Source: Investment Postcards
Thursday, December 09, 2010
Saturday, December 04, 2010
Monday, November 29, 2010
Source: John Maynard Keynes via Investment Postcards
Sunday, November 28, 2010
Sunday, November 14, 2010
Saturday, November 13, 2010
This applies to me, you and everyone else.
You know less than you think you do.
Be less certain in your views, aim for timid forecast and bold choices.
Don’t get hung up on one technique tool, approach or view – flexibility and pragmatism are the order of the day.
Listen to those who don’t agree with you.
Top tips for better decisions
You didn’t know it all along, you just think you did. Forget relative valuation, forget market prices, work out what the stock is worth (use reverse DCFs).
Don’t take information at face value, think carefully about how it was presented to you.
Don’t confuse good firms with good investments, or good earnings growth with good returns.
Vivid, easy to recall events are less likely than you think they are, subtle causes are underestimated.
Try to focus on facts, not stories.
Sell your losers and ride your winners.
Beating the biases
Being aware of the biases is not enough. It is just an important first step.
Need to create a framework that incorporates mental best practice. Easier said than done. Mental bad habits are persistent.
The good news, we continue to create new brain cells throughout our lives.
James Montier - Behavioural Finance: Insights into Irrational Minds and Markets
Wednesday, November 10, 2010
Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I'm getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis. I never think about other people who may be using the same stop, because the market shouldn't go there if I am right.
Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are willing to lose.
If you personalize losses, you can't trade.”
Sunday, November 07, 2010
"Taking advantage of potential major winning trades is not only important to the mental health of the trader but is also critical to winning. Letting winners ride is every bit as important as cutting losses short. If you don't stay with your winners, you are not going to be able to pay for the losers.
In addition to not overtrading, it is important to commit to an exit point on every trade. Protective stops are very important because they force this commitment on the trader."
Wednesday, November 03, 2010
Friday, October 29, 2010
Source: The Big Picture
Sunday, October 24, 2010
Saturday, October 23, 2010
Sunday, October 17, 2010
Saturday, October 16, 2010
Lesson Number One: Cut your losses quickly.
Lesson Number Two: Confirm your judgment before going all in.
Livermore was famous for throwing out a small position and waiting for his thesis to be confirmed. Once the stock was traveling in the direction he desired, Livermore would pile on rapidly to maximize the returns.
Lesson Number Three: Watch leading stocks for the best action.
Livermore knew that trending issues were where the big money would be made, and to fight this reality was a loser's game.
Lesson Number Four: Let profits ride until price action dictates otherwise.
"It never was my thinking that made the big money for me. It always was my sitting."
Lesson Number Five: Buy all-time new highs.
Lesson Number Six: Use pivot points to determine trends.
Lesson Number Seven: Control your emotions.
Friday, October 15, 2010
In the chart above we have the daily S&P500 (top) and the daily inverted S&P500 relative to the US small cap stocks index Russell 2000 Index (bottom). We notice that usually a relative strength of the small cap stocks is supportive for the uptrend of the large caps (blue chips) in the S&P as a sign of more risk taking in the markets. Since we have no divergence of the trends of both charts above, the uptrend in S&P seems to be healthy and poised to continue.
An example of a serious divergence we have in the same charts below but on weekly time frame. The uptrend in the relative strength of the small stocks ended in July 2006 and started trending down while the blue chips in S&P500 continued north in strong uptrend until January 2008. The underperformance of small stocks was an early important warning sign of the later strong reversal of the S&P500.
Thursday, October 14, 2010
The German DAX Index registered a breakout to the upside yesterday with a breakaway gap from an ascending triangle or a rectangle. The potential target price area is between around 6900 (computed from breaking out of the rectangle) and 7200 (computed from breaking out of the ascending triangle).
Wednesday, October 13, 2010
CRB Index has just reached a two year high and the trend is poised to continue longer term unless quickly turns down. We have a weekly chart above that indicates a potential target for the bullish run in the 320 - 340 area during the next several months. The trend is supported by the weakening dollar and by the Fed efforts to fight deflation through inducing inflation expectations via commodities.
The CRB Index has the following composition: Crude Oil (23%), Aluminum (6%), Copper (6%), Corn (6%), Gold (6%), Live cattle (6%), Natural Gas (6%), Soy beans (6%)Cocoa (5%), Coffee (5%), Cotton (5%), Heating oil (5%), Sugar (5%), Unleaded Gas (5%), Lean Hogs (1%), Nickel (1%), Orange juice (1%), Silver (1%), Wheat (1%)
Tuesday, October 12, 2010
Monday, October 11, 2010
MSCI Emerging Markets is trending up but an important price and time confluence might be strong resistance to pass.
In the chart below we see the relative performance of S&P500 against MSCI Emerging Markets. The strong downtrend since 2001 was briefly interrupted in 2008 but resumed shortly after showing continued strong emerging markets overperformance.
Sunday, October 10, 2010
Farrell retired in 1992, but his famous “10 Market Rules to Remember” have lived on and are summarized below. The words of wisdom are timeless and are especially appropriate as investors grapple with the difficult juncture at which stock markets find themselves at this stage.
1. Markets tend to return to the mean over time
2. Excesses in one direction will lead to an excess in the opposite direction
3. There are no new eras – excesses are never permanent
4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
5. The public buys the most at the top and the least at the bottom
6. Fear and greed are stronger than long-term resolve
7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names
8. Bear markets have three stages – sharp down, reflexive rebound and a drawn-out fundamental downtrend
We have yet to see the long-drawn-out fundamental portion of the bear market.
9. When all the experts and forecasts agree – something else is going to happen
10. Bull markets are more fun than bear markets
Source: Investment Postcards
Friday, October 08, 2010
Below we have the updated chart where we notice that the first target (1250) was reached in May 2010 a month later than its cycle time while the second target (1400) is supposed to be reached in November - December 2010 but it's close already today on 8th of October (when registered a high just shy of 1365). In a later post I will discuss more on the potential price and time targets of Gold.
Thursday, October 07, 2010
S&P500 reached a confluence of an upper side channel resistance and a 21-day cycle. With the potential volatility of the NFP news tomorrow we may be able to check if the next short term trend is stil up or turns down.
Wednesday, October 06, 2010
He learned this soon after he began work at Quantum. He had been unenthusiastic about the dollar and he took a large short position against the German mark. The position began to go in his favor, and he was quite pleased with himself. Soros dropped in on him in his ofce and discussed the trade.
“How big a position do you have?” he asked.
“One billion dollars,” Druckenmiller answered.
“You call that a position?” Soros said, a question that has become part of Wall Street folklore.
Soros suggested that Druckenmiller double his position. He did. And, just as Soros had predicted, even more prots poured into Quantum.
Source: SOROS - The Unauthorized Biography, Robert Slater
Tuesday, October 05, 2010
Monday, October 04, 2010
Sunday, October 03, 2010
“The trouble with the Recency Effect is that everyone all of a sudden thought they were Nassim Taleb, orinthological experts on the spotting of Black Swans. Every blip on the screen or blurb in the newspaper was fresh evidence of the next hundred years’ storm. Forget being fooled by randomness, people have become obsessed with randomness.
But as we’ve learned, not every aberration is a Black Swan in the making. Sometimes, it’s just an ordinary Black Duck. A negative event or possibility that is processed and dealt with, that doesn’t necessarily lead to contagion, panic and meltdown.”
Source: The Reformed Broker - Sometimes It’s Just a Black Duck
“As markets and economies struggle over the next several years, remember to keep your eye on the future and get ready for the Next Super Boom and the next 500% move in the market. From the last bottom in 1974 it took eight years before the market really took off in 1982 and then another eight to move up the rest of the 500%, in line with Yale Hirsch’s prediction in 1976 for a 500% market move by 1990. A 500% rise in the Dow over 16 years from the intraday low of 6470 on March 6, 2009 would put the Dow at 38,820 in 2025.”
War followed by Inflation, Peace and Secular Bull Market Gains
Saturday, October 02, 2010
Victor Niederhoffer on speculation:
“I am a speculator. I own seats on the Chicago Board of Trade and Chicago Mercantile Exchange. When my daughters ask me if my job is as important as the butcher's, the doctor's or the scientist's, I answer that the speculator is a hero, and has been throughout history.
Some speculators are discoverers like Christopher Columbus, creators like Henry Ford, or inventors like Thomas Edison. Their job is easy to place on a high plane. My role in the grander order is indirect, relatively invisible and unplanned. The only discoveries I make are the routes that prices will travel. Like hundreds of thousands of other traders, I try to predict the prices of common goods a day or two in the future. If I think the price of an item will go up, I buy today and sell later. If I think that the price is going down, I'll sell at today's higher price. The miracle is that in taking care of ourselves, we speculators somehow ensure that producers all over the world will provide the right quantity and quality of goods at the proper time, without undue waste, and that this meshes with what people want and the money they have available.
Let's consider some of the principles that explain the causes of shortages and surpluses and the role of speculators.
When a harvest is too small to satisfy consumption at its normal rate, speculators come in, hoping to profit from the scarcity by buying. Their purchases raise the price, thereby checking consumption so that the smaller supply will last longer. Producers encouraged by the high price further lessen the scarcity by growing or importing more. On the other side, when the price is higher than the speculators think the facts warrant, they sell. This reduces prices, encouraging consumption and exports and helping to reduce the surplus.
I am proud to be a speculator. I am proud that my humble attempts to predict Tuesday's prices on Monday are an indispensable component of our society. By buying low and selling high, I create harmony and freedom.”
Source: The Speculator As Hero
Friday, October 01, 2010
Wednesday, September 29, 2010
..si evadeaza din triunghiul ascendent, urmatoarele praguri de rezistenta vor fi 26.500, 28.000 si 30.000 puncte. Se observa in graficul saptamanal de mai jos ca dupa retragerea de 61.8% a trendului ascendent inceput in 2009 indicele revine incet pe crestere si intampina rezistenta la EMA50 care se afla in jurul valorii de 24.000 puncte..
Tuesday, September 28, 2010
Michael Steinhardt was one of the most successful hedge fund managers of all time. A dollar invested with Steinhardt Partners LP in 1967 was worth $481 when Steinhardt retired in 1995.
The following six rules were pulled out from a speech he gave:
1. Make all your mistakes early in life: The more tough lessons you learn early on, the fewer (bigger) errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something.
2. Always make your living doing something you enjoy: Devote your full intensity for success over the long-term.
3. Be intellectually competitive: Do constant research on subjects that make you money. Plow through the data so as to be able to sense a major change coming in the macro situation.
4. Make good decisions even with incomplete information: Investors never have all the data they need before they put their money at risk. Investing is all about decision-making with imperfect information. You will never have all the info you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation.
5. Always trust your intuition: Intuition is more than just a hunch — it resembles a hidden supercomputer in the mind that you’re not even aware is there. It can help you do the right thing at the right time if you give it a chance. Over time, your own trading experience will help develop your intuition so that major pitfalls can be avoided.
6. Don’t make small investments: You only have so much time and energy so when you put your money in play. So, if you’re going to put money at risk, make sure the reward is high enough to justify it.
Monday, September 27, 2010
..este zona 1.60 - 1.65 pe termen scurt, daca se va inregistra un breakout peste rezistenta din 1.48 - 1.50 pe volume in crestere. Strapungerea ferma a SMA200 si a laturii orizontale a triunghiului ascendent (care are implicatii bullish in general) dar si o numaratoare fortata de valuri Elliot care ne-ar plasa in valul impulsiv 5 cresc probabilitatea atingerii targetului mentionat aflat la confluenta unei retrageri si a unei proiectii Fibonacci. In caz contrar, linia de uptrend este aproape si ruperea acesteia probabil va intoarce actiunea in range. Vom vedea..
Thursday, September 23, 2010
Sunday, April 25, 2010
BETFI Weekly Chart 25-04-2010
Mai sus se afla graficul saptamanal al indicelui BETFI (scara logaritmica) cu evolutia anticipata a acestuia de la ultima analiza din 22-11-2009 pana in prezent si un scenariu de continuare in viitor. Se observa ca trendul ascendent al BETFI a intampinat rezistenta in luna februarie 2010 in zona de 30.000 de puncte si apoi s-a atins obiectivul de pret din zona aflata intre 30.000 si 34.000 puncte. Ulterior a inceput o corectie saptamanala aflata in desfasurare.
Indicele BETFI se inscrie momentan intr-un trend minor descendent. Trendul intermediar este in continuare ascendent si poate fi pus in pericol daca indicele va cobori sub media exponentiala de 20 saptamani (momentan zona de 29.000 puncte).
Avand in vedere rezistenta puternica din zona dintre 30.000 si 34.000 puncte, putem emite ipoteza unei retrageri mai ample din aceasta zona spre 50% din cursa ascendenta dintre minimele din februarie 2009 (7.666 puncte) si maximul din aprilie 2010 (34.504 puncte) care se afla in zona de 21.000 puncte. Aceasta retragere ar permite in primul rand un test al trendului ascendent pe termen lung pornit dupa minimul din februarie 2009 dar si o detensionare a unor indicatori precum oscilatorul Stochastic. Dupa aceasta potentiala retragere (care poate fi chiar mai scurta de 50% din cursa amintita) indicele ar putea sa se inscrie din nou pe un trend intermediar ascendent care sa-l duca in a doua parte a anului peste maximele deja atinse.
Aceasta ipoteza este infirmata daca indicele face in perioada urmatoare noi maxime care pot sa-l propulseze spre zona de 37.500 puncte (161.8% din ultimul trend descendent minor) si mai tarziu spre media mobila simpla de 200 zile aflata acum imediat deasupra nivelului de 40.000 puncte. Nu trebuie uitat ca indicele se afla in continuare intr-un trend saptamanal intermediar ascendent care poate sustinte testarea si chiar atingerea de noi maxime in perioada urmatoare.
Pe graficul zilnic de mai sus (scara aritmetica), indicele BETFI se inscrie pe un trend minor descendent si potential mediu descendent din urmatoarele motive:
- indicele pare ca si-a incheiat o cursa in 5 valuri pornind de la minimele din 2009 si pana la maximele din aprilie anul acesta. O corectie de tip ABC ar putea urma si care sa preceada continuarea trendului ascendent pe termen lung prin atingerea de noi maxime in a doua parte a anului.
- indicatorul de trend MACD bate la poarta zonei negative dupa ce a semnalat iesirea din trend ascendent.
Ca obiective de pret in situatia unei corectii avem:
- zona dintre 28.000 – 29.000 puncte unde apare linia de trend ascendent pornita de la minimele anului trecut precum si fosta rezistenta transformata in suport.
- zona dintre 26.000 – 26.500 puncte, proiectia de 161.8% a ultimului trend minor descendent, fosta rezistenta transformata in suport dar si in curand media mobila simpla de 200 zile in urcare.
- zona suport pe termen lung dintre 20.000 si 22.000 care include retragerea de 50% a trendului ascendent de la minimele de anul trecut pana astazi (21.000 puncte).
O trecere a indicelui peste zona de 32.500 puncte in perioada urmatoare (retragere de 61.8% a ultimului trend minor descendent) deschide calea unui test al maximelor si chiar noi maxime (cu obiectivele de pret de la graficul saptamanal), pastrand indicele intr-un trend intermediar ascendent sustinut de linia de trend ascendent aflata acum in zona de 28.000 puncte.
BUY la 32.500 cu SL la 30.000, TP1 la 34.500 cu RR (Reward/Risk): 0.8, TP2 la 37.500 cu RR: 2.00 si TP3 la 40.000 cu RR: 3.00.
SELL la 30.000 (sau la un test esuat al 32.500 pentru un RR imbunatatit) cu SL la 32.500, TP1 la 28.000 cu RR: 0.9, TP2 la 26.000 cu RR: 2.00 si TP3: 22.000 cu RR: 4.7.
Ambele scenarii nu au Reward/Risk exceptionale si au un grad mai ridicat de risc iar cat timp indicele se afla in zona 30.000 – 34.000 puncte ar fi indicata retinerea prudenta de la tranzactionare intr-un sens sau altul pana la aparitia unor rapoarte Reward/Risk mai atragatoare.
Dupa o stationare scurta in prima zona target, SNP a atins latura inferioara a celei de-a doua zone target inainte de a se retrage spre media mobila exponentiala de 50 zile. Aceasta retragere s-a facut pe volume in scadere ceea ce indica faptul ca un nou asalt al zonei target 2 este probabil in perioada urmatoare.
Sunday, January 24, 2010
Spre deosebire de alte actiuni romanesti care si-au continuat trendul ascendent pana in vara anului 2007, SNP a facut top la 0.6550 pe 3 februarie 2006 de unde incep trasate cicluri temporale de 34 saptamani pe graficul de mai sus. Se observa ca ultimul ciclu de 34 saptamani ce se incheie saptamana aceasta a fost unul de consolidare dupa miscarea de reversal din ciclul precedent, pretul osciland in jurul mediilor de 20 si 50 saptamani, fara a avea trend pe MACD dar situat in teritoriu pozitiv, cu volume in scadere si subperformant fata de indicele BETXT.
Dintr-o persepectiva a valurilor Elliot, putem emite ipoteza ca ne aflam in valul B (unul flat) sau inceputul valului ascendent C al miscarii corective ABC ce urmeaza celor 5 valuri evidentiate pe grafic ale trendului descendent precedent. De asemenea putem anticipa ca ultimul val C ascendent se poate finaliza in urmatorul ciclu temporal de 34 saptamani intre 29 ianuarie 2010 si 24 septembrie 2010.
Se observa ca pana acum pretul SNP si-a construit rezistenta la extensia Fibonacci de 161.8% (0.2900) a valului Elliot 5. In ipoteza inceperii (continuarii) valului ascendent corectiv C, zona target poate fi intre 0.3650 (fosta zona suport) si 0.3800 (50% retragere Fibonacci High – Low) sau 0.4000 (extensia de 261.8% a valului Elliot 5). Trebuie remarcata si SMA200 saptamanala ce coboara spre aceiasi zona target si poate constitui o rezistenta importanta precum si un magnet de pret. O iesire din consolidare sub suportul din jurul 0.2200 (varful valului Elliot 4 corectiv) are implicatii bearish importante.
Mai sus observam graficul SNP cu cicluri temporale de 55 zile pornind din 25 februarie 2009, ziua minimului de la 0.1120. Pretul numai ce a intrat in urmatorul ciclu temporal pe 18-01-2010 care va tine pana pe 05-04-2010. Pe parcursul ultimelor 2 cicluri pretul a fost intr-o consolidare dreptunghiulara intre 0.2430 si 0.2930 in care se da o lupta apriga intre tauri si ursi, nici unii nici altii neavand convingerea suficienta pentru a iesi din acest range. Free-float-ul de 8% al SNP este impartit probabil in special intre numerosi investitori institutionali puternici cu opinii contrare (dovada fiind numarul mare de rapoarte publicate despre SNP pentru clienti institutionali) care au determinat aceasta consolidare indelungata. Formatiunile de tip dreptunghiular, mai ales daca nu se produc dupa o perioada de scaderi sunt de natura conflictuala (intre tauri si ursi) si de consolidare si mai putin de indecizie. Din acest motiv exista o probabilitate mai mare de breakout in sus decat in jos, desi nu este exclusa a doua varianta.
Momentan pretul SNP (supravandut dupa Stochastic) se retrage de la rezistenta 0.2930 pe volume in scadere (bullish) catre suportul EMA50 si fosta rezistenta si potential suport de la 0.2700. Daca acest nivel de pret cedeaza, baza dreptunghiului si SMA200 ar trebui sa fie urmatorul suport in zona 0.2430.
Daca pretul SNP face breakout in sus din consolidare, in urmatorul ciclu temporal ce se incheie de Pasti prima zona target poate fi intre 0.3230 – 0.3430 (extensia Fibonacci 161.8% si 200% a inaltimii dreptunghiului). A doua zona target (unde se plaseaza si extensia Fibonacci 261.8% a inaltimii dreptunghiului) este cea identificata pe graficul saptamanal.
BUY la 0.3030 (3% peste latura superioara a dreptunghiului 0.2930), SL la 0.29, TP1 la 0.3430 cu RR (Reward/Risk): 3.08, TP2 la 0.3650 cu RR: 4.77, TP3 la 0.38 cu RR: 5.92.
BUY agresiv la 0.27, SL la 0.25 (-7%), TP1 la 0.3430 cu RR: 3.65, TP2 la 0.3650 cu RR: 4.75, TP3 la 0.38, RR: 5.50.
SELL la 0.2350 (3% sub latura inferioara a dreptunghiului), SL la 0.2500, TP1 la 0.2130 cu RR: 1.72, TP2 la 0.1930 cu RR: 3.63.