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Monday, February 28, 2011

Inside a paper bag

Paper bag jokes aside from my post the past week, I got the conviction that this is possible.
The price action worked like I imagined it from start to finish. And is the first time that happens observing a countertrend move.

Maybe for the reader it was just a small correction and I'm being silly, but to me is huge, because talking to myself I can explain it with logic and without blank spaces.

Another salient point is that countertrend moves are the main cause of the unpredictability of equity prices in my view.

The long trend assuming that is "set" for a while is more like the inertia in a moving object, the challenge is to determine what kind of roadblocks the countertrend is going to present against the primary move, in order to be able to (at least) guess if or when this small opposite forces can coalesce gathering strengh enough to change the primary trend or just remain bland and not presenting too much of a challenge to the primary trend.

That's why I'm always obssesing with the "correction" through all this time.The primary move like I mentioned back in September keeps going until something stops it.

So becoming more confident despite advancing too slowly for my tastes.And besides mindful that the observer has to be included in the equation too.

One example is the companies that couple month ago I mentioned what they were going to do (next week I'm going to focus on that) and out of the twenty something that I talk about I only have in my mind XOM and MEE for the simple reason that they impacted me when I saw them.

XOM last time I checked was making an impressive or at least solid movement.
MEE because was the worst to me, looked like it was going to die.
Yes it did (got acquired) but it jumped before being acquired.

So the price action was wrong but the driver in the forecasted move was that it was going to get destroyed something like ABK or EK.

Astrologically speaking I don't have good or bad deaths I have to translate when means bankrupt or acquired.

Still need an connecting step between the astrological "alignments" what happen to the company and the result in the price. Because a company can die so to speak but with two different results price wise:

Could get acquired at a premiunm of it's market price or go bankrupt (or a 95% drop in revenue like EK).EK thought that it was going to be bought but it just simply die (drop), so more work needs to be done with the direction of bad ones when the main trend is opposite.

But these two companies XOM and MEE impacted me as when I start studying them inmediately.
The one going with the trend appeared clear.
The one going countertrend still need to find that middle step who tells which one die bankrupt or badly sodomized and which one dies because it got acquired at a higher price.

I'm going to check all those stocks for the next week post.And see if the observer gor impacted with the most extreme or it was just random observations that caught my eye with XOM and MEE.


Regarding the equity market I'm not too sure what could happen by the end of the week could be a double fake first up then down and moving up afterwards or a movement more constant to the upside withouth the double fake because the two forces neutralizes each other.I don't know.

The only thing that will bring my paper bag back is a strong movement Wed-Thurs and particularly Friday because in that case is going to make a top by Monday in my view, not The Top so to speak but a top that could delay or avert the up movement several weeks.Something like the trend gets "choked" and then drop.

If there's not too much acceleration the first days my guess is that continues up.Will see.
Dan

Manny Monday - Oscar's Edition


Hope that Manny is working on his tan and enjoying a few days in the sun.

One of my guilty pleasures every year is the Oscars. It is nice escapist entertainment for winter, and I enjoy the pomp and circumstance, the ridiculous stars, the tacky gowns and seeing which of my favorite movies or actors win. This year's Oscar's was a bit boring, most of the A-list stars who weren't nominated didn't attend. Maybe they knew that this year the show was going to be a bomb and stayed away.

Ann Hathaway and James Franco were disappointing as co-hosts; he looked bored and was boring, she was almost unwatchable. If it were not for the 10 changes of gowns I would have fallen asleep. It got so bad that I kept thinking that it might be more entertaining if Franco would pretend to saw off his arm and beat her with it just for some comic relief.

Thank goodness Kirk Douglas was raised from the dead to add the most entertaining presentation of the night.

The homage to all of the dead stars failed to bring a tear to my eye even with Celine Dion's uninspiring rendition of "Smile". (Isn't rendition when they take people to foreign countries and torture them? It felt like torture to me. )

Then there was this tidbit:

James Franco's Rendition of Cher's Song Scrapped From Oscar Gala

Again, thankfully someone was smart enough to know that James Franco covering a Cher song at the Oscar's might be panned but somehow that same bit of sanity wasn't evident when they dressed him up like Marilyn Monroe and pushed him back on stage. Ugh.

The King's Speech - deserved to be Best Picture, Colin Firth was excellent as the stuttering King. I felt that Geoffrey Rush should have received best supporting actor. Helena Bonham Carter also was great.

The Fighter - we went to see the movie last night with the anticipation of seeing a great movie with Oscar nominated performances and were so disappointed. What a horrible movie. Amy Adams and Mark Wahlberg were well cast and performed well, but the rest of the stereotypical cast over acted with nauseatingly bad lower class Massachusetts accents, and the story line was not credible. Who wants to see a movie about poor people with bad accents acting badly?

It was a shame that the plot didn't call for the murder of Melissa Leo's character as I would have paid extra money just to have seen her put out of her misery. I cannot believe she won the Oscar for that performance.

Ditto for Christian Bale. Horrible, horrible horrible. His portrayal of a crack addict was so painful to watch that we walked out half way through the movie. The entire movie was painful to watch.

My second favorite movie of the year, True Grit, was passed over which was a shame because it was so well done with fine performances all around. Jeff Bridges was superb.

The Social Network earned best Adapted Screen Play which was written by Aaron Sorkin, and it also won Best Score. That score is a perfect example of how music can make a good movie seem much better than it is and great writing can redeem a pedestrian plot.

All in all, it was one of the worst Oscar productions that I have seen, under produced, and really boring. To give you a clue as to how bad the Oscar's were this year, the funniest jokes were told via flashback by Bob Hope, hosting a show more than 50 years ago. A dead Bob Hope was infinitely more entertaining than a live Franco and Hathaway.

I forgot to mention that best documentary was won by Charles Ferguson, who filmed an expose about the financial crisis.

"Inside Job" director Charles Ferguson subjected Wall Street players, economists and bureaucrats to a fierce cross-examination to depict the economic crisis as a colossal crime perpetrated on the working-class masses by a greedy few.

His film examined the financial crisis of 2008. His speech lamented the lack of accountability three years later.

"Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that's wrong," Ferguson said.


Friday, February 25, 2011

February 26, 2011 Linkfest

Geologist Bets on $70 Billion Oil Find Chasing Atlantic Drift

Why Do Protests Bring Down Regimes?, What Egypt learned from the students who overthrew Milosevic

Hong Kong’s Budget May Boost Handouts, Increase Land Supply, ECB Officials Signal They May Support Raising Interest Rates

Homeowner forecloses on Wells Fargo office, becomes folk hero

More Companies Plan to Put R&D Overseas

Chicago Economist’s ‘Crazy Idea’ Wins Ken Griffin’s Backing

The Lost Art of Pickpocketing

Friday Potpouri - The Rahminator


Tuesday, Rahm Emanuel was successful in his bid to be Mayor of the City of Chicago. The reaction to his win in Chicago is mixed as he is inheriting a city with a terrible budget crisis combined with a history of patronage politics, cronyism and corruption. It will be fascinating to see how Rahm will govern as Mayor and how the city will change without a Daley at the helm. (disclaimer: I did not vote as I am not a resident of the city of Chicago)

I don't have any opinion about Rahm at this point except that he has proven to be quite capable in his past endeavors, ironically Mayor Daley's brother Bill now has Rahm's chief of staff job for Obama in a political musical chairs.

Rahm's First Day as Mayor

"As a legacy of his Washington days, Emanuel has been tagged with a colorful reputation for throwing tirades and spewing expletives. The caricature makes great fodder for commentators and comedians, but also obscures a deep reservoir of personal and professional discipline that has nurtured Emanuel's career and confined any tantrums to the behind-closed-doors variety.

Rahm Emanuel and "The Chunks of Burke"

"Before we announce a new Tribune contest — the Pick the Moment Rahm Totally Loses It Sweepstakes — a couple of observations."

Rahm's Washington Ties Will Come In Handy

'But those friends also recognize the challenges Emanuel inherits, chief among them shrinking federal aid and a fiscal outlook for cities and states so dire that Rep. Mike Quigley, D-Ill., uses the words "doomsday scenario."'

Faceoff with teachers union awaits Emanuel

"The divide culminated last week when union president Karen Lewis stood before reporters and said: "The fact is Rahm Emanuel does not seem to support publicly funded public education as we know it." The union chose not to endorse a candidate for mayor."

The city wanted a strongman — and it got one

"Yet no matter what you call him, no matter what you think of him, by winning Tuesday's election without a messy runoff, Rahm Emanuel is boss of Chicago.

He'll govern that way. It's what was sold. It's what is expected. The thing is, he's smarter than the old boss, more talented, skillful, adept, more focused.

If one of Rahm's relatives ever receives $70 million in City Hall pension funds to invest in a real estate deal, he won't be able to say that he didn't know what was going on.

No one would believe him."

Mayor Emanuel

"Did you see what just happened? Do you understand what happens next?"


And nine more inches of snow is expected in Chicago, bringing us to a new snowfall record for the month of February.

Thursday, February 24, 2011

What Does This Mean To China?

Recent world events have had me thinking about what the future could possible hold for China in this "new" world we appear to be birthing.

One of the first things that comes to mind is inflation. China is currently bearing the brunt of much of the world's inflation and the rising price of oil is only going to make matters worse in this regard. Margins are already razor thin in China and manufacturers are having increasing difficulty finding workers willing to slave away for next to nothing. Can China handle any more inflation?

I've also been thinking about the many news stories I've read over the last couple of years on the ever increasing amount of world resources China has been gobbling up. What are China's investments in Northern Africa? Will the new governments be nearly as accommodating as the recently disposed despots? What if the people of these countries decide to take a hard look at the agreements made between their overthrown governments and China. What if they decide that because those resources were sold to China by a corrupt dictator, they are no longer valid? China is well known to have purchased resources all over the world with little to no benefit to the local people.

China may be furiously updating their military, but even in the most optimistic scenario, it will be quite a number of years, before China is going to be able to project it's power beyond it's own border to protect those resources in the need ever arises. With total US supremacy of the worlds oceans, could China even protect their international resource if they wanted to?

Wednesday, February 23, 2011

The Master Swing Trader: Support and Resistance

Farley goes on to talk about S/R. His basic definition has fudge factors built in, he talks about elasticity, and load factors (that is traded volume at the S./R point). The first important point he makes is that S/R points may not be price pivots, it may rather be short sellers getting in at a particular point or funds buying in to momentum. His second point is that S/R parameters, each by itself, is weak, and the more that add up at a particular price, the stronger the S/R point becomes.

His first S/R parameter is horizontal price marks, where on a price chart there may be price pivots at the same price value happening at different times. He says that when these happen with high volumes, it is a strong S/R parameter.



He discusses the moving averages, 20, 50 and 200 day. I reviewed my 600-list of stocks with the 20, 50 and 200 day moving averages, and found more violations than S/R’s, when using this single parameter.. He also uses EMAs or Exponential Moving Averages in some of his examples, and I did not evaluate that parameter.

He mentions Fibonacci numbers as an S/R parameter. Again, an evaluation of retracements showed far more violations of the Fibbonacci numbers as valid S/R points. (Fib numbers (38.2%, 61.8%, 70.7%, 78.6%, 84.1%.) For example here’s my favorite short X again, the fib levels were not hit on the retracement.



He mentions whole numbers as an S/R parameter. Like the Dow 12000 hat being a major S/R point. On my evaluations, I did find quite a number of even-dollar’ed pivot points (of course many more violations as you can logically imagine) but it was interesting that at these dollar points, how often it was a turning point for the stochastics. So, never put your stop at an even dollar point. Pick a point above or below, depending on if it’s a short or long.

As I said earlier, he uses volume as an S/R parameter. Again, volume by itself may or may not coincide with a price pivot. He mentions the volume must be substantially heavier than the average volume for that time period (daily, 60 minute, etc). His point is that when there is substantial volume above a period/s normal average volume, that establishes a lasting effect on price.

He talks about the channel boundaries that establish the trends, and how weak these particular boundaries are as an S/R parameter. Farley talks about (but does not elaborate on) the studies of central tendency as attempting to define S/R. He mentions that mathematical statistics of central tendency studies divergence from a central price axis. I googled around and found nothing, and my prob and stats book is long gone. But this interests me, and maybe I’ll ask my applied math friend at work, I’m sure he knows everything about this. :-)> And for a free lunch, will elucidate me. :-)>

And finally, Farley uses the term “fade” enough for us to get a definition. If you’ve ever heard “fade the stock”, it means reduce your position as the price heads for a S/R point.

There’s one more thing I’d like to mention about S/R. I have set stops below S/R points, not fading my position, but completely getting out; I guess you may call it a “hard stop”. I have seen more than a few instances where the price inflection point has turned around at the S/R point I expected, but one trade has gone below that point, and mine was the only order executed at that lower point. This leads me to believe that an operator may know the price is turning around because of order movement and bid/ask movement, and he reaches down to buy a single large block to put in his account as the stock turns. Since I have seen this several times, now I fade the stock at the S/R point rather than setting one stop loss order. This may be a special case of the hammer pattern (remember that one?)

I have read many traders who seem to feel that S/R points remain in place over extended periods. I read Barry Ritholz’s post in Buzz and Banter where he said “we go back to the support point from last April” or something like that. I’m wondering if these long-term S/R points have any merit at all, and I’m wondering what the effect of a trending market has on those S/R points. In other words, if there’s a horizontal large volume price inversion last April, and now the S&P is 20% higher, how that 20% affects that particular S/R point. I’m thinking it must. I mean, if the market’s up 20%, I’m going to set my stop 20% higher, so it’s logical to think the S/R point tracks the market.

Tuesday, February 22, 2011

Updating

Well here we are, an entire world region on fire and checking the S&P it moved a whole one percent down.

Sometimes conventional wisdom doesn't apply because for the life of me, how is it posible that panic didn't set in?

We can think that Tunisia and Egipt are not big players on the world stage but now we have Iran doing sightseeing (tourism) in the Mediterranean plus Libya who provides 10% of oil to Europe in a pickle. So capitals hate uncertainty, and the situation is certainly up in the air. So why the market is reacting so mildish?

Not using tv entitles me to not have a clue, but from an astrological point of view, is due to the lack of strong negative forces at play now.Mild in the US equity markets, of course other situations and places are on fire at the same time.

At the beginning of the month I mentioned that if Jan 29-Feb3 fail to correct the market could mantain the direction for the month. It didn't move a lot but didn't fall either.Then I found a position around Feb 13 that could start a correction but nope, not strong at all just consolidation.

I know that my common sense wants to find a correction because is not possible for this to keep going, so I start checking secondary elements with the intention to see if something can bring the market down at least 6-8% and I found something interesting that appeared past Friday, not too strong but unusual.

I was checking comparable effects when stronger forces are absent along the past century and they show an increased volatility...but to the upside, most of the time.

The end of the session finished going up again and Sunday it made a triple top in the one hour chart, so I thoght maybe something to the downside here...

But the drop being small today kept me thinking if world events can alter mild astrological situations for the US equity market. Honestly don't know if that's posible or the market will behave mildly going up and down but not that much.
Yeah with the Middle east on fire! not very logic indeed.

By the end of next week more strong alignments start gathering for a 10-12 day period that can produce the starting point of a strong up move.

Could be possible that kind of up move without scaring people first with a sharp down move? Everything could happen but a...correction...should...appear...for...that up move...to happen; this of course if I use my common sense.

If I exclude it, what astrology tells me is...relax chap, this could go down a little maybe 2-3% exaggerating and without even realizing it the next push should be almost here.

I remove slowly the paperbag from my mouth and smile at it.
Dan

Monday, February 21, 2011

Manny Mondays: President's Day Link Fest

Morning all! In honor of the President's Day holiday and the market being closed, I thought that I'd change things up a bit with a mini-link fest and open thread. So, what's on everyone's minds today?

The curse of negative home equity

The G.O.P.’s Post-Tucson Traumatic Stress Disorder

The Republican Strategy

The real reason for public finance crisis

Chinese Security Officials Respond to Call for Protests

Money Won't Buy You Health Insurance

Republican Science Cuts Imperil U.S. Prominence: Albert Hunt

Title

Just a reminder, but I will be on the beach enjoying some MUCH-needed sun, warmth, sand, and ocean this weekend so I won't be posting next Monday. I assume that Denise and Thor have it covered but if anyone wants my slot on Monday, have at it.

Friday, February 18, 2011

February 19, 2011 Linkfest



Mubarakism Without Mubarak, Mubarak, Karzai, and America, The West’s Middle East Pillars of Sand

Jonathan Schwartz on patents, Google’s Android Is ‘the Next Windows,’ Volpi Says, Eugene Kaspersky, Co-Founder of Kaspersky Labs, says Android will own 80% of the smartphone market

WSJ: Former Sun CEO Worries About Region's Prospects , It’s Not a Bubble, People; It’s a Pyramid Scheme

the cloud computing spot market!

787 Dreamliner teaches Boeing costly lesson on outsourcing

Self-Induced Panic And The Financial Crisis

The decline of the public stock market

How Anonymous hacked HBGary vs. how HBGary wrote backdoors for the government

Friday Potpouri




This monthly S&P chart was interesting to me for several reasons:

One, graphically it shows how far we have come in more than 25 years.

Two, we are fast approaching a potential triple top in the S&P 500 if the market doesn't break it's monthly trend line. Many people thought that S&P would more likely break the March 2009 lows of 666 than rally back to the 2007 highs.

Three, this chart puts into perspective the crash of 1987 and the 1998 LTCM debacle.

The VIX has stubbornly refused (so far) to confirm the new recovery highs in the market. This has happened five times in recent memory

February 2007
July 2007
October 2007
January 2010
April 2010
February 2010 - on going

Only one of these was a major top, October 2007, and the April 2010 was followed by the Flash Crash and a decline of 15.63%. The divergence in the VIX is something that I am watching carefully.

Meanwhile in Union Busting News, we are all Cheeseheads:

Wisconsin Protests-State Police Pursue Democratic Law Makers Boycotting Vote

"Wisconsin Democrats on Thursday fled the statehouse in an effort to prevent legislators from reaching a quorum and passing a bill put forth by Gov. Scott Walker (R), which would cripple the collective bargaining rights of public unions."

NRLB Amendment Beaten by GOP Dem Coalition

"WASHINGTON - Sixty House Republicans joined with every Democrat to beat back an anti-union amendment on Thursday that would have defunded the National Labor Relations Board, a New Deal-era independent agency that arbitrates labor disputes. The sixty defections come as the Midwest GOP governors in Wisconsin and Ohio are launching direct assaults on public employee unions."

Boehner has lost control of House Republicans, first the vote on the jet and now this. Gawd, how embarrassing. Obama's White House must be thrilled by the Speaker's incredibly amateur bungling.

Wisconsin Rep. Paul Ryan - "Like Cairo protests have moved to Madison"

Rep. Paul Ryan (R-Unionbuster), chairman of the House Budget Committee, compared on Thursday the large, ongoing protests in his home state to those that took place in Egypt against former President Hosni Mubarak earlier this month, claiming that they're "like Cairo has moved to Madison these days."

The Republicans are admitting to trying to bust the unions, not because of budgetary issues, but to break up a key Democratic voting bloc.

Imagine, the middle class is finally deciding to fight back.

Thursday, February 17, 2011

Thorsday Open Thread

. . .And a free chart! We're getting close to the break even point in much of the stock market. Where to from here? Both long and short term. Will the boomers who have lost so much in the last two crashes cash out once they're back in the black? Or will they assume, like all of the bankers it seems, that the market now has a permanent backstop in the Federal Government?  My bet, is that most, will go where they always go, in the direction of greed. Rally on Garth!

Wednesday, February 16, 2011

The Master Swing Trader

There was a comment a few days ago I’ve been thinking about, so I thought I’d put together a few posts on some of the content of The Master Swing Trader by Alan Farley. We all have our favorite books, but out of the ones I’ve read, I think this one covers quite a lot of useful trading stuff, however, has quite a bit of randomness in thought, and I think he assumes you know what his terminology means, because when he uses a new term, he doesn’t define it or show an example. It’s kind of hard to follow, so I’ll put down in the next few posts some salient features.

Farley talks about a trend and a range. What he means by this is that there will be a price range that a stock is trading in, and the trend is essentially the centerline of the range. Like this:




He talks about patterns and cycles. His idea of patterns is not the Japanese Candlestick patterns I posted about last week, but his concept is that these ranges rise and fall, and make trend patterns. In a later post, we’ll talk about some of the reasons for the patterns and useful information about helping predict their nature. Anyway, here is a stock that is displaying one of my favorite patterns, the ‘W”



The W is kind of hard to see, it’s in the heavy green lines in the center of the ranges. But if you can see it, you'll see that this is a W where the right side has a higher low, and then goes to a higher high. This is a great pattern for making money, and I almost always use it for my trades; I never enter on a high. I only enter on a pullback. More on that later.

Farley talks about reasons for these patterns to repeat themselves, in cycles. You can see in the CLF example above, that the W will repeat itself in time, as you move the time scale to the right. He mentions other aspects of the market, which help suggest reasons for the changing cycles, including mob philosophy, TICK, futures, and credit. These will be topics of posts in the future, so you get and introduction of how these can affect the cyclic nature of the patterns.

Not to be too long, here’s an example of my "favorite short". I am trading this long right now. (The reason it’s my favorite short is because it continues upward and when I look at the P/E on the balance sheet, it’s negative). Before you look at the chart, our goal is to try to predict what will happen tomorrow, because that’s how we make money, When you look at the chart, before the final price bar (assuming you don’t know it’s tomorrow yet), you need to determine if you should leave the stock, that is, will X break trend and turn lower, and follow the new green line trend range, or should you stay/add, hoping it will continue trending positive, in its range. And what reasons do you have to take this position? It’s in the chart, but follow the heavy green line downward, it will show you the reason.



As you can see from the relative strength, the price action of X relative to the S&P 500 is accelerating. The slope of the relative strength line is positive. X’s stronger than the market. If you put up a chart of the S&P, you would see it’s trending up. Therefore, my bet was that X would not go counter-trend. (Don't fight the tape). I stayed in, and added on the close. Today, I got a 3% pop.

Tuesday, February 15, 2011

Triplets

Hello everybody.
Middle east is starting to warm up. Yemen,Bahrain, Iran.
Just make me think, so maybe maybe they are not a bunch of fanatics who want to spread muslim religion over the world and eat people alive; instead, they (at least the youth who is filling the ranks to swell revolts) ask for freedom. They use "western" gadgets and ask for western ideals, like democracy and they look sick and tired of their local tirants.

Yes I think that they check the west through the window of internet and the homogenization due to technology is advancing at breakneck speed now.
Good for them.

Regarding Equities I mentioned Feb 13 as an important point; I mentioned that Friday 11 and Monday 14 could see an increased in volatility.
Only Friday happened, where the grinding lower gave place to a nice jump, but yesterday nothing worth mentioning occurred.

My view was like two or three days up fast to see it reversing Tuesday or Wednesday.
I'm checking futures now and looks like the correction is failing again.If today or tomorrow keeps hanging up there I'm abandoning the idea of a decent correction because the longest the advance without falling, the more chances of an important upward move.

This sounds counterintuitive but is due to the fact that we are aproaching an excellent time for moving up in around 2 1/2- 4 weeks so if a drop doesn't appears now (or during this week) the main trend is going to be with less ballast in a short while, and is going to go up.

So I'll check today, tomorrow and Thursday and then abandon the idea of a correction that deserves that name.

It caught my attention the lack of nervousness past week due to the middle east conflict, will see if 3 new countries at once can somewhat scare risk markets, I wouldn't hold my breath honestly.

Dan

Monday, February 14, 2011

Manny Mondays: Is Innovative Stagnation Upon Us?

Morning all! Had a very busy weekend and wasn't plugged into much of the happenings, but one article that caught my eye was this one written by Will Hutton at the Guardian:

Don't be blinded by the web. The world is actually stagnating

I'm not sure that I entirely agree with this premise, but it's an interesting one to ponder. Hutton states that real innovation over the past 50 years, in terms of it resulting in the true transformation of our lives and creating jobs and strong middle class, has in reality moved at a much slower pace relative to the previous 50 years. He also takes a look at Tyler Cowen's The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History,Got Sick, and Will (Eventually) Feel Better which argues that the promise of the innovation coming out of the internet creating jobs has been mostly a disappointment. Here are a couple of key excerpts:

My grandfather grew up in the 1900s in a world of horse-drawn carts and candle-lit houses. In the following 50 years he would live through a series of astonishing transformations – electricity, the motor car, television and radio, the telephone, the refrigerator, the vacuum-cleaner, penicillin and the aeroplane, just to name a few. It was not just these things that made the 20th century what it was. Their production was industrialised. They created huge employment and wealth.

Productivity advances are not being made in booming new industries; they are being made by laying people off or moving production to low-cost countries in Asia. One way or another, falling workforces in the west are producing broadly the same output. Nor is the internet a great job generator. Google, Apple, Microsoft, Amazon and eBay may be changing the way we read and communicate – but in the US they have created fewer than 100,000 direct jobs. This, argues Cowen, is what lies behind America's increasingly jobless recoveries and the squeeze on the incomes of its middle-class workers. Our scientists and technologists have not been able to create inventions that can be industrialised at the same pace as they once did. This, argues Cowen, is what lies behind America's increasingly jobless recoveries and the squeeze on the incomes of its middle-class workers. Our scientists and technologists have not been able to create inventions that can be industrialised at the same pace as they once did.


Given some of the backgrounds and talents of the contributors at this blog, I thought that maybe many of you would have an informed opinion on this topic. So what does everyone think? Are we really innovating at a much slower pace than we used to or is our innovation merely no longer serving the middle class in this country, with enough meaningful jobs that create wealth for the many over the few? Or is this just the reality behind the global economy that we all now inhabit?

Friday, February 11, 2011

February 12, 2011 Linkfest


The unambiguous winners of Tahrir Square





One of the best videos you will ever watch in your life

Wael Ghonim: A "One-Off" for Silicon Valley?

The Youth Unemployment Bomb

Egyptian Public Opinion

How one man tracked down Anonymous—and paid a heavy price

The overblown threat from "Islamic terrorism". Remember this when the Security State comes calling.

Cracking the Scratch Lottery Code

The Disruption of Bronze

Friday Potpouri




In light of the bait and switch from Mubarak I thought this was article explains a great deal about the resilience of the Egyptian revolution:

Wired and Shrewd, Young Egyptians Guide Revolt

CAIRO — They were born roughly around the time that President Hosni Mubarak first came to power, most earned degrees from their country’s top universities and all have spent their adult lives bridling at the restrictions of the Egyptian police state — some undergoing repeated arrests and torture for the cause.

Yet they brought a sophistication and professionalism to their cause — exploiting the anonymity of the Internet to elude the secret police, planting false rumors to fool police spies, staging “field tests” in Cairo slums before laying out their battle plans, then planning a weekly protest schedule to save their firepower — that helps explain the surprising resilience of the uprising they began.

In the process many have formed some unusual bonds that reflect the singularly nonideological character of the Egyptian youth revolt, which encompasses liberals, socialists and members of the Muslim Brotherhood.

Verizon iPhone Release Falls Flat

"NEW YORK--There were balloons, police barricades, security, and a full staff on hand early this morning at the Verizon Wireless store on Broadway in downtown Manhattan. Absent from the scene: customers."

This was interesting to me as my daughter had long coveted the new iPhone from Verizon but once she saw how much more expensive it would be compared to her current phone she has balked at the cost of the new plan. Who says these kids are spoiled!

Interesting take on the mismatch in jobs and the unemployed:

Searching for a willing worker
"Companies in the United States can’t find suitable candidates to fill about 2.3 million available spots, most of them technical positions. Europe faces the same curious predicament.
There are two talent pools that sluggish Western economies could tap into. The first are the ranks of the domestic unemployed, numbering in excess of 13 million in the United States. Alternatively, with unemployment rampant through much of the world, there is no shortage of skilled foreign workers willing to mobilize."


With Job Openings Falling, Trouble Could Be Coming


"The Bureau of Labor Statistics released data this week on its latest Job Openings and Labor Turnover Survey (JOLTS), which revealed that job openings fell in December for the second straight month."


Here's a link from Rock that I thought was interesting:
A conversation with Bill Gates

The Daily Princetonian: The number of computer science graduates — or, more generally, the number of engineering graduates — isn't growing in the United States, while numbers are steadily rising in India and China. Why are numbers declining here and what, if anything, should be done about it? What does a Princeton graduate have to offer Microsoft that a Chinese or Indian student can't?

Bill Gates: Of the top 20 [computer science universities] in the world, somewhere between 18 and 19 of them are in the United States, and it's true that India and China are improving their universities.




Thursday, February 10, 2011

Thorsrockday Emerging Markets

I wrote this big long story, but I figure nobody wants to read all that, so to summarize, the economic cycles repeat themselves throughout history. And we have something we call “the market” which does not necessarily reflect economic cycles. I wrote a tribal anecdote about that, with Chiefs and Indians.

We seem to be nearing the top of a market cycle right now. And at the bottom of economic cycles in many parts of the world (I hope we’re at the bottom in the US, but I’m afraid that may not be the case). South Africa has a 24% unemployment rate. Jobs are at a premium in Europe, so companies like American Express can write their own ticket on where they want to have their central headquarters (AMEX is moving out of Spain and into the UK, for instance). Singapore offers the lowest tax rate of all if you move to Sing: 0% for years. The number of years is negotiable.

No wonder jobs moved away from the US. But that’s not emerging markets. The emerging markets are offering something they have, so inexpensively that nobody can turn it down. For example, Indonesia offers housing, 10K buys a 1600 sq. ft. place, and it’s an hour commute to Singapore or Johor Bahru. (In Singapore you’d pay at least 2 Million and maybe 4 Million for 1600 sq. ft.).

So the emerging markets are taking from the developed markets, which makes their percentages look great. And, because companies are moving to countries with low tax rates (the “emerging markets”) their reports show huge profits in these areas (like Google’s profits were reported from the Canaan Islands, and you and I both know GOOG is in Palo Alto).

So when an emerging market shows a downtrend, what does that mean? It means they don’t have what we (the developed economies) want or need. What does that mean? We (the developed economies) stop buying from the emerging markets, and we stop sending profits there.

The cause of the 2008 crash was not the banks, although it’s nice to point fingers there. It was building permits. New permits numbers dropped like a stone a couple months before the big 666 dive. People stopped buying. That’s what caused the crash.

Now look at Brazil. People are stopping buying. The EWZ is turning down. I have a chart here which overlays the Dow and the EWZ, which is interesting. When EWZ starts to decline, the DOW follows.

I’m not saying that will happen this time, but when people stop buying, the market falls. And it may be that we’re not buying as much from emerging markets. See if you can find evidence where the developed economies are not buying as much from the emerging markets.

(I was going to talk about inflation in emerging markets, but I’ve taken enough space already).

I am no longer as full of bull as I was before. When people stop buying, the market falls. Looking at RTH, and retailers reports, US consumers seem to be buying, and the savings rate is going down again, so it's as a result of spending their savings. Not good signs, because ultimately, that buying stops.

Here's the chart:

Wednesday, February 9, 2011

Patterns

I have read a few books on trading, and usually there is some mention (at least) of candlestick patterns, sometimes referred to as Japanese. There have been whole books written on this subject, so this post is just intended as a simple introduction, which may peak your interest. For those with greater interest, here’s a list of a few of the books:

http://www.candlestickpicks.com/books1.htm

I don’t usually trade off patterns, but there are times when a pattern match is reassuring, and is perhaps one more of the technical factors of a trade to consider when doing your homework.

Additionally, my trading software tool from TDAmeritrade, StrategyDesk, has a feature that you can program in a pattern and the screener will automatically look for that pattern in a list of stocks that you give it. It has a backtest feature where you can take a stock, look for that trading pattern, and place a pretend order, and the backtest will tell you the success rate.

I programmed in a couple patterns and ran the backtest. I will do more as I have the time. But here are some of my observations:

Over the last year, almost all of the short trades lost money. That says, don’t use patterns to go contrary to the market direction. I think I heard that the hedge funds last year did not do as well as expected.

Over the last year, more than 75% of the long trades made money when an additional factor of stochastics < 20% was added in to the backtest. The success rate dropped to almost 20% when the factor of stochastics > 80% was added. That says, don’t chase the market. Set your timing and if you miss, well, accept the fact that you’ve missed, and wait for your setup again.

Here are some of the patterns:

http://www.daytradersbulletin.com/html/cs1.html
http://www.candlestickforum.com/PPF/Parameters/16_332_/candlestick.asp

Here is a common candlestick screener. With this one, it will find a daily chart with the most current day matching the pattern you select:

http://beta.stockfetcher.com/csf/


Additionally, I've heard of the following patterns:
1. RR Track
2. +1 -2 buy setup
3. -1 +2 sell setup
4. Gilligan's Island Buy Signal
5. Oreo Cookie down-up-down sandwich
6. The Bird
7. Sherlock Holmes' pipe
8. N/R7 reversal
9. Hanging Man

I'm probably not qualified to comment on these, but I have a kind of idea. Except for the +1-2 and -1+2 setups, which I heard from Cooper. I’ve read his definition of those maybe 30 times and I still don’t get it when in one of his articles he sees this pattern.

So be careful trading patterns Watch your volumes and stochastics, and above all, set stops to protect your capital.

If anybody’s got success stories trading patterns, a comment would be good.

Tuesday, February 8, 2011

On strike

...So dude keep your good work and tomorrow all can go to hell, I'm egiptian now so I'm on strike and I cannot post anything meaningfull tomorrow I spent a lot of time addressing irrelevant things and now is late.
Goog night.
Dan

Yes the above is a fragment of a comment made yesterday toward I-man.If you want more details go to yesterday comments section please.
Thank you

Monday, February 7, 2011

Manny Mondays: "What Now?" Edition

Morning all! As I was doing some lurking at this blog on Sunday afternoon (GREAT link fest, by the way, emmy, the Ireland article held me spellbound), many of the great comments stood out for me. However, it were Rock's comments about Egypt just being just another in a long line of "dominoes" that will likely fall in asynchronous, largely unpredictable fashion over the coming years, with seen and unforeseen ramifications on the global markets and economies, the previous ones being Iceland, Ireland, Greece, Tunisia, and now Egypt. Never mind that none of these countries' respective crises are far from "resolved", but this had me thinking about which "domino(es)" is/are next.

So what is it, folks? How might things play out in the coming years? I realize these things are extremely difficult to predict, but I thought it would be an interesting activity to try and speculate on how things might play out.

Speaking of Egypt, as of Sunday afternoon, the protesters in Egypt had still vowed to carry on until Mubarak stepped down:

Protesters Vow to Escalate Pressure on Mubarak

In the meantime, the U.S. markets (and slow quasi-economic "recovery") continue their steady march upward seemingly every week. How long can/will that go as well? Are we closer to '04'-'05 or '07-'08 at this point, or somewhere else entirely given the continuous involvement of the Fed and global government intervention?

Thursday, February 3, 2011

Friday Potpouri



Chart and trendlines courtesy of Finviz.

While watching the bull market continue to make new highs, I like to do an analysis to determine what markets are under performing. I came up with two glaring non-confirmations, Emerging Markets, and the Dow Jones Transports.

EEM-Emerging Markets Index Fund

A quick scan of gains since 12/1/10 of foreign country ETF's shows surprising strength:

Italy
Spain
Austria
Netherlands
South Korea
Russia
France
Japan
Taiwan

And weakness:

India
Thailand
Turkey
Chile
Indonesia
Brazil
China
South Africa

The Dow Jones Transports are also not joining the party to new highs.



As others have pointed out, this is a Dow Theory non-confirmation, with the airlines, and truckers falling out of favor, while the rails are still doing well. The cost of fuel does explain some of the weakness in the transports, even though they do hedge their fuel costs.



Are we rotating out of the former emerging market favorites and into old Europe and Japan?

Even MORE Egypt

Hopefully you're not all sick of my Egypt pics. Or suffering from Egypt fatigue! I've been very busy this week at work and unfortunately do not have time for much more than an open thread with some pictures appropriate to current events!

Here are some people of Egypt from our tour. It's so fresh in my mind, this trip, these people. We spent 10 very long days with our guide Mohamed. He had three small children and a young wife, and I sure hope he's ok. I wonder what each of these people are doing today, how they are faring.


Glass Blower - Aswan

Cairo (yes Cairo)

Courtyard of The Qaed Ibrahim Mosque- Alexandria

Ubiquitous Police- Luxor

Woman in Chador - Alexandria

Kids on a field trip - Temple of Hatshepsut- Luxor

Police at Giza (does that camel look familiar!?)

View from our hotel in Cairo (Tahrir Square at top)

Water Buffalo - Giza

Baking bread - Giza

Wednesday, February 2, 2011

Technology Leads the Way

Doing a little evaluation, we see that the S&P 100 (My ticker $OEX) and the Dow Jones (My ticker $INDU) have all underperformed the S&P 500 since about October, based on a 20 day (1 month) relative strength analysis.

However, the NASDAQ composite (my ticker $COMPX) and the NASDAQ 100 (my ticker $NDX.X) have outperformed by about 4%.

I was watching Bloomberg, where David Kostin was on live. He’s Goldman Sachs chief US investment strategist. I put this link up last night, where he’s talking to CNBC, and they’re giving him a hard time.

http://wallstreetpit.com/52393-david-kostin-on-goldmans-2011-forecast

If you want to get a little background on him, and his predecessor, Abby Cohen, see

http://moneymorning.com/2008/03/19/goldman-sachs-replaces-its-sp-500-forecaster-abby-joseph-cohen/

Kostin reported on Bloomie that it would be big caps that would be the movers in the next market segment. His position was that about 25 stocks drive 2/3 of the margin growth, that it’s around 8.7% now, and will be going to 8.9%, in 2011 making those 25 have better earnings reports. He reported that his meetings with portfolio managers showed him that revenues and margins are their focus: revenues up, margins up will cause the portfolio managers to invest in those companies.

David also said that the large companies would improve their margins by investing in technology. He said that they will use the application of technology to improve their margins. His estimate was that there will be 500 Billion $ of capital investment this year. Yes, companies have a cash/asset ration of better than 10%, so it may be time to invest that cash. David says we’ll continue to see some stock buybacks from the cash rich companies, as well as some dividends. But he’s looking for the big guys to buy technology and put it to work to improve margins.

So I’ve been thinking about this. I look at the S&P 100, and the DOW, and they’re underperforming the NASDAQ100, and underperforming the NASDAQ composite. Now, what’s the NASDAQ 100 and the NASDAQ composite got that the S&P 100 and DOW ain’t got?

My answer: Technology companies.

So it looks like David is right on with his analysis. Technology is being bought. When I had to buy capital equipment, typically we placed the order, and the gear showed up in 6 months or so. Maybe we're seeing that now, the revenues start to rise in the technology stocks in October-November, and April-May we start seeing it being applied, so I'm looking at mid-summer to see the big-caps margins improve.

Thinking about this some more (It’s starting to hurt inside here). Who’s got the technology? Maybe it’s the smaller tech companies. If we think about it, maybe the smaller companies will see this investment of 500 Billion, grow their revenues, make their earnings improve and their stock prices outperform the big caps. But that's another post.

Here’s the weekly charts for S&P 100, the DOW, the CBOE NASDAQ 100, and the NASDAQ composite. I put the crosshairs on about the 0 point for relative strength (0 relative strength means that the chart price % change matches exactly the S&P 500 price percent change.) for your reference. It's the bottom window on each chart. These charts are courtesy of TDAmeritrade StrategyDesk.

Also, as you know, I’m full of bull. But there are some worrisome bear signals that I don’t like very much. I put one of my most important worries in the last chart. It’s the 3LB of the S&P500 stocks above their 50 day moving average, courtesy of stockcharts.com. We are in a clear downtrend.









Tuesday, February 1, 2011

Cheers

Inmerse following wordly events doesn't prevent me to feel particularly proud today because today the girl is starting her university studies, she has choosen social worker studies.

Particularly proud at my boy's and wife's support.Few years ago the girl, who had a rough life, (her mom died when she was 10), living in and out in a foster home (neighbors of us) so we get to know her since she was a baby but she started living there regularly when she was 10.Few years later got pregnant and drop middle shool.Things flare up badly and well, we open our hearts and home to both of them.

She started again school and 4 years later she finished high school and ready to keep advancing in life, has a boyfriend for more than one year now , a young lawyer, well nobody is perfect,(just kidding) but..she..has..to keep..studying is our motto, and fortunately she knows that.

And the little one is really something.Watching them of course makes me feel proud but the most lasting impression inside of me is having witnessed people blossom, just for the mere fact of being empowered.

Well basically was empowering her because the devilish little one doesn't really need too much to feel empowered, indeed.He came turbocharged.

Yes empowering people and the pursuit of knowledge (the last one a lonely and arduos trip) are probably the two basic things chiselled in my brain.

And as an astrology researcher I'll talk to the future with this lines besides sharing them with all of you.

Maybe years down the road if the little one learns English and reads this paragraphs he will capture how proud uncle Daniel felt the day that her mom started college, I honestly hope that this could help empower him too at any trial moment in his life.

I'm a very proud and happy man today.
Dan



Markets is wait and see if a correction come at February 3 even 4 at the latest or just keep the trend up withouth correction again.