What comes after a blockbuster IPO tends to be less pretty. The chart, above, shows the post-IPO performance of 25 hottest offerings of 2010 and 2011. There’s a lot of red: after the initial “pop” (which is the jump from the offering price to the open), 20 of those 25 tanked. Many have fallen 50 percent from their first day opening price in the stock market* (one high profile example: Demand Media, down 68 percent since its January debut), a few more than 80%.
There is a slight, but potentially growing, disconnect between the S&P 500 Index and the Asian stock markets (specifically the Hang Seng).
On Friday the Hang Seng lost 1%. Moreover, looking at the recent price performance action … on a 20 day basis, the Hang Seng acting very different than other world markets.
Signal Financial Group just updated their seasonal chart series for the Hang Seng Index. It indicates that we could be at a turning point, with little upside expected based on historical patterns.
A Little Risk/Reward Exercise in Portfolio Diversification.
If the S&P continues to the upside … the Hang Seng may not follow. Thus, over the next few weeks, some traders may look at a potential Long S&P and Short Hang Seng play.
Just as an example, here is a quick look at a portfolio study covering 6 weeks, comparing the performance of a portfolio based solely on the S&P 500 Index versus a portfolio that is long the S&P (using 90% of capital) and short the Hang Seng (with 10% of capital).
Portfolio Allocation:
Equity Portfolio:
100% Long S&P 500 Index
Mixed Portfolio:
90% Long S&P 500 Index and 10% Short Hang Seng
The chart below provides a basic analysis, identifying the differences between the two portfolios. The chart is divided into three sections: return comparison, risk comparison and portfolio change. The first section shows the percent return figures for the portfolios over a recent six week period. The second section focuses on risk, which is defined as standard deviation of return, over the same six week time period. The final section shows the net percentage change to the portfolio's performance based on the small 10% allocation to Hang Seng.
The diversification helps the risk/reward ratio in the study. That looks like something to watch for in the coming weeks. Hope it helps.
There is a slight, but potentially growing, disconnect between the S&P 500 Index and the Asian stock markets (specifically the Hang Seng).
On Friday the Hang Seng lost 1%. Moreover, looking at the recent price performance action … on a 20 day basis, the Hang Seng acting very different than other world markets.
Signal Financial Group just updated their seasonal chart series for the Hang Seng Index. It indicates that we could be at a turning point, with little upside expected based on historical patterns.
A Little Risk/Reward Exercise in Portfolio Diversification.
If the S&P continues to the upside … the Hang Seng may not follow. Thus, over the next few weeks, some traders may look at a potential Long S&P and Short Hang Seng play.
Just as an example, here is a quick look at a portfolio study covering 6 weeks, comparing the performance of a portfolio based solely on the S&P 500 Index versus a portfolio that is long the S&P (using 90% of capital) and short the Hang Seng (with 10% of capital).
Portfolio Allocation:
Equity Portfolio:
100% Long S&P 500 Index
Mixed Portfolio:
90% Long S&P 500 Index and 10% Short Hang Seng
The chart below provides a basic analysis, identifying the differences between the two portfolios. The chart is divided into three sections: return comparison, risk comparison and portfolio change. The first section shows the percent return figures for the portfolios over a recent six week period. The second section focuses on risk, which is defined as standard deviation of return, over the same six week time period. The final section shows the net percentage change to the portfolio's performance based on the small 10% allocation to Hang Seng.
The diversification helps the risk/reward ratio in the study. That looks like something to watch for in the coming weeks. Hope it helps.
Contrast your annual salary with a hedge fund legend (and someone who most probably earns a bit more than you). The interactive infographic "You vs. John Paulson" employs a wide array of comparisons, clocks, and sliders to keep you interested in
It was fun to put the numbers in context. For example, if you make $500K per year, according to the infographic, it takes Paulson less than an hour to make that. Or, put in a different way, Paulson can spend $300,000 the way I buy a cup of coffee.
Contrast your annual salary with a hedge fund legend (and someone who most probably earns a bit more than you). The interactive infographic "You vs. John Paulson" employs a wide array of comparisons, clocks, and sliders to keep you interested in
It was fun to put the numbers in context. For example, if you make $500K per year, according to the infographic, it takes Paulson less than an hour to make that. Or, put in a different way, Paulson can spend $300,000 the way I buy a cup of coffee.
The recent doom and gloom can make it seem like the Market has suffered potentially fatal setbacks. However, a glance at a monthly chart of the S&P 500 Index shows a pretty normal-sized correction, based on recent swings.
It is worth noting, however, that the market has had four down months, and the MACD Indicator looks like it is rolling over. So, a move up here would certainly help Bulls feel more confident.
Moving down to a weekly chart of the S&P 500 Index, it is easy to see that a similar pattern occurred last year. At that time, the Triangle pattern resolved upwards. However, Triangles are often considered continuation patterns … and last year's Triangle came during a big move up. Arguably, this year's Triangle comes after breaking last year's up-trend. As a result, some traders will assume that it is more likely for the pattern resolve downwards.
Zooming in a little closer to a daily chart … it shows a lot of movement with little real change. The magenta zigzag indicator highlights moves of at least 5%. Moreover, price has crossed the 1160 level about a dozen times during September.
That kind of price action can create whipsaws. However, the next chart shows that there is a clearly defined range; and when price finally makes an extended move beyond it, traders will likely look for an entry.
In technical trading, price is the primary indicator. The market will tell you what's working.
