to accept is always not a way to learn. As bill gates said during his speech on harvard commencement on 1/10," I have realized that, to be odd can't guarantee your success" , a word to point out no people can be right all the time. And based on my experience to understand the big market, I strongly believe to learn from yourself or to overcome the barrier that stop yourself from further improvement is the trick to make your right. I have been writing the market review for about a year since my first attempt on STOCK board last year, and really enjoy sharing my view with all the friends here. All of the methods I have been using to predict the market have been totally introduced to all of you, without any reservation. And it is almost time for me to calm down and think about the new strategy to invest now. Carol has asked me so many times that when I can start to focus on the insider buying strategy? yes, I have to admit that not much time I have if I continue to monitor the market as what I am doing now. Therefore, to allow my focus onto new strategy development, someone must take the responsibility of keeping us posted about the market performance. Many friends here have improved a lot or have known a lot about market prediction such as bobobobo dude, brisk,bobby,auv and skiii. Carol, Fanzhi are both improving their technique. I would think it would be better that most of us contribute your thinking about market each week or daily here so that we all can benefit. Would it be a good idea?
Wait for you guys answer.
18 comments:
Thanks qianhu, good idea, although I won't think myself is qualified to do so at this point. Some ideas sent to ur hotmail mailbox :-)
Thanks Qianhu, I'm really honored to be mentioned here. I have been on and off on thinking and participating investment activities in the past several years. I was more interested in the fundementals of macro-economy at the begining, and found it was ehjoyable, yet non-profitable activity. I'm more leaning on trying to find a workable investing/trading approach for me more recently. I really enjoy reading your blog, since unlike many of our friends at the stock board, we share the common interest on thinking the big picture. I will try to be more active in both ends: thinking the pig picture and envolving investing activities. I'm taking some courses on Financial Management which in certain extend forces to learn and think. I will share the things I learned on the class here.
Best regards,
auv
Last week, we had a class discussion on yield-curve and perspectives on the interest rate. It started by reading a NY times article on 12/28/05 - Shares Plunge as Shift in Treasury Market Stirs Concern. That was when the yield curve first inverted (technically). We talked about the difference on the interest rate perspective (if any) between now and then. Here is the comment I made:
One main function of the FED is to adjust economy activity through adjusting over night interest rate. The higher is the interest rate, the higher is the borrowing cost, and less capital is flow into the economy. Yield curve reflects the supply and demand of bond at different mature terms. Rising interest hurts long term bonds, therefore when expect further interest raise, the long term bond yields raise, results larger yield different between long term bonds and short term bonds. When investors anticipate FED to cut interest which is beneficial to long term bonds, the demand on long term bonds drive the yield down, the yield difference between long term bond and short term bond diminished. When the long term bond yield is so low that it is less than short bond, the curve becomes inverted. Since banks profit from the positive interest difference between short term(loan) and long term(deposit), inverted curve will make it hard to get loan. Therefore, inverted curve result contraction in economic activities, and often see as a forecast of recession.
The low interest rate of 2001-2004 has been main factor that pull the US economy from the last recession, The low interest rate also results the latest housing boom market which many see as a bubble. After 13 consecutive interest rate, at the end of the 2005 when interest rate is at 4.25%. At that time, as indicated in the reference articles, many saw the interest rate raising phase is about to end and FED would cut the interest rate in the near future. That was the first time when the yield curve first became inverted. However, contrary to many people’s expectation, FED increased interest four more times instead of once, brought interest rate to 5.25% by mid of 2006, and left the rate at the level for a whole without indicating an interest rate cut is expected in the near future. Since the article published, the yield curve has been generally flat with some period of inversion. It indicated that the investors were continue to expect interest rate cut. It was until recently when the interest rate return flat but generally normal, which indicate investors are less expecting interest rate cut in the near future, even expecting an rise interest.
That is a truly surprise, and many people are worrying the high interest rate is hurting the economy, especially the housing market, which has been main driven force for the economy. The reason of such change in expectation lies in the other main function of the FED, which might be more important than the first one, that is maintain the value the US currency at a reasonable level, and control inflation. Since the US economy has been running on large deficit at country level, government level (and at individual level), it largely relies on borrowing from foreign investors and countries through new bond issues. The borrowing has been accumulated to such a high level that further issues of bond might not be absorb as before, which put more pressure on the US dollar. Also major US debtors such as China and Japan also have very low interest rate and are expecting to raise their interest rate. Such interest raise could draw capital out of the US economy if the US is to cut its interest rate. Comparing protecting the economy from a slow down, maintaining the US currency definitely has higher priority, therefore interest rate cut is not likely in the foreseeable future and it wouldn’t be a surprise to see interest rate continue to rise.
qianhu, always learned something fromyou. I would always be glad to tell everyone my fault and success. Reading books and write notes. Keep learning and never lose your enthunism to the market.
Best regard. And change a strategy always begin from loss money, hope it will not distract your original plan :)
wow,
AUV, you are awesome. Hehe seems you share similar habit as I do, studying the fudamental of macro economics and applying it. Yes,you can see I do use the interest rate yield curve to predict the market direction sometime. The lastest one would be last week if I don't make mistake. Financial management is a good course in my mind which tell you almost all the thing you need about finance. And what you learn about the interest rate curve is true and thanks for sharing:) As the inflation still remains in alert, our hope to see rate cut will be small at current time. And as a result, we need to be cautious about any rate hike in the future.
hehe, fanzhi,
my original plan is to get onto where I belong to and never change:)
thx auv for sharing this very helpful thoughts. qianhu is really "taiju" me. I am very new to fundamental stuff and big pictures, and have learned a lot from qianhu and everyone. I am now reading posts everywhere to absorb different ways of analysis, but havent got to my own set of methods yet. any usually my predication is very poor, and the only thing I can do to reduce the damage is to keep my mind clear and take reaction as good as I can. I will do some research this week, and if anything, will share with you guys. but dont get misleaded by me :P
thanks AUV for the thorough explanation about the economy and interest rate.
关于short
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我很久没玩short了， 因为我不会再一个uptrend 的market去short/put, 也不会在一个downtrend 的market 去long/call.
这样的好处是不累。而且，当我确定去做一个方向后，我总是想方设法去推翻我的论据，如果推翻不了，那么我可以确定我是对的。
老实说我觉得mit stock board 上很多人对short的理解很好笑。一年前我和千户探讨过这个问题。 short 的依据在一句话，行情在犹豫中发展，但是下跌可是多半不会在犹豫中进行， 一般直接到支撑位。
理解了这句话，你就可以知道何时应当place short position 了。mit stock board 一个不好的地方是track不了record. 记得去年夏天，我常在大盘上升逾百点时放short. 我的第一个100%多半就里来的。
放short的两个好位置是， 1， 在downtrend的stock, 反弹到中期趋势线下时。
2， overbot 的stock，高位放量，又或有重要趋势线压制，或者接近布林通道顶端，rsi, 威廉系数高位钝化。
我还在闭门思过，学习。 不过千户闹情绪了，我就只好上来冒个泡了
qianhu, I like to make contribution. But my experience is way too poor that I needs a mentor first. Could you give me a list of the resources that I can use to analyze then review the market?
wow, bobobo, you are a old gun. Few words make a lot of sense.
to bobobobo dude,
hehe, I am fine just need to get some time to study otherwise won't be able to get our strategy plan done:)
your comments are always appreciated.
to brisk,
hehe, you are old gun , same as bobobobo :) and got many things to share with us.
Qianhu is really making fun of me to share my idea for next week. I honestly don't know.
IBD's market pulse said "confirmed rally" last week and "rally under pressure" this week. What pressure we are facing? In addition to the risk hike speculation, don't forget next Friday is triple witching day. I remember very well of the week of March 12 through March 16. The week saw a heavy volume distribution day on Tuesday that dragged down the Nasdaq 2.15% followed by a hammer on Wedensday . Thursday and Friday were little changed finishing the week just 0.6% down from March 9th' closing. And the index had three days up in a row in the following week with March 21th up 1.98% marking the follow-through day for this quarter's rally.
I basically feel that MM's won't make next week a big green bar due to the conflicting interest on triple witching Friday. It is hard for me to think the shake out is all done, especially with the low volume increase on Friday indicating the buyers have not returned to the table fully. So my take for next week is wait and see to confirm the continued rally with volume increase.
With last Friday's closing of 2573.54, NAZ is 6.2% up YTD. Three down days in a row shed off 76.91 points of Nasdaq, 409.59 points of Dow. According to Qianhu (a very good indicator), it is done.
bobo说的这句话真不错，"行情在犹豫中发展", 看看纳指的五年图，从2004年1月到2006年8月犹犹豫豫了2年半才有了去年下半年的行情。不会是现在又开始犹豫了吧？呵呵。认同千户对今年大牛年的看法, 会stay invested.
Bobby,
pretty good. :) that is what I prefer that most of you speak out your view, no matter whether it is right or wrong. Only through this that you can improve your judgment Normally what IBD says about the future is not exactly right, but day to day could be quite accurate. As what they say, next week, "rally under pressure", a very good comment. The pressure comes from several perspectives. I strongly recommend to look at market from both the macro aspect and micro aspects so that we can understand what " pressure " mean. Here the pressure is that Institution remain side-line. Most of time, in OE week, we won't expect market to have a dramatic change, seldom it has. The three consecutive days plus the last green days totally drag down the market to 420-157=250 points, and NaZ from 86-27=60 points. Most of time, the first 2 days are distribution by institution. And the last day comes from small investors- dummy money. Whenever we see panic selling, there lies a chance there. Next week, we should remain cautious in the market. The overall bull trend is intact, there and in the future:)
Thx for so many sharing your thoughts. Tomorrow is Monday again. Both chart reading and market psychology indicate tomorrow is an important day to watch. If it stay positive, it may be a reversal signal from last week's sell off. If it is weak, then last Friday's rally is going to be short lived. I am trying to make a plan in both cases. But due to triple-watched OE week, it is complicated. Normally the end result of the OE week is not big movement, so it may be down,down and up up, or vice versa.
Bond was a hot topic last week, and it is going to be a hot topic this week too. FYI, 10-YEAR TREASURY NOTE is here at http://finance.yahoo.com/q?d=t&s=%5ETNX
Check the yahoo economy calendar, no event for Monday. Later this week, there are Fed's Beige Book, PPI and CPI.
Overall, I feel next week is going to be a good week with a lot of opportunities, as long as you dont get greedy :P Good luck to us all.
to brisk,
yes, focusing on bond market is one important aspect when volatility hikes. You may find out last week I use the T-bond rate as one basis to judge the market:)
报个到，财籽ID: tomx
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