Market Commentary

  • Capitalogix Commentary 04/17/09

    090417 Bear in the Wings Stocks continued their advance this week.  The U.S. Markets moved higher for the sixth week in a row. Yet, it was just the seventh positive week for those indices in 2009. 

    It is worth noting that the bulk of earnings begin to hit this week. We'll see if people continue to buy into bad news. I'm watching for a change in sentiment.

    Long-Term Market Reminder: We have been in a bear market.  So, until proven otherwise, basic trend-following theory implies that the higher probability trades will be on the short side.  That means selling rallies until the bear market ends.

    I sense a renewed interest in the market recently by retail investors. For example, just this week I had conversations with several people telling me that they regret not buying Apple and Goldman Sachs while they were down.  I tend to hear this type of conversation at tops.  Here is Goldman's chart.

    090417 GS Topping

    It is also worth noting that there are reports that Goldman's Q1 Profit was non-recurring and a result of AIG unwinds. Add that to the fact that there we have seen poor bank earnings so far. Yet, it seems that the market sees a much higher likelihood of future financial solvency than it did just two months ago.  Still, this is a sector I'm watching for signs of weakness.  The next chart will explain why.

    Here is an interesting chart related to banks from Crossing Wall Street. It could be titled "The Earthquake That's Shaking Our Markets".  It shows recent volatility of Banking Index.

    090417 Daily Change in Banking Index Since 2004

    Finally, I thought this was funny. Our peaceful pacifist president has become Obama The Pirate Killer.  Yeah, I know, the SEALs did it … But I like the chart anyway.

    090417 Obama The Pirate Killer

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

    Lighter Ideas and Fun Links that I Found Interesting This Week

  • Capitalogix Commentary 04/12/09

    The stock market often recovers six months before the economy does; but I
    don't really believe we are six months away from our economy being
    fixed.  So, I still classify this as a bear market rally.

    It is a big one though. The markets have come quite far off their recent bottom. The U.S.
    Markets moved higher for the fifth week in a row. Yet, it was just the
    sixth positive week for those indices in 2009.

    The S&P 500 is currently trading more than 8.5% above its 50-day moving average, which is its most overbought reading since May 2001.

    This rally has been a welcome respite from a seemingly unrelenting downtrend. Historically, I can't find too much precedent for the continuation of a move like this on a global basis. So a correction could soon be expected, or even welcomed.

    Normally a market turning-point is tested within a number of weeks. How the market behaves at that time is important. A light-volume decline to or towards the old lows … and then a heavy-volume start to a new rally would be ideal.

    View From the Trenches.

    I was talking to a friend of mine who is a partner in the bankruptcy section of a law firm. His market outlook is bearish because he's never seen his section's work pipeline this full before. There are a lot of bankruptcies in process, and a lot of companies talking to him to investigate whether it's the right option for them to pursue in the future. From his perspective, we're not done yet.  I'm not putting too much meaning into this.  Just passing on the data point.

    The Pyramid of Misery.

    The chart below shows a funny and current version of Maslow's Hierarchy of Needs.

    090410 Pyramid of Misery

    That graphic came from Portfolio Magazine, which has had a number of good articles recently.

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

    • Is YouTube Doomed? Half a Billion Dollar loss is a tough pill to swallow. (BusinessInsider)
    • Salary Cuts Instead of Lay-Offs: Ugly, But It Could Be Worse. (WSJ)
    • Loss Aversion: Traders take riskier decisions to avoid losing money. (Economist)
    • Teaching Survival Skills to a Technology Start-Up. (NYTimes)
    • New Economy Means New Entrepreneurs. (Street.com)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

  • Capitalogix Commentary 04/12/09

    The stock market often recovers six months before the economy does; but I
    don't really believe we are six months away from our economy being
    fixed.  So, I still classify this as a bear market rally.

    It is a big one though. The markets have come quite far off their recent bottom. The U.S.
    Markets moved higher for the fifth week in a row. Yet, it was just the
    sixth positive week for those indices in 2009.

    The S&P 500 is currently trading more than 8.5% above its 50-day moving average, which is its most overbought reading since May 2001.

    This rally has been a welcome respite from a seemingly unrelenting downtrend. Historically, I can't find too much precedent for the continuation of a move like this on a global basis. So a correction could soon be expected, or even welcomed.

    Normally a market turning-point is tested within a number of weeks. How the market behaves at that time is important. A light-volume decline to or towards the old lows … and then a heavy-volume start to a new rally would be ideal.

    View From the Trenches.

    I was talking to a friend of mine who is a partner in the bankruptcy section of a law firm. His market outlook is bearish because he's never seen his section's work pipeline this full before. There are a lot of bankruptcies in process, and a lot of companies talking to him to investigate whether it's the right option for them to pursue in the future. From his perspective, we're not done yet.  I'm not putting too much meaning into this.  Just passing on the data point.

    The Pyramid of Misery.

    The chart below shows a funny and current version of Maslow's Hierarchy of Needs.

    090410 Pyramid of Misery

    That graphic came from Portfolio Magazine, which has had a number of good articles recently.

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

    • Is YouTube Doomed? Half a Billion Dollar loss is a tough pill to swallow. (BusinessInsider)
    • Salary Cuts Instead of Lay-Offs: Ugly, But It Could Be Worse. (WSJ)
    • Loss Aversion: Traders take riskier decisions to avoid losing money. (Economist)
    • Teaching Survival Skills to a Technology Start-Up. (NYTimes)
    • New Economy Means New Entrepreneurs. (Street.com)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

  • You Focus On What You Measure

    090410 One Day at a Time AttackedI have the privilege of knowing many fine entrepreneurs. Some of them are doing surprisingly well. Others are licking their wounds and struggling with the loss of confidence in their business, their business model, or even themselves.

     On some level, recent events could represent the biggest failure that some of these people ever have in their lives.

    There are several ways to take that. Here's one to think about.

    What would you do if you knew your worst failure was behind you and everything from this point forward was a move upwards or at least provides an opportunity to make progress?

    I Sense A Lot of Pain.

    If you look at
    things based on cycles or seasons, then this probably has been winter.  Still, periods like this can teach you a lot about yourself.

    I got a phone call this week from a friend who asked where I've been hiding. I was surprised because I hadn't thought about it like that.  Yet, it didn't take much reflection to see that many people I know, including me, have been hiding in one way or another.

    For example, one of my closest friends hasn't been returning phone calls. That is one of his early warning signs that tells me he is having a tough time. And several unquestionably smart, resourceful, and successful businessmen have broken down into tears recently while talking to me about the circumstances in which they find themselves.  I get it; there is a lot of pain out there right now.

    It affects me too.  A business group that I've participated in for almost 10 years is going on its annual retreat this week. It's designed to be fun and a vehicle to reconnect with ourselves and each other. It's a time for reflection, sharing and hopefully for new insight. Yet, there's a part of me that doesn't want to go.

    If I'm honest with myself, it is probably because I don't want to re-examine what happened during the past year.  In other words, I don't want to reflect on what went wrong, again, because I've done that enough already.

    But going to the retreat doesn't have to be about that at all. In fact, instead of it being an unpleasant exercise focusing on what I don't want … it easily can be when I focus on what I do want, and how I'm going to get there in a way that's best for everyone involved. The only difference in those two retreats is what I make it mean – and of course what happens because of that.

    You Focus on What You Measure.

    So, it occurs to me that I might be measuring the wrong things in several areas. Just because I used to keep score one way, doesn't mean that it's a helpful measure for me now.

    Measurement is supposed to give you a sense of your momentum towards your target. Done right, it helps you feel more confident and in-control. Sure it tells you what to do less of … more importantly, though, it highlights what we can and should do more of.

    Cleansing Or Clogging?

    I remember being in a Tony Robbins seminar about health and hearing a simple rule that made sense to me about eating. He said: before you put something in your mouth think about whether it's cleansing or clogging. That made sense to me, and it was helpful. The same could hold true for deciding which things to focus on in business or life. Will focusing on this create momentum and energy, or not? 

    On some level pain is inevitable.  Yet, for the most part, suffering is optional.

    Choose what makes you strong and more likely to take actions that make progress.

  • You Focus On What You Measure

    090410 One Day at a Time AttackedI have the privilege of knowing many fine entrepreneurs. Some of them are doing surprisingly well. Others are licking their wounds and struggling with the loss of confidence in their business, their business model, or even themselves.

     On some level, recent events could represent the biggest failure that some of these people ever have in their lives.

    There are several ways to take that. Here's one to think about.

    What would you do if you knew your worst failure was behind you and everything from this point forward was a move upwards or at least provides an opportunity to make progress?

    I Sense A Lot of Pain.

    If you look at
    things based on cycles or seasons, then this probably has been winter.  Still, periods like this can teach you a lot about yourself.

    I got a phone call this week from a friend who asked where I've been hiding. I was surprised because I hadn't thought about it like that.  Yet, it didn't take much reflection to see that many people I know, including me, have been hiding in one way or another.

    For example, one of my closest friends hasn't been returning phone calls. That is one of his early warning signs that tells me he is having a tough time. And several unquestionably smart, resourceful, and successful businessmen have broken down into tears recently while talking to me about the circumstances in which they find themselves.  I get it; there is a lot of pain out there right now.

    It affects me too.  A business group that I've participated in for almost 10 years is going on its annual retreat this week. It's designed to be fun and a vehicle to reconnect with ourselves and each other. It's a time for reflection, sharing and hopefully for new insight. Yet, there's a part of me that doesn't want to go.

    If I'm honest with myself, it is probably because I don't want to re-examine what happened during the past year.  In other words, I don't want to reflect on what went wrong, again, because I've done that enough already.

    But going to the retreat doesn't have to be about that at all. In fact, instead of it being an unpleasant exercise focusing on what I don't want … it easily can be when I focus on what I do want, and how I'm going to get there in a way that's best for everyone involved. The only difference in those two retreats is what I make it mean – and of course what happens because of that.

    You Focus on What You Measure.

    So, it occurs to me that I might be measuring the wrong things in several areas. Just because I used to keep score one way, doesn't mean that it's a helpful measure for me now.

    Measurement is supposed to give you a sense of your momentum towards your target. Done right, it helps you feel more confident and in-control. Sure it tells you what to do less of … more importantly, though, it highlights what we can and should do more of.

    Cleansing Or Clogging?

    I remember being in a Tony Robbins seminar about health and hearing a simple rule that made sense to me about eating. He said: before you put something in your mouth think about whether it's cleansing or clogging. That made sense to me, and it was helpful. The same could hold true for deciding which things to focus on in business or life. Will focusing on this create momentum and energy, or not? 

    On some level pain is inevitable.  Yet, for the most part, suffering is optional.

    Choose what makes you strong and more likely to take actions that make progress.

  • Capitalogix Commentary 04/05/09

    The U.S. Markets moved higher for the fourth week in a row. This is just the fifth positive week for these indices in 2009.

    The public notices!  I had a guy approach me at the gym to ask if I thought he should start buying again.  He said he knew it could go back down, some, but isn't that "dollar-cost-averaging"?  And I got an e-mail from a friend asking me to recommend a trading course for his wife to take because she is starting to day-trade.  Those things whisper that sentiment is changing.  Hope the market does too.

    Rally Symmetry.

    While we are still in a downtrend on the longer timeframes, the size of the short-term rally is impressive.  This chart shows that the S&P 500 Index has rallied 27% off its March lows.

    090403 Rally Symmetry

    This is surprisingly similar to the size of the bear rally swings we saw in October and November.

    Is Rising On Bad News a Good Sign?

    The latest report on job losses showed that the American economy shed another 663,000 jobs in March and that unemployment rose to 8.5 percent. 

    While the Dow Jones Industrial Average initially fell on the news, it quickly shrugged-off the data, and closed back above 8,000 for the first time since early February.

    Bad news everywhere, and the Markets continued higher.  I thought it was an April Fool's joke.  It still may turn out that way?  In my book, though, that is a bullish sign.

    Another Bullish Sign, Markets Are Above Their 50-Day Moving Averages.

    For me, most notable is that our major indices are now above their 50-day moving averages for the first time in a very long time.  Even better, tech is leading the way. So until the 50-day is broken back to the downside, this market deserves some respect.

    Yes, shorter term, markets are overbought … but they have been overbought for more than a week. I can't believe I'm saying this … remember that overbought can also be a sign of strength.

    Recession Length.

    While the stock market has rallied nicely since bottoming on March 9th, the economy continues to struggle. For some perspective on the current economic recession, the chart below illustrates the duration of all US recessions since 1900.

    The five longest recessions all began prior to 1930. The length of the current recession (now entering its 16th month) is above average, and equal to the longest recessions (1973 & 1981) since the Great Depression.

    090403 Recession Length

    Since it is unlikely that the Recession is over, the question is how much longer till it ends?

    In addition, something I'm paying more attention to is the amount of talk I'm hearing about the inevitable devaluation of the dollar.  Let me know what you think about it.

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

    • How Can Small Investors Get In on the Bailout? (NYTimes)
    • A Few Drops Don't Make the Glass Half Full. (Barrons)
    • Have We Nationalized Banks in response to the current economic crisis? (Duke)
    • Credit bubble looms as investors rush to credit, distressed debt and CTA's. (Reuters)
    • G-20 Expands IMF Lending Powers to $1 Trillion to reignite world growth. (WSJ)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

  • Capitalogix Commentary 04/05/09

    The U.S. Markets moved higher for the fourth week in a row. This is just the fifth positive week for these indices in 2009.

    The public notices!  I had a guy approach me at the gym to ask if I thought he should start buying again.  He said he knew it could go back down, some, but isn't that "dollar-cost-averaging"?  And I got an e-mail from a friend asking me to recommend a trading course for his wife to take because she is starting to day-trade.  Those things whisper that sentiment is changing.  Hope the market does too.

    Rally Symmetry.

    While we are still in a downtrend on the longer timeframes, the size of the short-term rally is impressive.  This chart shows that the S&P 500 Index has rallied 27% off its March lows.

    090403 Rally Symmetry

    This is surprisingly similar to the size of the bear rally swings we saw in October and November.

    Is Rising On Bad News a Good Sign?

    The latest report on job losses showed that the American economy shed another 663,000 jobs in March and that unemployment rose to 8.5 percent. 

    While the Dow Jones Industrial Average initially fell on the news, it quickly shrugged-off the data, and closed back above 8,000 for the first time since early February.

    Bad news everywhere, and the Markets continued higher.  I thought it was an April Fool's joke.  It still may turn out that way?  In my book, though, that is a bullish sign.

    Another Bullish Sign, Markets Are Above Their 50-Day Moving Averages.

    For me, most notable is that our major indices are now above their 50-day moving averages for the first time in a very long time.  Even better, tech is leading the way. So until the 50-day is broken back to the downside, this market deserves some respect.

    Yes, shorter term, markets are overbought … but they have been overbought for more than a week. I can't believe I'm saying this … remember that overbought can also be a sign of strength.

    Recession Length.

    While the stock market has rallied nicely since bottoming on March 9th, the economy continues to struggle. For some perspective on the current economic recession, the chart below illustrates the duration of all US recessions since 1900.

    The five longest recessions all began prior to 1930. The length of the current recession (now entering its 16th month) is above average, and equal to the longest recessions (1973 & 1981) since the Great Depression.

    090403 Recession Length

    Since it is unlikely that the Recession is over, the question is how much longer till it ends?

    In addition, something I'm paying more attention to is the amount of talk I'm hearing about the inevitable devaluation of the dollar.  Let me know what you think about it.

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

    • How Can Small Investors Get In on the Bailout? (NYTimes)
    • A Few Drops Don't Make the Glass Half Full. (Barrons)
    • Have We Nationalized Banks in response to the current economic crisis? (Duke)
    • Credit bubble looms as investors rush to credit, distressed debt and CTA's. (Reuters)
    • G-20 Expands IMF Lending Powers to $1 Trillion to reignite world growth. (WSJ)
    • More Posts Moving the Markets.

    Lighter Ideas and Fun Links that I Found Interesting This Week

  • Capitalogix Commentary 03/27/09

    090327 Bear Market Rally Compared to Others
    All Revved-up and No Place to Go    .

    We just saw a 24% rally unfold in a little over two weeks. But a rally like that doesn't make too many people happy. For most, this is where fear and greed collide.

    Prudence dictates that position size and risk should stay small while in a serious long-term downtrend, especially with a stock like Citibank recently trading under a dollar. Yet a rally that big and steep often makes people feel like they should have been in the market, and wish they would've traded "this, that, or the other" stock or sector that they noticed a week or two ago.

    Don't Worry, This Little Bit of Mind Control Won't Hurt A Bit …

    This week I saw several news reports using the phrase "The Great Recession". This might be part of an interesting strategy on the part of the International Monetary Fund, which used that phrase a few weeks ago. Naming something gives you control over it (or at least the appearance of control over it). And "Recession" sounds so much less severe than "Depression". If you can just get people to adopt that phrase, it might give them enough hope that you actually avoid a depression? But just as it's hard to call a recession until you're well into it, I think it's pretty hard to tell whether you come out of it than till you're actually out of it. Still, it is a nice try.

    Likewise, I have been impressed by how the administration has played the financial crisis lately. There seem to be some sound ideas, talked about in ways that make sense to the public, which get announced at strategic times. Moreover, it seems to be working; and the market looks like it's responding.

    090327 Sons of Frankenstein Re-Animating the Banking System

    However, the key word there might be "looks". I'm certainly not convinced that the worst is over yet.

    Where Are We in the Cycle?

    A few weeks ago I noted the spread between smart money confidence and retail investor pessimism was at levels that often indicated short or intermediate-term bottoms. In hindsight it worked again, and there was a pretty sizable rally. However, retail traders are becoming confident again, too quickly for my taste.  And the spread is no longer significant.  So I don't see an edge there at this point.

    I don't believe this is the end of the bottom. Instead, I hope this is the beginning of the bottoming process. My sense is that there are many businesses hanging on by a fingernail, or sheer will. Some of them are getting tired, others are running out of money, while still others are finding it hard to sell something in this environment. The point is that I suspect we're due for another round of culling the herd. That's not necessarily a bad thing, either.

    090327 Evil_kniev-quad-form Chart Joke

    What I'll be looking for, this time, is that I think we'll see a number of deals get done as prices get lower again. The companies that are going to survive, the companies that are going to thrive, the companies that are going to become new leaders in this next phase of our economy are going to start moving forward again.

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

    • Bears Are Wary as Bull Returns – Dow Up 21% in 13 Days. (WSJ)
    • Is it safe to go back in the water? Best to figure out what went wrong first. (Andy Kessler)
    • US economy falls 6.3% in fourth quarter; fastest rate since 1982. (Financial Times)
    • Explanation of the Fed's $1.1 Trillion Public-Private Investment Program. (The Big Picture)
    • More Posts Moving the Markets (My List)

    Lighter Ideas and Fun Links that I Found Interesting This Week

    • Friedman: What Distinguishes the Best Leaders, is that they learn from crashes. (NYTimes)
    • Mind Control Goes Mainstream – Gadget offer working digital telekinesis. (Forbes)
    • Growing-up Online Shapes Work Expectations of the Facebook Generation. (Gary Hamel)
    • Nice Introduction to Twitter Use and Best Practices. (Twitips)
    • More Posts with Lighter Ideas and Fun Links (My List)

  • Capitalogix Commentary 03/27/09

    090327 Bear Market Rally Compared to Others
    All Revved-up and No Place to Go    .

    We just saw a 24% rally unfold in a little over two weeks. But a rally like that doesn't make too many people happy. For most, this is where fear and greed collide.

    Prudence dictates that position size and risk should stay small while in a serious long-term downtrend, especially with a stock like Citibank recently trading under a dollar. Yet a rally that big and steep often makes people feel like they should have been in the market, and wish they would've traded "this, that, or the other" stock or sector that they noticed a week or two ago.

    Don't Worry, This Little Bit of Mind Control Won't Hurt A Bit …

    This week I saw several news reports using the phrase "The Great Recession". This might be part of an interesting strategy on the part of the International Monetary Fund, which used that phrase a few weeks ago. Naming something gives you control over it (or at least the appearance of control over it). And "Recession" sounds so much less severe than "Depression". If you can just get people to adopt that phrase, it might give them enough hope that you actually avoid a depression? But just as it's hard to call a recession until you're well into it, I think it's pretty hard to tell whether you come out of it than till you're actually out of it. Still, it is a nice try.

    Likewise, I have been impressed by how the administration has played the financial crisis lately. There seem to be some sound ideas, talked about in ways that make sense to the public, which get announced at strategic times. Moreover, it seems to be working; and the market looks like it's responding.

    090327 Sons of Frankenstein Re-Animating the Banking System

    However, the key word there might be "looks". I'm certainly not convinced that the worst is over yet.

    Where Are We in the Cycle?

    A few weeks ago I noted the spread between smart money confidence and retail investor pessimism was at levels that often indicated short or intermediate-term bottoms. In hindsight it worked again, and there was a pretty sizable rally. However, retail traders are becoming confident again, too quickly for my taste.  And the spread is no longer significant.  So I don't see an edge there at this point.

    I don't believe this is the end of the bottom. Instead, I hope this is the beginning of the bottoming process. My sense is that there are many businesses hanging on by a fingernail, or sheer will. Some of them are getting tired, others are running out of money, while still others are finding it hard to sell something in this environment. The point is that I suspect we're due for another round of culling the herd. That's not necessarily a bad thing, either.

    090327 Evil_kniev-quad-form Chart Joke

    What I'll be looking for, this time, is that I think we'll see a number of deals get done as prices get lower again. The companies that are going to survive, the companies that are going to thrive, the companies that are going to become new leaders in this next phase of our economy are going to start moving forward again.

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

    • Bears Are Wary as Bull Returns – Dow Up 21% in 13 Days. (WSJ)
    • Is it safe to go back in the water? Best to figure out what went wrong first. (Andy Kessler)
    • US economy falls 6.3% in fourth quarter; fastest rate since 1982. (Financial Times)
    • Explanation of the Fed's $1.1 Trillion Public-Private Investment Program. (The Big Picture)
    • More Posts Moving the Markets (My List)

    Lighter Ideas and Fun Links that I Found Interesting This Week

    • Friedman: What Distinguishes the Best Leaders, is that they learn from crashes. (NYTimes)
    • Mind Control Goes Mainstream – Gadget offer working digital telekinesis. (Forbes)
    • Growing-up Online Shapes Work Expectations of the Facebook Generation. (Gary Hamel)
    • Nice Introduction to Twitter Use and Best Practices. (Twitips)
    • More Posts with Lighter Ideas and Fun Links (My List)

  • Visualizing Walmart’s Growth

    Chances are this will give you a different perspective on their impressive land-grab and expansion.

    There are three simple reasons I'm looking at Walmart.  Tough economic times have Americans looking to save money.  Proximity is power.  And that means most Americans don't have to look far to find a Walmart.  So I'll be watching how they do.

    Data visualization is an important tool in trading.  Sometimes work skills carry-over into personal life.  Watching stuff like this interests me.  Not sure if that means my hobby is part of my work, or if work is part of my hobby.

    Click the image below to watch Walmart's Growth.

    080815 Walmart's Growth Map

    Click here to check-out FlowingData.  I've found several interesting posts on that site.

    Also, here is more info about Walmart from FinViz and StockTwits.