Capitalogix Commentary 08/16/09

The unemployment numbers came in slightly better than expected, and the market reacted very favorably. Then quietly, adjustments were made for other months, which were very unfavorable. Moreover, examining recent numbers a little closer suggests that some portion of the slowing growth of unemployment is probably due to the way the number is constructed. Some people are being dropped from the ranks of the unemployed, even though they haven't found jobs, because their unemployment is now long enough that they no longer qualify for benefits.

Market Commentary.

There has been a lot of bad news in the press lately.  Nonetheless, the markets have held up well. There have been several sharp drops, which made me expect much worse; only to be met with another rally. As much as my gut wants to warn about "head fakes" and "finding the last buyer", this is the type of market action we see during bull market trends.

Comparison of World Index Performances.

The next chart shows how some of the big, thickly-traded, world equity indices (like the DAX, CAC, and FTSE) have performed year-to-date.  I like using a chart like this to get a sense of the bigger picture.  Last week's chart showed that the Emerging Markets have done much better so far this year.  Both charts show highly correlated trading.

The chart is interactive; so by clicking the picture, you can drag the yellow-highlighted date range slider to see how the change plays-out over time.  Try going back 232 days (which is the past year of trading days).  You can also add or change the markets this comparison uses.

Disaster Readiness.

"If this were an actual emergency" ... would you have learned anything from the events of the last year?  As a trader, I've been burning the midnight oil and studying the bear market data to figure-out which of our systems held-up best during those periods.  In addition, I'm looking for early indicators that would signal a phase shift out of the bullish trend.

Governments are probably going through a similar exercise, even though the Fed says the recession is ending and that it would take a step back toward normal policy as things return to normal.  Frankly they'd hope so, because the alternative is pretty scary.  How many things are left in their bag of tricks?

Exchange Certified Bullion.

Coincidentally, I'm hearing a lot more about investors and hedgers taking delivery of precious metals, like gold, silver, platinum, and palladium. Why? Apparently, unlike ETFs (like GLD), buying Warehouse Depository Receipts conveys title to specific, numbered, metal bars, which means they are not reportable as financial assets, yet you can still pledge them as collateral or sell call options against them.

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

• Fed Holds Steady and Moves to End Debt Buying. (NYTimes)
• What Happens If the Fed Takes the Economy Off Life Support? (Forbes)
• Lowry Research’s Intermediate Trend Buy Signal. (TradersNarrative)
• Prechter Expects Dollar to Rally for Next 3-Years. (OutlookProfit)
• Judge orders Microsoft to stop selling Word. (CNet)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• FriendFeed Updates Status: Married to Facebook. (NYTimes)
• Hold Innovation Tournaments to Find the Most Promising New Opportunities. (Wharton)
• Sony Adopts Open Book Strategy Against Amazon. (MediaPost)
• Mobile Phones Get Augmented Cyborg Vision. (BBC)
• DriveSharp Claims It Can "Train the Brain to Think and React Faster On The Road". (WSJ)
• More Posts with Lighter Ideas and Fun Links.