Capitalogix

Capitalogix Commentary 11/29/09

Black Friday came in several ways this year.  Yes, there was shopping.  However, the markets had a dark few days, too, as the world markets quaked at the news of Dubai's sovereign debt default.

I've always believed that you can tell a lot about the current character of the market based on how it responds to news. Sometimes markets go up on good news, and go down on bad news. That seems normal. On the other hand, I take it as a bearish sign when markets sell-off after good news. Likewise, I take it is a bullish sign when markets go up, despite bad news.

So, it wasn't surprising that markets reacted negatively to the largest sovereign debt default since Argentina. It was, however, somewhat bullish that the US equity indices went down as little as they did. Yes, I know that our markets were closed on Thursday (when most of the damage was done globally) because of our Thanksgiving holiday. And I also realized that Friday was a half day and had relatively light volume. Nonetheless, it could have been worse; much worse.

Here is a link to a post I wrote that I think is worth reading at this point in the markets. I called it "What My Dogs Can Teach Us about Markets".  It's really about how perceived danger puts us on alert; and why the second perceived danger often receives an even greater response. The point is that the world is now on alert, and I'm watching how calmly (or not) the market reacts to news.

Market Commentary.

The markets continue to hold up well on the surface.  Underneath, I'm seeing signs of weakness (poor breadth, weak up-volume, fewer new highs, more negative divergences, etc.).  Nevertheless, price has stayed above important levels.

With that said, here are some patterns worth watching.  This chart uses 15-minute bars to get an intra-day look at the S&P Mid-Cap Index throughout November. The most notable thing I see is a character change in mid-month.  The Bullish Break-Away Gaps seen at the beginning of the month are followed by two Bearish Island Reversal patterns (marked by the yellow boxes) in the second half of the month.  This type of pattern can be seen at market tops.  It starts with a gap-up (shown by the green circle) and ends with an exhaustion gap (shown by the red circle). You can click this chart to see a full-size version.

To understand what this pattern shows, you can think of it as the last buyers rushing to get in (pushing-up price so fast that it creates a break-away gap), only to find that there are no new buyers (causing a price drop and the resulting exhaustion gap).  This gap down can signal the beginning of a change in trend. Two of them in a row makes me more watchful.

David Corna reminded me that this pattern shows-up differently on a higher time-frame. For example, on a daily candlestick chart, the intra-day Island Reversal manifests as two classic reversal patterns, a Hanging Man followed by an Evening Star. Their very names are onomatopoetic to their meaning. These candlestick formations will almost always be found at the end of a trend and the beginning of a reversal.

Chart.ly from StockTwits is a Good Source of Ideas.

Many traders use charts and technical analysis to gain insight and perspective on what's happening in the markets.  I'm always looking for resources that help me do that.  Recently, I've found a lot of good content on the Chart.ly website.  It is part of StockTwits, and has a strong user community.  Here is an example of a chart I found there this week.

I like the analysis, and concur that the bottom trend-line (and the area on the far right of the chart marked by the blue circle) points to a key price area.  Staying above that is important for the rally to continue.

How bullish has the rally been in real economic terms?

What the Dow Priced in Gold Tells You?

This chart shows the Dow Jones Industrial Average priced in Gold.  In other words, how many ounces of gold does it take to buy the Dow's price?  So, for example, when the Dow is at 10,000 and Gold is $1,000 per ounce, it would take 10 ounces.

Here is a similar chart, limited to the past ten years.

As you can see, it took over 40 ounces of Gold to pay for Dow in early 2000.  It now takes around 8.75 ounces. From this perspective, it looks like the Dow lost 80% of its value. That seems significant, even though the Dow's price is back close to the levels traded in the year 2000.

I don't normally put too much stock in charts that show one asset priced in another.  If it was supposed to be priced that way, it would be ... However, this comparison seems more relevant to me because gold is a form or currency.  Also, as people decide what to invest in lost opportunity cost is a factor.

How is the Economy Doing?

Here is a chart from Russell Investments that identifies a few key economic and market indicators to help assess the current economic health and trend.  Click the chart for an interactive version.

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

• Reasons Gold Is Rallying  ... (Jesse's Café)
• A Good Old-Fashioned Panic & Not Just in Our Equity Markets. (Macro-Man)
• Stating the Obvious: Why the Stock Market Should Crash. (Of Two Minds)
• Kass: Is it Time to Anticipate a Reversal of Fortune? (TheStreet)
• NBC-Comcast Move Closer to Deal. (TDB)
• Betting on Bytes: is IT Rebound a Sign that the Economy's Improving? (Economist)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Alpha Males Must Trade on More than Machismo. (FT)
• America's Healthiest and Unhealthiest States. (MSN Health)
• In Tough Economy, Tighter Belts Mean Thicker Waists. (WSJ)
• Man in ‘Coma’ Heard Everything for 23 years. (MSNBC)
• Clicker's Online TV & Movie Guide Impresses. (Newser)
• Answers to 15 More Google Interview Questions that Will Make You Feel Stupid. (Insider)
• More Posts with Lighter Ideas and Fun Links.

Capitalogix Commentary 11/22/09

Obama's China Visit.

President Obama asked for patience about the economy.  Nonetheless, a Gallup poll showed his job approval rating had dropped to 49 percent, the first time he has fallen below 50 percent in this survey, as Americans express dissatisfaction with his handling of the economy and other issues.

Unfortunately for him (and us) that wasn't the only voice of dissatisfaction he's heard lately.

Also, here is a skit from Saturday Night Live.  Like most good humor, it is funny because of how much is true.  I'm not posting it for partisan reasons ... rather, it made me laugh.  Hope you enjoy it too.

Market Commentary: Spotting an Island Reveal Pattern.

In general, the markets held-up again this week.  As I scan the charts, there is little new or opinion-changing information.  However, I spotted an Island Reversal pattern on an intra-day chart of the S&P 500.  This is often seen at market tops.  It starts with a break-away gap (shown by the green circle) and ends with an exhaustion gap (shown by the red circle and the big red arrow). 

To understand this pattern, you can think of it as the last buyers rushing to get in (pushing-up price so fast that it creates a break-away gap), only to find that there are no new buyers (causing a price drop and the resulting exhaustion gap).  This gap down can signal the beginning of a change in trend. 

In this particular case, we are coming into a holiday-shortened week (often characterized by light trading).  So I'm not expecting anything dramatic.  Still, it seems worth watching to see if the market trades back up above the exhaustion gap.

Something Changed: Small Caps and Techs are Not Leading The Way.

Here is something else that caught my eye.  The chart below shows that the Russell 2000 Index (shown in green below) has led the way throughout the recent rally.  The S&P 500 Index (shown in red below), represents the broader market.  While the Dow Jones Industrial Average (shown in blue below) lagged.  You can click the chart image below to launch an interactive version on Stockcharts.com.  This chart shows the relative performance of these indices during the past year.  You can adjust the date range by dragging the date bar at the bottom.

The next chart shows the same information, except limited to the past month.  Notice that the relative performance of these indices has reversed. 

I'm watching this rotation to see if small caps recover or continue to show weakness.  They could be the canary in the coal-mine for a bigger correction.

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

• Fed Eyes Dollar Drop, But Clings to Low-Rate Pledge. (FluentNews)
• Goldman Outlines Fed’s New Dashboard Indicators. (WSJ)
• Buffett Says His Businesses Have Bottomed (Reuters)
• Memo to Buffett: Put Down the Pom-Poms & Tell Us the Truth. (HuffingtonPost)
• New Market Bubble is Brewing: It's Déja Vu All Over Again. (Newsweek)
• While U.S. Economy Struggles, China's Rises. (NPR)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Is Too Much Science Thwarting American Innovation? (FastCompany)
• 15 Google Interview Questions. Answers at the End. (BusinessInsider)
• How Ritz-Carlton Stays At The Top.  Interesting. (Forbes)
• Twitter: People Tweet 27 Million Times a Day. (HuffingtonPost)
• Let Them Eat Dog. (WSJ)
• Forbes Blog Post on How Leaders Balance Urgency & Patience. (Forbes)
• More Posts with Lighter Ideas and Fun Links.

Capitalogix Commentary 11/15/09

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. 

For example, here is a daily chart of the Russell 2000 Small-Cap Index.  It is holding its gains; yet, sitting at a decision point. 

Last week I posted a chart showing the Elliott Wave count of this index.  Nothing in this chart changes that analysis.

We can't abandon the discipline of looking to technical analysis, just because early indicators haven't tipped us off to the end of rally, yet.  All that means is that the rally hasn't ended, yet.

The trading action during rallies is often characterized as "climbing a wall of worry".  So, how long can this rally last?  The next section suggests that a rally can last a lot longer than this one has, so far.

How Does This Rally Compare With Historical Rallies?

The Dow made another rally high this week, as it moved further above the 10,000 level.

To provide some perspective to the current Dow rally that began back in March, all major market rallies of the last 109 years are plotted on the following chart from Chart of the Day.

• Each dot represents a major stock market rally as measured by the Dow.
• The Dow has begun a major rally 27 times over the past 109 years,
  which equates to an average of one rally every four years.
• Also, most major rallies (73%) resulted in a gain of between 30% and 150% (29.8% to 150.5% to be exact) and lasted between 200 and 800 trading days (9.5 months to 3.2 years).
• These "typical rallies" are highlighted in the blue-shaded box.

As it stands right now, the current Dow rally (noted with the yellow highlight) would be classified as both short in duration and below average in magnitude.

On a different, but related, topic ... I think it's time to pay some attention to what's happening to the U.S. Dollar.

What Happened to the U.S. Dollar - Or ... Why Is Everything Else Going Up?

Here is a Performance Chart showing how the major world currencies have performed since last March.  This chart made me think of the Sesame Street song "One of These Things is Not Like the Others". Notice that all the currencies, except the U.S. Dollar, are up since then.

To me, this implies that the government made a decision near the March lows. Here is a link to an insightful post on why you should care about the strength of the dollar.  In general, there is a strong inverse relationship between the strength of the U.S. Dollar and the strength of the U.S. Stock prices.  Here is a chart showing what that looks like.

At some point, the economy will be more important than the market.  To that end, U.S. Treasury Secretary Timothy Geithner said a strong dollar is in the nation’s interest; and that the government recognizes the importance it plays to the economic health of the United States and the global financial system.  We'll see.

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

• Cisco's Profit Falls 19% - Shares Rise Anyway. (WSJ)
• Roubini: Bernanke Can Avoid A Crisis by ... Actually He Can't. (BusinessInsider)
• Congressman Ron Paul Says Be Prepared for the Worst. (Forbes)
• Fed Sees No Need to Raise Rates Soon. (NYTimes)
• Buffett's Unusual Train of Thought on Burlington Northern. (WSJ)
• A VC Win: Greylock Partners Raised a $575MM new fund in six weeks. (WSJ)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Moon Crash - While Public Yawns, Scientists Celebrate. (PhysOrg)
• Manhattan Providing Incubator Office Space for Businesses to Grow. (NYTimes)
• Learning in the Womb: Newborn Babies Cry in Native Tongue. (LiveScience)
• Hands-Free Parallel Parking in Your Next Car. (WSJ)
• Does Being Sad, or Complaining, Make You Smarter? (MarginalRevolution)
• Brain Scanners Can Tell What You're Thinking About. (NewScientist)
• More Posts with Lighter Ideas and Fun Links.

Jump Point: How Network Culture is Revolutionizing Business

This is a compelling book.  The title refers to a change in the environment, so startling that we have no choice but to re-group and re-think the future.

When it happens, everything changes and the old trusted rules of the road to go out the window.

The book hype says: The Web 3.0 world of “pandemic economics” is a new economy that will function outside the traditional laws of commerce, free from today's impediments to business growth, and in a world where every person is connected to each other. Jump Point will help you to challenge old assumptions, re-think your business models, and take advantage of this fast-moving, unfettered, and fiercely competitive environment.

When Does It Happen?

The economic history of the world is punctuated by Jump Points. The tricky part has been identifying them at the right time.

Very often, we mistake the arrival of a stunning new invention for the Jump Point.  It is easy to get mesmerized by a new innovation, and to think the world has changed the day a new technology leaves the lab. But that is rarely, if ever, the case. That is not the Jump Point.

Instead, technology revolution is a fitful process. New technologies take time to be absorbed, diffused and adopted. We are a curious species; it is human nature to tinker, and experiment, test, and play. And most inventions improve with application, adoption, and time. Therefore, most Jump Points occur well after the enthusiasm settles and the parade has passed.

Real Jump Points most often arrive after we grow complacent about that invention, when the technology becomes routine and unremarkable, after the novelty has worn off and the technology has gone mainstream. It is then that rapid change finally happens.  Interesting.

Jump Point: How Network Culture is Revolutionizing Business

The Rules Are Changing

Goldman Sachs lost money trading only one day last quarter, and only two days the prior quarter.

Come on, how could that be? Their boss does say that banks "Do God's work."  I'm not sure that is a sufficient explanation.  When a firm's trading performance challenges not only all preconceptions of realistic trading, but also of statistical distributions, it's worth looking into.

Here's what ZeroHedge has to say about it.  Here is a chart that demonstrates Goldman's YTD trading track record: out of 194 trading days in 2009, the firm has made over $100 million on 116 occasions! This alone accounts for at least $11.6 billion in revenue (and is likely much more).

Yves Smith, at Naked Capitalism, adds: maybe I am just hopelessly out of touch, or perhaps more accurately, the Fed has created such a ridiculously favorable environment for banks and traders that if you are moderately competent, making money is like shooting fish in a barrel. But a winning streak this consistent looks like a rigged game. Is this just, ahem, “information advantages”? Greater ease in pushing markets around that have fewer players? Just a function of those monstrously wide bid-asked spreads? I’m curious for a sanity check from people closer to the action.

The party line comes in the Financial Times:

The performance – revealed on Wednesday in a regulatory filing – compares with two losing trading days in the previous quarter and confirms that the authorities’ drive to revive markets after the crisis is yielding huge windfalls for some banks.

Before the crisis, banks regularly recorded trading losses on several days in a quarter.

Goldman made more than $100m in profits on 36 of the 65 days in the three months to September and recorded more than $50m in profit on more than eight out of 10 trading days, the filing shows.

These figures were down from the second quarter, when Goldman reported record trading revenues and had 46 days with $100m-plus in profits. The smaller number of days with $100m-plus profits in the third quarter partly reflects the bank’s decision to rein in risk-taking in areas such as interest rates and equities.

There is a suggestion here that banks like Goldman might be taking advantage of the Fed and Treasury (although that might be by design, yet another hidden subsidy).

Let me know what you think about this.

Here is a how there stock is doing.

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Click here to download Flash Player now

View the full NYSE:GS chart at Wikinvest

Here is a link to a prior Goldman Sachs article worth checking-out.

Capitalogix Commentary 11/08/09

The best thing I can say about the market is that the current lack of sellers is giving investors a good long chance to take their bullish bets off the table.

Unemployment is above 10%, and at its highest level since 1983.  Here are a few economic signs.

What about the Market?

The chart below shows an upwards sloping trend channel on a chart of the S&P 500 Index.

1. Notice that the early part of the up-trend stayed above the channel's mid-line (indicated by the blue solid line); and
2. Notice the second half of the up-move stayed above the bottom portion of the channel (indicated by the green solid line) until recently;
3. Also notice that the market is recently rebounded to test the underside of this line. I highlighted that portion with an orange circle. This chart pattern is often called "kiss and say goodbye" because a failure to jump back above the lower trendline, back into the upward sloping channel, is often a sign seen at market tops.

On the other hand, jumping back into the upward sloping channel would be a bullish sign.

Bob Prechter Calls a Major Top Using the Elliott Wave Pattern.

If you are looking for Top-Calls, then Bob Prechter is not shy.  He says: "Stocks are topping out, commodities are topping out and the dollar is making a bottom". 

Prechter is a high profile market commentator who uses Elliott Wave as a framework for understanding the market.  So, I thought this might be an interesting time to re-visit this technique.

The premise is that the market doesn't affect sentiment.  Rather, it is the other way around;  collective sentiment affects the market.  And that while markets change, human nature doesn't ... consequently, predictable patterns play out over and over again. Prechter calls this "Socionomics".

While I now look at Elliott Wave more as a way of understanding what the market has done (rather than a great predictor of what it will do next), I do believe it is helpful in getting a sense of the next likely swing. 

Here is a chart that shows the basic sequence and an example of the sentiment causing the move.

The next chart shows that a similar sequence often happens in both directions.

All this reminded me that I have a piece of software called the Advanced GET, which uses a pretty clever algorithm for identifying some of the simpler Gann and Elliott Wave trading patterns. So I dusted-it-off, fired-it-up, and started playing around.

Looking at a weekly chart of the Russell 2000 Index, it's very easy to envision a five wave sequence as follows.

Note that the wave five target is beneath the recent bear market lows. And that the wave four pullback takes us back to the top of the downwards sloping trendline ... and seems to have pretty clean Elliott Wave size, slope, and timing.

Again, I don't trade the Elliott Wave. Yet it fascinates me, and is something that I do pay attention to as a framework.  Add to all this that the daily chart of many US equity indices are stalled at their 50-day moving averages and kissing the bottom of their recently broken up-trendlines, and I'm certainly going to be wary of a pull-back here.

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

• Does Economics Violate the Laws of Physics? (ScientificAmerican)
• Fed Tests Tool For Reeling-In Money From Economy. (Yahoo Finance)
• Time for Companies to Justify Big Gains. (WSJ)
• How We Got Here: Bush Advisor Analyzes the Financial Sector Meltdown. (WP Carey)
• Smaller, Faster, Cheaper - The Enterprise Is Changing. (Forbes)
• Is the Dollar Losing Its Status as the World's Reserve Currency? (WSJ)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Apple is the Outlier in this Recession. (Forbes)
• The Mortal Sins Of Chart Design, and How to Fix Them. (BusinessInsider)
• Will Airports Screen for Body Signals Instead of Bombs? (CNN)
• Can Men Breastfeed? Apparently, They Can. (MentalFloss)
• Why Some Sleep Better Than Others (Forbes)
• Are You Asleep? Exploring The Mind's Twilight Zone. (NewScientist)
• More Posts with Lighter Ideas and Fun Links.

Capitalogix Commentary 11/01/09

Last week it started to feel like the markets were breaking-down.   Most of the major US equity indices broke down through their 50-day moving averages and also below their up-trend lines. Likewise, the Dow is back under 10,000 again.

The chart, below, shows that we are that an important support and resistance level that goes back to November of last year. In addition, we're back to price levels from late July. That means that we've had three months of rally, good news, and talks of "green shoots", with no real price advancement and a decrease of momentum.

From a technical analysis standpoint, this would be a good place to reverse and rally. However, longer-term charts and the sheer size of the recent rally suggests that we might have a little more market correction to go before the decline reverses.

A Rising VIX Often Means Falling Prices.

The CBOE Volatility Index  (better known as the "VIX") is a measure of the implied volatility of S&P 500 Index options, with very low numbers indicating extreme bullishness and very high numbers severe bearishness. It is also referred to as the “fear gauge” of US stock markets and is used as a contrary indicator as it moves inversely to equity prices. So a rising VIX often means falling prices.  As shown below, the VIX spiked to its highest level since early July.

I'm watching the VIX for clues about the direction of the next big move. If fear subsides quickly, then the rally will likely continue.  On the other hand, volatility will increase if the markets remain jumpy.

What's GDP Got to Do with It?

Going back to last week, Bears started jumping in on estimates that GPD would fall from 3.0% to 2.7%. Then GDP came in at 3.5%, and suddenly there were a bunch of headlines and news reports that the Recession was over.  As a result, the market blasts 2% higher in one day. My guess, that was more a result of massive short-covering, rather than actual bullish buying behavior.

It's worth noting that the GDP number was annualized. Real GDP growth for the quarter was 0.87%.

So far, the Stimulus spending/ Bailouts have cost the US more than WWI, WWII, and the New Deal combined… and we get GDP growth of 0.87% for Q3?    That's not a sign of a strong economy.

Longer Term: How Does This Compare to Other Bear Market Rallies?

Here is an interesting inflation-adjusted comparison of three Mega-Bear Markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.

Something to keep in mind ... while history doesn't always repeat itself ... it often rhymes. If so, the next big move is down.

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

• 2010 Economic Forecast: Don't Hold Your Breath for Fast Growth. (WP Carey)
• U.K. GDP Numbers Worse Than Most Thought - Down about 5% this Year. (WSJ)
• Bank Failures Hit 106 Year-to-Date -  Most Since 1992. (MarketWatch)
• Will Retailers Top Last Year's Holiday Sales? (WSJ)
• The Good, Bad & Exaggerated in Michael Moore's New Film 'Capitalism'. (Wharton)
• Venture Firms Making Bets On Forex Start-Ups. (WSJ)
• Ten Odd Economic Indicators: From Hot Waitresses to Men’s Underwear. (Time)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Ten Things Every Good Business Plan Must Have (Forbes)
• Google, Microsoft Intensify Search Rivalry with Music. (WSJ)
• E Pluribus Tunum: How Not to Price Online Music. (Economist)
• Online TV Leader Hulu Won't Remain Free, Official Says. (WSJ)
• Why We Lie to Our Spouses? (WSJ)
• White House's Fox News Boycott Prompts Network Revolt (HuffingtonPost)
• Secrets of the Centenarians - Life Begins at 100. (NewScientist)
• More Posts with Lighter Ideas and Fun Links.

Capitalogix Commentary 10/25/09

Traders are starting to sell into strength.  That is something to watch.

This Heat Map, from FinViz, shows that last Friday was a tough day in the markets.  Most everything was red.  However, Amazon was up almost 27%.  And Microsoft had a pretty good day too.  Realize that the averages would have been even weaker without those outlier performances.

 

But big up-moves on big down days are another sign of volatility, confusion and disagreement.  These are simply things I've learned to notice. 

Price is still the primary indicator.  So keep an eye on the trend-line of your choice.

Items In the Rear-View Mirror May Only Be Half as Big as They Seemed.

Why isn't the world beating a path to our markets, driving-up prices and volume?  Perhaps because they don't see our market the same way we do. 

This next chart caught my eye because it shows our 20% rally (since May) is less than a 10% rally, when it is measured in Euros instead of Dollars.

 

A similar phenomena is playing-out with Gold too.

Venture Capital Charts are Eye-Opening ... But Not Wallet-Opening.

The third quarter was rough for VCs, with 17 firms raising just $1.6 billion. That's the fewest number of firms to raise money in 15 years; and it's the smallest amount of money raised since Q1 2003, says the National Venture Capital Association.

How tough was it?  Venture Capital funding fell 42% through the third quarter compared with last year, and had an 81% drop quarter-to-quarter from a year ago.

 

The more I think about this, the less it worries me.  There is a lot of money sitting on the sidelines, and I believe that we just aren't in the stage of the cycle where late-majority money flows to speculative investments.  There is a similar situation going on in the M&A cycle too.

When the longer-term economic recovery gets moving, so will the money.

The Jobs Flu.

The real virus affecting the economy is unemployment. 

For example, Sun says it is about to cut 3,000 jobs.  Frankly, I hear chatter from a number of companies planning to reduce headcount in meaningful and painful ways.  Bottom Line: Without a clear path to more sales, the pressure to make numbers is driving further reductions.

It seems several things are thinning the workforce.

President Obama declared swine flu a national emergency.  Officials described the move as similar to a declaration ahead of a hurricane making landfall; though perhaps it was more a "call to action," like how they hand out Nobel Peace Prizes.

 

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

• What Happens When the Fed's Buying Binge Ends? (WSJ)
• McKinsey Says Global Capital Markets Entering a New Era (McKinsey)
• Sharp Drop in Start-Ups Bodes Ill for Jobs & Growth Outlook. (WSJ)
• Bank of America Lost $1 Billion in Q3, & It's Now Testing Support. (NYTimes)
• Great Chart of Google's Long Road Back To $500 (BusinessInsider)
• Nokia Slaps Apple with Lawsuit about Wireless Patents. (Forbes)
• Some Reasons Not to Care about Dow 10K. (CuriousCapitalist)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• A $1 Million Research Bargain for Netflix, & Maybe a Model for Others. (NYTimes)
• Forbes Lists the 50 Most Influential Management Gurus. (Forbes)
• Does Social Media Mark the End of the Email Era? (WSJ)
• 54% of CIOs Forbid Use of Social Networks at Their Companies. (WallSt&Tech)
• Gout: The Missing Chapter from Good Calories, Bad Calories. (Ferriss)
• Study - Touch Money And You Feel Less Pain. (CreditCards)
• Disney Offers Refunds on Baby Einstein. (TDB)
• More Posts with Lighter Ideas and Fun Links.

New Version 4 of Shift Happens Video

Last week I wrote that my son (and his generation) won't communicate the way we do.

For example, he used 9,827 text messages and 564 MB of data on his phone this month.

I'm not going to pretend that I understand how I would use that many messages ... But I'm beginning to understand that he does.

A decade ago, I couldn't have conceived the way we use trading technology today.  The scope and scale of what's possible would have seemed like an improbable science fiction plot.

And that is the point.  Some things seem like nonsense (or magic), until they become science and way things are done.

New Version 4 of Shift Happens Video

Fascinating presentation of facts, stats, and insights about how technology (like the internet) has been changing the world. Some of the tech that we take for granted is now at an inflection point because of the sheer mass of late-adopters.

It is worth watching and thinking about ... as someone living in these changing times ... and in terms of how these changing times shift the game and create a whole new set of opportunities.

While similar to the post on how Social Media is changing everything ... this presentation focuses on the bigger picture and has a more general business tone. 

I like the new design and the added content; yet, found the music a bit distracting.

We are moving forward more quickly than ever.  What you thought you knew about the economy, technology, innovation, and the world are probably out-of-date. I can't wait to see what comes next.

• Here is a link to a transcription of the presentation.
• Here is a link to the author's blog.
• Here is a link to the Shift Happens Project.

Capitalogix Commentary 10/18/09

Dow 10,000 - Version 2.0.

SNL made a joke that hitting Dow 10K was different this time.  The difference was that 15 million unemployed Americans cheered while they watched CNBC on their couch in their pajamas.

 

The U.S. Equity Indices continue to perform well.  The economy, however, is sending mixed signals.  At this point, some would argue that any positive economic signal is a welcome signal.

Mixed Signals: Two Charts Giving Us Different Views Into a Potential Economic Recovery.

The first chart shows that unemployment is still growing faster than new job growth.  Recent readings show six unemployed people for each potential job opening.  A glance at the chart shows that ratio is usually 2:1 (rather than 6:1).  I'll be watching this indicator, and will take even a small improvement as a positive sign for the economy.

 

Speaking of positive signs of economic recovery, the next chart does show a hopeful turn of events (based on increasing Capacity Utilization).

 

Utilization has increased for three straight months, and is up from the record low set in June (the series starts in 1967). Capacity Utilization had decreased in 17 of the previous 18 months.  An increase in capacity utilization is usually an indicator that a recession is over.  Let's hope it keeps up.

When In An Up-Trend, Like This, Don't Fight the Fed.

I was reading "A Dash of Insight" and saw this investment hypothesis: "The government is on a mission.  You may not like the policies, but as an investor, you fight it at your peril."  In other words, don't fight the Fed.

Recently, that has been a painful lesson to Bears trying to short the rally.  The result, a dramatically declining short interest.  Here is a chart from Bespoke, illustrating that point.

 

At a certain point, the lack of sellers becomes the contrarian indicator that we are near a top.  Again, in trending markets, too much thinking is dangerous.  Just consider this another indicator to watch when the up-trend finally breaks.

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

• Impacts of High-Frequency Trading - Manipulation, Distortion or Improvement? (Wharton)
• Blue Chips Top 10,000 for the First Time in a Year. (WSJ)
• Loose Monetary Policy: When Will Wall Street's Biggest Gravy Train Slow? (WSJ)
• Goldman Sachs Sees a "Perfect Storm" for M&A. (StreetInsider)
• Venture Capital Exits Dallas and Other Places Outside of Silicon Valley. (WSJ)
• Pessimistic Commentators Remain Anything But Convinced by the Rally. (Economist)
• Bloomberg Buys BusinessWeek From McGraw-Hill. (StreetInsider)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Mossberg Gives Windows 7 a Good Review. (WSJ)
• White House Tells Fox Network News to Take a Hike. (Newser)
• Patent Auctions Offer Protections to Inventors. (NYTimes)
• Facebook Has a Happiness Index Drawn From Posts. (NYTimes)
• Anthropologist: Modern Male Is 'Worst' Man Ever. (Newser)
• Un-Tapped Potential: Autistic Savant Draws Cities from Memory. (Wiltshire)
• Cool Chart of Apple's Path To 2 Billion iPhone App Downloads. (BusinessInsider)
• More Posts with Lighter Ideas and Fun Links.