Be aware of the "Hinbenburg Omen": "Looking back at historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen within the next 41 days after its occurrence was 77%, the probability of a panic sellout was 41% and the probability of a major stock market crash was 24%." The traditional definition of a Hindenburg Omen has five criteria: * That the daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day. * That the smaller of these numbers is greater than 75. * That the NYSE 10 Week moving average is rising. * That the McClellan Oscillator is negative on that same day. * That new 52 Week Highs cannot be more than twice the new 52 Week Lows . This condition is absolutely mandatory.
I think one BIG mistake on the part of the Fed is trying to outlaw recessions vis a vis the Bears Stearns bailout. They (BSC) made a mistake......misjudged risk, they should pay the piper. All that crap about a domino effect was just to cover their (Fed) actions. By trying to delay the inevitable, they have just garanteed a worse outcome for everyone.
Excellent Commentary All ....................................................................... Makloda wrote.... For what its worth, one thing that always helped me is blend out news headlines, blend out CNBC, blend out anything that others say and strictly stick with my trading discipline. Come Monday is just another day. Just like last Monday and the one before. I won't do anything different and trade it day by day. I personally (and this is just my experience and not a recommendation) found that trying to adjust my trading style or net long/short exposure by the bearishness or bullishness of news or headlines brings more adverse than positive effects on my bottom line over time. The human brain unfortunately is wired to panic with the herd, not against it. ................................................................................. In fact....journalism blurting about all day is more of a hindrance....and can even be distracting.... Journalism has nothing to do with trading.... Journalism has to do with Nielson ratings and selling ads.... And entertainment.....
I had dinner with a guy last week who worked for the Fed for 30 years, retired in 2004 as a Senior Economist and there was no doubt in his mind that the Fed must have felt that they had to do what they did with BSC, such an action is anathema to the Fed and had it had any other option it would have taken it.
Extremely wise words, mak man. I've tried to eliminate the background noise on this latest 'feeling.' It does seem this time, to me, that there's more of substance behind the noise than usual.
All true but there is a cycle to the news (I don't think of CNBC as a news source if I think of it at all), by design perhaps I don't know, and it influences sentiment. If you can get in sync with that cycle it can be a helpful trading tool. For example, horrific news comes out and the market barely flinches might be another indication that it is time to go long. Or like last summer where seemingly every peice of news, good or bad, was seen as a reason to ramp equities up. As they say, its not the news that matters but the reaction to it.
I recently read something from a mortgage industry bigwig, who had been invited to the federal reserve for a luncheon. His take was that the Federal Reserve is set up to take care of the banks, they are not concerned about the economy. There is no way they should be exchanging treasuries for bad loans, what kind of shit is that? It's not bad enough they bankrupted countless pension funds with bad CDO's, what they have left in inventory the Fed takes off their hands? This country is so corrupt, no wonder Bush wants to merge with Mexico. It'll be a good fit.
"For example, horrific news comes out and the market barely flinches might be another indication that it is time to go long." Yeah, go long the week of the news, then short the following week when some tiny straw breaks the camel's back.