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I would say the hardest thing for any trader to do is to buy high, especially after seeing a huge run in the market.  Buying high is a technique that very successful professional traders use.  It is also a contrarian approach.  After all, if you feel that the value cannot go any higher, it probably won’t, right?  This market condition generally tempts traders to sell.  That is absolutely the wrong thinking!  That thinking falls under the category of “picking tops without cause,” “justification,” and “trading based off a set of rules or technical reasons”!  Do not try to anticipate what the market will do next.  Simply go with what the market tells you it is currently doing.  In other words, try to avoid concerning yourself with why the market is moving; focus on what is occurring.  That is my definition of staying in the now and, most important, staying with the trend.
21st-Jul-2009 01:35 pm - correlation btwn US$ and stocks

How the Dow and Dollar Dance

With so many investors keeping tabs on the dollar, many have no doubt often noticed an uncanny relationship the greenback is now showing with stocks. In effect, when the dollar rallies, stocks lately have a tendency to fall, and when the dollar falls, stocks -- and most other “risk” assets -- tend to rise.

The raw data confirms the hypothesis. From Aug. 1, 2007, to Dec. 31, 2008, the Dollar Index and US Equity Total Return Index showed a negative correlation of -0.65%. Since the beginning of 2009, that relationship has become even more pronounced, now at -0.86%, meaning that betting on the dollar, through an ETF like PowerShares DB U.S. Dollar Index Bullish (UUP: 23.50, -0.16, -0.67%), can potentially help hedge a stock portfolio even more than gold or foreign stocks.

Dollar Index and U.S. Equity Total Return Negatively Correlated in 2009

Source: Rosewood Research


 
now now boys, dont be too happy that the market is blowing its top off..
i am happy too but decided to cut my exposure (actually not by alot lah hahaha, which was not a bad choice considering that the stocks i cut din really move, and the ones i had stayed in are revving their engines..)

okay first things first, DONT be overoptimistic. what goes up will come down and what comes down will go up.
and whilst we are in somewhat of a bull market now, we must always step back and look at the bigger picture.
secular bear market we are in dudes.

16th-Jul-2009 12:53 pm - click to enlarge.


By ANDY KESSLER

I remember once buying the stock of a small company and I couldn't believe my luck. Every time my fund bought more shares the stock would go up. So we bought even more and the stock kept climbing. When we finally built our full position and stopped buying the stock started dropping, ending up at a price below where we started buying it. We were the market.

Just about every policy move to right the U.S. economy after the subprime sinking of the banking system has been a bust. We saved Bear Stearns. We let Lehman Brothers go. We forced Merrill Lynch, Wachovia and Washington Mutual into the hands of others. We took control of Fannie and Freddie and AIG and even own a few car companies, pumping them with high-test transfusions. None of this really helped.

[Commentary]

We have a zero interest-rate policy. We guaranteed bank debt. We set up the Troubled Asset Relief Program (TARP) to buy toxic mortgage assets off bank balance sheets. But when banks refused to sell at fire sale prices, we just gave them the money instead. Dumb move. So we set up the Public-Private Investment Program to get private investors to buy these same toxic assets with government leverage, and still there are few sellers. Meanwhile, the $1 trillion federal deficit is crowding out private investment and the porky $787 billion stimulus hasn't translated into growth.

At the end of the day, only one thing has worked -- flooding the market with dollars. By buying U.S. Treasuries and mortgages to increase the monetary base by $1 trillion, Fed Chairman Ben Bernanke didn't put money directly into the stock market but he didn't have to. With nowhere else to go, except maybe commodities, inflows into the stock market have been on a tear. Stock and bond funds saw net inflows of close to $150 billion since January. The dollars he cranked out didn't go into the hard economy, but instead into tradable assets. In other words, Ben Bernanke has been the market.

The good news is that Mr. Bernanke got the major banks, except for Citigroup, recapitalized and with public money. June retail sales rose 0.6%. Housing starts jumped 17% month to month in May and will likely be flat for June. Second quarter GDP may be slightly up. And he was successful in spreading a "green shoots" psychology throughout the media. But the real question is, now what? Government interventions are only meant to light a fire under the real economy and unleash what John Maynard Keynes called our "animal spirits." But government dollars can't sustain growth.

Like it or not, the stock market is bigger than the Federal Reserve and the U.S. Treasury. The stock market anticipates only future profits and prosperity, not government-funded starter fluid. You can only fool it for so long. Unless there are real corporate profits from sustainable economic growth, the stock market is not going to play along. It's the ultimate Enforcer.

In mid-May, Mr. Bernanke's outlook seemed to change. Maybe he didn't approve of the sharp housing rebound -- like we need more houses! Maybe he saw inflation in commodity prices -- oil popping to $72 from $35. Or, more likely, he finally realized that he was the market and took his foot off the money accelerator, as evidenced in the contracting monetary base (see nearby chart). Sure enough, things rolled over -- the market dropped 7.5% from its peak, oil prices dropped almost 17%, and even gold has lost some of its luster. But in July, the Fed started buying again and the market rallied.

Can the U.S. economy stand on its own two feet without Mr. Bernanke's magic dollar dust? Eventually, but apparently not yet. Unemployment stubbornly hit 9.5% in June, according to the Bureau of Labor Statistics. Housing prices are still dropping, albeit at a slower pace, and foreclosures are still rampant.

But I think what really bothers the market is that the structural problems that got us into trouble in the first place still exist. We took the easy way out and, with the help of Treasury Secretary Tim Geithner's loose "stress tests," swept banking problems under the carpet. We waved off mark-to-market accounting and juiced bank stock prices to help them recapitalize, but all those toxic mortgage assets on bank balance sheets are still there as anchors on lending. All the pump priming and stock market flows didn't get rid of them.

Hats off to Mr. Bernanke for getting the worst behind us. He'll be pressured politically to keep pumping out dollars, but he should resist the urge. The stock market will ignore his dollars if it doesn't believe they'll turn into real profits. Green jobs and government health-care clerks do not make a productive, sustainable economy. That can only come from innovative companies with access to growth capital. The stock market won't turn bullish until it sees that type of economy.

Again, when it's clear that you are the market you have to stop buying and begin tackling the hard stuff. By not restructuring banks, by not getting bad loans off bank balance sheets, by not standing up to the massive increases in government debt crowding out private capital, the Fed and Treasury are holding back real economic growth.


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my favourite site: evilspeculator.com

As we keep creeping higher one put holder after the other bites the dust - in typical OPX fashion a merciless bear squeeze was bestowed upon the bears. Before I talk about the bigger picture however, a quick look at the updated channel chart:

Is it a bird - is it a plane - no, it’s the equities market on earning fumes!

Okay, now this is what I really want to talk about. Just out of curiosity I checked out the Slosh Report on my iPhone this morning. And since I’m the inquisitive type I decided to expand the chart into early August, which is the chart you see above.

Now, last time I talked about this (also more background on TOMOs and repos in that post) we were supposed to drop to 189 Billion tomorrow and it seems that they upped it a bit as we’re now close to 240 Billion. But look at that drop off looming towards the end of July - now doubt that these numbers will be corrected to the upside again, but it seems to me that the Fed is beginning to slowly drain the swamp. Monopoly money is being pulled out of the banking system - and if that trend continues it will affect the funny money available to bang equities to the upside.

Again, anyone more verse in negotiating the credit markets is strongly encouraged in chiming in here. If I’m seeing pink elephants I’d like to know of course, but if I’m on the mark the implications would confirm my medium term outlook (which is to the downside).

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By the way, I am extra bearish because I am usually quite bullish and yet i dont want to be affected by greed. So the extra bear here makes up for my normally very bullish and happy outlook (as with most ppl when they make money.)

Important thing is.... IF you don't know how the market is moving, think of which move will screw the most ppl. That's the most likely view doods. So now that the bears have been screwed all over and the bulls are sensing victory, it could be the time to spoil the market ONCE again. But fear not, probably just looking at a 50 pt drop to 2380. Thats your support for now.
 



16th-Jul-2009 09:22 am - sentiments
i think the bear/fear of losing money is extremely influential.
fear is an extremely powerful YET illogical state of mind.
look at my previous view, i was all prepared to sell, went through a shit day (-40 pts) thankfully my lucky star was there to distract me from selling all day and eventually the bulls prevailed. 

for now im glad. life is good.
the theory i postulated on the market paid off, i finally have exposure to commodities (though less than i would like to and abit more volatile).. and my gamble has paid off.
the intense mental stress over the past week has dissipated. (kind of until the rally falls short of steam, 3rd day is usually v impt, must close above +30 i.e. > 2420 for the rally to be authenticated.
but i shall not be greedy, take profits at a certain target.
whipsaw zone of hell is at 2560 - 2600.
of course if it doesnt break 2500 or 2550 i will definitely think of cutting...

and i do need to cut abit. no money in my bank to buy air ticket LOL.
10th-Jul-2009 09:34 am - A



One of my favourite songs of all time, together with Right Here Waiting by Richard Marx.

Anyway, if a picture tells a thousand words, this should tell ( 72 fps x 3:41 min ) = 15 912 pictures = 15 912 000 words.

'nuff said.


6th-Jul-2009 10:17 pm - we the privileged ppl of singapore?
The hidden ugly side of Singapore
Vijay Kumar Jul 3, 09 6:48pm

In between the glamarous buildings and shoppings complexes of this city state, there is huge suffering that the world has never seen. Something that the Singapore government or media will try to hide from the rest of the world. And this is the lives of 80 percent of 'true' Singaporeans who live in the republic's Housing Development Board (low cost) flats.

I, like many young youths, went looking for a better future in this Lion City of opportunity, After four years of working experience in Kuala Lumpur. It was my first experience outside Malaysia and I was very happy to be offered a job in Singapore with a basic salary of S$3,500.

Then, with huge hopes, I started looking for a master bedroom to rent being single. I finally got a master bedroom in Clementi for S$700 a month but only after being rejected by many other landlords for being Indian. The ensuing eight- month ordeal that I spent in this HDB flat really opened my mind to what Singapore is for those who can't earn.

It made me ask if this is the type of development that I ever wanted in my country Malaysia. This is the first time that I felt gifted to be born in Malaysia. Anyway, I lived with a family of three (husband, wife with one daughter) who rented out their master bedroom to me while they slept in the common room.

It was a three-room flat (but unlike in Malaysia, a three-room flat has only two bedrooms). I did not believe it was the master bedroom that I was staying in until I went into the other room and saw that there is no attached bathroom there. I was given a bed and a mattress and also two fans. Then I noticed that the couple with their daughter sleeping on the floor with a thin mattress in the other room. Not even a fan in that room.

Both husband and wife are born Singaporeans and were employed. It was after one month that I realised that the daughter was not going to school regularly and most of the time there would be a quarrel in the early morning between the father and daughter as there was not enough money to pay for the bus to go to school.

There were times when the daughter was very sick and father had no money to take her to see a doctor. It was a real pain in the heart to hear a small girl suffering through the thin walls of this HDB flat. It was unbelievable for me to see this happening in this ultra-modern city. It took me another two months to realise that what was happening in this flat was not an isolated case of urban poverty in Singapore.

It was every where in those HDB flats. There was a Chinese neighbour (an elderly man) and his son had no money to get a taxi to send his father to the clinic for daily diabetic wound-dressing. I soon understood that poverty in Singapore transcends racial boundaries. The whole family of my landlord got a shock that I own a car in Malaysia.

My landlord would keep pestering me every time I come back to Malaysia to bring my car over so that his whole family could go sightseeing in Singapore. In all my life, I never believed people in a developed country like Singapore would ever consider car ownership a privelege.

Three months later, one fine day, I came back home and realised that there was no electricity in the house. This time, my landlord did not have the money to pay for the utility bills. I was back in the Stone Age, using candles. This lasted for days until finally he borrowed money from somewhere and settled the bills.

My landlord as a person I have known during that period never come back drunk or looked like a gambler. He had to pay for his mother's medical expenses, that much I know. This was the time in my life when I learned what is was like to live in that poor quality HDB flat, drying clothes in the rooms and listening to what the couple talked about in the next room via the thin walls.

It was this time in life that made me to think, 'Is this what I want Malaysia to be? For those who talk great or look up to Singapore's success, have they ever come and lived in Singapore like I how I did? Have you seen a HDB flat and how it looks like?

Bring your whole family for a dinner using public transport and then rush to catch the last bus. Is this what a 10% growth rate a year is about that we want boast? Does this growth figures mean anything in the first place? Do we want to open our country to expats so that they can progress at the expense of our own Malaysians?

Do we want to 'progress' to a level that even our children can't buy a house in our own land? Last, I ask myself. Do we Malaysians look at GDP growth as the only measure to choose our government or are we much more matured than that? Achievement at whose expense?
23rd-Jun-2009 08:44 pm - contemplation
alone at work now, in a very contemplative mood.
just finished 2 tutorials out of which i was expected to complete only 1.5 so all is good and awesome.

i seldom blog abt what i feel because to me, that is secondary. my feelings are for myself to savour (sometimes with a bitter frown) and to reflect upon.

However, i just want to say that thinking back on the 20 years of my life, I have indeed changed very much lots (lovely grammar) and I am now really ready to spread my wings and fly.

London will be my destination and most likely my flight will be on 20 Sept 2009. I am extremely lucky to be going with fantastic friends and I eagerly await a new chapter of my life!

Ok right now, my dad just called and he has a freaking flat tire omg life sucks he was supposed to pick me up! :( Have to cab down to help him out rawr
26th-May-2009 03:55 pm - stocks NOT for the long run.
Ahead of the Curve by Donald Luskin (Author Archive)

The Mysteries of the Treasury Market Revealed!


Oh boy. Just what we need now that the economy is finally getting back up on its feet: More end-of-the-world rumors.

 
On Thursday Treasury bonds experienced a massive selloff, with the yield on the 10-year bond rising to its highest level since last November. The stock market took a big hit in response. The U.S. dollar fell against every major currency. It was a bad day.
It was because a rumor got started in the professional bond trading community that China is starting to dump its massive horde of Treasury bonds. It's a portfolio worth almost $2 trillion, and it would surely destroy the bond market and the U.S. dollar if the Chinese ever really decided to dump it.
The rumor arose when some unusual trading patterns emerged in a weekly bond auction conducted by the New York Federal Reserve Bank. Each week the New York Fed buys Treasurys, as part of the $300 billion buy program that began about a month ago. It's the Fed's way of keeping long-term interest rates low, to help the economy and the housing market recovery.
Apparently, for the first time since these auctions began, the particular bonds being offered to the Fed were the type that foreign central banks — especially China's — tend to hold. I'm not sure I really believe that foreign central banks hold Treasurys that are any different looking than anyone else's. But that's what the bond experts tell me, and true or not, it was enough to get a rumor started.
As far as I know China hasn't denied it. I'm not sure they ever would. But common sense tells you that they have no possible sane reason to dump Treasury bonds in the first place.
For one thing, when you dump any investment you own, you are shooting yourself in the foot. You are destroying the value of your investment through your own careless and hasty action. If China really wanted to sell, it would have every interest in doing so very gently, very gradually and very quietly.
And surely they know that any big catastrophe in the Treasury market would cause the U.S. dollar's value to fall. And China definitely doesn't want that. The last thing an export-driven economy like China wants is a weak dollar, because it makes it harder for the U.S. to buy their manufactured goods. In fact, most economists believe China is assiduously manipulating its exchange rate in just the opposite direction — to make the dollar as strong as possible.
Oh... and then there's the statistical evidence. Every month the Treasury Department publishes statistics on how much of our government debt is held by various nations. As of the last report, on March 31, China was buying, not selling. In fact, China's portfolio of U.S. Treasury bonds has been growing over the last three months at better than a 20% annual rate. Maybe they changed their minds since March 31, but I really doubt it.
If it's not China or some other central bank dumping, then what caused Treasurys to sell off so hard Thursday?
I don't think it takes a genius to figure that one out. It's a sad fact that the U.S. is running record government deficits, and is issuing record amounts of debt to cover them. Last year, our outstanding debt was 40% of gross domestic product — by the end of this year, it will be 70%. And according to White House estimates, which I believe are wildly optimistic, it will stay at 70% pretty much forever.
There's good news, too, but it also is a reason for Treasury yields to move a lot higher. The good news is that the credit crisis is over, so investors the world around no longer need the safe haven of U.S. Treasury securities. Now that the panic has passed, it's only natural that yields will move up.
But there's also more bad news. Another reason for yields to rise is inflation. Just as we had to run up a lot of debt to end the credit crisis and set the economy on the road to recovery, the Federal Reserve also had to print a lot of money. That's causing inflation to start ramping up. When inflation rises, bond yields have to rise too, to compensate investors for the loss of future purchasing power.
Now here's where it gets tricky. The Federal Reserve can see what's happening to Treasury yields, and it doesn't like it one bit. With short-term interest rates already at zero, all the Fed can to now to help the economy start growing again is the keep long term rates low. That's why the Fed is buying $300 billion of Treasury bonds in those auctions. As yields move higher despite the Fed's buying, the Fed is going to have no choice but to buy even more.
But that leads to trouble. Because when the Fed buys more, it has to print money to do it. That means even more inflation. And that means yields will need to move higher still, caused by the Fed's very attempt to keep them from rising. It's a classic vicious cycle.
Famed investor George Soros calls that particular kind of vicious cycle “reflexivity.” It happens when events in the financial markets (bonds) influence the real world (inflation), and that in turn affects the financial markets all over again, which then affect the real word all over again (and so on and so on).
Soros put that principle to work in 1992, when he observed that the Bank of England was keeping the value of the U.K.'s currency artificially high. Soros and other investors sold short British pounds in massive quantity, forcing the BOE to raise interest rates sharply in order to defend the currency. The high interest rates weakened the British economy, which caused the pound to fall, which forced the BOE to raise rates more — and so on. Ultimately the BOE gave up and the pound collapsed, and Soros reportedly walked away will billions of dollars in profits.
I think the same thing is going to happen sometime in the next year with the Fed. The market will drive Treasury bond yields higher and higher — the reality of a recovering economy and massive deficits demands it. The Fed will intervene, which will hold down yields for a while — but soon the inflationary consequences of that intervention will drive yields higher still. The Fed will eventually give up, and when it does, the yield on the 10-year bond will probably be 5%, 6% or even higher — today it is 3.35%.

That will surely trigger a massive drop in stocks, and probably a recession. I hope the Fed can delay that inevitable day long enough so that the economy can experience some real growth before it happens.

elliot wave analysis



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