Trading the Trend

[IFocus]

I'll ask this for a 500th time seeing as you keep inferring the answer and then getting mealy-mouthed when it's asked directly:

Can we drop the agro it has no place here, the market will give everyone enough angst, Duc supply's more than enough information for us to digest, note that to do so is an enormous amount of time and effort its very good / free.

Opinions which are always welcome just beware the answers may mess up a few feathers as will the market just relax.

 

[Chronos-Plutus]

What data platform is that Chronus?

Investing.com:
https://www.investing.com/economic-calendar/
You can also get it from DailyFx:
https://www.dailyfx.com/economic-calendar

I like investing.com better because you can also get company earnings calendar

 

[over9k]

Can we drop the agro

The agro was in response to false accusations and snark.

Like I said, the only time I ever get a straight answer is with accusations and focus-shifting. Does he think the three instances of significant market drops were all just coincidences, yes or no.

 

[Smurf1976]

Can we drop the agro it has no place here

I was about to post the same comment until I read your post.

The more differing opinions the better and if someone has an opposing view and explains it politely with a constructive argument then that's a good thing not a bad thing.

There are no actual guarantees in the markets. If there were then pretty much everyone would be a millionaire.

 

[ducati916]

1. The agro was in response to false accusations and snark.

2. Like I said, the only time I ever get a straight answer is with accusations and focus-shifting. Does he think the three instances of significant market drops were all just coincidences, yes or no.

1. There are no false accusations. However feel free to post the evidence.

2. You had an answer. You simply don't like the answer. I don't see any:

(a) accusations; or
(b) focus shifting.

Therefore your complaint is without merit and irrelevant.

jog on
duc

 

[IFocus]

The agro was in response to false accusations and snark.

Like I said, the only time I ever get a straight answer is with accusations and focus-shifting. Does he think the three instances of significant market drops were all just coincidences, yes or no.

Just like in the market what we do / project / engage should never be driven by our emotions, hard to do but necessary.

Successful engagement on forums is a skill (not one I am overly endowed with if you see me over on general chat).

When seeking information or answers overt politeness is surely the order of the day, if some thing comes back that upsets you the answer is always to be polite to get into a bun fight makes no sense.
1. You just let some one else set your standards
2. You wont get the information you want
3. Why would you give some one you have never met control over how you feel, that's your choice surely?

Now for me to follow my own advice

 

[over9k]

1. There are no false accusations. However feel free to post the evidence.

2. You had an answer. You simply don't like the answer. I don't see any:

(a) accusations; or
(b) focus shifting.

Therefore your complaint is without merit and irrelevant.



View attachment 104938

jog on
duc

Ok I'll ask it another way:

Why do you think the pullback in the U.S last thursday, which occurred straight after a spike in U.S virus data, the pullback on the ASX this monday straight after a spike in chinese virus data despite an overwhelmingly postitive day in the U.S on the friday preceding it, and the pullback on the ASX today straight after a spike in australian virus data, ALL occurred straight after a release of a spike in virus data?

 

[willoneau]

How are the big boys going to clean up ?
Knowing how the general public will react to anything about the virus. So spike the market down on any news taking out the weak stock holders. I think once we stop seeing these spikes then the big boys are ready to start a bull run, just my thinking anyway.

 

[Smurf1976]

How are the big boys going to clean up ?

I do have a definite concern that, according to various reports at least, there's a lot of extremely inexperienced traders in the market right now.

Inexperienced as in people who 4 months ago had never directly owned shares in anything or even had a brokerage account and at most had made very passive investments into superannuation, managed funds etc.

How they react going forward may influence market volatility and overall it reminds me of 1999 - early 2000 somewhat.

 

[ducati916]

Lots to look at today. First off an overview of some of the sectors of the market.

This is important going forward as you want underlying support from lagging sectors (catching up) to provide support to the overall market as leading sectors cool off. If they don't cool off, well so much the better for the overall market.

Real Estate:

Improving. As for what has driven that surge in purchase applications, interest rates have played a major role. Although they are off the lows after rising a few basis points over the past few days, last Thursday the national average for a 30 year fixed rate mortgage fell to 3.38% which was the lowest level since October 3rd of 2016.

Consumer Cyclicals

Improving.

US Valuations

Valuations are (always) calculated with regard to growth. Apart from China, the US is (pretty) well placed for continued capital inflows for equity based investment based on its valuation and growth prospects relative to those below it in the rankings.

On that basis (macro-fundamentals) as the market approaches the closing of the gap and an assault on the 'all time high', valuations as a market are not outrageous. Business is picking up in sectors that still lag the market, which can provide support for the market trading at higher prices moving forward.

jog on
duc

 

[ducati916]

Drilling down into the sectors:

In consumer cyclicals, we have automobiles. Important due to their (usually) being purchased on credit. Credit which is provided by the financial sector, which we are interested in via providing support to the overall market moving forward.

Consumer finance, not looking so great atm. Bounced off of the lows, hit some resistance, and trickling lower. Definitely something to keep an eye on.

From the previous post, mortgage applications picking up. This sector looks far healthier, consolidating near the lows. If those applications keep coming, this sector will likely break higher, which will be good for the overall market.

And the Banks generally: sitting near the lows, consolidating. We know the Fed. will backstop NPLs. Lending activity picking up, with a steep curve (which the banks need) although margins are razor thin. I would say these chaps are poised to move higher. This is vitally important to the overall market. If the Banks move higher, the strength of the market will significantly improve. We will go through the all time highs. If they don't, well we may well have problems ahead.

jog on
duc

 

[ducati916]

Technical issues:

Once upon a time, Options expiry (Witching hour, Triple Witching was real serious business) was a (real) big deal. Then it sort of faded away and no longer seemed to have an impact. This one, obviously due to the sheer volume, is being flagged as a possible market moving event.

I always keep an eye on the Options market (for a variety of reasons) due to the hedging with stock/futures/etc of large positions or really significant OI.

The takeaway (from past experience) is that there may well be increased volatility, which (usually) means a move lower (but not always) and which lasts only a day or two. The expiry is always on a Friday, which if it creates volatility, means that you potentially have a false move, but the w/e to think about it.

Goldman Sachs think no change.
Nomuara think lower.

jog on
duc

 

[ducati916]

Psychological issues:

Some psychological issues to consider when engaging with the market. Pretty much self-explanatory.

jog on
duc

 

[ducati916]

Just in relation to the above post: https://www.linkedin.com/pulse/my-thoughts-new-bull-market-ken-fisher/?published=t

A new bull market was born March 23rd.

First, consider, a quick recap of 2020’s wild stock market, which I discussed at length in previous LinkedIn columns. The stock market was at all-time record highs in late February, then suddenly experienced its fastest drop ever into bear market territory (defined as a stock index dropping at least 20% from its peak). That took just 16 trading days. The total S&P 500 bear market was a decline of 34% from February 19 to March 23—fastest ever.

Why so fast? The best forecaster the world has ever known, the stock market, had to pre-price the reality of the grim economic impact of global governmental-imposed lockdowns aimed to slow the spread of coronavirus.

But after that, the S&P 500 recovered over 75% of its losses and isn’t far from new record highs. The Nasdaq reached new record highs in June. History displays lots of bear and bull markets. The longest good, accurate history is from America. Of all bear markets, there has never been a plunge into full scale bear market territory that recovered this much of the drop, 75% or more, that didn’t go on to new all-time highs. People talk about retesting the prior lows but once we’ve recovered this much from bear market territory that has never happened. That it never happened before doesn’t make it impossible. But it does make it very unlikely. Never happened before is a big thing to ask for.

But again, as for 2020’s bear market drop, what happened stock-wise in a month…in normal bear markets takes one or two years, not weeks. The beginning of historical normal bear markets actually roll over gently with the bulk of the declines coming much later. On average about two thirds of all bear markets’ percentage decline has occurred in its last third of duration. Over 55% of the drop has typically happened in its last three months. That’s what happens on average.

It wasn’t that way this time. The normal late stage plunging prices came all at once over a matter of just weeks.

“The Pessimism of Disbelief”

What happens after a bear market? A bull market! But they come in sneaky ways.

Steep stock declines scare people. They obsess over negative news and spin any and all potential positives back into negatives.

It’s happening now. The Federal Reserve announced trillions of dollars in stimulus measures in recent months in response to COVID-19. While that might be seen as a positive, plenty of investors instead fret this will spark inflation and future problems. Forget your views about it. Doesn’t matter! The sentiment is negative and negative sentiment is what bull markets are built on. Disbelieving positive developments or spinning positives into negatives is called what I’ve long written about as “The Pessimism of Disbelief.” This concept derives from what behavioral psychologists call, “confirmation bias.” It is, basically, the tendency to see what we want to see or think what we think we should see and reconfirm our prior views.

With every tick higher, stocks send a strong message to those who didn’t see the new bull market forming in March: “You’re wrong, you’re wrong, you’re wrong!”

It is human nature to want to avoid signs that show we’re wrong or contradict prior views – confirmation bias also and for the same reasons leads us to see evidence that confirms we were right and to revolt against or be blind to evidence confirming we are wrong. It is technically the tendency to “accumulate pride” and “shun regret” to motivate us to be more confident and keep trying….which worked great for our far distant ancestors hunting gazelle for the high payoff protein justifying many failures. But it hurts us in markets going up against The Great Humiliator, of which I’ve written so often.

Confirmation bias causes you to find reasons why, “I’m not wrong, I’m not wrong, I’m not wrong!” Said otherwise it is things like, “I sold that one; it went down—see how smart I am?” Or, “I sold that one; it went up; I wouldn’t have done it if my spouse hadn’t groused at me all last night and I got such a bad night’s sleep.” Or, “I bought it; it went up; I can do that again!” Or, “I bought it; it went down. The stockbroker misled me when he said blah, blah, blah.” All of this reinforces self confidence in the face of success or failure.

This drives “The Pessimism of Disbelief,” which keeps sentiment low as stocks rise against a myriad of negatives as they always do in every new bull market. It keeps the wall of worry going that every new bull market must climb. It sets low expectations and keeps lowering them. With low expectations, almost any subsequent realities lift stocks—subject, of course, to short-term volatility.

The stock market pre-prices widely known information

One bleak outcome many fret is the possibility of a second coronavirus wave.

Remember, the stock market pre-prices all widely known information between three and 30 months out into the future. I’ve written about this often. That is what the stock market does for a living. The worry about a second wave of coronavirus is priced into the stock market because it’s a very, very widely discussed and known risk. It’s being debated and discussed in the public forum right now. It has been for months. The only ones not fearing it now are in those rare parts of the world feeling their first wave.

Consider what happened in March. To pre-price a shock (the coronavirus-driven economic lockdowns), the market moved on the shorter end of that three to 30 month time horizon because the lockdowns were sudden and imminent and economic free-fall would be clear soon.

But when it moves to pre-price the very short end of its pre-pricing time horizon it soon moves to pre-price out toward the far end. It does this every bear market as it ends. Always has. It is now pre-pricing for a far better future—maybe in 2021. What happens before then is of less consequence to it. How far is it pre-pricing out in the future toward its 30 month-long range? No one knows or can know. There is no way to know that with any precision. But pretty far—maybe 20 months or 30 months. But it isn’t concerned with what will happen to the economy in August or October.

The new bull market

This new bull market began March 23. When a bull market starts, you tend to get a fairly long run, driven by “The Pessimism of Disbelief,” which is driven by confirmation bias.

I don’t know how long it will last. There could be new big, bad things that come along that none of us anticipate like we didn’t the coronavirus or lockdowns last December--and haven’t been pre-priced at all. Major, unexpected events that aren’t being contemplated or talked about - or euphoria - are the typical factors that can end a bull market. That’s how the stock market works.

Ken Fisher is founder and executive chairman of Fisher Investments. Follow him on Twitter @KennethLFisher.

jog on
duc

 

[ducati916]

So I had a check back in time: 2012, 2011 and 2010. Options expiry, very dull. Nothing happening.

jog on
duc

 

[ducati916]

Banking issues:

While much of the analyst community largely expects that bank payouts are safe—despite lower expected earnings—policy makers are increasingly urging that dividends be halted so that banks can conserve capital to serve customers.

The latest salvo came from the Federal Deposit Insurance Corp., which noted earlier this week that first-quarter dividends were nearly twice as high as first-quarter profits. Smaller, more interest-rate-sensitive banks were said to be on the FDIC’s radar.

Larger banks, with more-diverse revenue sources, are generally thought to have safer payouts based on forecast earnings. Part of the reason for this is many of the larger banks halted share repurchases in March, which have been more of a drag on banks’ capital. Still, the banks have faced pressure to halt their dividends as well, pressure that already accelerated after European regulators were successful in pushing banks there to do so.




Revolving credit lines are getting paid back, but that might not be fantastic news for banks.

As the coronavirus pandemic hit, companies quickly tapped their lines of credit to shore up liquidity as much business activity ground to a halt. Most of that borrowing occurred in March, and evidence from J.P. Morgan analysts suggests many of the drawdowns have been “repaid much faster than expected.”

This poses somewhat of a good news, bad news scenario for banks. The sector has been weighed down over the past few months because investors fear that banks will face hefty loan losses due to the coronavirus. Earlier this month, several banks hinted that they would increase their loan-loss reserves this quarter by as much as—or more than—they did in the first quarter. Any sign of companies paying back their loans should be viewed as a positive.

However, while few companies are now drawing on revolving credit lines—and some have used funds raised through bond issuances to repay their revolvers—there has been an increase in lower-yielding Paycheck Protection Program loans. The new mix of PPP loans and long-term bonds means that the big banks will see their net interest margins squeezed, explained Vivek Juneja, analyst at J.P. Morgan, in a note Tuesday.

jog on
duc

 

[qldfrog]

Just in relation to the above post: https://www.linkedin.com/pulse/my-thoughts-new-bull-market-ken-fisher/?published=t

A new bull market was born March 23rd.

First, consider, a quick recap of 2020’s wild stock market, which I discussed at length in previous LinkedIn columns. The stock market was at all-time record highs in late February, then suddenly experienced its fastest drop ever into bear market territory (defined as a stock index dropping at least 20% from its peak). That took just 16 trading days. The total S&P 500 bear market was a decline of 34% from February 19 to March 23—fastest ever.

Why so fast? The best forecaster the world has ever known, the stock market, had to pre-price the reality of the grim economic impact of global governmental-imposed lockdowns aimed to slow the spread of coronavirus.

But after that, the S&P 500 recovered over 75% of its losses and isn’t far from new record highs. The Nasdaq reached new record highs in June. History displays lots of bear and bull markets. The longest good, accurate history is from America. Of all bear markets, there has never been a plunge into full scale bear market territory that recovered this much of the drop, 75% or more, that didn’t go on to new all-time highs. People talk about retesting the prior lows but once we’ve recovered this much from bear market territory that has never happened. That it never happened before doesn’t make it impossible. But it does make it very unlikely. Never happened before is a big thing to ask for.

But again, as for 2020’s bear market drop, what happened stock-wise in a month…in normal bear markets takes one or two years, not weeks. The beginning of historical normal bear markets actually roll over gently with the bulk of the declines coming much later. On average about two thirds of all bear markets’ percentage decline has occurred in its last third of duration. Over 55% of the drop has typically happened in its last three months. That’s what happens on average.

It wasn’t that way this time. The normal late stage plunging prices came all at once over a matter of just weeks.

“The Pessimism of Disbelief”

What happens after a bear market? A bull market! But they come in sneaky ways.

Steep stock declines scare people. They obsess over negative news and spin any and all potential positives back into negatives.

It’s happening now. The Federal Reserve announced trillions of dollars in stimulus measures in recent months in response to COVID-19. While that might be seen as a positive, plenty of investors instead fret this will spark inflation and future problems. Forget your views about it. Doesn’t matter! The sentiment is negative and negative sentiment is what bull markets are built on. Disbelieving positive developments or spinning positives into negatives is called what I’ve long written about as “The Pessimism of Disbelief.” This concept derives from what behavioral psychologists call, “confirmation bias.” It is, basically, the tendency to see what we want to see or think what we think we should see and reconfirm our prior views.

With every tick higher, stocks send a strong message to those who didn’t see the new bull market forming in March: “You’re wrong, you’re wrong, you’re wrong!”

It is human nature to want to avoid signs that show we’re wrong or contradict prior views – confirmation bias also and for the same reasons leads us to see evidence that confirms we were right and to revolt against or be blind to evidence confirming we are wrong. It is technically the tendency to “accumulate pride” and “shun regret” to motivate us to be more confident and keep trying….which worked great for our far distant ancestors hunting gazelle for the high payoff protein justifying many failures. But it hurts us in markets going up against The Great Humiliator, of which I’ve written so often.

Confirmation bias causes you to find reasons why, “I’m not wrong, I’m not wrong, I’m not wrong!” Said otherwise it is things like, “I sold that one; it went down—see how smart I am?” Or, “I sold that one; it went up; I wouldn’t have done it if my spouse hadn’t groused at me all last night and I got such a bad night’s sleep.” Or, “I bought it; it went up; I can do that again!” Or, “I bought it; it went down. The stockbroker misled me when he said blah, blah, blah.” All of this reinforces self confidence in the face of success or failure.

This drives “The Pessimism of Disbelief,” which keeps sentiment low as stocks rise against a myriad of negatives as they always do in every new bull market. It keeps the wall of worry going that every new bull market must climb. It sets low expectations and keeps lowering them. With low expectations, almost any subsequent realities lift stocks—subject, of course, to short-term volatility.

The stock market pre-prices widely known information

One bleak outcome many fret is the possibility of a second coronavirus wave.

Remember, the stock market pre-prices all widely known information between three and 30 months out into the future. I’ve written about this often. That is what the stock market does for a living. The worry about a second wave of coronavirus is priced into the stock market because it’s a very, very widely discussed and known risk. It’s being debated and discussed in the public forum right now. It has been for months. The only ones not fearing it now are in those rare parts of the world feeling their first wave.

Consider what happened in March. To pre-price a shock (the coronavirus-driven economic lockdowns), the market moved on the shorter end of that three to 30 month time horizon because the lockdowns were sudden and imminent and economic free-fall would be clear soon.

But when it moves to pre-price the very short end of its pre-pricing time horizon it soon moves to pre-price out toward the far end. It does this every bear market as it ends. Always has. It is now pre-pricing for a far better future—maybe in 2021. What happens before then is of less consequence to it. How far is it pre-pricing out in the future toward its 30 month-long range? No one knows or can know. There is no way to know that with any precision. But pretty far—maybe 20 months or 30 months. But it isn’t concerned with what will happen to the economy in August or October.

The new bull market

This new bull market began March 23. When a bull market starts, you tend to get a fairly long run, driven by “The Pessimism of Disbelief,” which is driven by confirmation bias.

I don’t know how long it will last. There could be new big, bad things that come along that none of us anticipate like we didn’t the coronavirus or lockdowns last December--and haven’t been pre-priced at all. Major, unexpected events that aren’t being contemplated or talked about - or euphoria - are the typical factors that can end a bull market. That’s how the stock market works.

Ken Fisher is founder and executive chairman of Fisher Investments. Follow him on Twitter @KennethLFisher.

jog on
duc

I like the

Steep stock declines scare people. They obsess over negative news and spin any and all potential positives back into negatives.

Does this ring a bell anyone?

 

[qldfrog]

So I had a check back in time: 2012, 2011 and 2010. Options expiry, very dull. Nothing happening.

View attachment 104970

jog on
duc

Hopefully this will carry on..
PS can i get invited to your party ,like the last one picture ;-)

 

[ducati916]

So you missed the bottom. You missed the bounce. You are not happy. All is not lost. The 'small' banks have not really joined the main show. They will at some point. I'll be opening a position in the AM.

DPST is the x3 leverage of the small banking sector (KRE). It pays an 8% dividend (hence my interest in bank dividends) which may or may not be 'safe'.

The train has not left the station. Last whistle sounding.

jog on
duc

 

[Smurf1976]

Some psychological issues to consider when engaging with the market. Pretty much self-explanatory.

Agreed although the notion that something is in decline can be true at times since there are indeed things which are in long term decline.