International markets traders banter

[cynic]

Oh dear, hope those green numbers dont turn out to be red the next day

A regular occurrence for those possessed of a sufficient level of insanity to trade the Demonic DAX!

 

[Modest]

"Hanging by a thread"

http://northmantrader.com/2015/10/04/hanging-by-a-thread/

 

[fiftyeight]

Nah bottom in.......

Any chance of knowing what your thinking was behind this?

 

[Trembling Hand]

Any chance of knowing what your thinking was behind this?

Guestimate of breadth divergence on any further declines outside of the big one that is just around the corner.

Has been for the last 8 years apparently.....

 

[fiftyeight]

Guestimate of breadth divergence on any further declines outside of the big one that is just around the corner.

Has been for the last 8 years apparently.....

So I had to find out what breadth divergence is, but still in the dark sorry.

So unless the August low was "the big one" it was a likely low based on the breadth divergence?

 

[sinner]

So I had to find out what breadth divergence is, but still in the dark sorry.

So unless the August low was "the big one" it was a likely low based on the breadth divergence?

During bull markets, lows in most technical measures (especially weekly/monthly frame) represent an oversold status which is close to the bottom - a wise place to buy. Breadth is a good one as it often leads index price movements.

However if bear momentum picks up then the lows merely represent the start of a protracted downtrend.

There have been multiple occurrences post GFC of the technical oversold state which many (including myself on one or two occasions!) claimed as the potential beginning of a new bear only to see new highs attained shortly thereafter.

TH is poking fun at those people

 

[sinner]

Of course, it depends on your perspective I guess. A new high steamroller driven by huge demand for claims against real assets is not really that optimistic.



Not that I'm claiming that is the case for the larger global indexes, which I think have mostly been influenced by FASB mark-to-unicorn rule relaxation in 2009 than anything else.

 

[fiftyeight]

mark-to-unicorn rule relaxation in 2009

And back to google we go, such a newb

Cheers for the reply sinner, your detailed replies are greatly appreciated

 

[sinner]

And back to google we go, such a newb

Cheers for the reply sinner, your detailed replies are greatly appreciated

Basically, in 2009 the US Financial Accounting Standards Board (and equivalent organisations in other developed countries) changed a simple but important accounting rule which essentially used to be: your assets are valued conservatively, either the price you paid or the current price (mark to market). According to that previous rule, most major financial institutions, globally, would be considered insolvent based on GFC "asset" (in this cases, mostly liabilities in the form of securitised debt) prices.

The new rule (known jokingly as mark to unicorn) allowed financial firms to declare the value of their assets to be what they (not the market) believed the assets to be worth. So let's say a Mortgage Backed Security or Municipal Bond is trading at 7c on the dollar, but you think that (under a whole host of assumptions) that it should be worth two dollars on the dollar. So you note it down in your balance sheet as $1.50 and call it a weighted measurement of value.

Now having said that, obviously the point of what caused the 2009 bottom is under heavy contention and in all likelihood we will never know for certain. Some will say TARP and QE and the road to ZIRP drove liquidity which drove prices, others will say that Obama fixed the US economy and so on. And to top it off, obviously those who claimed there were systemic issues got handwaved or laughed away as markets bottomed and proceeded to rip higher.

But I do believe that the change of this rule was really what allowed postponing of what is essentially inevitable (mathematically speaking) and shifted investor risk preferences back into bullish mode (technical oversold = buy signal) because the cornerstone of credit economies (read: our global economy) is the banks and financial system that they operate.


(h/t hussmanfunds.com)

 

[Trembling Hand]

TH is poking fun at those people

Who? me? Nooooo!

So I had to find out what breadth divergence is, but still in the dark sorry.

Here is what I was anticipating but in reverse. (that is bullish rather than bearish setup)

http://tremblinghandtrader.typepad....009/10/interesting-rollover-on-the-cards.html

http://tremblinghandtrader.typepad.com/trembling_hand_trader/2009/11/the-back-end-of-a-bull.html

(I'm not saying its the same situation that will lead to a 50% index move. Rather just the fact that breadth as Sinner said turn before the Indexes do)

 

[sinner]

(I'm not saying its the same situation that will lead to a 50% index move. Rather just the fact that breadth as Sinner said turn before the Indexes do)

Those are some good old blog posts that I remember reading and wish I had paid more attention to back then, would have saved me a motza on puts in proceeding years (although admittedly some did work out OK thanks to Deepwater crushing BP and GBPUSD).

Re "broad advances sign of a healthy market" interesting this phrase triggered my memory, as AFAIK the McClellan Summation Index (basically the 19/39 EMA of cumulative Advance Decline) uses a similar concept - moves above 500 indicate a liquidity wave (i.e. broad advances indicating more bull to come) and moves below -500 indicate the inverse.

Make of the following charts what you will

 

[fiftyeight]

Rather just the fact that breadth as Sinner said turn before the Indexes do

Breadth is a good one as it often leads index price movements.

Finally the holy grail, a leading indicator

Cheers guys a fair bit there for me to look at tonight and digest.

 

[sinner]

Finally the holy grail, a leading indicator

Cheers guys a fair bit there for me to look at tonight and digest.

It won't lead in such a way that it allows you to print money, the correlation with actual index movements is higher than that, everyone with market experience knows about breadth so you aren't going to generate post-tax alpha just by following it.

But I do find that it (along with other measures) provides a decent (and rational!) proxy for investor risk sentiment. As do yield spreads on different grades of corporate and quasi-Government debt, diversification measures (high or low correlation between sectors and indices), volume measures (up volume as a ratio to down volume) and so on.

It can also act as a decent input signal for short term EOD trading, i.e. rather than betting on mean reversion of the index price you can bet on mean reversion once a majority of stocks are making 5 day lows, or similar signals (reverse for momentum).

As an example: http://ibankcoin.com/woodshedderblo...g-indicator-signaling-breadth-bounce-is-near/

 

[CanOz]

Guestimate of breadth divergence on any further declines outside of the big one that is just around the corner.

Has been for the last 8 years apparently.....

Do you have internals for Europe as well TH?

 

[sinner]

Do you have internals for Europe as well TH?

Can get some for free on indexindicators.com (DAX, CAC and a few others IIRC).



If you have the data, not too difficult to build yourself in R. Realistically, for 30 stocks in the DAX or whatever, can even do it manually.

 

[fiftyeight]

I was attempting humour, newb looking for the holy grail.

Cheers again Sinner. I am going to log off before you give me even more to read

 

[CanOz]

Can get some for free on indexindicators.com (DAX, CAC and a few others IIRC).

View attachment 64603

If you have the data, not too difficult to build yourself in R. Realistically, for 30 stocks in the DAX or whatever, can even do it manually.

Thanks Sinner, Particularly interested in an NYSE style tick index for the Xetra....Having a look around, they must have one, but it might be called something different....

edit: Apparently the tick index for the Dax Xetra is the TICK-IBIS

 

[sinner]

Thanks Sinner, Particularly interested in an NYSE style tick index for the Xetra....Having a look around, they must have one, but it might be called something different....

Interactive Brokers has it as a product, the code is TICK-IBIS.

https://www.interactivebrokers.com/en/index.php?f=2222&ns=T&exch=ibis&showcategories=

 

[CanOz]

I now have my Tick indicator....thanks for making me look for this Sinner....

 

[sinner]

ECB announces they will be conducting the anticipated traditional Christmas "dumping [of cash] on your front lawn" early this year

https://www.ecb.europa.eu/press/accounts/2015/html/mg151008.en.html

With regard to the pace of purchases under the APP, the ECB had undertaken – as would be published on Monday, 7 September 2015 – purchases of €51.6 billion in August. Given the modest frontloading of purchases in previous months, the Eurosystem had now bought assets amounting to, on average, around €60 billion per month over the first six months of the APP. Purchases under the third covered bond purchase programme (CBPP3) had amounted to €7.5 billion in August, with the book value of CBPP3 holdings having stood at around €111.5 billion at the end of that month, and with primary market purchases amounting to a share of 17.9%. With regard to purchases of asset-backed securities (ABS), the Eurosystem had bought €1.3 billion of such securities in August, bringing the book value of holdings under the ABS purchase programme to €11.1 billion at the end of that month, with 27.2% purchased in the primary market.

From September to November 2015, purchases under the APP would again be somewhat frontloaded to prepare for the expected decline in market liquidity in December.

(h/t ZH)