The Range Expansion Index is now available on MarketTurbulence.com. Go check it out.
I have made the RealCode available and hope that people can learn something by inspecting it.
At least there is one good thing associated with skyrocketing food and oil prices. More walking and smaller portions.
I added my ATR based trailing stop to MarketTurbulence.com yesterday. I provided the RealCode along with the chart so you can play with the conditions if you like. A reader was kind enough to send some real data from Arps’ Trender so I could directly compare the two. While it seems that there are some differences in the actual values of the stop points, most of my Trailer indicator buy and sell signals match up pretty well with Arps’ Trender. I will post the actual charts later.
Oil is having another down day and I’m wondering how the press could top their stupid headlines from yesterday’s 4% drop. In the meantime, I thought I might post something about the depressing post I saw over at Paul Kedrosky’s blog. Check out the Fast Money interview with Matt Simmons.
The Oil Bubble Trouble Bubble, Kedrosky Blog
One of Simmons big points is that everyone thinks that oil is in a bubble and expects it to tank at any moment. He says that someone needs to put a floor under the oil contract so that this mentality can be broken and real progress towards energy independence can take place. I see his point but wonder if that floor is already in place from hedgers. These are the people, like the airlines, who are freaked out and will be buying contracts at any dip, won’t they? Check out the quote from American Airlines.
Our company continues to be severely challenged by the fuel crisis that has afflicted our entire industry, and we expect these difficulties to continue for the foreseeable future,” Chief Executive Officer Gerard Arpey said in the statement.
I suspect the floor is in and that we will not see sub-$100 oil ever again. That doesn’t mean that I wouldn’t love to be short the OIH right now.
Thanks to the improvements made by Kuf in the latest Blocks release I have now completed a full TD Sequential chart. This chart is fully contained and easily shareable. I made a couple improvements in how I array the data, which makes the chart I show below fully backtestable (not a word, I know).
More improvement will be coming soon. I will also code up TD Combo.
The bearishness out there is insane!
I’m back and I’m just in time for all of the fireworks. I thought I might review some of my favorite breadth indicators and remind myself about why I’m expecting a bounce. While there are tons of cliches out there about how we should buy when there is blood in the streets, I always turn to the simple fact that the market never goes up forever and it never goes down forever. Here are a few ways to anticipate the change in trend and get a sense if blood is actually flowing in the streets.
First is to use some standard measure of a buy or sell signal. In this case I’m using my Trailer indicator and counting the percentage of S&P 500 stocks that are either on the bullish or bearish side of the line. Clearly the S&P is in oversold territory and looking back at history we can see that a bounce has occurred soon after reaching these extreme levels.
Using a similar technique, I can also use the triple exponential moving average cross that was featured in a recent Stocks and Commodities article. Here you can also see that we are due for a bounce.
Finally, I’m showing my favorite breadth indicator. This is a measure of how stretched the market it by displaying the difference in the number of stocks that are 15% below their 35 day high and 15% above their 35 day low. Again, we are very extended indeed.
For you brave souls out there, Goldman Sachs has completed a TD Sequential buy.
Every once and a while I read something that really pisses me off! Not your average irritation, mind you, I mean a real visceral, blood-boiling, punch-the-wall type of anger that only a politician can inspire.
Just take a minute and really think about the current state America finds itself in. I don’t think you would get an argument from anyone if you said that the bursting housing bubble has been at the heart of our troubles (duh). How did we really get to this point? How was it that Wall Street firms were able to give money to those who could only pay it back if housing continued to rise? Subprime loans existed in the past but were mainly offered to people who already had home equity. Why did these loans take a life of their own and grow into the next excuse for Geogre Soros to write another book about reflixivity?
The reason why these things happened is because the government allowed them through deregulation. Who was the sponsor of this fight to deregulate Wall Street? Yup, Sen. Phil Gramm of Texas. The ability to engineer credit-default swaps would never have happened without the bills written by the financial industry and pushed through by Sen. Gramm. Without these swaps, or insurace for bad bonds, the banks would never have ignored all of the risk they were taking on by giving money to unqualified borrowers. Here is a bit out of a recent editorial by Jim Sack in the News-Sentinal paper.
A few years back, the Wall Street insiders decided they needed congressional protection for their new “investment vehicles,” so they turned to the chairman of a banking committee in Congress, Phil Graham of Texas. They wrote a bill, and he carried it for them. The goal of the act was to free Wall Street from federal and state regulations. Wall Street was free, thanks to Graham, to build a system that was “off the books,” free from the scrutiny of, among others, state insurance regulators who would normally require sufficient reserves to cover losses. Without checks and balances, the system became unstable and has failed. Losses are not being covered. Instead, bailouts, at your expense, are in the works. Bear Sterns, among other financial concerns, has collapsed, and you, my fellow taxpayer, are paying through job losses, tighter credit to buy a home, much tighter credit to run a business, destabilized neighborhoods and much more to come, including higher taxes.
Also read a piece called “Foreclosure Phil”, by David Corn
So knowing all of this already I read that Sen. Phil Gramm, now economic adviser to John McCain, is telling people that we are not in a recession and that Americans whine too much. He says that 1% growth is not a recession (he obviously trusts government numbers) and that the recession is only in our heads. Well hell Sen. Gramm, it is no wonder why you are living with your head in the sand, as you are the one person most responsible for the mess America finds itself in. But hey, there hasn’t been any accountability in the last 10 years, why should it start now?
Since I do not have the time to offer my own meaningful posts, I’ll point you to some blogs that do. The recent post from Barry Ritholtz about confusing cause and effect is a must read. Posts like this are the reason why “The Big Picture” is my favorite financial blog. Pay particular attention to the prescient quote from T. Boone Pickens regarding G.W. Bush and oil prices. Its funny how the best ideas look so obvious when we look back at them.
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