Market Update: May 7, 2009
May. 7th, 2009 | 10:25 am
It's been awhile since I've done a market update. Since my last one, about two months ago, the markets have made a major reversal as projected, but did not first drop to as deep a low as expected first. Looking back at it, I think this is probably due to market and currency manipulation by the government. Since there is a frontier of diminishing returns on that sort of thing, I don't expect it to last.
The headline in the Seattle Times this morning is "Is recession coming to an end?" and the DJIA has broken significant resistance to the upside in the last couple of days. Sharp-eyed readers will remember that one of the psychological waypoints I was looking for was a broad pause for breath in which the markets ask themselves "Are we saved?". Odds are good we just hit that point or are very close to it. Next up, a correction within the corrective rally that takes us for a little gut-wrenching ride down before resuming the tail end of the rally.
When Time or Newsweek prints a cover with some variation on "We're Saved!", the overall rally is over or nearly so. Then get ready for a big, multi-month or even multi-year drop.
Anyway, here's an updated chart, taking my earlier projection and showing where we've been since then.
Note that we got a complete psychological progression into the March low, but its price magnitude was abbreviated. Actually, I think that's likely to be a very negative indicator in the long run, but only time will tell. I'm still looking for DJIA 9,000 to 11,000 for the next significant top.
The headline in the Seattle Times this morning is "Is recession coming to an end?" and the DJIA has broken significant resistance to the upside in the last couple of days. Sharp-eyed readers will remember that one of the psychological waypoints I was looking for was a broad pause for breath in which the markets ask themselves "Are we saved?". Odds are good we just hit that point or are very close to it. Next up, a correction within the corrective rally that takes us for a little gut-wrenching ride down before resuming the tail end of the rally.
When Time or Newsweek prints a cover with some variation on "We're Saved!", the overall rally is over or nearly so. Then get ready for a big, multi-month or even multi-year drop.
Anyway, here's an updated chart, taking my earlier projection and showing where we've been since then.
Note that we got a complete psychological progression into the March low, but its price magnitude was abbreviated. Actually, I think that's likely to be a very negative indicator in the long run, but only time will tell. I'm still looking for DJIA 9,000 to 11,000 for the next significant top.
Link | Leave a comment {9} | Add to Memories | Tell a Friend
Query
May. 5th, 2009 | 10:24 am
Anybody out there in Eljay Land know anything about MS Sharepoint? I'm trying to set up some internal web sites on our company intranet for project management, and feel like I'm beating my head against a wall.
And...in b4 "dump sharepoint and go with something else." Not an option here. I have to work with what I've got.
And...in b4 "dump sharepoint and go with something else." Not an option here. I have to work with what I've got.
Link | Leave a comment {2} | Add to Memories | Tell a Friend
(no subject)
Apr. 27th, 2009 | 11:12 am
Any of you have a Dreamwidth invite you'd be willing to email me?
Link | Leave a comment {2} | Add to Memories | Tell a Friend
Ennui and Taxes
Apr. 17th, 2009 | 11:10 am
Another tax day has come and gone, and I greeted the occasion with indifference.
It's not that I didn't want to attend the local Tea Party protest. I did, if for no other reason than to be entertained for a few hours and measure the liver of the crowd. Is the US middle class finally wising up to how badly they've been played for the last eighty years? Frankly, I doubt it.
Unfortunately, I had to teach so I missed it.
Nor am I all worked up about my tax bill or the herculean effort of figuring out how to comply with US tax law every year. I hire an accountant to do that for me, and as usual his efforts paid for themselves several times over. If you've never had a real professional give your tax forms a work-over, I highly recommend it. Worth every penny I paid him, and then some.
I don't even get especially exasperated by the gross inequity inherent to our taxation system. Every civilization requires some form of pay-to-play to function. The income tax is ours (partly), and it's not fundamentally any more arbitrary or ridiculous or destructive to property rights than any others.
Some may find it curious that I get much more foaming-at-the-mouth outraged about daylight saving time than I do about the income tax. Let me explain.
I won't go into the DST thing at length since I've done so elsewhere. Let it suffice to say that what offends me most about it is the blatant Orwellian nature of the whole thing, impacting a core aspect of our daily lives for essentially trivial reasons. It uses a ten-megaton mind-control nuke to affect a pointless change simply as an academic exercise in mass mind control. And it makes hundreds of millions of people tired and annoyed in the bargain. Feh.
The taxation thing though...it strikes me that most people who are so outraged by the way our income tax system works fall into one of three categories (or all simultaneously):
A) Their opinions are colored by envy, manifesting in outrage that somebody else is getting a perceived special privilege (whoever that might be. This is often cloaked in the language of egalitarianism and class conflict.
B) They are stuck in the teenager's solipsistic perspective in which they cannot comprehend their actual obligations to their own civilization, manifesting in outrage that somebody might dare to arrogate themselves the power tocome into their room and touch their stuff ^H^H^H^H take money that rightfully belongs to them. This is often framed in the language of lilbertarianism.
C) They utterly fail to understand how government finance works in a fiat currency regime. This is usually framed in the language of fiscal conservatism, in which the government's finances and our family checkbook are unreasonably conflated, and much anger expressed over using our national pin money to pay for hookers and blow or Kennedy rehab ensues.
The first two...well if the shoe fits I can't do much to talk you out of it any more than I could convince the Pope to renounce the Holy and Catholic Church. Purging your mind of either of those wrong-headed belief systems is a personal journey, and weaning oneself from treasured security blankets is a painful process.
The third, however, can be partly addressed by a little education (and also provides an explanation for why I think so-called "fiscal conservatives" are dupes).
I'll keep this simple. The government's finances don't work like your family checkbook because you can't print your own money at will, and the government can. That's one reason why it's a sovereign, and you're not (another being that it has no recourse to higher authority, and you do). If you want to buy groceries, you can't just whip up a few hundred-dollar bills with Grandma's picture on them on your color printer and take them down to Safeway. Different rules apply to sovereigns than to puny individuals like you or me, and this is particularly true when a sovereign gets into the dodgy business of creating fiat (literally "let there be"...alluding to creation by word command alone) money.
When a sovereign with its own fiat currency wants to pay for something, all it has to do it print up the money. It needs no other revenue source, so long as it can get others to accept the currency as a valid form of money in the first place. This is as true of the United States Federal Government (henceforth, "Fed.gov") as it is of any sovereign that has a fiat currency. Fed.gov could pay all of its bills on a day to day basis without ever collecting a dime in tax "revenue" and never once face bankruptcy. Try that when you pay your utility bills. I dare you.
Of course, the problem with Fed.gov doing exactly that is it creates massive inflationary dilution of the supply of its currency, devaluing all the existing units of that currency in proportion to all the new ones that get created as it pays its bills. Inflationary dilution of value then reduces the willingness of others to accept that currency in payment, and the system breaks down.
A taxation system directly addresses this problem in two ways.
On one hand, forcing everybody to pay taxes creates large, ongoing financial obligations from everybody to Fed.gov in direct proportion to whatever is being taxed (which, more and more, is everything). Fed.gov demands that these obligations be paid in units of its fiat currency only. Just try paying the IRS in chickens, or even gold bullion, and see how far you get...though you'll still have to pay tax (in USD) on the chickens-to-gold barter transaction. Hence, taxation creates a large structural demand for the fiat currency.
If you refuse to pay your taxes, or refuse to pay them in the fiat currency, angry men in uniforms with guns come to your house, shoot your dog, and throw you in jail. For this reason, I describe the system used to back our monetary system as the "Hot Lead Standard" and it trumps old-fashioned gold standard currencies in a crude but effective way.
On the other hand, when Fed.gov collects all those fiat currency dollars we pay in taxes, it takes them out of circulation and reduces the overall inflationary pressure generated by paying for all the hookers and blow our economy needs with federal spending. This is especially important when a fiat monetary system is combined with a fractional reserve bank credit system (as ours is). Fractional reserve lending means that banks are allowed by law to lend out most of the money they take in as demand deposits (your paycheck deposited in your checking account, for instance) and then lends most of it to buy Florida swampland on a 30-year payback plan.
Fractional reserve credit transfers some of Fed.gov's power to make new money to anybody who creates credit. For every dollar Fed.gov prints, nine other credit "dollars" are magically created from fractional reserve lending down the line. This allows some plausible deniability on the part of politicians who are engaging in massive inflationary spending to build patronage networks, and makes bankers happy...most of the time.
It works this way because when I depost $100 in my checking account, the bank then lends $90 to, say, Bernie Madoff (not that he needed it, mind you, having found his own government-style financing scheme), who uses it to buy a pair of cashmere pants. The seller of cashmere pants then deposits the $90 in his own checking account, and 90% of it is loaned out again...ad infinitum. This is how one dollar magically transmutes into in approximately $10 through the power of credit.
So fractional reserve lending increases the amount of inflation in the system by...well...A LOT. The more inflation there is, the less willing people will be to accept the fiat currency in payment for anything (LOL Zimbabwe). That undermines Fed.gov's power by undermining its fiat currency, since the government can loudly proclaim the value of its dollars all it wants, but it means nothing if people will only use them for toilet paper.
Income taxes help control credit inflation. Fractional reserve lending rolls over the procedes from every credit-based transaction back into more credit. Income tax (and sales tax) is charged on every transaction, taking away some of the new money and reducing inflationary pressure. In fact, an income tax reduces the amount of inflation in the system from fractional reserve credit by more than half. This is usually a good thing.
The bad part of it is that it's typically not the banks and borrowers who are having their money destroyed to keep a lid on inflation. It's people who make an actual...you know...income. Which is why I'm happy to pay as little tax as I can manage, and reward my accountant handsomely for facilitating that desire.
It's not that I didn't want to attend the local Tea Party protest. I did, if for no other reason than to be entertained for a few hours and measure the liver of the crowd. Is the US middle class finally wising up to how badly they've been played for the last eighty years? Frankly, I doubt it.
Unfortunately, I had to teach so I missed it.
Nor am I all worked up about my tax bill or the herculean effort of figuring out how to comply with US tax law every year. I hire an accountant to do that for me, and as usual his efforts paid for themselves several times over. If you've never had a real professional give your tax forms a work-over, I highly recommend it. Worth every penny I paid him, and then some.
I don't even get especially exasperated by the gross inequity inherent to our taxation system. Every civilization requires some form of pay-to-play to function. The income tax is ours (partly), and it's not fundamentally any more arbitrary or ridiculous or destructive to property rights than any others.
Some may find it curious that I get much more foaming-at-the-mouth outraged about daylight saving time than I do about the income tax. Let me explain.
I won't go into the DST thing at length since I've done so elsewhere. Let it suffice to say that what offends me most about it is the blatant Orwellian nature of the whole thing, impacting a core aspect of our daily lives for essentially trivial reasons. It uses a ten-megaton mind-control nuke to affect a pointless change simply as an academic exercise in mass mind control. And it makes hundreds of millions of people tired and annoyed in the bargain. Feh.
The taxation thing though...it strikes me that most people who are so outraged by the way our income tax system works fall into one of three categories (or all simultaneously):
A) Their opinions are colored by envy, manifesting in outrage that somebody else is getting a perceived special privilege (whoever that might be. This is often cloaked in the language of egalitarianism and class conflict.
B) They are stuck in the teenager's solipsistic perspective in which they cannot comprehend their actual obligations to their own civilization, manifesting in outrage that somebody might dare to arrogate themselves the power to
C) They utterly fail to understand how government finance works in a fiat currency regime. This is usually framed in the language of fiscal conservatism, in which the government's finances and our family checkbook are unreasonably conflated, and much anger expressed over using our national pin money to pay for hookers and blow or Kennedy rehab ensues.
The first two...well if the shoe fits I can't do much to talk you out of it any more than I could convince the Pope to renounce the Holy and Catholic Church. Purging your mind of either of those wrong-headed belief systems is a personal journey, and weaning oneself from treasured security blankets is a painful process.
The third, however, can be partly addressed by a little education (and also provides an explanation for why I think so-called "fiscal conservatives" are dupes).
I'll keep this simple. The government's finances don't work like your family checkbook because you can't print your own money at will, and the government can. That's one reason why it's a sovereign, and you're not (another being that it has no recourse to higher authority, and you do). If you want to buy groceries, you can't just whip up a few hundred-dollar bills with Grandma's picture on them on your color printer and take them down to Safeway. Different rules apply to sovereigns than to puny individuals like you or me, and this is particularly true when a sovereign gets into the dodgy business of creating fiat (literally "let there be"...alluding to creation by word command alone) money.
When a sovereign with its own fiat currency wants to pay for something, all it has to do it print up the money. It needs no other revenue source, so long as it can get others to accept the currency as a valid form of money in the first place. This is as true of the United States Federal Government (henceforth, "Fed.gov") as it is of any sovereign that has a fiat currency. Fed.gov could pay all of its bills on a day to day basis without ever collecting a dime in tax "revenue" and never once face bankruptcy. Try that when you pay your utility bills. I dare you.
Of course, the problem with Fed.gov doing exactly that is it creates massive inflationary dilution of the supply of its currency, devaluing all the existing units of that currency in proportion to all the new ones that get created as it pays its bills. Inflationary dilution of value then reduces the willingness of others to accept that currency in payment, and the system breaks down.
A taxation system directly addresses this problem in two ways.
On one hand, forcing everybody to pay taxes creates large, ongoing financial obligations from everybody to Fed.gov in direct proportion to whatever is being taxed (which, more and more, is everything). Fed.gov demands that these obligations be paid in units of its fiat currency only. Just try paying the IRS in chickens, or even gold bullion, and see how far you get...though you'll still have to pay tax (in USD) on the chickens-to-gold barter transaction. Hence, taxation creates a large structural demand for the fiat currency.
If you refuse to pay your taxes, or refuse to pay them in the fiat currency, angry men in uniforms with guns come to your house, shoot your dog, and throw you in jail. For this reason, I describe the system used to back our monetary system as the "Hot Lead Standard" and it trumps old-fashioned gold standard currencies in a crude but effective way.
On the other hand, when Fed.gov collects all those fiat currency dollars we pay in taxes, it takes them out of circulation and reduces the overall inflationary pressure generated by paying for all the hookers and blow our economy needs with federal spending. This is especially important when a fiat monetary system is combined with a fractional reserve bank credit system (as ours is). Fractional reserve lending means that banks are allowed by law to lend out most of the money they take in as demand deposits (your paycheck deposited in your checking account, for instance) and then lends most of it to buy Florida swampland on a 30-year payback plan.
Fractional reserve credit transfers some of Fed.gov's power to make new money to anybody who creates credit. For every dollar Fed.gov prints, nine other credit "dollars" are magically created from fractional reserve lending down the line. This allows some plausible deniability on the part of politicians who are engaging in massive inflationary spending to build patronage networks, and makes bankers happy...most of the time.
It works this way because when I depost $100 in my checking account, the bank then lends $90 to, say, Bernie Madoff (not that he needed it, mind you, having found his own government-style financing scheme), who uses it to buy a pair of cashmere pants. The seller of cashmere pants then deposits the $90 in his own checking account, and 90% of it is loaned out again...ad infinitum. This is how one dollar magically transmutes into in approximately $10 through the power of credit.
So fractional reserve lending increases the amount of inflation in the system by...well...A LOT. The more inflation there is, the less willing people will be to accept the fiat currency in payment for anything (LOL Zimbabwe). That undermines Fed.gov's power by undermining its fiat currency, since the government can loudly proclaim the value of its dollars all it wants, but it means nothing if people will only use them for toilet paper.
Income taxes help control credit inflation. Fractional reserve lending rolls over the procedes from every credit-based transaction back into more credit. Income tax (and sales tax) is charged on every transaction, taking away some of the new money and reducing inflationary pressure. In fact, an income tax reduces the amount of inflation in the system from fractional reserve credit by more than half. This is usually a good thing.
The bad part of it is that it's typically not the banks and borrowers who are having their money destroyed to keep a lid on inflation. It's people who make an actual...you know...income. Which is why I'm happy to pay as little tax as I can manage, and reward my accountant handsomely for facilitating that desire.
Link | Leave a comment {4} | Add to Memories | Tell a Friend
Market Update: March 12, 2009
Mar. 12th, 2009 | 04:00 pm
It looks like we're in that rally I mentioned last week (I missed the start of it by 3 days...mea culpa). It's already bumped up nearly to the range expected, and may run out of steam soon. Expect a push in the DJIA to 7400 to 7500 and then a reversal. The reversal may not be long-lived, since we're in a significant psychological support range now (between 6350 and 7800 or so). The probability that we see some significant sideways bouncing bounded in this range is high.
I still think we're going to see one more significant drop for the multi-month rally back to 9000+ I expect through the rest of the year gets rolling. Downside target for that drop is still below 6000 and maybe as low as 3750, though I now think we'll most likely see it rebound hard in the 5000s.
The larger downtrend psychological pattern for this phase is not yet complete, though, even though it's in its last stages. This rally has been strong, but I don't think it's got huge amounts of upside left in it.
Having said that, though, this analysis predicts at least a week of further sideways volatililty with some significant rallies within it. For that reason, I'm now neutral. My trading strategy loses me money if I wind up in a volatile sideways pattern (it cost me big during November/December 2008, as you might recall) I expect to go short again soon, but not until I see some indications that the rally is done.
As for the discussions now being held in DC about re-instituting the Uptick Rule for shorts, I have only one comment: "Idiots."
Blaming shorts for a bear market is nuts, and shows a profound ignorance of how markets work. The short sellers have been providing lots of needed liquidity and allowing the markets to make some attempt at pricing all the crazy uncertainty going around. The short sellers have also been forcing exposure of fraudulent and bankrupt companies in an orderly fashion. Without the short sellers, we'd be seeing more downward price gaps, crashes on surprise news events, and "AM Limit Down" days in futures. No sensible share trader or share owner really wants those things, even if they are underwater and being pressured.
The Uptick Rule itself doesn't have much impact on short sellers, but negligent CEOs and opportunistic politicians are looking for scapegoats right now. If they go beyond simply re-instituting the Uptick Rule and start drastically limiting short selling, the markets will be a in a world of hurt.
I still think we're going to see one more significant drop for the multi-month rally back to 9000+ I expect through the rest of the year gets rolling. Downside target for that drop is still below 6000 and maybe as low as 3750, though I now think we'll most likely see it rebound hard in the 5000s.
The larger downtrend psychological pattern for this phase is not yet complete, though, even though it's in its last stages. This rally has been strong, but I don't think it's got huge amounts of upside left in it.
Having said that, though, this analysis predicts at least a week of further sideways volatililty with some significant rallies within it. For that reason, I'm now neutral. My trading strategy loses me money if I wind up in a volatile sideways pattern (it cost me big during November/December 2008, as you might recall) I expect to go short again soon, but not until I see some indications that the rally is done.
As for the discussions now being held in DC about re-instituting the Uptick Rule for shorts, I have only one comment: "Idiots."
Blaming shorts for a bear market is nuts, and shows a profound ignorance of how markets work. The short sellers have been providing lots of needed liquidity and allowing the markets to make some attempt at pricing all the crazy uncertainty going around. The short sellers have also been forcing exposure of fraudulent and bankrupt companies in an orderly fashion. Without the short sellers, we'd be seeing more downward price gaps, crashes on surprise news events, and "AM Limit Down" days in futures. No sensible share trader or share owner really wants those things, even if they are underwater and being pressured.
The Uptick Rule itself doesn't have much impact on short sellers, but negligent CEOs and opportunistic politicians are looking for scapegoats right now. If they go beyond simply re-instituting the Uptick Rule and start drastically limiting short selling, the markets will be a in a world of hurt.
Link | Leave a comment {2} | Add to Memories | Tell a Friend
Market Update: March 5, 2009 9:45AM Intraday
Mar. 6th, 2009 | 09:43 am
The market looks like it's working itself up for another big drop. Watch out.
Link | Leave a comment {3} | Add to Memories | Tell a Friend
Market Update: March 5, 2009
Mar. 5th, 2009 | 01:59 pm
Okay...so maybe I was slightly premature in calling for a multi-day rally. DJIA closed below 6600 today, with a 4% decline from yesterday's close (and more like a 5.5% decline off of yesterday's intraday high). No matter. I still think we'll see one somewhat soon, particularly if the DJIA bounces hard off of 6350. I still don't expect it to last, though.
But I've been wrong before.
But I've been wrong before.
Link | Leave a comment {3} | Add to Memories | Tell a Friend
Market Update: March 4, 2009
Mar. 4th, 2009 | 01:16 pm
The DJIA had a bit of rally today, and it looks like it will continue for a few days. Overall, we just went through a bit of smaller-scale panic and have transitioned into a larger Fear phase. Here's my opportunity to update my chart:
You can see that the market's action over the last month seems to have confirmed my most probable scenario, and has followed it reasonably closely, with a little bit of throw-over and undershoot. I've been noticing that in these bear market patterns, the normal bull market tendency to have the powerful moves occur in the middle of trend-direction patterns has changed. As we move down, we're getting the powerful moves near the end of the trend-direction pattern more often than not. That's why I'm wondering if we may have hit one of the projected interim lows as of yesterday (the green dots on the chart). Monday's drop was certainly attention-getting ... excactly what you'd expect as you hit the middle of a trend-direction psychological shift. It headlined all the newspapers and people sat up and took notice. There was also manifest surprise and relief in the markets at the rally today. That means this ain't over. The beginnings of real rallies off of major bottoms begin with despondence and capitulation, not relief and surprise.
As for this rally: how high and how long? Don't know. Day-to-day predictions aren't my bag, baby. It could be days or it could be weeks. Unlikely longer than that. It could bump up to 7000 and reverse, or head all the way back up toward 8000 (unlikely, but within scope). A bounce off of 7400 to 7500 or just below is most likely, but I'm not going to try and trade it. There's way too much uncertainty in the short term. My trade horizon is still medium-term right now (one month or longer out).
I am still 200% short and have a high confidence that the market has more downside before we go into a larger-scale upside rally lasting months or years. Downside price range on the DJIA for this leg is somewhere between 3750 and around 6000. The drop into that price range will likely be surprising and gut-wrenching. If we head below 6000, I'll start to go neutral by parts.
You can see that the market's action over the last month seems to have confirmed my most probable scenario, and has followed it reasonably closely, with a little bit of throw-over and undershoot. I've been noticing that in these bear market patterns, the normal bull market tendency to have the powerful moves occur in the middle of trend-direction patterns has changed. As we move down, we're getting the powerful moves near the end of the trend-direction pattern more often than not. That's why I'm wondering if we may have hit one of the projected interim lows as of yesterday (the green dots on the chart). Monday's drop was certainly attention-getting ... excactly what you'd expect as you hit the middle of a trend-direction psychological shift. It headlined all the newspapers and people sat up and took notice. There was also manifest surprise and relief in the markets at the rally today. That means this ain't over. The beginnings of real rallies off of major bottoms begin with despondence and capitulation, not relief and surprise.
As for this rally: how high and how long? Don't know. Day-to-day predictions aren't my bag, baby. It could be days or it could be weeks. Unlikely longer than that. It could bump up to 7000 and reverse, or head all the way back up toward 8000 (unlikely, but within scope). A bounce off of 7400 to 7500 or just below is most likely, but I'm not going to try and trade it. There's way too much uncertainty in the short term. My trade horizon is still medium-term right now (one month or longer out).
I am still 200% short and have a high confidence that the market has more downside before we go into a larger-scale upside rally lasting months or years. Downside price range on the DJIA for this leg is somewhere between 3750 and around 6000. The drop into that price range will likely be surprising and gut-wrenching. If we head below 6000, I'll start to go neutral by parts.
Link | Leave a comment {10} | Add to Memories | Tell a Friend
Interesting
Feb. 28th, 2009 | 08:56 pm
I was looking back at some information about the 2008 Presidential election cycle, including the Intrade futures data, and also had a stock chart open in the background. I started wondering what, if any, corelations there might be between the two. So I created this chart with several notable Primary and General Election events superimposed over it. The result is very interesting, and not particularly flattering for Barack Obama if you consider that market participants not only price probabilistic information (including signficant uncertainty) into their pricing, but also react to the certainty that comes from the occurence of actual events (such as an election). The highest price point on this chart occurs almost exactly concurrently with Obama clinching the Democratic nomination for President of the United States of America. Pre-election upticks conincide precisely with Obama's opponents experiencing gains in the polls, including the last-minute October rally before the election in which McCain looked briefly as if he might have a chance after all.
I've also thought about making a chart of the last three months showing the daily intraday pricing on the DJIA versus the times any member of the Obama transition team / administration made a public statement regarding the economy. I know over the last few weeks the markets would drop like a stone every time Geithner came on television ... to the minute ... but I have no way of getting the data needed to create a chart like that.
I've also thought about making a chart of the last three months showing the daily intraday pricing on the DJIA versus the times any member of the Obama transition team / administration made a public statement regarding the economy. I know over the last few weeks the markets would drop like a stone every time Geithner came on television ... to the minute ... but I have no way of getting the data needed to create a chart like that.
Link | Leave a comment {4} | Add to Memories | Tell a Friend
Economic Version Control
Feb. 26th, 2009 | 12:05 pm
A lot of people have been referring to our burgeoning economic troubles as "Great Depression 2.0", but this is wrong.
If we're going to be accurate about this, we need some version control. Here's the tally so far:
v0.1.0 (alpha): 1780s Depression Pre-release version: caused total system freeze requiring hard restart of systems. Addressed with new kernel (ref. U.S. Constitution) and new transaction protocol (ref. U.S. Dollar)
v0.1.1 (alpha): The Panic of 1797 New features: Transatlantic collapse infects local economy.
v0.1.2 (alpha): Depression of 1807 New features: Protectionist policy prompts economic collapse in trade-based cities.
v0.2.0 (beta): Panic of 1819 Beta release taken to broader test market in limited release. New features: Widespread homegrown financial collapse prompted by malfeasance in the banking sector.
v0.2.1 (beta): Panic of 1837 New features: Paper currency failure. Bug Fixes: Second Bank of the United States dissolved.
v0.3.0 (beta): Panic of 1857 New features: Sector-based stock bubble collapse (railroads); Major insurance company failures (Ohia Life Insurance & Trust Company). Bug Fixes: Slavery process dependence eliminated via major kernel revision.
v1.0: The Great Depression (1871-1896) (Includes Service Pack 1 - Panic of 1873, and Service Pack 2 - Panic of 1893) A first attempt a a major re-branded release. Was retroactively re-branded/retconned to "The Long Depression" in 1933. New features: Starts in obscure foreign conflict, Broad-based stock bubble collapse, Global involvement, Major money shortage combined with productivity increases. Bug Fixes: Industrial revolution.
v1.1: Panic of 1907 New features: European hyperinflation crashes US markets; Cornering activity in copper market; Rapid bank runs; Federal Reserve Bank implemented as Service Pack 3 in 1913. Bug Fixes: [su jpmorgan - root]
v1.2: Post-WW1 Recession (1918-1921) New features: End of major wartime production causes sharp contraction; High unemployment following demobilization; Treaty reparation subroutines cause hyperinflationary crashes and kernel reboots on foreign language platforms.
v2.0: The Great Depression (1929-1945) More successful re-branding attempt. This major release included numerous new features (mostly undocumented, with lots of "easter eggs") and a brand new kernel (ref. New Deal) with secure superuser privileges. Often derisively referred to as bloatware (and indeed, is known for ravenously consuming system resources), nevertheless dominated the market and became the model for many following upgrades and competitors. Has a fanatically loyal user-base. Technical support is notoriously poor. New features: Hog-wild government spending, Agricultural desolation, Flashy new Cult of Personality GUI, 90%+ stock market crash, Complete banking collapse, Major real estate asset decline, Global Warfare Mode. Bug Fixes: Thermonuclear Reboot button, Game Theory implementation.
v2.0.1: 1950s Tightenings Released in 1953, and updated in 1957. New features: Loose monetary policy followed by arbitrary credit tightening. Bug Fixes: Massive manufacturing productivity increases, Cars with wings.
v2.1: Malaise (1973-1981) Updated in several concurrent non-numbered service packs (ref. Oil Shock, 1973 Market Crash, 1979 Energy Crisis). New branding not well accepted. New features: Stagflation; Double-digit inflation rates; Gas lines; Weak political leadership; Disco; Loss of military effectiveness. Bug Fixes: Morning in America, Deregulation, Tax Reform.
v2.1.1: Unnamed Release (1987-1991) New features: Single-day 22.6% stock decline; Savings & Loan Bailout.
v2.1.2: Tech Stock Crash (2000) New features: Companies with no assets, no revenue, gigantic market capitalizations, and lots of stock options; Planes flying into buildings (on purpose). Bug Fixes: Y2K Non-event.
This one is either 2.2 or 3.0:
v2.2 if this is simply a major service-pack update of the idiocy promulgated during the 1920s and 1930s, or,
v3.0 if this is an entirely new release with many new features gone to gold code, and possibly a new kernel.
So far, it's looking more like a "point X" release than a full new version. I don't see a lot of bug fixes or radical new features, just window-dressing and bloatware.
If we're going to be accurate about this, we need some version control. Here's the tally so far:
v0.1.0 (alpha): 1780s Depression Pre-release version: caused total system freeze requiring hard restart of systems. Addressed with new kernel (ref. U.S. Constitution) and new transaction protocol (ref. U.S. Dollar)
v0.1.1 (alpha): The Panic of 1797 New features: Transatlantic collapse infects local economy.
v0.1.2 (alpha): Depression of 1807 New features: Protectionist policy prompts economic collapse in trade-based cities.
v0.2.0 (beta): Panic of 1819 Beta release taken to broader test market in limited release. New features: Widespread homegrown financial collapse prompted by malfeasance in the banking sector.
v0.2.1 (beta): Panic of 1837 New features: Paper currency failure. Bug Fixes: Second Bank of the United States dissolved.
v0.3.0 (beta): Panic of 1857 New features: Sector-based stock bubble collapse (railroads); Major insurance company failures (Ohia Life Insurance & Trust Company). Bug Fixes: Slavery process dependence eliminated via major kernel revision.
v1.0: The Great Depression (1871-1896) (Includes Service Pack 1 - Panic of 1873, and Service Pack 2 - Panic of 1893) A first attempt a a major re-branded release. Was retroactively re-branded/retconned to "The Long Depression" in 1933. New features: Starts in obscure foreign conflict, Broad-based stock bubble collapse, Global involvement, Major money shortage combined with productivity increases. Bug Fixes: Industrial revolution.
v1.1: Panic of 1907 New features: European hyperinflation crashes US markets; Cornering activity in copper market; Rapid bank runs; Federal Reserve Bank implemented as Service Pack 3 in 1913. Bug Fixes: [su jpmorgan - root]
v1.2: Post-WW1 Recession (1918-1921) New features: End of major wartime production causes sharp contraction; High unemployment following demobilization; Treaty reparation subroutines cause hyperinflationary crashes and kernel reboots on foreign language platforms.
v2.0: The Great Depression (1929-1945) More successful re-branding attempt. This major release included numerous new features (mostly undocumented, with lots of "easter eggs") and a brand new kernel (ref. New Deal) with secure superuser privileges. Often derisively referred to as bloatware (and indeed, is known for ravenously consuming system resources), nevertheless dominated the market and became the model for many following upgrades and competitors. Has a fanatically loyal user-base. Technical support is notoriously poor. New features: Hog-wild government spending, Agricultural desolation, Flashy new Cult of Personality GUI, 90%+ stock market crash, Complete banking collapse, Major real estate asset decline, Global Warfare Mode. Bug Fixes: Thermonuclear Reboot button, Game Theory implementation.
v2.0.1: 1950s Tightenings Released in 1953, and updated in 1957. New features: Loose monetary policy followed by arbitrary credit tightening. Bug Fixes: Massive manufacturing productivity increases, Cars with wings.
v2.1: Malaise (1973-1981) Updated in several concurrent non-numbered service packs (ref. Oil Shock, 1973 Market Crash, 1979 Energy Crisis). New branding not well accepted. New features: Stagflation; Double-digit inflation rates; Gas lines; Weak political leadership; Disco; Loss of military effectiveness. Bug Fixes: Morning in America, Deregulation, Tax Reform.
v2.1.1: Unnamed Release (1987-1991) New features: Single-day 22.6% stock decline; Savings & Loan Bailout.
v2.1.2: Tech Stock Crash (2000) New features: Companies with no assets, no revenue, gigantic market capitalizations, and lots of stock options; Planes flying into buildings (on purpose). Bug Fixes: Y2K Non-event.
This one is either 2.2 or 3.0:
v2.2 if this is simply a major service-pack update of the idiocy promulgated during the 1920s and 1930s, or,
v3.0 if this is an entirely new release with many new features gone to gold code, and possibly a new kernel.
So far, it's looking more like a "point X" release than a full new version. I don't see a lot of bug fixes or radical new features, just window-dressing and bloatware.
Link | Leave a comment {15} | Add to Memories | Tell a Friend
Market Update: February 23, 2009
Feb. 23rd, 2009 | 10:47 pm
I've been on vacation for a week and am now in Anchorage, Alaska attending a conference, so I haven't had time to do much market checking or chart updating. The DJIA blew through downside resistance fairly handily, invalidating Case 3 from my February 2 scenarios. Case 1 is still looking the most probable, and the market's followed it pretty closely so far.
In the meantime, see the psychological progression ratchet to the next level. We've entered the Fear Zone.
In the meantime, see the psychological progression ratchet to the next level. We've entered the Fear Zone.
Link | Leave a comment {2} | Add to Memories | Tell a Friend
Interlude
Feb. 13th, 2009 | 08:58 am
Remember that post last week looking at the gold charts, in which I speculated that the Euro was about to take a dump with respect to the dollar? Well, EUR is currently off by more than 300 points against the USD since tuesday, with more downside in the offing.
Also, we got a bump up in the DJIA on open much like I thought, with a failure to get above 7990. That seems to indicate that my take on it is still correct, though it's too early to tell.
Also, we got a bump up in the DJIA on open much like I thought, with a failure to get above 7990. That seems to indicate that my take on it is still correct, though it's too early to tell.
Link | Leave a comment | Add to Memories | Tell a Friend
Market Update: February 12, 2009 12:00PM Intraday
Feb. 12th, 2009 | 12:01 pm
Buh-bye. Primary scenario confirmed. We're now dropping off a cliff. This afternoon and tomorrow (Friday the 13th, no less) should be big downward moves.
EDIT 2:10PM: Posted this before taking off for lunch. The market, as usual, takes orders from nobody, especially me. However, the rally in the last hour of trading looks very much like the closing leg of a 3-3-5 flat correction (of which we're seeing many in sequence, all of a sudden). The new interim low intraday today was still a confirmation of scenario, so the DJIA would have to go over 8315 near-term to negate it. Much more likely that we'll see a bump up on the open tomorrow, followed by some major downward movement. Alternately, we could see a couple of days of sideways movement, then a big drop, or a bump up to around 8080 to 8220 and then a big drop. Most importantly, the market has started moving down in multi-day trend-style patterns again (vs. corrective, or counter-trend patterns). Rallies have been following more distinctive counter-trend patterns. This indicates that the medium-near-term trend has shifted negative again (and was confirmed today).
EDIT 2:10PM: Posted this before taking off for lunch. The market, as usual, takes orders from nobody, especially me. However, the rally in the last hour of trading looks very much like the closing leg of a 3-3-5 flat correction (of which we're seeing many in sequence, all of a sudden). The new interim low intraday today was still a confirmation of scenario, so the DJIA would have to go over 8315 near-term to negate it. Much more likely that we'll see a bump up on the open tomorrow, followed by some major downward movement. Alternately, we could see a couple of days of sideways movement, then a big drop, or a bump up to around 8080 to 8220 and then a big drop. Most importantly, the market has started moving down in multi-day trend-style patterns again (vs. corrective, or counter-trend patterns). Rallies have been following more distinctive counter-trend patterns. This indicates that the medium-near-term trend has shifted negative again (and was confirmed today).
Link | Leave a comment {5} | Add to Memories | Tell a Friend
Market Update: February 11, 2009
Feb. 11th, 2009 | 01:28 pm
Definitely a corrective rally pattern today. It looks like it will wrap up tomorrow, perhaps with a bump up as high as 8140-8160 or so (or possibly contracting sideways movement...hard to tell right now). After that, it looks very much like Wall Street is going to be having a very bad few days. The panic phase of this part downswing is about to take hold. Batten down the hatches. A 1000-point plus down day wouldn't be entirely out of the question if I'm right about this.
Note also that if this rally does get up in the vicinity of 8140 and then turns, it will make a classic "head and shoulders" pattern, which typically precedes a major reversal.
Note also that if this rally does get up in the vicinity of 8140 and then turns, it will make a classic "head and shoulders" pattern, which typically precedes a major reversal.
Link | Leave a comment | Add to Memories | Tell a Friend
Market Update: February 10, 2009 9:30AM Intraday
Feb. 10th, 2009 | 08:54 am
That first step's a duesy. End of previous pattern confirmed (with a vengeance). Already down 300 points in early trading. If the DJIA breaks hard below 7840, then my most-probable case is confirmed near-term. Don't expect this downward phase to be directly linear, but it going to have legs.
EDIT 11:35AM: 7840 not broken yet, but getting awfully close. May see a confirmation by end of trading today. If so, look out below. The next several days are likely to be gut-wrenching.
Also, since I've got a few questions about this already in other places, it would have made absolutely no difference what Obama and Geithner said over the last 24 hours with respect to what the market is doing right now. Geithner could have produced a herd of actual gold-crapping unicorns and Obama revealed himself as the son of God and Ayn Rand and the market would still have dropped like a stone. News follows market sentiment, not the other way around.
EDIT 11:35AM: 7840 not broken yet, but getting awfully close. May see a confirmation by end of trading today. If so, look out below. The next several days are likely to be gut-wrenching.
Also, since I've got a few questions about this already in other places, it would have made absolutely no difference what Obama and Geithner said over the last 24 hours with respect to what the market is doing right now. Geithner could have produced a herd of actual gold-crapping unicorns and Obama revealed himself as the son of God and Ayn Rand and the market would still have dropped like a stone. News follows market sentiment, not the other way around.
Link | Leave a comment | Add to Memories | Tell a Friend
Market Update: February 6, 2009 - 12:05PM Intraday Update
Feb. 6th, 2009 | 12:10 pm
Negative Ghostrider. The pattern is full.
I just got a massive sell signal, and the countertrend rally pattern I've been watching for the last week just completed itself, seeming to confirm my most probable case. The worm just turned. I expect the next couple of weeks to be very negative, with a palpable change in market psychology for the worse.
I just got a massive sell signal, and the countertrend rally pattern I've been watching for the last week just completed itself, seeming to confirm my most probable case. The worm just turned. I expect the next couple of weeks to be very negative, with a palpable change in market psychology for the worse.
Link | Leave a comment {4} | Add to Memories | Tell a Friend
LOL Me
Feb. 6th, 2009 | 10:03 am
So, end of day Wednesday, I posted a note that I thought we might see a big drop in the DJIA on Thursday. There was indeed a 110 point drop on the open, but the market immediately reversed into an upward spike that continues today. Good thing I'm not a day trader, I guess. Can you say "whipsaw?" I knew you could.
Having said that, unless the DJIA goes over 8410, an upside breakout is not confirmed. All of the market's action since its intraday low on Monday has looked very corrective in structure, suggesting more downside to come as this rally exhausts itself. If you look at the chart I posted on Monday, you'll see that all three scenarios posited a rally from Wednesday forward. The only question is, how big of a rally? The main scenario suggested a lower-magnitude rally over the course of a few days prior to moving into a sharp downward spike. The secondary scenario suggested a rally back into the previous trading range of Nov.-Jan. (no higher than 9,000 or so, but definitely above 8,410), followed by an even sharper downward spike. The third scenario suggests a major rally back above 9,000 prior to some sort of gotterdamerung.
Which is it? I still don't know. I thought it was the first scenario because the rally on Tuesday looked like a complete textbook extended correction and was followed by a downward move on Wednesday that looked a lot like the re-establishment of trend. I still don't see the kind of momentum changes that tilt the balance toward the beginning of a major rally, even though the market is spiking upward in fits and starts.
I'm still short 200%, so that's some indication of where my money thinks my mouth is. For the record, I'm basically back to even (maybe incrementally ahead) after all the volatility we've seen in the last three months. Win some, lose some.
Somebody asked me for advice on stops. I won't give any, aside from saying that my own experience as a trader back in the 1990s convinced me for all time that stop-loss orders are generally a bad idea. The brokerages and traders all know where the standing orders are, and regularly move the market to "pick up the stops" before going on their merry way. I can't count the number of times I've seen good trades stopped out
I also repeat again that none of my projections here have much of a time element. That's why there's no indication of when I think the price target progressions I see coming up will occur (and the chart I posted doesn't have a time scale. I haven't the faintest idea when. It could be tomorrow, or ten years from now. However, I do know that historically major corrective moves to the downside tend to happen much faster than the upside blow-offs that precede them.
I'm not recording all my thoughts on this to give advice to anybody on what they should be doing with their own money. If you'd done what I did last year, you made out like a bandit. If you'd done what I did in the last three months, you're back to par (or in the hole, if you didn't have the earlier gains to back you up). Primarily, I want to have a record for myself of my evolving market analysis and the trading record that results therefrom so I can refine it and learn.
Having said that, unless the DJIA goes over 8410, an upside breakout is not confirmed. All of the market's action since its intraday low on Monday has looked very corrective in structure, suggesting more downside to come as this rally exhausts itself. If you look at the chart I posted on Monday, you'll see that all three scenarios posited a rally from Wednesday forward. The only question is, how big of a rally? The main scenario suggested a lower-magnitude rally over the course of a few days prior to moving into a sharp downward spike. The secondary scenario suggested a rally back into the previous trading range of Nov.-Jan. (no higher than 9,000 or so, but definitely above 8,410), followed by an even sharper downward spike. The third scenario suggests a major rally back above 9,000 prior to some sort of gotterdamerung.
Which is it? I still don't know. I thought it was the first scenario because the rally on Tuesday looked like a complete textbook extended correction and was followed by a downward move on Wednesday that looked a lot like the re-establishment of trend. I still don't see the kind of momentum changes that tilt the balance toward the beginning of a major rally, even though the market is spiking upward in fits and starts.
I'm still short 200%, so that's some indication of where my money thinks my mouth is. For the record, I'm basically back to even (maybe incrementally ahead) after all the volatility we've seen in the last three months. Win some, lose some.
Somebody asked me for advice on stops. I won't give any, aside from saying that my own experience as a trader back in the 1990s convinced me for all time that stop-loss orders are generally a bad idea. The brokerages and traders all know where the standing orders are, and regularly move the market to "pick up the stops" before going on their merry way. I can't count the number of times I've seen good trades stopped out
I also repeat again that none of my projections here have much of a time element. That's why there's no indication of when I think the price target progressions I see coming up will occur (and the chart I posted doesn't have a time scale. I haven't the faintest idea when. It could be tomorrow, or ten years from now. However, I do know that historically major corrective moves to the downside tend to happen much faster than the upside blow-offs that precede them.
I'm not recording all my thoughts on this to give advice to anybody on what they should be doing with their own money. If you'd done what I did last year, you made out like a bandit. If you'd done what I did in the last three months, you're back to par (or in the hole, if you didn't have the earlier gains to back you up). Primarily, I want to have a record for myself of my evolving market analysis and the trading record that results therefrom so I can refine it and learn.
Link | Leave a comment {3} | Add to Memories | Tell a Friend
Market Update: February 4, 2009
Feb. 4th, 2009 | 03:40 pm
Pattern is still holding for my most-probable option. It's not fully confirmed yet, but today's market action leads me to strongly suspect that tomorrow is going to be a major down day in the DJIA.
Link | Leave a comment {4} | Add to Memories | Tell a Friend
Market Update: February 2, 2009
Feb. 2nd, 2009 | 06:22 pm
As promised, here's a quick and dirty chart of my current scenarios for the DJIA. The red line represents most probable scenario in my estimates. Purple is a close alternate. Green is the outside case. Expected value is heavily negative over my current trade horizon regardless, so I am currently 200% short.
[click on the image for a larger view]
This chart is in linear, not logarithmic, scale. That may skew your perception of magnitude a little bit. Remember, only percentages count.
You'll also notice that I've now started including the psychological state benchmarks. The little ones are medium-term cycle in magnitude. The bigger ones are longer-term cycle in magnitude. This could be repeated to arbitrary levels of scale up and down, but the chart would quickly get unreadable. At the very largest scale, we're still very much in the "Denial" phase...soon to switch over to "Fear" for the next year or so.
There are also some trend channel lines in there (very faint orange) if you're interested in such things.
Expect the news to follow the mass psychological state of the markets, not the other way around. Headlines are a trailing indicator.
[click on the image for a larger view]
This chart is in linear, not logarithmic, scale. That may skew your perception of magnitude a little bit. Remember, only percentages count.
You'll also notice that I've now started including the psychological state benchmarks. The little ones are medium-term cycle in magnitude. The bigger ones are longer-term cycle in magnitude. This could be repeated to arbitrary levels of scale up and down, but the chart would quickly get unreadable. At the very largest scale, we're still very much in the "Denial" phase...soon to switch over to "Fear" for the next year or so.
There are also some trend channel lines in there (very faint orange) if you're interested in such things.
Expect the news to follow the mass psychological state of the markets, not the other way around. Headlines are a trailing indicator.