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« Bonds at Resistance - 7th Time the Charm? | Main | Natural Gas is the Transitional Fuel to the Green Future »

Thursday, April 15, 2010

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joe

Duncan, I use my topping only on Pizza,

Try it sometimes, it will relax you and stop you from brainless chatter.

Also are you married by any chance? (STU & EWI) or are you step child of one of them? Can you also post your affiliate income from those two from 2009, with your IRS form.

trendlines

Yelnick, two months ago my blog independently identified a triangle scenario for Shanghai, with bullish implications medium-term:

http://trendlines618.blogspot.com/2010/02/shanghai-composite-medium-term-bullish.html

Anyway, no breakout in the immediate future IMHO(on GDP news). Need a wave E down first, which might take a few weeks/months. Breakouts seldom happen on "good news", it comes later. And here's the other post with long-term count:

http://trendlines618.blogspot.com/2010/04/shanghai-composite-long-term-count.html

trendlines

Update on SGX, Singapore Exchange

http://trendlines618.blogspot.com/2010/04/sgx-escape-velocity.html

trendlines

Thoughts on SPX for today. Expecting consolidation.

http://trendlines618.blogspot.com/2010/04/s-short-term-surprising-strength.html

MHD

Could Ludwig Von Mises and Austrian economics be wrong, and Benny Bastard, Turbo Timmy, and SpendObama, have found a way to avoid the collapse of the biggest credit bubble of all time? Could Tony C. be right about a new bull market, meaning credit bubble blowups are actually good for the economy? Could Karl Denninger be totally wrong about all the big banks being insolvent, as the Feds have made all their bad loans 100% good by the push of a button. Is this why investors are paying $19 for BAC and close to $5 for C? Maybe the Feds knew they were going to have to make these loans 100% par, so why let it get to the point of a bank run, and have to issue debt to make them solvent. Wouldn't a magic wave of Benny's money wand be better as there would be no debt shown on the Feds balance sheet as the money just magically appeared on the banks balance sheets? I mean we're talking about 100's of billions, if not trillions, but who's counting anymore.
This might be crazy thoughts, but how else would BAC sell at $19, when they are insolvent if marked to market. This is public knowledge!!!

DG

Just missed triggering a short trade by 8 minutes. If we go below 120.2 SPY before 3:02 PM Eastern, one will trigger. And, yes, I'm still short from my original trade, so I won't actually take the trade, for the lawyers in the crowd.

If a long trade triggers before then, I'll post that, in order to avoid accusations of bias.

Hockthefarm

Has Negative Social Mood Returned?
By: Nate | Thu, Apr 15, 2010 Share Print Email Two ex-Bear Stearns executives were found not guilty of fraud in November. However Bernanke, Geithner, and Goldman Sachs and other banks have seen increased scrutiny in past months. Banks are being reigned in. Obama wants restrictions on proprietary trading desks, bonuses, and generally the way Goldman Sachs and other banks manage their capitol. These concerns seem to be well received by the population.

In the case of Bernanke fighting for another nomination, Robert Prechter stated, "One sure sign of [primary wave] [3]'s arrival is what has happened to the Federal Reserve chairman over the past 3 weeks. Noting that government was resuming its bear market role, the January issue of Global Market Perspective(GMP) called for a blast of anti-Bernanke sentiment as part of the transition back to negative social mood," (21, 1/29/10 (Feb) GMP). With the wave [3] call aside, how can it be that there is suddenly negative social mood returning, particularialy since fundamentals and hence main street sentiment follow stock market prices? This delay of fundamentals is a fact that was pointed out in the 1/29/10 GMP itself a few pages earlier. Furthermore the government is merely a reflection of the people it represents and never leads change. Even if negative social mood has returned, it did not correlate to the beginning of [3] since there was a new recovery high last week in the S&P 500.

The answer is that negative social mood has not returned. When questioned, both Bernanke and Geithner stated that they handled the situation correctly and ensured that the worst is behind us. Following this they were allowed to keep their jobs. I believe the scrutiny of these individuals is just a psychological process that an affected party goes through to "assure" themselves that there is no larger problem. So the government and population are really trying to convince themselves that there is no larger problem, but the reason they feel inclined to speak out is a big warning sign! If the feelings of optimism and confidence in the foundation for future economic growth are truly genuine, then why would this questioning by the government and population be needed at all?

People tend to resist change and also try to justify the situations of the past and present. It appears that the emotions that are really taking place amongst the government and population are those of denial and complacency, not returning negative social mood. As was correctly pointed out in the Feb. edition of GMP, complacency is currently high; there is no economic data to back up the feelings of hope and optimism.

The ex-Bear Stearns executives were probably allowed to walk because of the feeling of hope that the worst is behind us. People do not press charges when they feel there has been a mutual understanding.

As for Goldman Sachs and other banks, the scrutiny is for the same reasons, but rules were imposed on them. In this case I also believe the new rules are simply the government and population's way of "fixing" the problem which really is a way of creating hope from the situation while remaining complacent. In a way unwritten rules were imposed on Bernanke and Geithner; "do not let this happen again!". The spirit is the same in all cases. Some blaming has been directed towards the banks, which are a handy target when assessing what happened. The key here is the word "happened" in past tense.

A feeling of complacency should be a strong indication that a stock market top is near. After a feeling of totally complacency is obtained by the population, the next move can only be away from complacency or towards concern. People sell stocks when they begin to worry.

Hock

Michael

Yelnick,

Looking at the dollar value of shares traded per day would be an interesting check on this volume "theory". My educated guess is that the surge in volume of shares in late 2008 and most of 2009 had more to do with huge, almost generational institutional liquidations of the banking shares, not too mention the continued high volume of the trading of these names into the single digits. Also, one has to remember that an awful lot of hedge-funds and volatility players closed up thereby lessening activity even further.

For the reasons pointed out above, analyzing volume (and even the VIX for that matter) is a complete waste of time in my opinion. Price is all that really matters. That's what investors and traders get paid in. Price!

yelnick

Michael, so what do you make of the increase in volume in the last two days? The beginnings of distribution (ie topping) or lots of play in a few stocks like C?

Hockthefarm

Thoughtd from Mauldin:

http://tinyurl.com/y29r7o9

One thing about Mauldin: he knows a lot of very smart people.

Hock

DG

For the reasons pointed out above, analyzing volume (and even the VIX for that matter) is a complete waste of time in my opinion.

I wouldn't do wave counts on the VIX, but I think it is actually one of the few sentiment indicators worth watching.

http://evidencebasedta.com/PurifiedSentimentIndicatorsfortheStockMarket5.04.09.pdf

We attempt to improve the stationarity and predictive power of stock market sentiment indicators (SI) by removing the influence of the market’s recent price dynamics (velocity, acceleration & volatility). We call the result a purified sentiment indicator (PSI).
PSI is derived with an adaptive regression model employing price dynamics indicators to predict SI. PSI is the difference between observed SI and predicted SI normalized by model error. We produce PSI for the following SI: CBOE Implied Volatility Index (VIX), CBOE Equity Put to Call Ratio (PCR), American Association of Individual Investors Bulls minus Bears (AAII), Investors Intelligence Bulls minus and Bears (INV) and Hulbert’s Stock Newsletter Sentiment Index (HUL). All SI series are predictable from price dynamics (r-squares range from .25 to .70). Using crossvalidation we derive a signaling rule for each SI, PSI, and price dynamics indicator and compare them with a random signal in terms of their out-of-sample profit factor (PF) trading the SP500. Purification generally improves the stationarity of SI by reducing
drift and stabilizing variability. However, it generally reduces PF for PCR, AAII, INV and HUL suggesting at least some of their predictive power stems from price dynamics. In contrast, PF of VIX is significantly enhanced by purification implying it contains predictive information above and beyond price dynamics but which is masked by price dynamics. Purified VIX is superior to all other indicators tested.

DG

Well, a long trade triggered. Stop would be 120.5 SPY.

Hockthefarm

The Obamster and his 100 million of budget savings:

http://www.wimp.com/budgetcuts/

This one is going to get some air time in the fall. No swift boaters required.

Hock

DG

Raise stop to 121.03, reducing risk by 84%.

DG

Stop to 121.34, locking in small profit of .21 SPY.

Don't know what the market will do from here.

yelnick

trendlines, you have been doing a great job watching the SSEE. If no break soon, when then? End of summer?

Mr. Panic

Unbelievable readings in ISEE equities only put call ratio. Currently at 385; started the day in the 700s. I might need to surf some sites to see if that might be an error.
AAII bulls up to 48.8% but bears at 29.7%. Would like to see a higher bullish reading/ lower bearish reading but 48.8% is good enough to produce a correction.
Several resistance levels align a few dozen dow points away and it would be nice to see the market hit them this week. Seasonality for midterm election years predict a peak around this time frame.

Zendo

Shanghai finally debut their first index future today. Now I wonder when they can start to allow shorting stocks.

Eventhorizon

"A quick scan of financial sites will show repeated comments about the VIX sell signal: a drop two standard deviations below followed by a rise back."

This meme has me baffled. If it is the one I am thinking of it goes like this:

"2 out of the last 3 times this happened the market eventually fell."

What are the possible outcomes (B and NOT(B)) of a Bernoulli process with three trials? 0/3, 1/2, 2/1, 3/0.

Let's say we examine event A and outcome B. Even if there is no connection whatsoever we will always get AT LEAST 2 tests that result in (A AND B) or (A AND NOT(B)).

i.e. you cannot possibly draw any conclusions about a connection between A and B from 3 trials: there is no information there!

Eventhorizon

Let me clarify above:

B => market rises; NOT(B) market doesn't rise.
A => vix breaks lower BB and comes back inside the band.

DG

Once again going real-time, a short trade on the SPY just triggered.

DG

Wow, bulls come right back and trigger a long trade.

DG

Long trade stopped out. Bull trap? At least in the short-term it was. Have to see if another one gets triggered.

DG

Definitely a short-term increase in volatility as another long trade just triggered.

DG

Stop on the long trade now at breakeven with this move up.

Mr. Panic

ISEE equity only index closed at an alltime high of 348 yesterday bringing the 10day average to an alltime high of 270 (I believe 279 was the previous one day all time high reading). Today the ISEE closed at a still robust reading of 223 despite the down day.
The only problem I have right now is the rsi levels were too high yesterday and new highs on NYSE made new 52 week highs on Wednesday. Still think the averages might need to make new highs with better divergences.

trendlines

Hi Yelnick, after a possible spurt up towards 3200 by end of this month, Shanghai is likely to go downwards-to-sideways till end of summer, before rising into the year-end. I'll be posting on blog updates on blog, in any case.

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