Trading

  • Weekly Commentary through August 8th 2008

    The Markets are up, but relatively trendless.  Yes the recent lows have held, and I'm seeing higher lows (and that is a bullish sign).  However, recently, the thing to note has been the markets' volatility.  For the Dow, there have been seven 200-point up or down days and two 300-point up days … but in that time, the Dow is only up 36 points. It is tough to hold trades overnight in this type of trading environment.  Going home bullish or bearish hasn't led to peaceful sleep lately.

    Here are some other stats to ponder.  First, 300-point rallies are pretty normal during bear markets (and in the beginning of new bull markets).  Also, It is quite normal to have intermediate term rallies in bear markets that last 2-3 months. The last one lasted 2 months; but only had narrow leadership in the Commodities.  This time the leadership is much broader (most everything, except Commodities).

    Also this week, the Fed held rates steady, and the US Dollar Index now trades above its 50-day and 200-day
    moving averages, signaling a breakout from its five-month trading range.

    Here are a few of the posts I found interesting this week:

    • IPOs at 5-Year Low, Worldwide (WSJ)
    • Wharton Finance Professor, Jeremy Siegel Calls a Market Bottom (Morningstar)
    • Rackspace IPO loses 20% on first day of trading (WSJ)
    • President Bush: "Wall Street got drunk"…"and now it's got a hangover" (Wall $t. Folly)
    • Does the 4-Year Presidential Cycle have predictive power in the markets? (CXO Advisory)
    • Too many ETFs, too little volume; the weakest are closing (Bespoke)
    • Crisis Averted: Improvisation is one thing, Policy is another (NYTimes)
    • Foreign money buying US properties at deep discounts (NYPost)

    And, a little bit extra:

    • Big Brother is watching: Apple shuts down "I Am Rich" Application for iPhones (Download Squad)
    • Innovations show how water-starved countries could solve their food crises (NYTimes)
    • At $6BB spent, Olympic Security is No Game; but they do ride Segways (BusinessWeek)
    • Twitter's micro-blogging success suggests I'm old, because I still don't get it (Fortune)
    • Caffeine Myths De-Bunked; go get a cup of coffee (NYTimes)

  • Weekly Commentary through August 8th 2008

    The Markets are up, but relatively trendless.  Yes the recent lows have held, and I'm seeing higher lows (and that is a bullish sign).  However, recently, the thing to note has been the markets' volatility.  For the Dow, there have been seven 200-point up or down days and two 300-point up days … but in that time, the Dow is only up 36 points. It is tough to hold trades overnight in this type of trading environment.  Going home bullish or bearish hasn't led to peaceful sleep lately.

    Here are some other stats to ponder.  First, 300-point rallies are pretty normal during bear markets (and in the beginning of new bull markets).  Also, It is quite normal to have intermediate term rallies in bear markets that last 2-3 months. The last one lasted 2 months; but only had narrow leadership in the Commodities.  This time the leadership is much broader (most everything, except Commodities).

    Also this week, the Fed held rates steady, and the US Dollar Index now trades above its 50-day and 200-day
    moving averages, signaling a breakout from its five-month trading range.

    Here are a few of the posts I found interesting this week:

    • IPOs at 5-Year Low, Worldwide (WSJ)
    • Wharton Finance Professor, Jeremy Siegel Calls a Market Bottom (Morningstar)
    • Rackspace IPO loses 20% on first day of trading (WSJ)
    • President Bush: "Wall Street got drunk"…"and now it's got a hangover" (Wall $t. Folly)
    • Does the 4-Year Presidential Cycle have predictive power in the markets? (CXO Advisory)
    • Too many ETFs, too little volume; the weakest are closing (Bespoke)
    • Crisis Averted: Improvisation is one thing, Policy is another (NYTimes)
    • Foreign money buying US properties at deep discounts (NYPost)

    And, a little bit extra:

    • Big Brother is watching: Apple shuts down "I Am Rich" Application for iPhones (Download Squad)
    • Innovations show how water-starved countries could solve their food crises (NYTimes)
    • At $6BB spent, Olympic Security is No Game; but they do ride Segways (BusinessWeek)
    • Twitter's micro-blogging success suggests I'm old, because I still don't get it (Fortune)
    • Caffeine Myths De-Bunked; go get a cup of coffee (NYTimes)

  • Weekly Commentary Charts through July 18th 2008

    Here are a few charts that caught my eye.  The first is from the
    Trading Godess site.  It is from a post called, “Did someone ring a bell.”  It shows
    that a break above the downtrend, on volume, with MACD turning up.  In
    other words, it has the makings of a decent long set-up.

    080718 DIA from Trading Goddess

    On the other hand Phil Erlanger had this chart, which shows that
    the Dow has re-traced 50% of the move off its 2003 lows, but that it
    might have a little more to go.

    080718 DOW from Erlanger

  • Weekly Commentary Charts through July 18th 2008

    Here are a few charts that caught my eye.  The first is from the
    Trading Godess site.  It is from a post called, “Did someone ring a bell.”  It shows
    that a break above the downtrend, on volume, with MACD turning up.  In
    other words, it has the makings of a decent long set-up.

    080718 DIA from Trading Goddess

    On the other hand Phil Erlanger had this chart, which shows that
    the Dow has re-traced 50% of the move off its 2003 lows, but that it
    might have a little more to go.

    080718 DOW from Erlanger

  • How Clear is Your Market Vision, Through the Lens of Emotions?

    Do lower prices frighten people?  Or, do fearful people cause lower prices?

    On some level, it is clear that the ebbs and flows of a Market Chart represent the collective fear and greed of its participants.  As more people get fearful, you have more sellers.  As more people get greedy, prices catch a bid. 

    But what about you and me?  Are we immune from the primal portion of our brains?  As I was thinking about this, I saw the following quote:

    "The thoughts they had were the parents of the actions they did; their feelings were parents of their thoughts."

         -Thomas Carlyle (1795-1881)

    It is true, isn't it?  Thoughts flow from feelings.  Or (at least) feelings affect thoughts.  At some level, I've known this about many discrete areas of my life (motivation, relationships, etc.).  Yet I've resist accepting this as a global truth. 

    Nonetheless, it makes sense that understanding (or at least recognizing) what you feeling is an important step in better thinking and better actions. 

    Likewise, if you are a discretionary trader, it might be interesting to note how your emotions affect your trading. For example, it is pretty clear that your emotional state can create an anchor point and context that affects
    judgment and even the interpretation of market signals (for example,
    whether or not to take a trade).

    On any given day, I might get angry, happy, frustrated, excited or even
    greedy.  We all experience a range of emotions regularly, don't we?  Yet from a trader's perspective, it might feel like nothing noteworthy is happening to them throughout the day.  Why?  Because traders are so used to the range of emotions they experience, experiencing them again simply feels "normal", and  they learn to ignore them.

    As a systematic and algorithmic trader, emotions still affect my day.  That is why we follow the "rules" while the market is open.  Discussions about changing rules or adding new rules happen after-hours (when the fear and greed simmer down and heads clear).

    Clearly, many things can affect how and when a discretionary trader
    trades. Identifying and recognizing when something affects you is the
    first step towards mastering it.

  • How Clear is Your Market Vision, Through the Lens of Emotions?

    Do lower prices frighten people?  Or, do fearful people cause lower prices?

    On some level, it is clear that the ebbs and flows of a Market Chart represent the collective fear and greed of its participants.  As more people get fearful, you have more sellers.  As more people get greedy, prices catch a bid. 

    But what about you and me?  Are we immune from the primal portion of our brains?  As I was thinking about this, I saw the following quote:

    "The thoughts they had were the parents of the actions they did; their feelings were parents of their thoughts."

         -Thomas Carlyle (1795-1881)

    It is true, isn't it?  Thoughts flow from feelings.  Or (at least) feelings affect thoughts.  At some level, I've known this about many discrete areas of my life (motivation, relationships, etc.).  Yet I've resist accepting this as a global truth. 

    Nonetheless, it makes sense that understanding (or at least recognizing) what you feeling is an important step in better thinking and better actions. 

    Likewise, if you are a discretionary trader, it might be interesting to note how your emotions affect your trading. For example, it is pretty clear that your emotional state can create an anchor point and context that affects
    judgment and even the interpretation of market signals (for example,
    whether or not to take a trade).

    On any given day, I might get angry, happy, frustrated, excited or even
    greedy.  We all experience a range of emotions regularly, don't we?  Yet from a trader's perspective, it might feel like nothing noteworthy is happening to them throughout the day.  Why?  Because traders are so used to the range of emotions they experience, experiencing them again simply feels "normal", and  they learn to ignore them.

    As a systematic and algorithmic trader, emotions still affect my day.  That is why we follow the "rules" while the market is open.  Discussions about changing rules or adding new rules happen after-hours (when the fear and greed simmer down and heads clear).

    Clearly, many things can affect how and when a discretionary trader
    trades. Identifying and recognizing when something affects you is the
    first step towards mastering it.

  • Phi on Fibonacci and Markets

    FIBONACCI SPIRAL drawing
    As noted, 6/18 is "Phi Day" for Fibonacci aficionados. 

    So, here is a link to a description of the sequence on Prechter's Elliott Wave website.

    And here is a follow-up article.

  • Phi on Fibonacci and Markets

    FIBONACCI SPIRAL drawing
    As noted, 6/18 is "Phi Day" for Fibonacci aficionados. 

    So, here is a link to a description of the sequence on Prechter's Elliott Wave website.

    And here is a follow-up article.

  • “It’s About Time” — Or, Isn’t it?

    There is a difference between working on a problem and focusing on a solution.  Thus, trying to improve performance is different than focusing on limiting losses. 

    Einstein said: "We cannot solve our problems with the same thinking we used when we created them."

    It got me thinking. Most trading charts are time-based (meaning that price change is measured against time).  But maybe looking at price change in other ways would provide a different perspective.

     
    There are several interesting techniques gaining favor among technical traders.  These include measuring price change based on a certain volume traded or a constant range of directional movement.  Here is a link to a brief article about this in StockCharts.com.
     
    In some respects, these are "smoothing" techniques.  Nonetheless, they present a different picture of the market, and are something worth investigating.
     
    Here is how the S&P 500 Index looks like in one of these charts.
     
    080613 SPX Renko Chart

  • “It’s About Time” — Or, Isn’t it?

    There is a difference between working on a problem and focusing on a solution.  Thus, trying to improve performance is different than focusing on limiting losses. 

    Einstein said: "We cannot solve our problems with the same thinking we used when we created them."

    It got me thinking. Most trading charts are time-based (meaning that price change is measured against time).  But maybe looking at price change in other ways would provide a different perspective.

     
    There are several interesting techniques gaining favor among technical traders.  These include measuring price change based on a certain volume traded or a constant range of directional movement.  Here is a link to a brief article about this in StockCharts.com.
     
    In some respects, these are "smoothing" techniques.  Nonetheless, they present a different picture of the market, and are something worth investigating.
     
    Here is how the S&P 500 Index looks like in one of these charts.
     
    080613 SPX Renko Chart