Sunday, July 31, 2011
Friday, July 29, 2011
Thursday, July 28, 2011
Wednesday, July 27, 2011
S&P 500 Intraday Bias, 10:00 AM
Negative and the oversold condition has been relieved.
(Forgot to hit publish! Post written at 10AM, published at 10:22AM)
(Forgot to hit publish! Post written at 10AM, published at 10:22AM)
Tuesday, July 26, 2011
Monday, July 25, 2011
Saturday, July 23, 2011
The Economy: A Structural Problem by Will Rahal
For several decades, the consumer, business and government sectors embarked on a journey of increasing debt dependence for consumption and political popularity. This led to unsustainable credit expansion, which ultimately resulted in a financial crisis.
History has shown that many years are needed to unwind the excesses while the economy balances on a tight rope high above ground and financial authorities struggle to provide a safety net below.
The chart above shows the three-year growth rate of nominal GDP over a sixty-year period. The chart clearly illustrates how unusually slow the economy has grown recently; it is currently at one-third the average of the period. The economy has a structural problem.
Nevertheless, there will be some periods of strength as the chart below indicates.
Plotted is the difference between the year-and-a-half annualized growth rate and a three-year annualized growth rate of nominal GDP. Note that it is about to roll over, suggesting a significant deceleration.
So where is the safety net? Bernanke understands the structural problem and has thus engaged in monetary easing. Judging from the deceleration that is coming, however, one can conclude that the timing of QE2 could have been better. Since a third round of quantitative easing is harder to sell than a second round, there may be a tardy response to the economic slowdown.
What about the markets?
Earnings, which are increasingly dependent on a global economy, have done well. The world, however, is plagued with the same malaise as the US. Expect a slowdown.
The injection of liquidity from monetary easing benefits the markets. Commodities compete with financial markets, and have the effect of P/E contraction, which partially explains why, in spite of record earnings, many indexes are still below their lifetime highs.
In summary, sub-par economic performance will continue and it better be viewed as a structural problem that is well understood by financial authorities. This understanding will not guarantee a smooth ride, but will provide a cushion.
History has shown that many years are needed to unwind the excesses while the economy balances on a tight rope high above ground and financial authorities struggle to provide a safety net below.
The chart above shows the three-year growth rate of nominal GDP over a sixty-year period. The chart clearly illustrates how unusually slow the economy has grown recently; it is currently at one-third the average of the period. The economy has a structural problem.
Nevertheless, there will be some periods of strength as the chart below indicates.
Plotted is the difference between the year-and-a-half annualized growth rate and a three-year annualized growth rate of nominal GDP. Note that it is about to roll over, suggesting a significant deceleration.
So where is the safety net? Bernanke understands the structural problem and has thus engaged in monetary easing. Judging from the deceleration that is coming, however, one can conclude that the timing of QE2 could have been better. Since a third round of quantitative easing is harder to sell than a second round, there may be a tardy response to the economic slowdown.
What about the markets?
Earnings, which are increasingly dependent on a global economy, have done well. The world, however, is plagued with the same malaise as the US. Expect a slowdown.
The injection of liquidity from monetary easing benefits the markets. Commodities compete with financial markets, and have the effect of P/E contraction, which partially explains why, in spite of record earnings, many indexes are still below their lifetime highs.
In summary, sub-par economic performance will continue and it better be viewed as a structural problem that is well understood by financial authorities. This understanding will not guarantee a smooth ride, but will provide a cushion.
Friday, July 22, 2011
Thursday, July 21, 2011
Wednesday, July 20, 2011
Tuesday, July 19, 2011
The Master Key System
One month ago, I asked for book recommendations of the self-help genre. To my great benefit, many people offered a suggestion. I plan to read each suggestion, provided that my judgement approves. Currently, I am reading The 7 Habits of Highly Effective People and have begun The Master Key System (along with other books of my own choosing.)
The latter, published in 1912, and rumored to be what inspired Bill Gates to start Microsoft, prescribes that it be read over a 24 week period, a week given to each chapter. Initially, having read the Foreword and Introduction, the book seemed to be comprised of self-absorbed metaphysical musings, which, when done systematically, resemble all too many philosophical works. To my delight, however, I discovered that each chapter ends with an exercise that is essentially meditation-- and the author calls this the application of the principles.
A search for the keywords "Zen, Buddhism" on Amazon.com yields 2,422 paperback book results. Read a 5 page description of meditation exercises, then meditate every day, and you will never have to read a single word from any of those 2,422 books to expertly know what Zen is.
A common criticisms of self-help books is that they invoke only a transient inspiration, and none of the principles are habitualized. I agree. Through meditation, however, one can truly implement wise suggestions. By promoting meditation, long before it was popularized in the United States, the author and the potential utility of his book's "teachings", have gained credibility in my eyes.
To help ensure that I stick with the 24 week course, I have decided to post my journey through The Master Key System on this blog. Should be fun.
The latter, published in 1912, and rumored to be what inspired Bill Gates to start Microsoft, prescribes that it be read over a 24 week period, a week given to each chapter. Initially, having read the Foreword and Introduction, the book seemed to be comprised of self-absorbed metaphysical musings, which, when done systematically, resemble all too many philosophical works. To my delight, however, I discovered that each chapter ends with an exercise that is essentially meditation-- and the author calls this the application of the principles.
A search for the keywords "Zen, Buddhism" on Amazon.com yields 2,422 paperback book results. Read a 5 page description of meditation exercises, then meditate every day, and you will never have to read a single word from any of those 2,422 books to expertly know what Zen is.
A common criticisms of self-help books is that they invoke only a transient inspiration, and none of the principles are habitualized. I agree. Through meditation, however, one can truly implement wise suggestions. By promoting meditation, long before it was popularized in the United States, the author and the potential utility of his book's "teachings", have gained credibility in my eyes.
To help ensure that I stick with the 24 week course, I have decided to post my journey through The Master Key System on this blog. Should be fun.
Monday, July 18, 2011
Next Stop, 1280-1285
Above is a 30-minute, candlestick chart of SPX. There are three Darvas boxes of approximately equal length stacked upon eachother. Prices have yet to reach the bottom of the third box, which will be around 1280-1285, hence, the price target.
S&P 500 Intraday Bias 10:00 AM
Negative
With SPX down as much as it is, that is not much help. I will not be available later today, so I will post an update before I leave. It is only worth pointing out that there are no positive divergences based on this indicator.
With SPX down as much as it is, that is not much help. I will not be available later today, so I will post an update before I leave. It is only worth pointing out that there are no positive divergences based on this indicator.
Friday, July 15, 2011
Thursday, July 14, 2011
S&P 500 Intraday Bias, 10:00 AM
Positive
It seems like a base has formed since Monday and that the sell-off that began from 1356 is over. If today is a high-range day in which prices continually grind up, and that closes near the high of the day, that would add confirmation to this assessment.
It seems like a base has formed since Monday and that the sell-off that began from 1356 is over. If today is a high-range day in which prices continually grind up, and that closes near the high of the day, that would add confirmation to this assessment.
Wednesday, July 13, 2011
Monday, July 11, 2011
Saturday, July 9, 2011
Friday, July 8, 2011
Intraday Bias 10:00 AM
Negative
I am not sure how reliable the bias is today due to complex factors relating to the dominant trend, current price action and the payroll report. However, the bias has been positive on days with big down gaps, so there is no bullish divergence.
I am not sure how reliable the bias is today due to complex factors relating to the dominant trend, current price action and the payroll report. However, the bias has been positive on days with big down gaps, so there is no bullish divergence.
Thursday, July 7, 2011
Intraday Bias 10:00 AM
Positive
If this is indeed the start of another leg up, I don't think the market will let any of the "buy the dips" traders in for a while. This is the norm for a new up-leg. Contrawise, a pull back would be more bearish than it originally would appear to be.
If this is indeed the start of another leg up, I don't think the market will let any of the "buy the dips" traders in for a while. This is the norm for a new up-leg. Contrawise, a pull back would be more bearish than it originally would appear to be.
Wednesday, July 6, 2011
Friday, July 1, 2011
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