“Whether you think you can, or you think you can't–you're right.” ~ Henry Ford
Sometimes inexperience is a benefit … because not knowing you shouldn't be able to do something does not prevent you from doing it.
Awesome!
November 2012
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Best CyberMonday Deal on Apple – Perhaps Apple Itself?
There
we were at the Cowboys game. It was a beautiful day. I was feeling
terrific because I was with my two sons. The crowd was cheering … and I
had a great thought: 'Let's get a picture of this'.Perfect … a random series of events had led to a satisfying crescendo … and I captured the moment.
It wasn't so random. Despite a difference of four years and two stadiums – the result was similar (if not predictable).
History doesn't necessarily repeat itself. But it often rhymes.
It Is True In Trading As Well.
The Hype Curve is an interesting map of human emotion. Below is an idealized version.
Here is a chart of Apple going back to 2004. Note the similarities.
For a deeper analysis, see this post by Market Oracle. Here is an excerpt explaining the framework.
Classic economic theory dissects the economic cycle into four distinct stages: expansion, trough, decline and recovery. A stock is no different, and proceeds through the following cycle:
- Stage 1 – After a period of decline a stock consolidates at a contracted price range as buyers step into the market and fight for control over the exhausted sellers. Price action is neutral as sellers exit their positions and buyers begin to accumulate the stock.
- Stage 2 – Upon gaining control of price movement, buyers overwhelm sellers and a stock enters a period of higher highs and higher lows. A bull market begins and the path of least resistance is higher. Traders should aggressively trade the long side, taking advantage of any pullback or dips in the stock's price.
- Stage 3 – After a prolonged increase in share price the buyers now become exhausted and the sellers again move in. This period of consolidation and distribution produces neutral price action and precedes a decline in the stock's price.
- Stage 4 – When the lows of Stage 3 are breached a stock enters a decline as sellers overwhelm buyers. A pattern of lower highs and lower lows emerges as a stock enters into a bear market. A well-positioned trader would be aggressively trading the short side and taking advantage of the often quick declines in the stock's price. More times than not all of stage 2 gains are given back in a short period of time.
While these stages are historically defined over long time periods they actually exists in all time frames, allowing traders to take advantage of a cycle regardless of their trading time frame. Fortunately this phenomenon, known as a "fractal", exists within all security markets. A fractal is simply a rough geometric shape that can be subdivided into smaller parts that have the same properties; a smaller version of the whole.
This is important to understand because through technical analysis as we are often analyzing multiple time frames. In the short term, the four stage model may repeat itself many times. The combination of these short term cycles form a medium term cycle, and the combination of multiple medium term cycles form a long term cycle.
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Some Links for Your Weekend Reading
Here are some of the posts that caught my eye. Hope you find something interesting.
- The
Science of Success. Interesting article. (TheAtlantic) - Is
Technology Making You More (or Less) of a Jerk? (Harvard Business Review) - Why Things
Fail. From Tires to Helicopter Blades, Everything Breaks Eventually.
(Wired) - Removing
Earwax Isn't Good For You, Experts Say. (WSJ Video) - Life
Expectancy for Less Educated Whites in U.S. is Shrinking. (NYTimes)
- Walmart
Reports Its Best Black Friday Ever With 5,000 Items Sold Per Second.
(TheNextWeb) - Does
Black Friday Correlate With Upcoming Stock Market Performance. (Bigtrends) - Fiscal
Cliff: The What, Why, When, and How – All In One Place. (Learnist) - Reality
Check: Does High-Frequency Trading Hurt the Little Guy? (QZ) - Anonymous
Deletes The Bank of Jerusalem’s Web Database. (BetaBeat)
- The
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The S&P 500 Index Just Broke a Long Term Up Trend – Do You Care?
Trading doesn't have to complex.
Sometimes simple indicators are better. Trend lines are easy to follow and often meaningful.
Below is a weekly chart of the S&P 500 Index showing the recent break of an up-trend in place since 2009. If price stays beneath this level, it will likely be tough for Bulls.
In addition to the trend line break, there is a negative divergence (where recent price highs happened with lower momentum). Technicians often take this to be sign of weakness.
Let's see what happens.
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Some Links for Your Weekend Reading
You know the economy is tough when a company like Hostess
Brands, the maker Twinkies and Wonder Bread, announces plans to close its plants and fire 18,000 employees as it moves to
liquidate.
On eBay, the starting bid for a single Twinkie is now $5,000.
Here are some of the other posts that caught my eye. Hope you find something interesting.
- How
the Secret Service Said Goodbye to Mitt Romney. (GQ) - Get
Smart People to Moonlight for Free By Turning Problems Into Contests. (QZ) - The
Next Generation Business. Data is the New Platform. (GigaOM) - Humans
Can't Be Empathetic and Logical at the Same Time. (Popular Science) - 25
Entrepreneurs Tell What They Wish They’d Known Before Founding Their First
Startup. (DavidHauser)
- QE3:
5 Things to Know. (AdvisorOne) - Getting
Less Bang for Fed Bucks. (Wall Street Journal) - Why
Wall Street Hates Obama. (Money) - Veterans
Say Economy Is Top Security Risk. (BusinessInsider) - Stock
Market Fragility Fast Approaching "Flash Crash" Levels Warns Bill
Gross. (ZeroHedge)
- How
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100 Years of Income Tax – Infographic Shows How the Brackets Changed
Did you know the top tax bracket in the U.S. was once 94% … ?
With 2013 marking the 100th anniversary of income tax as we know it, here isa look at what both the average Joe and the average CEO have been paying throughout the years.
So what’s in store for the future?
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What Percent Are You?
The Occupy Wall Street movement claimed to speak for the bottom 99% of the population by income, which includes pretty much everyone who makes less than $500,000 a year.
The calculator, below, shows where your income ranks in the wide range of the 99% … or the 1%.
An annual household income above $506,000 puts you in the top 1%, while you need to make less than $2,500 a year to be in the bottom 1%.
Find out where you stand.
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Flight to Safety for Markets?
Many traders expected a sell-off after the election. We got that, and now the market is pretty oversold. So, is it time to jump back in … or should you pay attention to signs that we are still in a "Risk-Off" trading environment?
Traders know it is tough to call a meaningful 'Market Top' because you have to be right about both price and time. Adding to the difficulty is that humans seem to be wired to focus on what they missed, so it doesn't take much to trigger buying behavior.
With that said, sometimes it makes sense to pay attention to warning signs. In this post, we'll look at a technical warning pattern some traders call "the four horsemen of the apocalypse". As you probably guessed, it involves four components.
Why are they called the four horsemen? Because when you see all four of these rise at the same time, the underlying message is ominous.
Under normal circumstances, these market symbols are not correlated. In other words, the "horsemen" generally do not ride in the same direction. For example, when gold is going up, the dollar and USTs are normally going down, or vice versa.
When they all rise together, however, it indicates an extreme correlation of "risk-off" and diminished risk appetite across the board.
Here is a composite of all four charts. The yellow highlit areas show the coordinated move higher.
According to Mercenary Trader, U.S. Treasuries rise via their designation as the ultimate deep liquidity safe haven instrument.
Gold rises as the "alternative currency" not subject to a printing press — the safe haven for those who fear U.S. Treasuries are booby-trapped.
The Dollar rises as US investor capital is repatriated from emerging markets (and foreign investor capital flows into bonds).
And the VIX rises as equity risk assets are being shunned …
Why is this happening now?One possibility is rising concern over the "fiscal cliff," and the likelihood of partisan deadlock, as the threat of automatic tax hikes loom (via the expiration of time limited reductions). Some believe that the heavy selling we are seeing, especially in market bellwethers like Apple (AAPL), is at least partially the result of capital gains lock-in prior to a higher taxation period.Regardless, it seems the safe move is to position for the worst and hope for the best.
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Here Are Some Interesting Links to Read This Weekend
There is something satisfying about a "Perfectly Timed Photo". Click to see others.
Here are some of the posts that caught my eye. Hope you find something interesting.
- How
to Make One Better Decision Each Day. (Forbes) - 10 Ways You Can Be More
Like Richard Branson. (Entrepreneur) - Rethinking
Sleep. (NYTimes) - Australians
Surge in Quest to Build Quantum Computer. (NYTimes) - Windows
8 Will Succeed, Despite All the Fear, Uncertainty, and Doubt. (TechCrunch)
- How
the Gods of Finance Could Help Solve the Fiscal Cliff. (Businessweek) - Money
Managers Take a Timeout From Stocks. (Wall Street Journal) - The
New Game of Thrones. Sovereign Wealth Funds Rise as a New Category of
Investors. (IAM) - Softbank's
300 Year Vision For Making Customers Happy. (CNet) - Bye-Bye,
PCs. As the PC era wanes, Tablets, smartphones, and big data will drive
leaders. (Barrons)
- How
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Stand and Deliver: Jimmy Fallon and Christina Aguilera Use Office Supplies to Perform Her New Song
Here is a clip of Jimmy Fallon and Christina Aguilera using office supplies and used them as instruments to perform Christina's "Your Body."
Here is the "Instrument" list:
stapler, iPhone keypad, coffee pots with pencil drumsticks, roll of sticky tape, water cooler jug, tissue box & elastic band guitar, spiral notebook (a.k.a. the "tear snare"), keyboard washboard, paper clip shaker, and scissors.
Innovative, talented, and pretty cool.
