Booting up SkyNet.
Kevin Slavin argues that we're living in a world designed for -- and increasingly controlled by -- algorithms.
In this thought-provoking talk from TEDGlobal, he shows how these complex computer programs determine: stock prices, espionage tactics, movie scripts, and architecture. And he warns that we are writing code we can't understand, with implications we can't control.
Here is a TedTalk by Kevin Slavin.
Fear is not logical.
Nonetheless, you can often use logic to predict human response to certain emotions and stimuli.
For example, let's look at the clear shift in investor sentiment over the last few weeks.
Click here for a live version of this chart.
In short, the money flows show a re-pricing of risk. Stocks and commodities, which are viewed as riskier assets, declined over the last two weeks. Bonds and gold, which are viewed as safe-havens, advanced as alternatives. The Dollar, which is somewhere in the middle is virtually unchanged.
There Are Other Ways to Measure Fear.
The sell-off of the past few weeks triggered a number of extreme measures. Whether you look at volatility, price action, breadth, or volume, recent readings were off-the-charts. The table below is from Quantifiable Edges. It highlights some of those extremes.
However, every action brings a reaction ... what can we expect next?
What Does the Volatility Bring?
We just saw four straight days with moves of 400 points or more in the Dow Jones Industrial Average ... a first in its history. Is that just a meaningless market statistic?
Perhaps, instead, it is another indicator that we're at a significant extreme? If so, periods of great volatility are often followed by periods of relative calm. The logic is that bulls and bears fight until one side gives up (for a while); and the market pushes forward in the direction of the winner.
Looking For a Positive Sign? Here's a Promising Trading Signal.
Mark Hulbert says market indicator with perfect record just signaled 'buy'.
Last week, we got to a point where less than ten percent of NYSE stocks traded above their 200-day average. When the number of stocks that manage to stay above this moving average -- a common measure of momentum -- make a nasty two standard deviation move to the downside from the norm, it usually means an oversold market and a good time to buy.
The last -- and most extreme -- oversold position was on March 2, 2009, about around the start of the bull market. Click here for more on this type of chart.
You don't have to like the economy or the markets to trade them.
Only some of the heat traders felt this week came from a volatile week in the markets.
Here are some of the posts that caught my eye. Hope you find something interesting.
It was a hot week.
Here are some of the posts that caught my eye. Hope you find something interesting.
After a tough week for the markets, the "Cherry-On-Top" is that the S&P downgraded the United States' credit rating.
Happy Birthday Mr. President, you now own the only credit downgrade in modern U.S. history.
It is going to be a tough week for Tim Geithner too. Did he really say there was ‘No Risk’ of a Downgrade? Unfortunately for him, there is a video showing that he did.
Here is an excerpt (from April 2011):
Peter Barnes “Is there a risk that the United States could lose its AAA credit rating? Yes or no?”
Geithner’s response: “No risk of that.”
“No risk?” Barnes asked.
“No risk,” Geithner said.
Here is the clip:
via ZeroHedge
I'm curious, how much do you think this will matter in the long-run?
Wow! That was a tough week for the markets.
There was a fair amount of selling into a pretty consistent stream of bad news. But it ended without panic selling ... and the Bulls can take some comfort in that.
How bad was the week? Here's an overview.
via The Daily
With a market sell-off of this magnitude, watch for an increase in volume and volatility.
Will sellers finally press their bets? If so, summer may get a little hotter.
If, however, the Bears stay on the sidelines ... once again, look for traders to buy into the next rally.
Here are some of the posts that caught my eye. Hope you find something interesting.
The size of the spending cuts needed is staggering. It must be difficult to negotiate something hard to comprehend.
Have you seen TwitSprout's Obama Dashboard?
Obama held a Town Hall via Twitter in early July. You can see the full analysis here; or look take a look at how the infographic breaks-it-down and highlights some interesting details.
Here is the link for the interactive version. The infographic was created by Dan Holowack at TwitSprout.
This is an interesting use of Twitter, data-mining, and the real-time analysis of big data. I imagine we'll be seeing a lot more of services like this.
One positive for the stock market has been the dramatic rise in earnings following the financial crisis.
Most business students can tell you that stock prices supposedly represent the present value of the future earnings stream.
However, one reason for the current earnings spike has been the fact that the US dollar has effectively been devalued.
Slash the yardstick by which financial performance is measured (e.g. dollars to dollarettes) and relative performance will appear more positive.
For example, when corporate earnings are measured in dollars, an investor will find that earnings are currently greater than what was achieved during the dot-com bubble and fast approaching the record levels that were achieved at the tail-end of the credit bubble. However, when measured in another world currency such as gold (see the chart below), the earnings picture isn’t quite so rosy.
Click here for more Chart of the Day insights.
This chart illustrates how S&P 500 earnings measured in ounces of gold actually peaked back in 2001, and has moved within the confines of a dramatic downtrend ever since.
From this perspective, the historic spike in earnings that began in the summer of 2009 doesn’t look all that historic, with current earnings coming in at a level that is significantly lower than what occurred at the conclusion of the dot-com and credit bubbles.
Here is a quote from Richard Russell, one of the well-known market commentators and Dow Theory experts:
"Gold will be around, gold will be money when the dollar and the euro and the yuan and the ringgitt are mere memories."
We Are the World: And It Was a Tough Week For Most World Markets.
German Chancellor Angela Merkel sent a pretty clear message to the Markets this weekend – that Europe's leaders will not be bullied into action just because the markets are throwing a fit about the speed of their actions.
Other highlights of her recent comments include:
Cullen Roche, from Pragmatic Capitalism, says: if you’re a market speculator you can basically read her comments as such: “We are in no rush whatsoever to solve the crisis in Europe. We will not be swayed by market crashes or panics.” Interesting, because the markets are sending them a very clear message. There is a very serious risk of a banking crisis in Europe.
It's Not Just Europe.
The DAX was the biggest loser, down 8.63%. It's also the index that has slipped the furthest into bear territory, down 27.20% from its interim high set on May 2nd.
In fact, five of the seven are now in cyclical bear territory, down 20% or more from their interim highs: The DAX, Nikkei, Hang Seng, Shanghai, and the BSE Sensex.
The FTSE and S&P 500 remain above the traditional bear boundary, vying for the dubious designation as top performer during this world-wide correction.
How Do The Moves in Once Country Compare to Others?
Here is a chart, from Doug Short, showing the comparative performance of World Markets since March 9, 2009.
It has been a tough few weeks for just about everyone.
Laszlo Birinyi adds that stock correlation is also soaring. The average 50-day correlation of S&P 500 members to the index has risen to the highest levels since the market bottomed in 1987.
Are 'fat tails' are more likely to happen at the end of a crisis? If so, we might see a bottom soon. It bears watching to notice which sectors will break out as new leaders.
Posted at 04:33 PM in Current Affairs, Market Commentary, Trading | Permalink | Comments (0) | TrackBack (0)
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