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I picked Deep Throat!

Tuesday, May 31, 2005 | 05:46 PM

A reader reminds me of something I had written at essays and effluvia, our sister (read: goofy) blog.  Back in February, I picked who was Deep Throat!

I had forgotten all about it.

Considering I was 11 when Watergate took place, I chalk up this astounding  act of prescience tot he fact that I had selected one person from a list of less than a dozen -- hence, it was only good luck.

Tuesday, May 31, 2005 | 05:46 PM | Permalink | Comments (0) | TrackBack (1)
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Looking for the Next Catalysts

Tuesday, May 31, 2005 | 12:49 PM

As the markets are digesting their most recent gains off of the April lows, we are looking at potential catalysts – some obvious, some less so – which will allow the markets to break out of their recent trading ranges.

A few items come to mind. While some are impossible to time – a Hedge fund blow up, terrorist activity, Avian flu outbreak outside of Asia, significant Iraqi developments – others are potentially more “game-able.” We’ll concentrate on those catalysts where we at least have a fair chance of potentially forecasting market-moving outcomes:

· Non-Farm Payrolls: The most significant economic report of the week, if not month. While most investors took solace in April’s NFP Report, we are in a distinct minority who view April data as an outlier. This is primarily due to the BLS’ Birth/Death adjustment. April 2004 saw a similarly disproportionate impact. As such, a weaker than expected release may force investors to reconsider their expectations of an ongoing Goldilocks economy; A sell off may test resolve and help form the next substantial bottom;

· Oil relief?: Last year, we noted that our upside target for Oil was $57-59; After reaching that level, Oil pulled back towards $47, where support was plentiful. We now expect a move back to the old highs – and beyond – towards $60-62; We do not believe that rising stocks of sour crude with its lower gasoline yields and environmental issues will provide much in the way of relief to Summer drivers;

· Housing bubble bursting: We remain in the distinct minority in believing that housing is not a bubble – at least, not yet, anyway, by a technical definition of what a bubble actually is. That doesn’t mean a bubble can’t or won’t form, it simply suggests that this is not an immediate danger to the market anytime soon. (More on this issue tomorrow).

· Microsoft EU problem: While the DoJ has let Microsoft off the hook, their European equivalent never seems to let an opportunity go by to administer a spanking to Gates & Co. Given the company’s weighting in SPX, Dow and NDX, a severe punishment, while a low probability event, could have a significant impact;

· Euro Weakness: The French “Non” vote will pressure the Euro versus the Dollar. Given that the weak dollar hasn’t done diddley for US exports, we are clueless as to the impact that this development will have. Color us confused at best.

Our expectations remain for a tradable low in June.

We advise using pullbacks to s l o w l y build long positions in higher Beta sectors: Tech, Energy, Semis.


UPDATE: May 31, 2005 9:31pm
On the way home tonite, I got to thinking about the next Fed meeting at the end of June . . .  Any signal from the Central Bank that the tightening cycle is about to pause potentially launches a moonshot.   

Tuesday, May 31, 2005 | 12:49 PM | Permalink | Comments (6) | TrackBack (0)
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Chart of the Week: A/D with Volume 2 x 21-day MA

Tuesday, May 31, 2005 | 12:38 PM

Internals continue to improve from oversold conditions but a pause is likely. NASDAQ improvement suggests that after some digestion (backing and filling), a summer rally can work higher. As such, expect choppy trade. Improving internals suggest an upside resolution of the trading range.

Advancers-Decliners with Volume  2x 21-day MA
click for larger graphic

Source: Kevin Lane, Redwood Technimentals

The 10-day average (blue line) of the net above average volume advancers (above average volume stocks trading up minus those trading down) has moved back above the zero line suggesting that more stocks are trading up on big volume than down - this is a positive change in a conditional element.

Random Items:

Yield Curve, More Than Shapely Body, Has a Brain

Trojan horse also hit major int'l firms

The real problems with $50 oil

Bullish on housing, no letup in sight

It's Not a Bubble Until It Bursts

Why smart people defend bad ideas

11 steps to a better brain

Quote of the Day:

“Every time everyone is talking about something, that is the time to sell."
-George Lindemann


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Don't Buy Housing Bubble Propaganda

Tuesday, May 31, 2005 | 06:03 AM

The latest subscription only Real Money column, Don't Buy Housing Bubble Propaganda, is now available on Yahoo (no subscription required).

In writing it, I decided to forget everything I thought I knew, and look at housing from scratch.  Consider the factors that make Real Estate very different than stocks. Lose the assumptions, check out the numbers driving Real Estate, and see if Housing is truly the bubble everyone claims it to be.

Turns out there's much less of a bubble than commonly believed by many people believe. While anecdotal evidence of regional excesses are interesting, they doesn't mean we are about to see home prices get cut in half (or worse) over the next few years.

There are three key drivers hardly discussed by pundits opining on the U.S. housing market "bubble":

1)  Purchase prices don't matter to buyers -- monthly payments do;
2)  US has the fastest growing population of industrialized nations;
3)  "Only 3% of all buyers sell their home in a year or less," a survey found.

These issues, taken together, suggest that while Real Estate may be an extended asset class (i.e., two  standard price deviations above historical trend) that doesn't maeke it a bubble.

Of course, its interesting to note that a Playboy bunny gave up her modeling career to go into real estate speculation (mentioned previously here), it doesn't mean the end is nigh.

Now if I can only figure out how these columns end up at Yahoo . . .


Don't Buy Housing Bubble Propaganda
Barry Ritholtz
RealMoney by TheStreet.com, Thursday May 26, 2:04 pm ET


UPDATE June 12, 2006 9:39am

I just noticed that the Yahoo page expired; The full article is after the jump . . .


Continue reading "Don't Buy Housing Bubble Propaganda"

Tuesday, May 31, 2005 | 06:03 AM | Permalink | Comments (10) | TrackBack (1)
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Summer's almost here!

Monday, May 30, 2005 | 09:56 AM


via The New Yorker

Monday, May 30, 2005 | 09:56 AM | Permalink | Comments (0) | TrackBack (0)
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John Murphy's Ten Laws of Technical Trading

Monday, May 30, 2005 | 09:00 AM

StockCharts.com's Chief Technical Analyst, John Murphy, has created another set of trading rules:   "Ten Laws of Technical Trading:"

"Which way is the market moving? How far up or down will it go? And when will it go the other way? These are the basic concerns of the technical analyst. Behind the charts and graphs and mathematical formulas used to analyze market trends are some basic concepts that apply to most of the theories employed by today's technical analysts."

The following are John's ten most important rules of technical trading:

• Map the Trends
• Spot the Trend and Go With It
• Find the Low and High of It
• Know How Far to Backtrack
• Draw the Line
• Follow That Average
• Learn the Turns
• Know the Warning Signs
• Trend or Not a Trend?
• Know the Confirming Signs

Note: All of the following is the work of John Murphy (not me)

1. Map the Trends

Study long-term charts. Begin a chart analysis with monthly and weekly charts spanning several years. A larger scale "map of the market" provides more visibility and a better long-term perspective on a market. Once the long-term has been established, then consult daily and intra-day charts. A short-term market view alone can often be deceptive. Even if you only trade the very short term, you will do better if you're trading in the same direction as the intermediate and longer term trends.

2. Spot the Trend and Go With It

Determine the trend and follow it. Market trends come in many sizes -- long term, intermediate-term and short-term. First, determine which one you're going to trade and use the appropriate chart. Make sure you trade in the direction of that trend. Buy dips if the trend is up. Sell rallies if the trend is down. If you're trading the intermediate trend, use daily and weekly charts. If you're day trading, use daily and intra-day charts. But in each case, let the longer range chart determine the trend, and then use the shorter term chart for timing.

3. Find the Low and High of It

Find support and resistance levels. The best place to buy a market is near support levels. That support is usually a previous reaction low. The best place to sell a market is near resistance levels. Resistance is usually a previous peak. After a resistance peak has been broken, it will usually provide support on subsequent pullbacks. In other words, the old "high" becomes the new "low." In the same way, when a support level has been broken, it will usually produce selling on subsequent rallies -- the old "low" can become the new "high."

4. Know How Far to Backtrack

Measure percentage retracements. Market corrections up or down usually retrace a significant portion of the previous trend. You can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retracements of 38% and 62% are also worth watching. During a pullback in an uptrend, therefore, initial buy points are in the 33 38% retracement area.

5. Draw the Line

Draw trend lines. Trend lines are one of the simplest and most effective charting tools. All you need is a straight edge and two points on the chart. Up trend lines are drawn along two successive lows. Down trend lines are drawn along two successive peaks. Prices will often pull back to trend lines before resuming their trend. The breaking of trend lines usually signals a change in trend. A valid trend line should be touched at least three times. The longer a trend line has been in effect, and the more times it has been tested, the more important it becomes.

6. Follow that Average

Follow moving averages. Moving averages provide objective buy and sell signals. They tell you if existing trend is still in motion and help confirm a trend change. Moving averages do not tell you in advance, however, that a trend change is imminent. A combination chart of two moving averages is the most popular way of finding trading signals. Some popular futures combinations are 4- and 9-day moving averages, 9- and 18-day, 5- and 20 day. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day moving average also provide good trading signals. Since moving average chart lines are trend-following indicators, they work best in a trending market.

7. Learn the Turns

Track oscillators. Oscillators help identify overbought and oversold markets. While moving averages offer confirmation of a market trend change, oscillators often help warn us in advance that a market has rallied or fallen too far and will soon turn. Two of the most popular are the Relative Strength Index (RSI) and Stochastics. They both work on a scale of 0 to 100. With the RSI, readings over 70 are overbought while readings below 30 are oversold. The overbought and oversold values for Stochastics are 80 and 20. Most traders use 14-days or weeks for stochastics and either 9 or 14 days or weeks for RSI. Oscillator divergences often warn of market turns. These tools work best in a trading market range. Weekly signals can be used as filters on daily signals. Daily signals can be used as filters for intra-day charts.

8. Know the Warning Signs

Trade MACD. The Moving Average Convergence Divergence (MACD) indicator (developed by Gerald Appel) combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line. Weekly signals take precedence over daily signals. An MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It's called a "histogram" because vertical bars are used to show the difference between the two lines on the chart.

9. Trend or Not a Trend

Use ADX. The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or a trading phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.

10. Know the Confirming Signs

Include volume and open interest. Volume and open interest are important confirming indicators in futures markets. Volume precedes price. It's important to ensure that heavier volume is taking place in the direction of the prevailing trend. In an uptrend, heavier volume should be seen on up days. Rising open interest confirms that new money is supporting the prevailing trend. Declining open interest is often a warning that the trend is near completion. A solid price uptrend should be accompanied by rising volume and rising open interest.


Technical analysis is a skill that improves with experience and study. Always be a student and keep learning.

- John Murphy

Monday, May 30, 2005 | 09:00 AM | Permalink | Comments (0) | TrackBack (0)
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Link Fest

Monday, May 30, 2005 | 08:16 AM
Daily News
Boston Globe | Chicago Tribune | Christian Science Monitor | CNN | Los Angeles Times | New York Post | New York Times | Newsday | San Jose Mercury News | USA Today | Washington Post | Major Metros | Other Newspapers |

Business News
Barrons ($) | CNNmoney | Crain's: Chicago | Crain's: NY | Financial Times | Investor's Business Daily | Journal of Commerce | Kiplinger | Law News Network | Singapore Business Times | Wall Street Journal ($)

International News
BBC | Globe and Mail | Herald Tribune | Le Monde | London Times | World Press Review | Africa | Asia | Asia Pacific | Canada | Central America

Online Television News

Business Magazines
Business 2.0 | Business Week | CFO | Context | Darwin Magazine | Economist | Fast Company | Forbes | Fortune | Inc. | Newsweek | Smart Money | Time | US News | Wired

Business Knowledge
Harvard Business Online | INSEAD | Knowledge @ Wharton | Strategy & Business | Book Reviews: CEOExpress Book Reviews | McKinseyQuarterly: Strategy | E-Commerce | Marketing | Operations | Finance | Technologies | WhitePapers: Technology White Papers

Tech Magazines & News
AtNewYork | CIO | C-NET | ComputerWorld | First Monday | Intranet Journal | MIT TechReview | SlashDot | ZDNet

Time & Weather
Forecasts: Intellicast | Weather Channel | Yahoo Weather | Advisories: Airport Delays | Biz Travel | Time: Naval Clock | Perpetual Calendar | U.S. Time | World Time Zones | Of Interest: Nat'l Buoy Center | Weather Images

AP Wire | AP Sports | Bloomberg | Google News | Google News Alerts | NPR | Reuters | UPI | VentureWire | PressReleases: Business Wire | PR Newswire | International: AP Wire Int'l | Canada Newswire | Politics: New!Inside Politics | The Hill | Off Beat News: Drudge Report | Fark.com | Smoking Gun

Internet Search
About.com | Alta Vista | Google! | Teoma | Yahoo | Vivisimo | WebBrain | Government Portals: State Resource Center | US Government | Lists: Fortune 500 | Global 500 | Private 500 | Inc. 500 | The List of Lists | Search Help: Invisible Web | How best to use a search engine | Search Strategy |

Website Locator/Registration
Country Domain Codes | Domain Registration | InterNIC 'Whois' | Register.com
Go Daddy Registrar

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Weekend Wrap Up

Sunday, May 29, 2005 | 06:00 PM

Add weatherman to the list of prognosticators (including economists and strategists) who often get it wrong. Despite the forecasts for a rainy weekend in the Northeast, the weather is glorious, and (as of Saturday morning) I’m hitting the beach -- before the weathermen end up being right after all.

Before I run, there are a few fascinating stories worth pursuing -- print ‘em out, they make for good beach reading!

The Stock Trader's Almanac has created an interesting new feature:  the Almanac Investor ETF Lab. They will be chronicling the developments and tracking the growth of the ETF universe.

Jeff Hirsch was kind enough to give me permission to post the first installment of this (PDF), which you can download for free. (Stock Trader's Almanac is by subscription).  Their dissection of the universe of ETFs by sector, trading volume, market cap and performance is terrific. Fascinating stuff.

Half of New Jobs Are Real Estate Related
I'll bet that title got your attention? Its barely an exaggeration: From the end of 2001 recession until April 2005, 43% of new private sector jobs were housing industry related, according to Northern Trust. From 2001 to the start of the rate hiking cycle, it was over half.  Pick your jaw up off the desk and go read all the details.

• Quite a few Hedge fund stories this week: 
First, the WSJ and the NYT look at each side of the coin of hedge funds. The Journal looks at the Demand for funds, while the Times explains why the Supply is there. (If you lack access to either, go here).

• Hedge fund Performance Numbers: 
Two looks -- One from Barron's, which notes the relative weak fund performance as of late . The second, from Cogent Hedge, which provides an interesting table chock full of data on style (and sub-style) performances. (Same routine: click here).   

•  Prediction markets:
Readers know I have reservations about placing too much trust into things like Tradesports and IEM. But if you want to start researching Prediction Markets, you can't do better than Chris Masse’s prediction market vortal. Enormous amounts of data and links on the subject.

•  Blogs blogs blogs:
You may be sick of hearing about them, but I suspect the top ain't in yet. A (free) WSJ story discusses why Measuring the Impact of Blogs Requires More Than Counting is worth a few minutes, C/Net asks whether Blogs are the next big thing for advertisers

The Greenspan Conundrum 
John Mauldin has some choice words for the Fed chair. I do not think he and the Chai see eye to eye on inflation, bubbles and the like. So too for Jim Jubak, who notes that The Fed Is All Wrong About Inflation.

• Wonk Heaven:
Finally, the policy wonks out there might like to read the most recent remarks by Vice Chairman Roger W. Ferguson, Jr. To the Seventh Deutsche Bundesbank Spring Conference, Berlin, Germany on Asset Prices and Monetary Liquidity. Also, have a look at this discussion on Global Imbalances: A Contemporary Rashomon Tale with Five Interpretations...

Lastly, mad props to Paul Kedrosky, who's RM weekend link fest is always good fun (and the inspiration for my Saturday CC posts). Be sure to check out Infectious Greed, his musing about the money culture.

Sunday, May 29, 2005 | 06:00 PM | Permalink | Comments (1) | TrackBack (0)
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10 Principles of Being Rich

Sunday, May 29, 2005 | 08:34 AM

K_10prin_1Ever come across an odd but interesting website, that you just don't know what to do with? That was my experience with Fiscal Agents.com.

Since I started writing the Apprenticed Investor series, I've been researching various methodologies for planning simple planning strategies. Not the actual plan, mind you, but ways to get people to sit down and execute one. This strategy is as good as any other -- if it forces you to do just that:


1. Focus on Time

2. Time as a Friend - as a Foe

3. The Frugal Investor

4. Setting Goals - Recognizing Values

5. Developing a Blueprint

6. The importance of Insurance

7. Building a Portfolio

8. Diversification and Asset Allocation

9. Monitoring / Buy and Hold

10.Estate Planning

Each of these titles is a chapter in a book, and is available on line for free here.


The Ten Principles Of Being Rich
Fiscal Agents.com


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Trading Mistakes

Saturday, May 28, 2005 | 10:10 AM

Nick Proffitt has a nice overview of classic Trading Mistakes.

-- Letting small losses turn into large losses.
-- Refusing to take a loss at all.
-- Overbetting.
-- Bottom fishing/Catching falling knives.
-- Averaging down.
-- Shorting bulls and buying bears.
-- Confusing the company with its stock.
-- Falling in love with a "story."
-- Following the leader.
-- Buying IPOs.
-- Finding the Holy Grail.
-- Overtrading.
-- Excessive tape watching.
-- Being undercapitalized.
-- Letting the tax tail wag the stock dog.
-- Relying on gurus.
-- Thinking this market stuff is easy.
-- Thinking rather than looking.

That's just the list; its fully explained at Decision Point.

Why is common sense so uncommon? 

Saturday, May 28, 2005 | 10:10 AM | Permalink | Comments (0) | TrackBack (1)
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