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

  • A Bohemian Rhapsody in Three Parts

    Compare the original to the Muppets' version and a parody. Some things are classic. Some things are good enough to stand-up no matter who performs it.  You be the judge. 

    A Little Background.

    "Bohemian Rhapsody" is a song written by Freddie Mercury, originally recorded by the band Queen
    for their 1975 album A Night at the Opera.

    The song is a parody of a
    rock opera
    and has a very unusual musical structure for a piece of
    popular music. Its three different sections have no chorus but both a
    cappella
    and heavy metal arrangements. Despite this, it was released as a single and became a huge commercial success, marking a decisive point in Queen's
    career.

    The single was accompanied by a
    groundbreaking "promotional video", which helped establish the visual
    language of the modern music (and helped make the music video a must have accessory for any performer).

    Muppets – Video of Bohemian Rhapsody:

    The Muppets have created their own version of Queen's classic song and video.  This version has very quickly gone viral, as people around the world flock to see it.

    The Muppets released their version of Bohemian Rhapsody as a funny and endearing tribute marking the 18th anniversary of Freddie Mercury's untimely death. 

    While there will never be another Freddy Mercury, neither will there be another Gonzo, Fozzie Bear nor Miss Piggy.  Here is their attempt at rock opera:

    Bohemian Bankruptcy – A Tragedy by Drag Queen.

    This, completely different, take on the classic is a witty parody of our economic times.

    The Original: I Saved the Best for Last.

    Here is the original.  After all this time, it still speaks for itself.

    Here is a link to that video with the lyrics superimposed.

  • A Bohemian Rhapsody in Three Parts

    Compare the original to the Muppets' version and a parody. Some things are classic. Some things are good enough to stand-up no matter who performs it.  You be the judge. 

    A Little Background.

    "Bohemian Rhapsody" is a song written by Freddie Mercury, originally recorded by the band Queen
    for their 1975 album A Night at the Opera.

    The song is a parody of a
    rock opera
    and has a very unusual musical structure for a piece of
    popular music. Its three different sections have no chorus but both a
    cappella
    and heavy metal arrangements. Despite this, it was released as a single and became a huge commercial success, marking a decisive point in Queen's
    career.

    The single was accompanied by a
    groundbreaking "promotional video", which helped establish the visual
    language of the modern music (and helped make the music video a must have accessory for any performer).

    Muppets – Video of Bohemian Rhapsody:

    The Muppets have created their own version of Queen's classic song and video.  This version has very quickly gone viral, as people around the world flock to see it.

    The Muppets released their version of Bohemian Rhapsody as a funny and endearing tribute marking the 18th anniversary of Freddie Mercury's untimely death. 

    While there will never be another Freddy Mercury, neither will there be another Gonzo, Fozzie Bear nor Miss Piggy.  Here is their attempt at rock opera:

    Bohemian Bankruptcy – A Tragedy by Drag Queen.

    This, completely different, take on the classic is a witty parody of our economic times.

    The Original: I Saved the Best for Last.

    Here is the original.  After all this time, it still speaks for itself.

    Here is a link to that video with the lyrics superimposed.

  • Capitalogix Commentary 11/22/09

    Obama's China Visit.

    President Obama asked for patience about the economy.  Nonetheless, a Gallup poll showed his job approval rating had dropped to 49 percent, the first time he has fallen below 50 percent in this survey, as Americans express dissatisfaction with his handling of the economy and other issues.

    Unfortunately for him (and us) that wasn't the only voice of dissatisfaction he's heard lately.

    Obama's 091122 Obama Fortune Cookie From His Visit to China

    Also, here is a skit from Saturday Night Live.  Like most good humor, it is funny because of how much is true.  I'm not posting it for partisan reasons … rather, it made me laugh.  Hope you enjoy it too.

    Market Commentary: Spotting an Island Reveal Pattern.

    In general, the markets held-up again this week.  As I scan the charts, there is little new or opinion-changing information.  However, I spotted an Island Reversal pattern on an intra-day chart of the S&P 500.  This is often seen at market tops.  It starts with a break-away gap (shown by the green circle) and ends with an exhaustion gap (shown by the red circle and the big red arrow). 

    091122 SP500 Index Island Reversal

    To understand this pattern, you can think of it as the last buyers rushing to get in (pushing-up price so fast that it creates a break-away gap), only to find that there are no new buyers (causing a price drop and the resulting exhaustion gap).  This gap down can signal the beginning of a change in trend. 

    In this particular case, we are coming into a holiday-shortened week (often characterized by light trading).  So I'm not expecting anything dramatic.  Still, it seems worth watching to see if the market trades back up above the exhaustion gap.

    Something Changed: Small Caps and Techs are Not Leading The Way.

    Here is something else that caught my eye.  The chart below shows that the Russell 2000 Index (shown in green below) has led the way throughout the recent rally.  The S&P 500 Index (shown in red below), represents the broader market.  While the Dow Jones Industrial Average (shown in blue below) lagged.  You can click the chart image below to launch an interactive version on Stockcharts.com.  This chart shows the relative performance of these indices during the past year.  You can adjust the date range by dragging the date bar at the bottom.

    091122 Index Performance Comparison this Year

    The next chart shows the same information, except limited to the past month.  Notice that the relative performance of these indices has reversed. 

    091122 Index Performance Comparison this Month

    I'm watching this rotation to see if small caps recover or continue to show weakness.  They could be the canary in the coal-mine for a bigger correction.

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

    • Fed Eyes Dollar Drop, But Clings to Low-Rate Pledge. (FluentNews)
    • Goldman Outlines Fed’s New Dashboard Indicators. (WSJ)
    • Buffett Says His Businesses Have Bottomed (Reuters)
    • Memo to Buffett: Put Down the Pom-Poms & Tell Us the Truth. (HuffingtonPost)
    • New Market Bubble is Brewing: It's Déja Vu All Over Again. (Newsweek)
    • While U.S. Economy Struggles, China's Rises. (NPR)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

  • Capitalogix Commentary 11/22/09

    Obama's China Visit.

    President Obama asked for patience about the economy.  Nonetheless, a Gallup poll showed his job approval rating had dropped to 49 percent, the first time he has fallen below 50 percent in this survey, as Americans express dissatisfaction with his handling of the economy and other issues.

    Unfortunately for him (and us) that wasn't the only voice of dissatisfaction he's heard lately.

    Obama's 091122 Obama Fortune Cookie From His Visit to China

    Also, here is a skit from Saturday Night Live.  Like most good humor, it is funny because of how much is true.  I'm not posting it for partisan reasons … rather, it made me laugh.  Hope you enjoy it too.

    Market Commentary: Spotting an Island Reveal Pattern.

    In general, the markets held-up again this week.  As I scan the charts, there is little new or opinion-changing information.  However, I spotted an Island Reversal pattern on an intra-day chart of the S&P 500.  This is often seen at market tops.  It starts with a break-away gap (shown by the green circle) and ends with an exhaustion gap (shown by the red circle and the big red arrow). 

    091122 SP500 Index Island Reversal

    To understand this pattern, you can think of it as the last buyers rushing to get in (pushing-up price so fast that it creates a break-away gap), only to find that there are no new buyers (causing a price drop and the resulting exhaustion gap).  This gap down can signal the beginning of a change in trend. 

    In this particular case, we are coming into a holiday-shortened week (often characterized by light trading).  So I'm not expecting anything dramatic.  Still, it seems worth watching to see if the market trades back up above the exhaustion gap.

    Something Changed: Small Caps and Techs are Not Leading The Way.

    Here is something else that caught my eye.  The chart below shows that the Russell 2000 Index (shown in green below) has led the way throughout the recent rally.  The S&P 500 Index (shown in red below), represents the broader market.  While the Dow Jones Industrial Average (shown in blue below) lagged.  You can click the chart image below to launch an interactive version on Stockcharts.com.  This chart shows the relative performance of these indices during the past year.  You can adjust the date range by dragging the date bar at the bottom.

    091122 Index Performance Comparison this Year

    The next chart shows the same information, except limited to the past month.  Notice that the relative performance of these indices has reversed. 

    091122 Index Performance Comparison this Month

    I'm watching this rotation to see if small caps recover or continue to show weakness.  They could be the canary in the coal-mine for a bigger correction.

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

    • Fed Eyes Dollar Drop, But Clings to Low-Rate Pledge. (FluentNews)
    • Goldman Outlines Fed’s New Dashboard Indicators. (WSJ)
    • Buffett Says His Businesses Have Bottomed (Reuters)
    • Memo to Buffett: Put Down the Pom-Poms & Tell Us the Truth. (HuffingtonPost)
    • New Market Bubble is Brewing: It's Déja Vu All Over Again. (Newsweek)
    • While U.S. Economy Struggles, China's Rises. (NPR)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

  • A Matter of Perspective

    What could turn this boy, who I happily go to Cowboys games with …

    091119-HMG-and-ZAG-at-Cowbo

    … Into this boy?

    091119-HMG-and-Zach-as-a-Bl

    When it happened, I posted this comment on Twitter: "My high-school age son came home today as a Platinum Blond. Hooray … it makes guessing 'What's Next' so much more fun." 

    The responses were clever.  One guy said: "Grounding is next, I expect."  Someone else thought providing a little contrast would help. They said: "Here's what could be next … Well, hope not … but you never know".  Click this link to see what they were referring to.

    As it turns out, his blondness was something many football players did to celebrate their team making the play-offs and getting to play at the new Cowboys' Stadium.

    091122 Zach in Star at Cowboys Stadium
    Somehow (in this context) he looks better to me already … But he doesn't have my burst of slowness, yet.

    The point is that many things we initially perceive one way, may turn out to be something quite different all-together.

    Here is a Story to Illustrate This Better … And to Make it Stick.


    091119-Village This is another one of those stories I get, in different forms, from time-to-time.

    It is called "Who Knows?" And sometimes it is told as an old story from China, while other times it is set during the American Civil War.

    Nevertheless, "Who Knows?" is one of those  "sticky"
    stories that people like to re-shape and re-tell.  So, with no further
    ado, here it is for you to read for yourself.

    Who Knows?

    A farmer's horse ran away one day and all the villagers came to him saying, Oh what bad luck you've had! Your horse that you need to do your work is gone!

    The farmer shrugged his shoulders and said, Good luck, bad luck. Who knows?

    Several days later, the farmer's horse returned, followed by a herd of wild horses!

    Oh what good luck you have, cried the same villagers! Not only has your horse returned, he has brought you many horses!

    The farmer again shrugged his shoulders and said, Good luck, bad luck. Who knows?

    One day not long after, the farmer's son was trying to break one of the wild horses. He was thrown off the horse and broke his leg.

    Oh what bad luck you have! Cried the villagers. Now your son has a broken leg. Who will help you?

    The farmer shrugged his shoulders and said, Good luck, bad luck. Who knows?

    Not long after, as the son was recuperating, an army came through the village and took all the young males to fight in a war in another region. They did not take the farmer's son because of his broken leg.

    Oh what good luck you have! The villagers cried once again. Your son has been spared being taken off to war because of his broken leg!

    The farmer shrugged his shoulders and said, Good luck, bad luck. Who knows?

    We Don't Know … Yet.

    This is a great story to remember when you're projecting far beyond the present moment … or even when you're just worrying about what will happen next?

    The things we think are good fortune can often have bad endings; and vice-versa. How many times have you looked back on what seemed like bad luck, when it happened, but later realized that it was the start of something better?

    Made to Stick

    Made to StickThis story reminded me of the book by Chip and Dan Heath, called Made to Stick: Why Some Ideas Survive and Others Die.  It is a fascinating explanation about what makes an idea memorable or interesting.

    The
    premise is that you should focus on the six things that make ideas
    stick – which they summed up in the mnemonic "SUCCES" (yes, I know that
    success has two "s"s at the end … I didn't make up the acronym). 
    Here is what that represents:

    • Simple — find the core of any idea;
    • Unexpected — grab people's attention by surprising them;
    • Concrete — make sure an idea can be grasped and remembered later;
    • Credibility — give an idea believability;
    • Emotion — help people see the importance of an idea;
    • Stories — empower people to use an idea through narrative.

    Other Resources:

  • A Matter of Perspective

    What could turn this boy, who I happily go to Cowboys games with …

    091119-HMG-and-ZAG-at-Cowbo

    … Into this boy?

    091119-HMG-and-Zach-as-a-Bl

    When it happened, I posted this comment on Twitter: "My high-school age son came home today as a Platinum Blond. Hooray … it makes guessing 'What's Next' so much more fun." 

    The responses were clever.  One guy said: "Grounding is next, I expect."  Someone else thought providing a little contrast would help. They said: "Here's what could be next … Well, hope not … but you never know".  Click this link to see what they were referring to.

    As it turns out, his blondness was something many football players did to celebrate their team making the play-offs and getting to play at the new Cowboys' Stadium.

    091122 Zach in Star at Cowboys Stadium
    Somehow (in this context) he looks better to me already … But he doesn't have my burst of slowness, yet.

    The point is that many things we initially perceive one way, may turn out to be something quite different all-together.

    Here is a Story to Illustrate This Better … And to Make it Stick.


    091119-Village This is another one of those stories I get, in different forms, from time-to-time.

    It is called "Who Knows?" And sometimes it is told as an old story from China, while other times it is set during the American Civil War.

    Nevertheless, "Who Knows?" is one of those  "sticky"
    stories that people like to re-shape and re-tell.  So, with no further
    ado, here it is for you to read for yourself.

    Who Knows?

    A farmer's horse ran away one day and all the villagers came to him saying, Oh what bad luck you've had! Your horse that you need to do your work is gone!

    The farmer shrugged his shoulders and said, Good luck, bad luck. Who knows?

    Several days later, the farmer's horse returned, followed by a herd of wild horses!

    Oh what good luck you have, cried the same villagers! Not only has your horse returned, he has brought you many horses!

    The farmer again shrugged his shoulders and said, Good luck, bad luck. Who knows?

    One day not long after, the farmer's son was trying to break one of the wild horses. He was thrown off the horse and broke his leg.

    Oh what bad luck you have! Cried the villagers. Now your son has a broken leg. Who will help you?

    The farmer shrugged his shoulders and said, Good luck, bad luck. Who knows?

    Not long after, as the son was recuperating, an army came through the village and took all the young males to fight in a war in another region. They did not take the farmer's son because of his broken leg.

    Oh what good luck you have! The villagers cried once again. Your son has been spared being taken off to war because of his broken leg!

    The farmer shrugged his shoulders and said, Good luck, bad luck. Who knows?

    We Don't Know … Yet.

    This is a great story to remember when you're projecting far beyond the present moment … or even when you're just worrying about what will happen next?

    The things we think are good fortune can often have bad endings; and vice-versa. How many times have you looked back on what seemed like bad luck, when it happened, but later realized that it was the start of something better?

    Made to Stick

    Made to StickThis story reminded me of the book by Chip and Dan Heath, called Made to Stick: Why Some Ideas Survive and Others Die.  It is a fascinating explanation about what makes an idea memorable or interesting.

    The
    premise is that you should focus on the six things that make ideas
    stick – which they summed up in the mnemonic "SUCCES" (yes, I know that
    success has two "s"s at the end … I didn't make up the acronym). 
    Here is what that represents:

    • Simple — find the core of any idea;
    • Unexpected — grab people's attention by surprising them;
    • Concrete — make sure an idea can be grasped and remembered later;
    • Credibility — give an idea believability;
    • Emotion — help people see the importance of an idea;
    • Stories — empower people to use an idea through narrative.

    Other Resources:

  • A Lesson Learned About the Time-Value of Living

    091115 Me and My Dad This weekend marked 10 years since my dad passed away.

    It's amazing to me how fast time flies, and yet how important he still is in my life. Rather than mourn his death, I celebrate what a great job he did living.

    One of the things his passing taught me was the "time-value of life".

    At the end, to him, one more year of living seemed priceless. Yet at that point, he was older and more infirm than at any other point in his life.

    Wouldn't it be better to recognize the importance of living fully, earlier?

    In other words, the best way to capture and leverage the value of this year is to live it fully now.

    Wouldn't now be a good time to start?

  • A Lesson Learned About the Time-Value of Living

    091115 Me and My Dad This weekend marked 10 years since my dad passed away.

    It's amazing to me how fast time flies, and yet how important he still is in my life. Rather than mourn his death, I celebrate what a great job he did living.

    One of the things his passing taught me was the "time-value of life".

    At the end, to him, one more year of living seemed priceless. Yet at that point, he was older and more infirm than at any other point in his life.

    Wouldn't it be better to recognize the importance of living fully, earlier?

    In other words, the best way to capture and leverage the value of this year is to live it fully now.

    Wouldn't now be a good time to start?

  • Capitalogix Commentary 11/15/09

    What do you think is the most bullish indicator of our markets?  It's not a trick question; the answer is "price".

    The markets have held-up nicely, throughout this rally, despite lots of bad news about the economy. And that, in-and-of-itself, is bullish.

    It doesn't matter what technical analysis indicator you use (increasing negative divergences and selling on down days … or less positive momentum and market breadth), the markets have given us a clear message recently. Price is the primary indicator, and it has stayed above support. 

    For example, here is a daily chart of the Russell 2000 Small-Cap Index.  It is holding its gains; yet, sitting at a decision point. 

    091115 Russell 2000 Index Below 50-Day Average

    Last week I posted a chart showing the Elliott Wave count of this index.  Nothing in this chart changes that analysis.

    We can't abandon the discipline of looking to technical analysis, just
    because early indicators haven't tipped us off to the end of rally, yet.  All that means is that the rally hasn't ended, yet.

    The trading action during rallies is often characterized as "climbing a wall of worry".  So, how long can this rally last?  The next section suggests that a rally can last a lot longer than this one has, so far.

    How Does This Rally Compare With Historical Rallies?

    The Dow made another rally high this week, as it moved further above the 10,000 level.

    To provide some perspective to the current Dow rally that began back in March, all major market rallies of the last 109 years are plotted on the following chart from Chart of the Day.

    • Each dot represents a major stock market rally as measured by the Dow.
    • The Dow has begun a major rally 27 times over the past 109 years,
      which equates to an average of one rally every four years.
    • Also, most major rallies (73%) resulted in a gain of between 30% and 150% (29.8% to 150.5% to be exact) and lasted between 200 and 800 trading days (9.5 months to 3.2 years).
    • These "typical rallies" are highlighted in the blue-shaded box.

    As it stands right now, the current Dow rally (noted with the yellow highlight) would be classified as both short in duration and below average in magnitude.

    091115 Length of Rally

    On a different, but related, topic … I think it's time to pay some attention to what's happening to the U.S. Dollar.

    What Happened to the U.S. Dollar – Or … Why Is Everything Else Going Up?

    Here is a Performance Chart showing how the major world currencies have performed since last March.  This chart made me think of the Sesame Street song "One of These Things is Not Like the Others". Notice that all the currencies, except the U.S. Dollar, are up since then.

    StockCharts.com Performance Comparison Chart

    To me, this implies that the government made a decision near the March lows. Here is a link to an insightful post on why you should care about the strength of the dollar.  In general, there is a strong inverse relationship between the strength of the U.S. Dollar and the strength of the U.S. Stock prices.  Here is a chart showing what that looks like.

    091115 Relationship of US Dollar to US Stocks

    At some point, the economy will be more important than the market.  To that end, U.S. Treasury Secretary Timothy Geithner said a strong dollar is in the nation’s
    interest; and that the government recognizes the importance it plays to the
    economic health of the United States and the global
    financial system
    .  We'll see.

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

    • Cisco's Profit Falls 19% – Shares Rise Anyway. (WSJ)
    • Roubini: Bernanke Can Avoid A Crisis by … Actually He Can't. (BusinessInsider)
    • Congressman Ron Paul Says Be Prepared for the Worst. (Forbes)
    • Fed Sees No Need to Raise Rates Soon. (NYTimes)
    • Buffett's Unusual Train of Thought on Burlington Northern. (WSJ)
    • A VC Win: Greylock Partners Raised a $575MM new fund in six weeks. (WSJ)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

  • Capitalogix Commentary 11/15/09

    What do you think is the most bullish indicator of our markets?  It's not a trick question; the answer is "price".

    The markets have held-up nicely, throughout this rally, despite lots of bad news about the economy. And that, in-and-of-itself, is bullish.

    It doesn't matter what technical analysis indicator you use (increasing negative divergences and selling on down days … or less positive momentum and market breadth), the markets have given us a clear message recently. Price is the primary indicator, and it has stayed above support. 

    For example, here is a daily chart of the Russell 2000 Small-Cap Index.  It is holding its gains; yet, sitting at a decision point. 

    091115 Russell 2000 Index Below 50-Day Average

    Last week I posted a chart showing the Elliott Wave count of this index.  Nothing in this chart changes that analysis.

    We can't abandon the discipline of looking to technical analysis, just
    because early indicators haven't tipped us off to the end of rally, yet.  All that means is that the rally hasn't ended, yet.

    The trading action during rallies is often characterized as "climbing a wall of worry".  So, how long can this rally last?  The next section suggests that a rally can last a lot longer than this one has, so far.

    How Does This Rally Compare With Historical Rallies?

    The Dow made another rally high this week, as it moved further above the 10,000 level.

    To provide some perspective to the current Dow rally that began back in March, all major market rallies of the last 109 years are plotted on the following chart from Chart of the Day.

    • Each dot represents a major stock market rally as measured by the Dow.
    • The Dow has begun a major rally 27 times over the past 109 years,
      which equates to an average of one rally every four years.
    • Also, most major rallies (73%) resulted in a gain of between 30% and 150% (29.8% to 150.5% to be exact) and lasted between 200 and 800 trading days (9.5 months to 3.2 years).
    • These "typical rallies" are highlighted in the blue-shaded box.

    As it stands right now, the current Dow rally (noted with the yellow highlight) would be classified as both short in duration and below average in magnitude.

    091115 Length of Rally

    On a different, but related, topic … I think it's time to pay some attention to what's happening to the U.S. Dollar.

    What Happened to the U.S. Dollar – Or … Why Is Everything Else Going Up?

    Here is a Performance Chart showing how the major world currencies have performed since last March.  This chart made me think of the Sesame Street song "One of These Things is Not Like the Others". Notice that all the currencies, except the U.S. Dollar, are up since then.

    StockCharts.com Performance Comparison Chart

    To me, this implies that the government made a decision near the March lows. Here is a link to an insightful post on why you should care about the strength of the dollar.  In general, there is a strong inverse relationship between the strength of the U.S. Dollar and the strength of the U.S. Stock prices.  Here is a chart showing what that looks like.

    091115 Relationship of US Dollar to US Stocks

    At some point, the economy will be more important than the market.  To that end, U.S. Treasury Secretary Timothy Geithner said a strong dollar is in the nation’s
    interest; and that the government recognizes the importance it plays to the
    economic health of the United States and the global
    financial system
    .  We'll see.

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

    • Cisco's Profit Falls 19% – Shares Rise Anyway. (WSJ)
    • Roubini: Bernanke Can Avoid A Crisis by … Actually He Can't. (BusinessInsider)
    • Congressman Ron Paul Says Be Prepared for the Worst. (Forbes)
    • Fed Sees No Need to Raise Rates Soon. (NYTimes)
    • Buffett's Unusual Train of Thought on Burlington Northern. (WSJ)
    • A VC Win: Greylock Partners Raised a $575MM new fund in six weeks. (WSJ)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week