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

  • Capitalogix Commentary 07/12/09

    Obama told the G8 that the "World has Staved Off Economic Disaster." So, it's all good now.  You are safe to jump back in the pool.  If there was still risk, he couldn't have said that in front of world leaders, right?

    Is This the New Normal … Or Just the Calm Before the Storm?

    Here is a chart that shows how volatility has reduced recently.  Putting on my curmudgeon hat for a moment, I remember the old trader's adage that lack of volatility begets volatility.

    090711 Volatility is Down

    That chart whispers "beware the calm before the storm" to me.  Others may see a return to normal.  What do you think?

    A Look At the Markets.

    The markets have given back close to 25% of their recent gains in the last four weeks. In many respects that was a healthy move. The news has been bad enough that I expected a bigger and steeper downswing.

    Also, there's been a lot of talk about the potential of a head and shoulders top. But when you look at a composite of the five U.S. Equity Indices (shown in the bottom-half of the chart, below), we haven't broken the neckline, yet.

    In addition, the 200-day moving average (red line) continues to provide support. If we don't have a sustained break beneath this level, the 200-day moving average will act as support.  Click the chart to see a full-size image.

    090711 SP500 and Composite

    With that said, sentiment is getting more bearish, and the move down
    has not created a spike in the VIX. So, again, there are clues that lead me to suspect that we might be witnessing the calm
    before the storm.  Earnings Season is starting; and a move down would trigger the head-and-shoulders topping pattern and the 200-day moving average would become overhead resistance.  And fear would increase … you get the picture.

    Sometimes, the right picture can be worth a thousand words.

    Dow's Dead-Cat Bounce from GuidePostings

    So short-term, a bounce wouldn't surprise me. Nonetheless, a bigger correction still seems likely.

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

    • Businessman Pays $2.1 million for Lunch with Buffet; Banks More (DigitalJournal)
    • 11 Places With a Worse Economy Than Ours. (USNews)
    • Currency Funds Crushed on Dearth of Market Trends. (Bloomberg)
    • The Dollar's role in the global economy is Safe From the Yuan, for Now (WSJ)
    • Ex-Goldman Sachs Employee Arrested Stealing Secret Trading Codes. (StreetInsider)
    • Citadel Sues Firm Linked to Alleged Goldman Software Theft. (FinAlternatives)
    • Mark Cuban on Business Models: Succeed with Free, Die by Free. (BlogMaverick)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

  • Here’s a Movie Worth Seeing

    What do you do when your wife and kids are out of town, and you find yourself alone?

    Besides catching-up on projects that I somehow avoided until now, I like to watch movies.

    TiVo now links to Netflix,
    and provides an instant viewing option. Upon opening that folder on the DVR, I saw a
    bunch of things I normally wouldn't choose to watch on my own. One of them
    was a movie called Saint Ralph.  And I chose to watch it anyway.

    My Dad had an "interesting" belief. He didn't watch scary or negative movies, because he felt that life was enough of a challenge on its own … and it was better to find things that raised our spirits. Well, I inherited that from him.

    Don't get me wrong, I still I love drama and thrillers. But in the absence of compelling circumstances, I tend to prefer positive stories.

    090711 Saint Ralph Movie Poster So a plot about a down-on-his luck Catholic High School student whose father is dead and whose mother is in a coma, doesn't sound like my type of movie. 

    But Saint Ralph was my type of movie.  It made me think and I enjoyed it.  The movie was lighter, funnier, and better than I expected.

    On one level, it's a coming-of-age story about perseverance and faith through uncertain times. On another level, it's a well-written comedy about a quirky 14-year-old boy who gets it in his head that the only way to
    save his mother is through a miracle (and the miracle he thinks will
    save her … is for him to win the Boston Marathon).

    It is a movie that asks, if you're going to dream for something, why not dream for miracles?

    Hope you enjoy it.

    Here's a link to the trailer for Saint Ralph. 

    Here's a link to find it at Netflix.

  • Here’s a Movie Worth Seeing

    What do you do when your wife and kids are out of town, and you find yourself alone?

    Besides catching-up on projects that I somehow avoided until now, I like to watch movies.

    TiVo now links to Netflix,
    and provides an instant viewing option. Upon opening that folder on the DVR, I saw a
    bunch of things I normally wouldn't choose to watch on my own. One of them
    was a movie called Saint Ralph.  And I chose to watch it anyway.

    My Dad had an "interesting" belief. He didn't watch scary or negative movies, because he felt that life was enough of a challenge on its own … and it was better to find things that raised our spirits. Well, I inherited that from him.

    Don't get me wrong, I still I love drama and thrillers. But in the absence of compelling circumstances, I tend to prefer positive stories.

    090711 Saint Ralph Movie Poster So a plot about a down-on-his luck Catholic High School student whose father is dead and whose mother is in a coma, doesn't sound like my type of movie. 

    But Saint Ralph was my type of movie.  It made me think and I enjoyed it.  The movie was lighter, funnier, and better than I expected.

    On one level, it's a coming-of-age story about perseverance and faith through uncertain times. On another level, it's a well-written comedy about a quirky 14-year-old boy who gets it in his head that the only way to
    save his mother is through a miracle (and the miracle he thinks will
    save her … is for him to win the Boston Marathon).

    It is a movie that asks, if you're going to dream for something, why not dream for miracles?

    Hope you enjoy it.

    Here's a link to the trailer for Saint Ralph. 

    Here's a link to find it at Netflix.

  • The Flow of Planning

    090705 Compass I was in Columbus Ohio last week for a series of meetings and strategic planning sessions.

    I love getting away from the business in order to work on the
    business. That means stepping back from day-to-day issues, to look at
    the bigger picture. It also means getting back in-touch with goals and
    intent.

    In a sense, the process acts like a compass, which sets the general direction for the journey.

    In addition, preparing for a series of meetings, like this, is a lot like working on a business plan.

    Personally, I've found that that one of the primary benefits of
    creating a business plan has almost nothing to do with the plan itself.
    Working on the plan, immersing yourself in the ideas and possibilities,
    and ultimately choosing what stays-in, versus what's filtered out …
    there is magic in that.

    Yes, the plan is important.  But it is the planning that takes you from thinking … to feeling … to knowing.  That's where the real benefit of business planning comes from.

    A Good Sign.

    Sometimes you hear a question and it takes the air out of an idea.
    Other times a question helps you make a new distinction or consider an
    alternate and better course of action.

    At our planning sessions, last week, there was a lot of those
    pushing, pulling, probing, and deep thought … yet it built momentum. 
    So, I felt like we were on the right track.

    How to Tell You Are On the Right Track.

    I
    tend to be analytical.  Yet, over time, I've come to believe that one
    of the best tools to measure whether you are on the right track is how
    you feel.

    Have you ever gotten a phone call from someone, and when you saw or heard that it was from them, you wilted?  In
    contrast, have you ever become more animated and energized while
    interacting with someone else?  It is easy to recognize the difference. 

    Each person has different thoughts, people, or situations that trigger these positive and negative states.

    In sports, this positive state is often referred to as being "in-the-Zone".  It is also called "Flow". 
    It happens when someone is fully immersed in what they are doing, and
    has a feeling of energized focus or awareness, full involvement, and
    success in the process of their activity.

    090705 Challenge_vs_skill

    Being in Flow feels good. On some level, when you are in Flow, you know you're on the right track.

  • The Flow of Planning

    090705 Compass I was in Columbus Ohio last week for a series of meetings and strategic planning sessions.

    I love getting away from the business in order to work on the
    business. That means stepping back from day-to-day issues, to look at
    the bigger picture. It also means getting back in-touch with goals and
    intent.

    In a sense, the process acts like a compass, which sets the general direction for the journey.

    In addition, preparing for a series of meetings, like this, is a lot like working on a business plan.

    Personally, I've found that that one of the primary benefits of
    creating a business plan has almost nothing to do with the plan itself.
    Working on the plan, immersing yourself in the ideas and possibilities,
    and ultimately choosing what stays-in, versus what's filtered out …
    there is magic in that.

    Yes, the plan is important.  But it is the planning that takes you from thinking … to feeling … to knowing.  That's where the real benefit of business planning comes from.

    A Good Sign.

    Sometimes you hear a question and it takes the air out of an idea.
    Other times a question helps you make a new distinction or consider an
    alternate and better course of action.

    At our planning sessions, last week, there was a lot of those
    pushing, pulling, probing, and deep thought … yet it built momentum. 
    So, I felt like we were on the right track.

    How to Tell You Are On the Right Track.

    I
    tend to be analytical.  Yet, over time, I've come to believe that one
    of the best tools to measure whether you are on the right track is how
    you feel.

    Have you ever gotten a phone call from someone, and when you saw or heard that it was from them, you wilted?  In
    contrast, have you ever become more animated and energized while
    interacting with someone else?  It is easy to recognize the difference. 

    Each person has different thoughts, people, or situations that trigger these positive and negative states.

    In sports, this positive state is often referred to as being "in-the-Zone".  It is also called "Flow". 
    It happens when someone is fully immersed in what they are doing, and
    has a feeling of energized focus or awareness, full involvement, and
    success in the process of their activity.

    090705 Challenge_vs_skill

    Being in Flow feels good. On some level, when you are in Flow, you know you're on the right track.

  • Capitalogix Commentary 07/05/09

    Another grim report on unemployment casts doubt on the likelihood of a quick economic recovery. 

    The unemployment rate edged up to 9.5 percent in June, to its highest level in 26 years. The bigger problem is that many analysts expect joblessness to get worse in the coming months.

    A Different Perspective on the Job Market:

    Here is a chart that caught my eye on Barry Ritholtz's blog.  It shows the increased competition for jobs.  There are now close to six unemployed people for each available position.

    090705 Unemployed Per Job-Opening Chart

    The point is that as fewer jobs become available, it will get harder for normal citizens to obtain them.  The cycle continues because loss of jobs means reduced spending … which means tighter margins. 

    So, this next chart doesn't surprise me.  It shows that in addition to an increase in unemployment, there was also a decrease in hours worked.  Simply counting the number of people who lost their jobs misses something important. Lots of people have lost part of their jobs through a variety of techniques like furloughs and thirty-hour work weeks.

    090705 Not Just Fewer Jobs - Less Hours Worked

    Notice how consistent the decline in aggregate hours worked (purple line) has been over recent months. It is something to watch.

    For a longer perspective, here is a chart comparing the monthly national unemployment rates since 1948.  Click the chart to see the interactive version on WSJ.com.

    090705 Unemployment Since 1948

    Market Chart:

    How will all that play-out in the Markets?  So far, the markets have held-up nicely.  I've been seeing more negative divergences and selling on down days … and less positive momentum and market breadth. But price is the primary indicator, and it has stayed above support.

    Here is a daily chart of the Dow Jones Industrial Average Index.  I marked a head and shoulders pattern that many traders are watching.  Click the chart to see a full-size image.

    090705 Head and Shoulders Pattern on Dow Daily

    Short-term, a bounce still wouldn't surprise me. Nonetheless, a bigger correction seems likely.

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

    • Investors are Now Racing Toward Volatile Areas of the Market. (NYTimes)
    • Another Indicator Predicts Economic Recovery is Near. What do you think? (MJPerry)
    • A China Stock Bubble: IPO Mania Dangerous in Recession. (Time and Economist)
    • Why China Hates the U.S. and What It Means for Your Portfolio. (Motley Fool)
    • A Run on an Amish Bank Teaches the Risks of Modernity. (WSJ)
    • The Fed's Delicate Balancing Act On the Complex & Slow Road to Recovery. (SmartMoney)
    • How GE Reaped Bailout Dollars Even Though It Wasn't a Bank. (TDB)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

    • Michael Jackson Insider on What Really Killed Him. (TDB)
    • Monkey 'Stock Market' Prone to Fluctuations Too. (NewScientist)
    • Calculating Consumer Happiness at Any Price. (NYTimes)
    • A Glimpse at the Future: Domestic Robots With A Taste For Flesh. (NewScientist)
    • Scientists Create First Electronic Quantum Processor. (PhysOrg)

    • Tomato Pill's new form of Lycopene Beats Heart Disease. (BBC)

    • Is an Ugly Baby Harder to Love? (Time)
    • More Posts with Lighter Ideas and Fun Links.

  • Screen Capture Software Worth Snagging

    090705 Snagit I'm so glad I found Snagit.  It is one of the un-sung heroes that I use all the time but don't think about because it is so reliable and stable that I forget how good it is.

    What Can You Do With Snagit? 

    Capture anything you see on the screen. Edit and combine those captures. Add text, arrows, or highlights to make the image better.  Then share them through your favorite applications. Organize and find them again later.

    I end-up using it several times a day.  It is my default image editor.  I use it to create or edit the graphics for the blog, presentations and e-mails.  I use it to capture and annotate certain financial transactions … and to get or give tech support. Bottom-Line: the more you use Snagit, the more ways you'll find to use it. 

    Here is a two-minute video that will give you a quick overview of some of the things Snagit can do for you.

    090705 Snagit Overview Video

    Techsmith makes several other cool tools too.  I'm not affiliated with them, other than as a satisfied client.  Just thought it was worth sharing.  Hope it helps you too. 

    Click here to go to the product page for Snagit.

    Click here to download a trial.

  • Screen Capture Software Worth Snagging

    090705 Snagit I'm so glad I found Snagit.  It is one of the un-sung heroes that I use all the time but don't think about because it is so reliable and stable that I forget how good it is.

    What Can You Do With Snagit? 

    Capture anything you see on the screen. Edit and combine those captures. Add text, arrows, or highlights to make the image better.  Then share them through your favorite applications. Organize and find them again later.

    I end-up using it several times a day.  It is my default image editor.  I use it to create or edit the graphics for the blog, presentations and e-mails.  I use it to capture and annotate certain financial transactions … and to get or give tech support. Bottom-Line: the more you use Snagit, the more ways you'll find to use it. 

    Here is a two-minute video that will give you a quick overview of some of the things Snagit can do for you.

    090705 Snagit Overview Video

    Techsmith makes several other cool tools too.  I'm not affiliated with them, other than as a satisfied client.  Just thought it was worth sharing.  Hope it helps you too. 

    Click here to go to the product page for Snagit.

    Click here to download a trial.

  • Capitalogix Commentary 06/28/09

    Rolling Stone is not where I typically read insightful Market commentary.  Nonetheless, Matt Taibbi wrote a piece for them you should read.  The article is called "The Great American Bubble Machine", and it details Goldman Sachs' role in engineering every major market manipulation since the Great Depression.  Take a look.

    0906028 Goldman Sachs Bubble Machine Article Link

    Also, here is a link to the text of the article.

    Other Asset Classes.

    This chart caught my eye.  It shows the top-ten residential real-estate markets, and let's just say none of them are around here.  Click the picture to go to Reiden's site for more data.

    0906028 Most Expensive Real Estate 

    I guess Goldman Sachs isn't the only one who can create Bubbles. 

    Also, I'm hearing a lot more rumblings from experienced traders about buying a little gold.  Richard Russell, of Dow Theory fame, says: “The way the world is going, ‘gold will be the last man standing’. Gold will be wanted because unlike everything else, gold can not go bankrupt. Gold has no debt against it, gold is not the product of some nation’s central bank. Gold is pure intrinsic wealth. It needs no nation to guarantee it. Gold is outside the paper system.”

    Confidence In the U.S. Equity Markets.

    The VIX closed at 25.93 today, down more than 16% from Monday’s close of 31.17 to the lowest closing level since September 12, 2008 – the last trading day before the Lehman Brothers bankruptcy was announced.  A rise in volatility from these levels would likely be bearish.

    0906028 VIX At Recent Lows

    Bespoke notes that the Michigan Confidence joins the growing number of indicators that are now at or better than Pre-Lehman levels.  It is currently at its highest level since January 2008.  This month's reading is also the fourth consecutive month-over-month increase in confidence.  

    Market Metaphor?

    This NYC hotel claims that one of its rooms is not only a tourist attraction, but is “art”. Art that starts to smell bad in warm weather.

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

    • Why Isn't The Stimulus Stimulating? Seems Like Speed Will Matter. (Forbes)
    • World Economy Tracking or Doing Worse than the Great Depression. (VoxEU)
    • Morgan Stanley Topples Goldman as M&A Leader this Year. (NYPost)
    • List of Banks with the Biggest Profits and Losses Last Year. (Economist)
    • Tech Sector Strength May Be Weaker than Claimed. (Barrons)
    • Why Computers Can't – Yet – Consistently Beat the Market. (Forbes)
    • Michael Jakson's Debt, Private Equity & His Hedge Fund Backer. (FinAlternatives)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

    • What Is Your Favorite Michael Jackson Song? Interactive Retrospective. (NYTimes)
    • Windows 7 at Half Price: Why is Microsoft Offering Discounts? (InformationWeek)
    • New Defense Industry Niche: Researchers Developing Tiny Flying Spies. (Forbes)
    • New Book on the Secret History of the National Security Agency. (USNews)
    • Super-Intelligence: When Will Computers Be Smarter Than Us? (Forbes)
    • Google Voice: Smarter Phone Calls for Your Smart Phones. (NewScientist)
    • Can You Get Fit in Six Minutes a Week? The Research is Promising. (NYTimes)
    • More Posts with Lighter Ideas and Fun Links.

  • Capitalogix Commentary 06/28/09

    Rolling Stone is not where I typically read insightful Market commentary.  Nonetheless, Matt Taibbi wrote a piece for them you should read.  The article is called "The Great American Bubble Machine", and it details Goldman Sachs' role in engineering every major market manipulation since the Great Depression.  Take a look.

    0906028 Goldman Sachs Bubble Machine Article Link

    Also, here is a link to the text of the article.

    Other Asset Classes.

    This chart caught my eye.  It shows the top-ten residential real-estate markets, and let's just say none of them are around here.  Click the picture to go to Reiden's site for more data.

    0906028 Most Expensive Real Estate 

    I guess Goldman Sachs isn't the only one who can create Bubbles. 

    Also, I'm hearing a lot more rumblings from experienced traders about buying a little gold.  Richard Russell, of Dow Theory fame, says: “The way the world is going, ‘gold will be the last man standing’. Gold will be wanted because unlike everything else, gold can not go bankrupt. Gold has no debt against it, gold is not the product of some nation’s central bank. Gold is pure intrinsic wealth. It needs no nation to guarantee it. Gold is outside the paper system.”

    Confidence In the U.S. Equity Markets.

    The VIX closed at 25.93 today, down more than 16% from Monday’s close of 31.17 to the lowest closing level since September 12, 2008 – the last trading day before the Lehman Brothers bankruptcy was announced.  A rise in volatility from these levels would likely be bearish.

    0906028 VIX At Recent Lows

    Bespoke notes that the Michigan Confidence joins the growing number of indicators that are now at or better than Pre-Lehman levels.  It is currently at its highest level since January 2008.  This month's reading is also the fourth consecutive month-over-month increase in confidence.  

    Market Metaphor?

    This NYC hotel claims that one of its rooms is not only a tourist attraction, but is “art”. Art that starts to smell bad in warm weather.

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

    • Why Isn't The Stimulus Stimulating? Seems Like Speed Will Matter. (Forbes)
    • World Economy Tracking or Doing Worse than the Great Depression. (VoxEU)
    • Morgan Stanley Topples Goldman as M&A Leader this Year. (NYPost)
    • List of Banks with the Biggest Profits and Losses Last Year. (Economist)
    • Tech Sector Strength May Be Weaker than Claimed. (Barrons)
    • Why Computers Can't – Yet – Consistently Beat the Market. (Forbes)
    • Michael Jakson's Debt, Private Equity & His Hedge Fund Backer. (FinAlternatives)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

    • What Is Your Favorite Michael Jackson Song? Interactive Retrospective. (NYTimes)
    • Windows 7 at Half Price: Why is Microsoft Offering Discounts? (InformationWeek)
    • New Defense Industry Niche: Researchers Developing Tiny Flying Spies. (Forbes)
    • New Book on the Secret History of the National Security Agency. (USNews)
    • Super-Intelligence: When Will Computers Be Smarter Than Us? (Forbes)
    • Google Voice: Smarter Phone Calls for Your Smart Phones. (NewScientist)
    • Can You Get Fit in Six Minutes a Week? The Research is Promising. (NYTimes)
    • More Posts with Lighter Ideas and Fun Links.