Archive for August, 2010

Wednesday’s Trading – 9/1/2010

Tuesday, August 31st, 2010

China PMI
The SPX futures jumped 5 points when China’s PMI report printed a bit better than expected at 9pm EST on Tuesday night. You can follow China’s economic reports on this site. The country code is CNY.

Note: I may add more notes (ha, ha) to this later.

Cloud Trading

Monday, August 30th, 2010

What’s that you say? You don’t have your automated trading strategies running in the cloud? WTF?

The SPX had its final-hurrah today up at 1060 just as my “cloud computing” indicator went purple (click to enlarge):

White bars indicate a neutral condition; yellow means caution, red means the rally is toast, and purple is a brick wall. If all four bars go red/purple, then the bulls are about to get tossed on the barbie.

The cloud indicator gives mean-reversion signals. So, I only use it during the middle of the trading day. The first and last hours of trading exhibit positive feedback more often than not, so trend-following strategies usually work better than mean-reversion strategies. However, the color of the cloud often gives a clue about the next morning. Here is how the octo-cloud looked at Friday’s close:

The market was poised to roll down from a stretched condition, and it was indeed weak first thing this morning.

Here it is at today’s close:

Light blue is a bullish signal; green is a buy signal, and navy blue means the market can’t really drop any more without some consolidation first. Even though the market was in a positive-feedback plunge into the close, notice that it flattened out after the cluster of navy blue bars at 15:20pm. It spent 25 minutes consolidating before beginning the next leg down.

If you went short at the close, chances are good that you are in for a bit of squeezing tomorrow morning. But this is a very short-term scalping indicator, and it only predicts the very near future.

I could tell you how this works, but then I’d have to kill you.

Monday’s Trading – 8/30/2010

Sunday, August 29th, 2010

On Friday, Ben Bernanke proclaimed that the Fed will not permit deflation:

“The FOMC will strongly resist deviations from price stability in the downward direction.”

TLT plunged 2.79% on the day (and TBT soared 5.65%). So, did Bernanke kill the bond bubble? Did the tidal wave of money that rotated out of stocks and into bonds reverse course on Friday?

Say a Prayer for James Toney

Saturday, August 28th, 2010

Why is boxing called “The Sweet Science”? Because it’s just slap-fighting with big fluffy mittens. Tonight we will see a demonstration about how boxing doesn’t prepare you for real-world fighting at UFC 118 when champion boxer James Toney gets a beating from a guy who knows how to fight for real, Randy Couture.

Normally, the UFC does not put on this kind of circus act. And that’s a good thing. But since boxing is a competitor to MMA for pay-per-view dollars, I think Dana White probably sees this as a great way to embarrass boxing and take market share.

Update: Well, I was right. Toney didn’t land a single punch, and was instantly taken-down, mounted, pummeled, and choked out.

The Real Gold Catalyst

Saturday, August 28th, 2010

Why has gold soared during this deflationary depression? Maybe it is forecasting that inflation is right around the corner, or that the USA will default and the dollar will lose its status as the world’s reserve currency.

But what if it’s something completely different? What if gold is really forecasting a military confrontation between the USA and China? The Chinese have been buying quite a lot of gold after all, and are challenging the USA in the South China Sea.

At the bottom of this BBC story, you can see a map showing China’s ridiculously aggressive claims of waters all the way down to Malaysia. And there have been reports of Chinese naval vessels exchanging fire with the locals.

Chinese officials have told the USA that the South China Sea is a “core interest”, which means an area they plan on conquering in the future, like Taiwan.

Further reading: Chess on the High Seas: Dangerous Times for U.S.-China Relations.

Note: As far as I can tell, Marc Faber is rooting for the Chinese. Since he lives in Thailand and has an office in Hong Kong, I suppose that he needs to kowtow to the regional power.