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BP said Saturday that its latest attempt to stop the gushing oil well in the Gulf of Mexico was unsuccessful, and the effort, known as a “top kill,” was being scrapped in favor of yet another maneuver to stem the flow spreading into the waters.
Sometimes, an ounce of prevention is worth a pound of cure.
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Wolfram Alpha is not a traditional search engine — rather, it is a "computational knowledge engine". That means it generates output from its own internal knowledge base, instead of searching the web and returning links. Nonetheless, it produces some amazing answers to things you want to calculate or know about.
Watch this video to get a sense of some of the things it can do, and how it can help you.
The breadth of topics it covers is pretty amazing.
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Officials from the U.S. Department of the Treasury, the Federal Reserve Board and the United States Secret Service unveiled the new design for the $100 note. Complete with advanced technology to combat counterfeiting, the new design for the $100 note retains the traditional look of U.S. currency.
If you haven't seen one in person yet, here is what to expect.
Here is a link to an interactive graphic that lets you explore the features of the new note.
Here is a video from the new Currency Channel.
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Can a graphic that looks like a bowl of spaghetti help people understand a complex problem?
By now, you may have seen the “Afghanistan Stability” chart. It is raising questions about the amount of time and effort spent on slides like these ... and their point of diminishing returns.
Isn't Lack of Thinking a Bigger Problem?So, is using PowerPoint (or some other tool) really dangerous? Some claim it is because it can create the illusion of understanding and the illusion of control. Here are some interesting commentaries about that from the NYTimes and the comments from FlowingData.
Do You Focus on the Process or the Result?Working on a PowerPoint presentation, mind map, data visualization, or even a business plan ... all have something in common. In many respects, the process is more important than the product.
When a chart (like the one below) is shown out-of-context, I wonder about its construction process. For example:
OK, let's have some fun with the map.
The Afghanistan Stability Chart.According to NBC News' Chief Foreign Correspondent, the goal in Afghanistan is to "convince militants to stop
fighting and to persuade Afghans sitting on the fence—those unsure
whether to back the Taliban or President Hamid Karzai’s government—to
throw their support behind the U.S.-backed government and its security
forces."
Fair enough ... But if you want to know how we plan to
accomplish that feat, take a look at the large version of the military's
amazingly complicated schematic (from the Office of the Joint Chiefs of
Staff) which outlines the entire strategy. The chart, at least, is a
bit of a quagmire.
“When we understand that slide, we’ll have won the war,” a General joked.
Likewise, John Stewart has a few funny things to say on the subject.
| The Daily Show With Jon Stewart | Mon - Thurs 11p / 10c | |||
| Afghanistan Stability Chart | ||||
| ||||
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It's time to talk about American Idol (with the Finale this week, and all).
Sorry, my mistake ... another bad jobs numbers came out & the markets went down ... so it is time to talk about the American Idle.
Last week was rough for the bulls; and if not for a reversal after the opening bell on Friday, it would have been a lot worse. Consider this: The Russell 2000 gained 2.5% after the open on Friday and still finished with a 6.44% loss for the week. So, yes, it could have been a lot worse.
Was That a Key Reversal Day in the Markets Last Friday?
The S&P Index 500 technically complied with all the rules of a "key reversal day." It plunged to a new low of a significant decline. It then rallied up on increasing volume, and closed well above the prior close.
And here is a longer-term chart showing the S&P on a weekly basis.
We will see if there is some buying triggered here. If the bull-market swing is to continue it has to kick-in soon.
But Where Is the Selling Pressure?
With the market in a dizzying decline, why haven't we seen more committed bearish bets? Are traders going flat instead of short?
One reason is discussed by Carl Swenlin. His assumption is that bull market declines will be short-lived, and that a neutral signal eliminates market exposure during a correction, while at the same time addressing the lower probability outcome of a full bear market decline. In other words, we never know if a bull market correction will actually be the beginning of a new bear market, but we do know that most of the time it won't be, so it makes sense to bet with the odds and go neutral.
I saw a list that I wanted to share. It from the Dash
of Insight blog, which is a consistently good source of information. Here is an excerpt.
"I am pretty fussy about economic news related to jobs and housing, and I did not like what I saw.
The high volatility in trading is frightening to nearly all investors. Thursday was especially bad. The extremely late rally on options expiration day makes the week's pricing look a bit better, but most observers will need much more convincing."
VIX Approaches Pre-2008 Record Highs
The Volatility Index is spiking.
When the VIX rises as it's done the past two weeks, emotions rule the market.
Bill Luby found that, prior to 2008, the VIX only managed to nudge its way over a reading of 45 on three instances:
The table below summarizes the top ten pre-2008 VIX closing highs. Last week’s VIX spike to 45.21 would put it at #3 all-time outside of the 2008 financial crisis.
Will fear subside, or will volatility continue to soar? That will be one of the keys to the market worth watching next week.
Business Posts Moving the
Markets that I Found Interesting This Week:
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The numbers are incredible. Goldman Sachs just revealed in an SEC filing that its traders made money on every single
trading day last quarter, a record for the firm. Net revenue for
trading was $25 million or higher in all of the first quarter’s 63
trading days with 35 of those days bringing in more $100 million.
Even if you had a 95% likelihood of a winning day, you would have only a 3.9% chance of doing it 63 trading sessions in a row.
Does a Perfect Trading Quarter Score One for the Rigged-Market Theory?Whatever the cause of the perfect quarter, it comes as part of a pattern. Goldman Sachs only recorded 11 loss days in the prior 12 months. So while some luck is involved in stringing together a perfect Quarter, the trend of success does not seem to be a fluke.
It gets more curious, because it wasn't just Goldman. Bank of America, Citigroup, and JPMorgan each also recorded a perfect quarter of trading profits. What are the odds of that happening? Apparently, pretty high under their current operating conditions.
When the government is on a mission, you may not like the policies ... but as an investor, you fight it at your peril. More simply put, don't fight the Fed.
It looks like the Banks figured that out.
Goldman figured it out sooner.
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After the "flash crash", the markets recovered quickly and then sold off again, ending that week with additional selling pressure. While some people might have seen that volatile move down as a buying opportunity, many others saw it as a place to get short (or at least to take some risk off the table).
The result was heavier shorts and lighter longs going into the beginning of last week.
For those of you that believe in the "Plunge Protection Team" (which isn't quite the same as believing in the Tooth Fairy), then it probably wasn't surprising to find the markets gapping higher to start trading last Monday. Nonetheless, you might have been surprised to find that the gap was close to 4%.
It All Depends on How You Look At It.
Once again, different types of traders will interpret that as a threat or an opportunity.
The Bear: Some consider "expecting gaps to close" to be a high probability trading setup. Consequently, a big gap-up offers an opportunity to enter a short position with a well defined stop. Add the increased volatility, and the bears were frothing at the mouth.
The Bull: This type of trader would notice that a 4% gap is very different than a half percent (or a even a one percent) gap. Consequently, they expect massive short covering from all the bears trapped in their short positions from the week before. Therefore, they are looking to buy the gap (instead of shorting it).
Imagine the arguments at trading desks around the world as they try to figure out whether this pattern was part of a market top or the sign of a continuation rally.
Obviously, the markets continued higher. This forced more shorts to
cover, and also disturbed traders who wanted to buy, but didn't because
of risk concerns.
The Skeptic: That brings up a third type of trader, someone who was sitting on cash because their trading systems work well during normal market conditions (but who suspects that these are not normal market conditions because of the volatility and exogenous threats).
So, Wednesday comes and it is clear that the markets have been trending higher. Now imagine the conversations at the trading desks of the people who are sitting-out these big swings. They are getting pressure from their bosses and their clients to ask why they are missing these "easy" trades.
It's easy to go to cash, but when do you get back in? How do you determine when it's safe to get back in the water?
Is It Safe?
And there are signs that something "different" is happening. Here is a video from Jason Leavitt.
Many of the algorithmic firms got burned during the last period of unusual volatility. They have the benefit of sophisticated back testing and analysis tools. You'd expect them to develop new rules to reduce their exposure, or at least a switch which systems are using in the markets. So their behavior shouldn't be surprising.
Pick Your Poison.Going back to the folks who believe in the Plunge Protection Team, as I've discussed before, it makes sense for the government to move the markets higher during periods of light trading. It accomplishes their goal with the least cost.
Because it's supposedly a free market, if people disagree with higher prices ... it will trigger selling. At this point, it appears that we are getting close to the area that will trigger selling. Moreover, I don't think it is in the government's interest to prevent that from happening. Nonetheless, there is a lot of backstage maneuvering going on right now to prevent heavy selling.
So traders now have a different decision in front of them. On one hand, they know it isn't often profitable to fight the Fed. On the other hand, in the long run, it's even harder to fight human nature. Markets can be pushed a little this way or that; but for how long?
Greece Is The Word, At Least For A Little Longer ... Then It Might Be PIIGS.
Paul Kedrosky posted a chart showing that this time is different. Behold the immensity and the singularity of Greece’s sovereign debt & fiscal adjustments.
Next, take a look at this. The NYTimes came up with an interesting graphic depicting Europe's web of debt.
As the Atlantic
points out, it's not just the case that these countries are running
huge deficits. It's also worrying that they owe each other tens of
billions of dollars. Greece owes $10 billion to Portugal. Portugal owes
$86 billion to Spain. Spain owes more than $200 billion to both France
and Germany. If Greece defaults, it's not clear where the domino effect
stops.
Business Posts Moving the
Markets that I Found Interesting This Week:
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I have been using a software tool you might find useful. It solves a problem that you probably have, even if you don't think about it often.
A Cure for Information Overload.It In the old days, you could photocopy something and put it in a file. So finding it was relatively straight-forward.
Today, you are faced with a different type of challenge (and chances are your filing system is so "1990s"). Nowadays, you might be looking for a picture, audio snippet, or video ... a document (or more likely, just a part
of one) … or a scrap you saved (like a quote, web-link, or blog post).
Moreover, as you use the computer for more things (and a bigger percentage of the work you do), it gets harder to find a random "something" that you might be looking for.
Part of the problem is that we are getting more efficient at creating "stuff", so there is more of it. In addition, that stuff is a lot more varied than it used to be.
Capture Everything to Your Personal Digital Memory.Evernote makes it easy to store, organize, and find virtually anything. Even better, it is also good at sharing it with others (award-winning good at it).
Chances are, if you can see it or think of it, Evernote can help you remember it. Type a text note. Clip a web page. Snap a photo. Grab a screen-shot. It will be there when you need it.
Finding it Fast, Wherever You Are.Everything you capture is automatically processed, indexed, and searchable. That means you can find things quickly and easily.
You can search for items by keywords, titles, and tags. Evernote even makes the printed and handwritten text inside your images searchable, too (for example, the text on a photo of your white-board).
There is an application program. However, you can also access your information through a Web interface (wherever you are, even if you are away from your computers). In addition, there are versions that work on various smart phones and Evernote provides "Capture" buttons that integrate with Microsoft Outlook and whatever browser you might use. What that means is that it's easy to use, and it's there when you need to use it.
Here is a video showing you how it works.
One Tool That Takes the Place of Many Others.
I've tried dozens of programs that do similar things. In the old days, they were called "personal information managers".
Many of these tools are specialized, so to handle it all you might use a to-do list (or "Getting Things Done" organizer), Internet bookmark manager, screen-capture utility, document management system, and free-form database.
Evernote does all that, and virtually anything else you throw at it ... yet, it doesn't cost you anything until you throw enough stuff into it to pass its generous monthly threshold. For what it is worth, I clipped over 200 items before passing the limit.
Bottom-Line: Use Evernote to save your ideas, things you see, and things you like. Then find them all on any computer or device you use. For free. It's worth a try, you might like it.
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Have you heard the commentators trying to explain Thursday's massive move down in the markets by blaming computer trading, a trader's error, or the news about what's happening in Greece?
I don't believe that any of those explanations are the "cause" of the melt-down.
There's a difference between things that happen near the same time, and things that cause other things to happen. In statistics this is the difference between a coincident and a causal indicator.
Even if some trader accidentally tried to sell a billion shares of Procter & Gamble rather than 1 million shares ... Do you really believe a broker's or exchange's risk-management protections would allow a billion share order (sure, an error ... but not that error)? Or, do you really believe that a "fat-fingered" sale in America would cause Asia's market to go down 8%?
Think about how many market participants there are around the world. Free market buying and selling is supposed to take care of mispriced assets. If something is too high, then people won't buy it. When something's too low, speculators swoop in to grab the bargain.
A More Likely Scenario.The real story is that people are scared. And unlike the recent rally, the move down was met with selling rather than buying.
There's an old trading adage that says markets climb a wall-of-worry one step at a time, then fall off the roof. In a normal up-trend, chances are you'll just hold what you own; because you have no real incentive to take action. Consequently, as recent policies and actions pushed the markets higher, many market participants simply smiled and felt good about their good fortune.
However, it doesn't work the same way when markets go down. In order to protect your profits, or avoid losses, it is important to take risk off the table. As more people start doing that, prices start to move faster, which feeds the fire ... and finds even more sellers. As a result, there actually is an incentive to take massive action.
But Don't You Have to Blame Someone?
One of the interesting arguments that I've heard recently is that the crash was caused as high-frequency trading firms stopped trading in the market. In other words, the lack of liquidity caused these massive price moves.
To me, it makes sense that high-frequency trading (or other algorithmic trading systems) stopped trading during times of market turmoil. One of the primary lessons from last year's bear market is to recognize that certain systems are designed only for normal market periods.
As price and volatility move outside normal levels, we now tighten our risk and cash management parameters. Once we got past those limits, we stopped trading. Why? Because of the massive pain inflicted by not doing that the last time we saw those types of price moves and volatility.
Likewise, I suspect it's the same for many other systems traders. Each of them went through a process of figuring out what works, and what doesn't work, during different market conditions. It makes sense that they learned to trade less when they don't have an edge.
Consequently, the patterns of price movement and liquidity changed during the big move down.
Let the Investigations Begin.Trying to figure-out what caused people to be afraid is silly. Fear cause people to be afraid. Human nature weighs the fight or flight instinct ... and often chooses flight during dangerous situations.
And if people are trying to sell, but no one is buying, then price will continue to fall until it's low enough that people feel they're getting a bargain again.
On a side note, if a trader puts in a limit order to buy an asset if gets down to a certain price (let's say $0.01 for a share of Accenture) and there is no other buyer to fill a "market order", then crazy as it sounds, that is what happens.
Will More Regulation Help Here?
I see both sides. On one hand, I am surprised that the Specialists weren't there to back-stop the market and take more sales at falling (yet, realistic) prices. Perhaps that merits some scrutiny?
On the other hand, in a free market environment, do you really believe that it is in our best interests for the governments and the exchanges to figure-out how to prevent markets from going down?
When the NYSE started to enforce trading curbs and slowdowns, sophisticated investors started off-loading some of their sales to other markets and exchanges around the world. The result is that prices continued to go down.
Again, I don't believe that an error caused prices to go down, though it may have been in error in judgment caused by human nature for masses of the population to feel so scared.
However, remember that fear and greed are the fuel that drives the engine of the markets. I suspect that limiting fear will have unintended consequences.
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Capitalogix Commentary for the Week of 05/31/10
The Dow Jones Industrial Average broke below 10,000 last week. Then again, it also crossed right back above that level. If it seems like 10,000 has been one of the most 'magnetic' 1,000 point thresholds, you are right. On the other hand, is it a meaningful trading level?
All-in-all, May was quite a month! We saw a "flash crash", followed by a 400-point relief rally, followed by a slow motion free-fall, followed by a nearly 300-point rally. The cherry-on-the-top was last Friday's triple-digit drop going into the long weekend.
Putting the Dow's Drops and Rebounds in Perspective.The market's recent "flash-crash" ranks as the largest point-wise drop in history. But how does it stand up percentage-wise; and how many drops greater than 5% have we seen? Minyanville posted a visualization of the data (going back to 1928) that answers those questions. Click to the graphic for an interactive version.
One other point worth noting, historically, big gaps and daily rallies occurred most often in the context of bear markets. They are not usually a sign of impending calm waters or smooth sailing.
Nonetheless, we've seen a decent pull-back and there are signs that the short-term might offer some upside bias.
Recently, Bearish Spikes Have Provoked Bullish Responses.
Bespoke reports that this week's sentiment surveys from Investors Intelligence and the American Association of Individual Investors showed sharp increases in bearish sentiment among both advisors and individual investors. The chart below compares the S&P 500 with bearish sentiment since the start of 2009. The current level of combined bearish sentiment is the highest since the start of November. As shown in the chart, since the market bottomed back in 2009, spikes in bearish sentiment have actually turned out to be pretty good buying opportunities.
So, let's look at the market. Short-term, here is David Singer's bullish case for the S&P. It is drawn on a 60-minute chart, and shows a series of head and shoulder bottom patterns. The implication is for a rally that measures the same distance as from the neckline to the head.
Longer-term, Singer shows a potential head and shoulders topping pattern on a daily view of the S&P 500. Click it to see a larger version.
We'll see. Hope you have a good week.
Business Posts Moving the Markets that I Found Interesting This Week:
Lighter Ideas and Fun Links that I Found Interesting This Week
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