Capitalogix

Capitalogix Commentary 01/17/10

On the surface, the markets still look pretty good.  However, last week something happened that I consider a bearish warning sign.  The Market sold-off on good news.  Although Intel announced strong results, it looks like the market priced-in the good news already.

In addition, the tech-heavy Nasdaq Composite Index has lagged the S&P 500 recently.  Clearly, it is still in an up-trend.  However, price has pulled back to test the trend-line.  If the trend is to continue, this is where buyers should step-in.

There is key support at the 2,200 level.  No alarms, yet ... Just a reminder to stay vigilant.

Is the Rally Losing Momentum?

The rally has lasted longer than I expected.  And each time we've been at a tipping point, recently, market corrections haven't succeeded in triggering sellers.

However, the rally has lost some of its momentum. There are many signs (like poor volume or increasing negative divergences) that point to underlying weakness.

Is there an Unseen Hand?

Some believe the rally is orchestrated by the government, and supported by various plunge-protection initiatives.  I find that hard to fathom.  It's a free market, and there are simply more buyers than sellers.  It doesn't matter if there are only a few buyers ... price will continue to go up as long as buying pressure is stronger than selling pressure.

Nonetheless, recent trading has stayed in a relatively narrow range.  From my standpoint, this is probably a result of a fundamental disagreement between the Bulls and the Bears. Let's look at some of the major areas of contention.

Here are some of the reasons Bulls think the Market is still cheap enough for valuations to be attractive. 

• The green-shoots of growth may be a sign that the economy is getting stronger.
• Corporations are starting to invest, and M&A activity is picking-up.
• Perhaps most important, though, is that government stimulus continues, while the Fed remains accommodative. 

In contrast, Bears are warning that we may be at an important longer-term top.  Here are things they are watching.

• Whether there is growth, other than from government stimulus?
• Whether spending starts to loosen-up and grow?
• Whether the credit crisis gets worse?
• Whether real-estate has another leg down?
• Whether employment numbers start to improve?

Time will tell, and so will the charts.

The New Bailout.

Finally, I thought this was funny.

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

• Bubble Warning - Markets Too Dependent on Government Stimulus. (Economist)
• JP Morgan Analyst Optimistic about 2010. (Business Insider)
• Divergent Views on Signs of Life in the Economy (NYTimes)
• Tech's Winners & Losers for 2010 from John Dvorak (MarketWatch)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Sony Pins Future on a 3-D Coming to Your Living Room. (WSJ)
• A New High-Tech Battle - Which 3-D Glasses Are Best? (NYTimes)
• Data Pack Rats: Why Storage is Becoming a Bigger Issue. (Forbes)
• 24 Job Interview Questions You Don't Want To Be Asked. (Business Insider)
• More Posts with Lighter Ideas and Fun Links.

Capitalogix Commentary 01/10/10

Now that the New Year is here, everyone has to get back to work.

What About the Markets?

The rally continues.  While volume hasn't been that impressive, price continues higher.

After taking a break, the Financial Sector has picked-up some relative strength and is leading the market higher.

Unemployment Still Factors Into the Equation.

The jobs number came in worse than expected, with continued cuts and unemployment still above 10%.  Yet, the market reacted better than I expected to that news.

Joking aside, here is an interactive graphic to dive a little deeper into these numbers.  Click on the picture to change the settings yourself.

Efficient Market Hypothesis: The Meltdown’s Biggest Casualty

Here is a video from BigThink about whether the market is as efficient as some economic theory paints it to be.  Alan Greenspan said he was shocked "that market players turned out not to be able to take care of their own interests."  Perhaps the takeaway of the recent crisis is that individual players (pursuing individual interests), collectively, will not always create an outcome which is good for the collective (or even for those individual players). Consequently, Chrystia Freeland, U.S. Managing Editor of the Financial Times, argues that the Markets needs someone or something to protect the collective interests and outcome.

Now for something a little lighter ...

Here is a Preview of Next Year's Review.

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

• Ten 'BreakOut!' Business Ideas Of 2009. (Forbes)
• Four Reasons to Remain Wary About an Economic Recovery. (WSJ)
• Will U.S. Home-Sales Data Temper Belief in the Government's Powers? (WSJ)
• John Mauldin's 2010 Forecast - The Year of Uncertainty. (InvestorsInsight)
• Decade Over – Here are 10 Huge Questions that Remain. (Forbes)
• Comprehensive List of 2010 Investment Predictions & Outlooks. (PragCap)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Read This Later - How to Combat the Natural Tendency to Procrastinate. (Economist)
• Taming the Digital Distractions That Make Your PC a Time-Waster. (NYTimes)
• Amazon Sold More Kindle Books Than Physical Books On Xmas. (Business Insider)
• Innovation: Where Next for Social Networking? (NewScientist)
• Google Unveils News-by-Topic Service called "Living Stories". (NYTimes)
• More Posts with Lighter Ideas and Fun Links.

Waving Goodbye to Last Year

As you start making progress on your New Year's Resolutions and 2010, I thought I'd share these two videos to put last year in perspective and chronicle some of its happenings.

One of the new technologies to generate a buzz last year was Google Wave. Even if you don't understand what it can do, you can appreciate how it's used here.

Finally, JibJab brings a little humor its retrospective.

Best Wishes and Good Luck in 2010.

Past Performance Doesn't Limit the Future

How will history view the past decade?

In my holiday greeting, this year, I chose the phrase: "I hope that you are grateful for the things that are great in your life, that you choose what you can use from the things weren't great … and that you invest those lessons in your future."

We can learn from history, so we don't have to repeat it (unless we choose to).

For Your New Year, Here is an Old Irish Blessing.

Here's to the bright New Year,

And a fond farewell to the old;

Here's to the things that are yet to come,

And to the memories that we hold.

May God be with you and bless you.

May the best of this year be the worst of the next.

May you be poor in misfortune, rich in blessings.

May you know nothing but happiness.

From this day forward ...

Happy New Year!

A Data Visualization of the Past Decade

Here is a clever way to capture a lot of information.  It also seems like a good technique to try with personal or business information ... or (with a little modification) even to use as a planning tool.

You can click the image to get the full-size version.

From the NYTimes.

Capitalogix Commentary 12/27/09

Since I'm spending the holidays in Asia, I thought I'd share a few lighter things this week.

First up is the Elf-Yourself site from JibJab.  And my wife says I can't dance.

Send your own ElfYourself eCards

Click here to make one yourself.

Second, here is something I look forward to each year.  Uncle Jay sings the year in review.

Market Commentary.

At the end of each year, the big financial media outlets typically conduct roundtables to get outlooks from key players in the financial markets.  Over the past few years, the individuals that run the best financial blogs and websites have become key players in their own rights, and their opinions are highly regarded by millions of loyal readers.  This year, Bespoke asked twelve popular financial blogs/websites to respond to the same 25 questions regarding their 2010 outlooks as well as their take on 2009. 

 

The responses were thought-provoking, and hopefully they will help you form your opinions on what is to come for financial markets in the year ahead. 

Best Wishes for a happy holiday season and for a prosperous New Year.

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

• Is the Recession Really A Depression? (ZeroHedge)
• One in Four Children on Food Stamps, One in Eight Overall. (GlobalEconomicAnalysis)
• 77% of Small Businesses Plan No Raises in 2010. (Financial-Planning)
• U.S. Foreclosures to Reach Record 3.9 Million in 2009 (Bloomberg)
• What's the Real Purpose & Risks Of Quantitative Easing? (WSJ)
• Physics Envy: Finance's Search for the Laws Of Human Behavior? (FT)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• The 10 Questions You Should Never Stop Asking. (Forbes)
• Founder of Salesforce.com Explains How to Start a Business. (Economist)
• Which IT Projects are Right for the Cloud? (Computerworld)
• Why Vegetarians Might Want To Think Twice Before Eating Tomatoes. (DigitalJournal)
• Will Science Allow Us to End Aging by 2029? (H-Plus)
• Russia's Highest Court Rules Against Religious Freedom. (DigitalJournal)
• More Posts with Lighter Ideas and Fun Links.

Capitalogix Commentary 12/20/09

John Mauldin and George Friedman were in Dallas this week.  Several hundred people came out to hear their thoughts on the world and the economy. 

For what it's worth, Freidman's Stratfor service and Mauldin's Thoughts from the Frontline and are both terrific reads.

I take it as a bullish sign that so many people made time, in the middle of the day, for an event like this. 

While the mood in the room was that the easy money has already been made in the equity markets, people were looking for places to put money to work. 

Sentiment Soaring ...

Up-and-Down ... the ride continues.  Still, sentiment is quite bullish.  How bullish?  AAII's weekly survey showed the fewest bears since April 30th. That was just about the time the Russell 2000 rolled-over to start an 8% correction.

Market Commentary.

Here is a daily chart of the Dow Jones Industrial Average.  It shows the market at a decision-point.  The month-long consolidation has taken the market to a place just above major support and resistance level ... And back to the upwards sloping trendline.  

Traders expect a big move after periods of compressed range (like the one we are in now).  Bollinger Bands are often used to represent volatility. You can construct by plotting bands two standard deviations on either side of the 20-period moving average (note the pink bands in the chart above).  One of the indicators I keep an eye on, is the band-width of these Bollinger Bands (it is plotted in the bottom pane of the chart shown above). When it gets narrow for an extended period, that "squeeze" puts me on alert for expanding volatility. 

What do you do?  You watch price.  This is the classic buy point in an up-trend.  On the other hand, there's everything else.

Insight: Price is the Primary Indicator.

What do you think is the most bullish indicator of our markets?  It's not a trick question; the answer is "price".

The markets have held-up nicely, throughout this rally, despite lots of bad news about the economy. And that, in-and-of-itself, is bullish.

It doesn't matter what technical analysis indicator you use (increasing negative divergences and selling on down days ... or less positive momentum and market breadth), the markets have given us a clear message recently. Price is the primary indicator, and it has stayed above support. 

While there will likely be a bearish divergence when the trend finally ends, it is clear that a strong uptrend trumps most bearish divergences.

The Implications of America's Rapidly Expanding Debt.

Here is a video from Consuelo Mack's WealthTrack, about the lessons of history. Best selling author and historian Niall Ferguson talks about the seismic global economic and market shifts of recent years mean for our future, particularly the longer term implications of America's exploding debt.

Here is the transcript.

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

• Volcker: No Growth Besides What the Fed's Pouring Into the Economy. (BusinessInsider)
• M&A Activity: Google Buying Start-ups Again. (BusinessInsider)
• A Start-Up Jokingly Touted a $100 Billion Valuation. Now VCs are Calling. (Forbes)
• Wal-Mart's Web War Against Amazon Risks Little. (WSJ)
• What's Glittering Isn't Always Gold - Other Metals Doing Well.(WSJ)
• Thoughts on the Market's Recent Gap Activity. (Quantifiable Edges)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• A Glimpse at the Future from Microsoft's Lead Tech Visionary. (CNet)
• Forbes Gave Ken Auletta’s ‘Googled’ a Great Book Review. (Forbes)
• Milken Institute's Journal of Economic Policy Worth a Look. (Milken)
• Craziest Google Street View Shots. (HuffingtonPost)
• Jewish Delis Are Dwindling, Traditions and All. (NYTimes)
• MIT's Next Bionic Breakthrough ... Stepping Beyond Human. (Forbes)
• More Posts with Lighter Ideas and Fun Links.

Palin and Shatner's Strange Word War

Words alone, won't do this justice.  You should watch for yourself.

Sarah Palin and William Shatner channel something strangely reminiscent of beatnik poetry or Haiku.

Enjoy.

It is like a competitive poetry performance, except they are reading each other's words out of context.

Other Resources:

• This is generating some press.
• Here is a link to Palin's book, Going Rogue: An American Life.

 

Capitalogix Commentary 12/13/09

It was a slow news week, as long as you weren't Tiger Woods.  Numbers and charts can tell only so much of a story.

Market Commentary.

Why has the market stayed so strong?  The first thing that comes to mind is massive government intervention.  The next thing that comes to mind is that there have been more buyers than sellers.  That is not a pun.  Perhaps it is more telling to say there hasn't been a lot of committed short sellers.  Recently, however, there hasn't been a lot of committed buyers either.  The result has been a month-long, narrow trading range.

Here is an intra-day chart of Dow Jones Industrial Average. It is easy to see the trading range that has constrained prices for the past month.  Notice how many times price has turned-down off the highs, and bounced off the lows.  The question is, will it happen again?

Technical traders will see this as a likely time to turn back down.  The Dow is at the top of its recent trading range and has several negative divergences (like the MACD shown at the bottom of the chart).  However, markets aren't known for rewarding the "easy" trade.

In addition, big moves often happen after tight ranges.  So, the next move might be a big one.

For a clue as to the direction of the next move, it may help to look to the Financial Sector.

Financials are Often Early Indicators of the Broader Market.

Here is a chart of Goldman Sachs. It is going through a downside correction, beneath its 50-day moving average, and is testing support.  A sustained move above this level could be a very bullish early indicator for the U.S. Equity markets.  A further break-down, from here, would also be telling.

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

• The Post-Recessionary Global Economy: In Search of the New Normal. (Wharton)
• Think The Worst Is Over? Think Again, VCs Say At Tech Showcase. (WSJ)
• BusinessWeek's List of the World's Most Intriguing Companies. (BusinessWeek)
• Where Does the Money Go From Each iPod Bought? (Telegraph.UK)
• Is Time to Be Brave and Buy the Dollar? (TimesOnline)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Time Magazine's The 50 Best Inventions of 2009. (Time)
• Loneliness is Contagious: Even If That Sounds like an Oxymoron. (Slate)
• Six Social Media Trends for 2010. (Leader)
• Learning From Porn: Lessons from the Cutting-Edge Of Technology. (MediaPost)
• Dissecting the Dollar's Re-Design Project. Is This Re-Branding? (Mint)
• More Posts with Lighter Ideas and Fun Links.

Capitalogix Commentary 12/06/09

It looks like the economy is taking off.  Of course, a jobless recovery would weigh things down. 

We saw more favorable (or at least less negative) jobs report this week.  We'll see if this marks a turning point for this important measure.  In any event, the Markets have continued to hold up well.

The Big Picture.

Here is a three-year look at the NASDAQ Composite Index.  The good news is that price broke above the blue-dashed trend-line, and has been able to hold its position and make new highs.  That was bullish.  Traders notice that momentum is slowing, and that price is mired in a key resistance zone.  This area (marked in pink) is seen as a support-and-resistance zone and also marks the 61.8% retracement level (which traders often look at a reversal trigger).

 

Consequently, a sustained move above this cluster of resistance would be bullish for the market.

Let's Zoom-In for a Closer Look.

As noted, though, upwards momentum has slowed.  The next chart is an intra-day chart of the S&P 500 Index.  For most of November, you can see trading ranges alternating above and below a "Disagreement Zone" (which is highlighted by the gray zone).  Think of this as an arm-wrestling match.  Currently, there is no clear winner.  Each push in one direction, has been met with an equal push in the opposite direction.  In addition, many of the moves are the result of overnight gaps. These are marked by the orange circles. You can click the chart below to see a larger version.

This chart also implies that it would be bullish for the markets to sustain its move above this "Disagreement Zone" level.  It is a pretty clear "line-in-the-sand".

Let's Look Under the Surface at Market Breadth.

This chart looks at NSYSE stocks making new 52-week highs, and subtracts the number of NYSE stocks making new 52-week lows . That means we get more Net New Highs when the markets are doing better. As it stands, A lot of NYSE stocks are making highs for the year.  Yet, there are less Net New Highs than we saw in October. While this is a little picky, it does constitute a negative divergence. Consequently, I'm watching what happen in this measure as a potential early indicator of market change.

Hope you have a good week.

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

• Respecting the Recovery: Do the Pouting Pundits of Pessimism have it Wrong? (Forbes)
• Too Big to Ignore: Unease Over Banks' $1 Trillion of Cash Reserves. (WSJ)
• Roubini: A Tale of Two American Economies. (RGE Monitor)
• M&A Is Back -- But This Time, It's Different. (Wharton)
• Shoppers Are Winning at Chicken, Waiting for Discounts. (WSJ)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Sinnovation: The Seven Deadly Sins of the Innovator. (BusinessWeek)
• Balancing Urgency & Patience to Get Best Business Results. (Forbes)
• Why Do We Yawn? Theories Abound. (Telegraph)
• Research Shows 40% Bare Is How Women Best Attract Men. (Newser)
• TIME 100 Roundtables - Talking About The Future of Technology. (Time)
• More Posts with Lighter Ideas and Fun Links.