullish or bearish) of the story was about to change in the market.  Moreover, when an economic issue makes the cover of a general market publication (like Time), it's guaranteed to be already very late in the game.

    Consequently, I hear a lot of traders joke that Time Magazine's selection of Ben Bernanke as their "Person of the Year" will be the straw that breaks the bull-market's back.

    100103 Time Person of the Year


    An Old Pro Summarizes the Year for Traders.

    Here is a brief interview with Art Cashin, the director of floor operations for UBS, and a frequent CNBC commentator.  He is an old pro who does a nice job explaining what happened this past year and providing some perspective.

    For more video from Art, click here.

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

    Lighter Ideas and Fun Links that I Found Interesting This Week

  • Capitalogix Commentary 01/03/10

    The rally continues.

    Individual Investors Enter the New Year with Confidence.

    The weekly sentiment survey done by the American Association of Individual Investors (AAII) measures the percentage of individual investors (who take the survey) that are bullish, neutral and bearish.

    The chart below shows that retail investors are getting quite confident and that the percent of bearish investors is unusually low.  While that sounds positive, typically, this is a contrary indicator.  Said a different way, turning points often happen at confidence extremes.  Consequently, traders watch for bearish moves to happen at this level of bullish sentiment.

     091231 Bears Running for the Exits

    Consensus in the marketplace is rare.  If everyone truly believed the same thing, no one would take the other side of your trade.  However, when investors behave as a herd, it is usually because they are emotional about something. And, as we know, greed and fear are the most prevalent emotions in the market.

    • Major market tops are typically accompanied by extreme levels of bullish euphoria.  The crowd grows frenzied with greed — its enthusiastic lust makes stocks attractive at any price.
    • Major market bottoms are characterized by widespread pessimism and despair.  Here, a fear-induced panic makes most issues less attractive — regardless of price or value.

    Contrarian analysis, of course, is based on the simple notion that the majority is rarely right about the stock market's direction, especially at market turning points.

    Do Headlines Signal the End of Trends?

    Likewise, conventional wisdom holds that magazine cover stories are contrary indicators – by the time a success or failure reaches the cover page of a major publication, the story is so well known as to be completely reflected in the market.  While simplistic, the magazine cover indicator now has the support of recent academic research. This research found that cover story headlines on Business Week, Fortune and Forbes tended to indicate that the mood (bullish or bearish) of the story was about to change in the market.  Moreover, when an economic issue makes the cover of a general market publication (like Time), it's guaranteed to be already very late in the game.

    Consequently, I hear a lot of traders joke that Time Magazine's selection of Ben Bernanke as their "Person of the Year" will be the straw that breaks the bull-market's back.

    100103 Time Person of the Year


    An Old Pro Summarizes the Year for Traders.

    Here is a brief interview with Art Cashin, the director of floor operations for UBS, and a frequent CNBC commentator.  He is an old pro who does a nice job explaining what happened this past year and providing some perspective.

    For more video from Art, click here.

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

    Lighter Ideas and Fun Links that I Found Interesting This Week