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Crash Buyer

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  1. Does anyone use ETF's - specifically commodities/oil. Mind if I ask who you get them through?

    The main UK providers are ETF Securities (commodity ETFs), iShares, DBX trackers and Lyxor (equity ETFs). As HAM said any good online broker will allow you to trade them.

    My 2p regarding the issues you raised:

    - be very wary of any futures based commodity ETFs (the contango / option roll effect can wipe out the majority of any gains, trading is hard enough as it is). I'd go for an equity "style" ETF instead to avoid these issues (i.e. agri companies rather than agri commodity)

    - always go for physical if you can (precious & ind metals)

    - stick to the most liquid ETFs

    - you are exposed to exchange rates whether denominated in USD or GBP due to the underlying usually being priced in USD

  2. I've never made money shorting this market - I broke even on the last correction and I'm currently underwater on SUK2 although that's with the market action at the moment and am considering scaling out of shorts if my losses get much bigger. I didn't want to be long this market, sitting on too much cash or 100% in gold miners so I'm happy with my decision to still be short given the charts I've posted - you just know that the moment you decide to sell is going to be when the market rolls over and you crystallize a loss.

    I can sympathise - its been a frustrating few weeks. I'm down to a few core positions having offloaded all my trading longs over the past couple of months. Sitting in cash waiting for the inevitable correction. Seemed like the right thing to do and it's hard to regret it having been caught out last April.

  3. Love to see these kinds of comments - when you see people almost start to justify these high levels with this indicator or that indicator and then making comparisons with disimilar points in market history (hinting that we could still go higher) then you know a top must be in.

    The October 20, 1982 reading for example came 2 months after the secular low on August 9, 1982 before stocks went into a long 17-year secular bull market - a completely different point to where we are now which is over 23 months from the start of a cyclical bull market which is within an on-going secular bear market. Then there's the obvious difference in what price earnings ratio's were like between then and now - stocks were extremely undervalued back in 1982.

    I'm not a fan of simple moving averages either, but do occasionally use them - I much prefer exponential moving averages which put more emphasis on recent price data. Look what happens when you use the 200-day exponential moving average:

    I would say a top is in by this week or by Monday/Tuesday next week at the latest.

    Its hard to be bullish looking at that chart. Nice one CF.


    But there's always a reason to close up (chart from Bespoke).

  4. http://www.bespokeinvest.com/thinkbig/2011/2/9/market-breadth-check-up.html


    In the second chart we highlight the percentage of stocks in the index that are currently trading above their 50-day moving averages. At 80%, the reading has yet to move above levels it was at just a few weeks ago, and it's well below the 85%-90% levels seen during similar rallies seen last March/April and September/October. Bulls can take this to mean the rally has more room to run since breadth has yet to hit its prior highs, while bears will say that a market run-up with less stocks participating is an unhealthy one.

    Well I don't know either. But I've been taking profits for the past few weeks. Cash looks quite good right now.

  5. Not sure if anyone posted Jeremy Grantham's latest newsletter. I don't recall seeing it.


    Thanks for posting this RK, much appreciated. All good reading but I found this bit particularly interesting (page 2)

    As a simple rule, the market will tend to rise as long as short rates are kept low. This seems likely to be the case for

    eight more months and, therefore, we have to be prepared for the market to rise and to have a risky bias. As such,

    we have been looking at the previous equity bubbles for, if the S&P rises to 1500, it would offi cially be the latest in

    the series of true bubbles. All of the famous bubbles broke, but only after short rates had started to rise, sometimes

    for quite a while. We have only found a couple of unimportant two-sigma 40-year bubbles that broke in the midst of

    declining rates, and that was nearly 50 years ago. The very famous, very large bubbles also often give another type

    of warning. Probably knowing they are dancing close to the cliff and yet reluctant to stop, late in bubbles investors

    often migrate to safer stocks, and risky stocks betray their high betas by underperforming. We can get into the

    details another time, but suffi ce it to say that there are usually warnings, sometimes several, before a bubble breaks.

    Overvaluation must be present to defi ne a bubble, but it is not a useful warning in and of itself.

    Edit: Formatting

  6. This happened with the Greek riots a few months ago. Every single news channel is playing the live feed. What's the reckoning this blows over by next week?

    Although the piggys were the usual suspects and Egypt is not (the middle east is more scary than southern Europe, fear of the unknown, what "those extremists" might do etc), therefore maybe enough to justify an irrational panic and a correction.

    Say about 10%.

  7. Nadeem's latest update

    The above analysis is concluding towards probability favouring continuation of the trend higher to the Dow 12k target by early Feb, when the market can be expected to consolidate the advance of the past 6 months and enter into a significant correction that at this point suggests a 10% decline, so tighten the stops and take the ongoing rally to bank profits which is the number one AIM of trading / investing!


  8. Do people on here rate Walayat? I used to read the Market Oracle a great deal and it taught me a lot, but I am unconvinced by him in general. I think he is an excellent chart reader, and has called it right thus far, but I cannot help feeling he does not really understand the underlying mechanisms of what he is seeing and I don't much like his writing style, which often verges on the shrill.

    Nadeem did OK last year, the Dow forecast was pretty good. Only concern was a flip-flop in the short-term updates around the April top, but the annual forecast wasn't bad (a bit on the high side but the trajectory was broadly correct, with mid-year weakness and a late rally). Agree with you comments on tone, not exactly academic in style, but I don't mind. Its the forecast that counts.


  9. It is times like these where I value Jack's Wrap commentary where he gently encourages you to wait for that price signal rather than trying to pre-empt it.


    And of course, they will all be able to say they were right....eventually.

    Agreed, who knows how far this can go? Not long ago, S&P 1300 looked like it was weeks away. IMO it's worth missing the first few points of a move if it results in improved risk/reward (rather than guessing, which is the alternative).

  10. Today I think you are right.

    Just a little anecdote for people.

    I invested a large portion of funds in LUK2 at the very end of November. My plan was just to hold on and hold on regardless of what the extreme levels of sentiment said and wait and wait for the market to finally correct and to take a little loss on the down side of the curve - all the while knowing where we are in terms of overbought conditions and extreme levels of sentiment.

    However, the night before last I had an atrocious night's sleep and during the course of the day I felt increasingly weary and agitated and my mind finally cracked and said 'oh just sell up - you've had a good gain' - so I did and sold up at 6030.

    This sort of mental effect is not dissimilar to trying to give up smoking - you can be good for weeks and weeks but it only takes a moment's weakness and before you know it you're puffing on a fag (I eventually managed to finally give up smoking about 12 years ago now).

    I had a great night's sleep last night and am regretting my actions of the day before. The market is acting bullish, it is up versus my exit and we are coming into earnings season where results should be very good (although expectations are very high).

    Now - should I just simply reverse the actions of the day before and pretend it never happened? But would I normally invest here. No I wouldn't - I would just be trying to reverse the 'mistakes' of yesterday. (note it is only a mistake in the sense I changed my strategy, not necessarily that I will do better or worse).

    So p*ssed off with myself today.

    This goes to show that a strong mind is required for this game. Little alcohol, lots of sleep, healthy body leads to better moods and better, less erratic decisions.I have a tendency to drink too much too and am cutting down during the week. I think this is a much ignored but important area of trading. How mood affects your decisions.

    I couldn't agree more - the 'internal battle'. Its interesting how many successful traders say they sleep at 9pm, wake at 5am and exercise for an hour, no alcohol or smoking etc. I suppose a bit of yoga would help too!

    I noted in a previous post you only speculate tax efficiently - this goes for LUK2 as well?

  11. Well here's my attempt to hone in on what I think is the 5th wave, which is just another smaller fractal of the current 5-wave structure. If wave (v) is equal to wave (i) then we've maybe got 4 more days to make that pop higher and hit the all important 1300 level on the S&P - I'm showing the Dow here, because the wave structure seems better plus I'm using a 60-minute chart.

    I've only recently started looking at EW myself, but not really utilised it properly yet.

    Also, the article I posted a few days ago from Quantifiable Edges would reinforce your forecast (historic data suggests no upside edge to mid/late Jan).

  12. My own work was originally calling for a peak between August 27, 2010 and September 3, 2010 but that was before I really discovered cycles and had learnt about one of the most powerful cycles - the 4-year cycle. After the 4-year cycle made it's low back in the summer of last year I realised there would be a higher peak further out because the cumulative advance-decline line had made new highs and the decline would create a roughly equal advance since we were still in a cyclical bull market. Classical Dow Theory still hadn't given a primary trend change (or sell) either.

    When I saw Nenner saying that we would peak by August 2010 after we had made those lows then I was confident he was wrong, since there's usually a divergence between the two at a peak (in 1987 the cumulative A/D wasn't making new highs although stocks were which is how a few people saw it coming). In early August 2010 the cumulative A/D line broke the April highs which to me meant we would definitely get back to the April highs in price.

    Here's what he said

    Since I've got into using cycles my accuracy has got better - you can kind of know where a cycle low is going to come and when a 4-year cycle low can be expected. If you have a projection for a peak that's also a cycle low then something is obviously wrong - with the current market action there appears to be at least 2 cycles still in play which are keeping the market up, despite the extreme sentiment measures.

    I'm partly short since the 5th (FTSE 6086) and am hoping we get a pop to new highs later in the week to add the rest - there's a Bradley turn date on January 16 (Sunday) so if the sentiment measures stay extreme then there's a chance the turn comes then giving a correction a bit like the one we saw in January/February 2010.

    My own gut feeling is also that the 5 Jan top will be surpassed to draw in more 'dumb money' before the correction begins. Particularly as the general consensus amongst experts was that a correction was imminent following the Santa rally (so why not exploit the consensus - you know who).

    Reporting season (from Bespoke)


  13. http://ftalphaville.ft.com/blog/2011/01/07/452196/december-payrolls/

    I presume the upward adjustment for previous months caused the rate to fall more than expected.

    Of course the immediate reaction is based on the headline number for the current month.

    Be interesting to see whether the market adjusts its opinion a little by the close of play. This should give us a good insight into the state of the market.

    S&P down just 2 points at the close. That's pretty bullish considering payrolls missed consensus by over 30%.

    Edit: Formatting

  14. i think it will be a fail myself, but wont do too much damage, what i think is going to bring about the majority of the 8-10% decline being looked for is you guys getting a rate rise next week, may only be 25 points but it would be more than enough to spook the markets and would explain the potential inside selling of gold and reversal on the GBP/CHF rate a couple of days ago at 1.45

    My initial reaction is also fail, but then again, who made the consensus (and why ;) ) and how bullish is it really?

    HAM usually posts these below, but here it is anyway.



    Most instances showed a decent amount of runup prior to the market rolling over. In fact the last five instances, starting in 2002 and ending in 2010, all saw the market rise 1%-3% before the move down ensued.

    Edit: Quote added

  15. How much of this thread was clocked up in work hours?

    I'll start with my contribution of almost 100% and you can average down from there.

    Mine was too, but I've changed jobs since and have a bit more to do now. :P

    Anyone here lucky enough not to be a wage slave (I think there are one or two entrepreneurs out there)?


    Edit: Post tidied up

  16. Happy New Year.

    As much for my benefit as anyone else's, I'm posting the following (kind of a new year's resolution), although these are aimed mainly at day traders.


    The 22 Rules of Trading

    I was looking over some old posts at the old website this morning and rediscovered this little gem offering the 22 Rules Of Trading according to Dennis Gartman:

    Never, under any circumstance add to a losing position! Nothing more need be said. To do otherwise will eventually and absolutely lead to ruin!

    Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.

    Capital comes in two varieties: mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two.

    Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.

    The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is “low.” Nor can we know what price is “high.” Always

    remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed “cheap” many times along the way.

    In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.

    Markets can remain illogical longer than you or I can remain solvent. Illogic often reigns and markets are enormously inefficient despite what the academics believe.

    Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds… they shall carry us higher than shall lesser ones.

    Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect “gaps” in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.

    Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In “good times,” even errors are profitable; in “bad times” even the most well researched trades go awry. This is the nature of trading; accept it.

    To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market’s technicals. When we do, then, and only then, can we or should we, trade.

    Respect “outside reversals” after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more “weekly” and “monthly,” reversals.

    Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.

    Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen… just as we are about to give up hope that they shall not.

    An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.

    Establish initial positions on strength in bull markets and on weakness in bear markets. The first “addition” should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.

    Bear markets are more violent than are bull markets and so also are their retracements.

    Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are “right” only 30% of the time, as long as our losses are small and our profits are large.

    The market is the sum total of the wisdom and the ignorance of all of those who deal in it and we dare not argue with the market’s wisdom. If we learn nothing more than this we’ve learned much indeed.

    Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.

    The hard trade is the right trade: If it is easy to sell, don’t; and if it is easy to buy, don’t. Do the trade that is hard to do and that which the crowd finds objectionable.

    There is never one cockroach!

    All rules are meant to be broken: The trick is knowing when and how infrequently this rule may be invoked!

    7 things to do to improve

    In celebration of my 7th anniversary, I would like to share with you 7 simple things I think you can do to improve your performance in the markets for the remainder of the year:

    Stop believing the market is logical – The market is primarily moved by both perception and emotion far more than reality or logic. Trade what you see, not what you think you should or want to see. There’s a reason why most people stink at trading as they fail to understand that markets are often illogical and influenced by emotion rather than reality. Whenever possible, try to adopt and hold an “opportunistic” mindset rather than a dominant bullish or bearish posture.

    Concentrate your holdings – If you have more than 5 to 10 positions in your portfolio, you are hindering your performance without even realizing it. With the availability of ETFs now, you can diversify as much as you need. Likewise, even if the best of environments, you probably should only be able to find a handful of really good opportunities that offer the most upside with the least amount of risk. Frankly, if you are able to find more than that, then you really don’t understand what it means to find a true low risk/high reward opportunity!

    Stop chasing performance – The very best opportunities before you now are in stocks and sectors that no one is talking about or even knows to look at. Likewise, stop looking to chase the hot hand of others. The media and far too many investors are always focused on what is working well now and who is making the most money while the best opportunities are frequently elsewhere. Go where the market is quiet and which no one is interested in and you’ll find more opportunity. In addition, being patient when you don’t find anything that really fits your eye is more than half of the battle.

    Turn off the noise – Information may be the world’s most precious commodity, but 99% of the information at your disposal is not. In today’s age of real-time information, opinions, analysis, etc. it is my strong belief that information overload and noise is hindering performance far more than it is helping. The first step is to stop watching all TV and to place severe restrictions on all media. In addition, to perform better this year you must stop wasting time on seeking out advice and opinions that only serve to confirm what you really want to hear in order to justify your positions. If anything, what time you spend in social media should be devoted to looking for ideas that challenge your positions and/or offer unique insight you can really learn something from.

    Understand your limitations and strengths – Not everyone can be a short-term trader nor do they have to be. The mistake that many make is copying another’s strategy that doesn’t fit them nor one they truly understand. This is why they also readily abandon those strategies when the pressure is on which really hurts performance. So, figure out how much time you can devote, what skills you already have, and formulate a strategy that works best for you based on that. Keep in mind also that the best strategies are often so simple that you should be able to explain how they work to those who aren’t intimately involved in the markets.

    Accept you will make many mistakes – Those who learn how to minimize the damage when they are wrong and who readily own up to the mistakes they make will do far better over the long haul. Making mistakes is a part of this game, but knowing how to handle them is everything. Likewise, if you attach your ego to your portfolio’s performance you are destined for failure. The market absolutely loves to kill those with big giant egos and who look for the markets as a place to prove how smart they are. Markets chew and spit out these folks routinely for good reason and they will continue to do so at every available opportunity.

    Become a specialist, not a jack of all trades – You don’t have to know everything about everything to do well. In fact, those who focus on a specific setup, chart pattern, program pattern, industry group, or even just trade only one ETF frequently perform far better than those who know a lot about a lot of things but have no real discernible edge. I run into people all of the time who know a great many things, but are not an expert of any one thing and that is to their clear disadvantage. So, find something that interests you more than anything else and concentrate all of your time and focus on that one thing. That path will lead you to developing an clear edge that will provide huge profits to you down the line.

  17. I'm not in total agreement with all that Adam Hamilton does (which is healthy) since I firmly believe in the long Kondratieff wave which I believe is currently running at around 71 years. The deflationary K-winter is the longest part of the wave at around 20 years (US 1929 to 1949 and Japan 1989 to 2009) as it's unwinding a lot of the massive debts and imbalances that have built up over previous cycles.

    So the first half of the long wave is two shorter cycles - a K-spring (secular bull) and a K-summer (secular bear) lasting around 33 years. This is then followed by two longer cycles - a K-autumn (secular bull) and a K-winter (secular bear) that together last around 38 years.

    So I have the secular bear market that started in early 2000 ending at some point in 2019 - having studied the wave patterns from 1929 to 1949 and 1989 to 2009 extensively then I'm convinced that we will shortly begin a new cyclical bear market lasting 2 years into around April/May 2013 to be then followed by a 4 year cyclical bull market into 2017. The final 2 years from 2017 to 2019 I've not studied enough as it's not so clear and so far off - looks to be a lot of chopping about a bit like 1980 to 1982 was with no clear trend.

    In the medium term then I'm sure a top is almost in and that we will make a bigger correction into mid-February before making a failed re-test in early April - that's just what all my work is suggesting, but I've learnt not to be wedded to a single outcome and be ready to change if things look different.

    Your 71 year wave is longer than the orthodox 50 years, which doesn't really fit with the evidence nowadays anyway (although it fitted OK in the 1800s). So why not indeed?

    Personally I'm not making any predictions about the medium term as I was sure that the HPC was imminent for most of the past decade!

    In the short term, I do expect a minor correction in the next few weeks but I'm just going with the flow whilst the uptrend continues.

  18. I did read that one and it was interesting to hear him say those things - I guess he's right. I certainly feel more confident about the future now that I have the tools to protect and even grow my wealth whatever the corrupt thieves in power do to destroy the living standards of many in this country (particularly the poor and elderly) by causing inflation and keeping rates low.

    I agree, not exactly season's greetings and goodwill to all men but I found it a good pep talk from the coach. Up and at 'em!

    Here's to another year of learning and getting better at doing this.

    I can't see it - it's a different part of the long wave and the 1970's was also an inflationary K-summer. There are similarities between the crash in '74 and the wave pattern out of it into 1976 where you get 3 peaks on the S&P before another decline into 1978 and I'm expecting the top to play out in a similar fashion:

    1st peak July 14, 1976 (lowest)

    2nd peak September 21, 1976 (highest)

    An 8.4% correction and then a failed higher high

    3rd peak December 31, 1976

    Compare that with today

    1st peak November 5, 2010 (lowest)

    2nd peak January 3, 2011? (highest)

    An 8.5% correction with the S&P back down to around 1150/1160 and FTSE 5500?

    3rd peak early April 2011 (failed higher high)

    1st peak to 2nd peak is around 2 months/2 months, 1 week

    2nd peak to 3rd peak is around 3 months/3 months, 1 week

    This is how I see it panning out:

    Cycles work and other stuff I do is pointing to a mid-February low plus there is also a Bradley turn date on February 17, 2011 and a full moon on February 18, 2011.

    Thanks CF. For comparison, how do you see the medium term panning out?

    Adam has the following:


    Stock markets move in great 34-year cycles I call Long Valuation Waves. The first half is a 17-year secular bull, like we saw from 1982 to 2000. The second half is a 17-year secular bear, like we’ve been experiencing since 2000. Within these sideways-grinding secular bears, smaller multi-year cyclical bulls and bears oscillate. Check out my essay delving into these critical cycles. We are in one such mid-secular-bear cyclical bull today.

    Cyclical bulls within secular bears average 3 years in duration, but can be as short as 2 or as long as 5. Yet our current one was only 13 months old in late April when the stock markets peaked before their recent correction. This bull was far too young to give up its ghost then, which strongly suggests it is very much alive and well today.

    Therefore a secular bear for 2000 to 2017, with the current cyclical bull top at some point during 2012 to 2014 around the previous high (S&P 1500).

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