Posts filed under “Quantitative”

4 Major Secular Bear Markets, 1900-2011

Dow Jones Industrial Average 1900- present (log scale, monthly)

Click for ginormous chart

Source: Monthly Chart Portfolio, Merrill Lynch Market Analysis, November 4, 2011

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I mentioned yesterday I had a long term chart of secular bear markets that was informative; the above chart (via Merrill Lynch) is what I was referring to.

There are three issues worth noting here plus one important caveat:

1. The long 10-20 year secular bear moves seem to have lots of major rallies and sell offs; the ups and downs are intense, but make little in the way of net progress. After 15 years, the average secular bear is essentially unchanged.

2. The roller coaster ride leaves investors psychologically exhausted. They come to forget the good times of so long ago, and believe there is no way out of the morass. Naturally, they are reluctant to believe in the new bull market once it begins.

3. The major bottom seems to occur about halfway through; this implies that the March 2009 lows will not be revisited (note I only wrote IMPLY and not guarantee or forecast!)  If we look at the current Bear versus the ’66-’82 (with lows like ’73-’74), it suggest that 8500-9000 on the Dow is possible, but barring another crisis 6500 is much less likely. And it also suggests that the next secular bull might begin around 2016-18.

Now for the caveat: We have but one century of data, and within that 100 year span, only four examples of long term secular bear markets. We really need 500-1000 years of data, 20-40 secular bears during the era of modern capital markets. That would allow us greater confidence that these four patterns aren’t merely coincidences.

See you around 2900 to validate the data . . .

Category: Markets, Quantitative, Technical Analysis

HFT/Algo Trading Alert Systems

What does it say about the state of our exchanges that trader on proprietary and execution desks now can buy a software program to alert them to the activities of Co-Located Algo Servers? “HFT Alert, the first real time software designed to detect high frequency and algorithmic trading systems. HFT Alert identifies when these trading…Read More

Category: Quantitative, Really, really bad calls, Trading

Markets are Efficient If (and Only If) P = NP

An NYU Poly Department of Finance and Risk Engineering professor has a forthcoming paper in Algorithmic Finance that claims that “Markets are efficient if and only if P = NP.” Why is this important? Most economists think markets are at least weakly efficient (I disagree). Computer scientists think that P != NP — that current…Read More

Category: Quantitative, Think Tank

What Does Inflation Say About Risk On/Off?

click for larger chart > Michael Gayed observes: “When the TIP/IEF price ratio (Inflation-Protection/Nominal-No-Inflation-Protection) trends higher, it means bond market is swinging towards increased inflation expectations. When the ratio is trending down, bond market is favoring deflation through outperformance of Nominal bonds. Inflation hedge tends to be equities: risk-on. Deflation hedge tends to be nominal…Read More

Category: Inflation, Quantitative, Trading

How Algorithms Shape Our World

Kevin Slavin argues that we’re living in a world designed for — and increasingly controlled by — algorithms. In this riveting talk from TEDGlobal, he shows how these complex computer programs determine: espionage tactics, stock prices, movie scripts, and architecture. And he warns that we are writing code we can’t understand, with implications we can’t control

Hat tip Flowing Data

Category: Mathematics, Quantitative, Video

FusionIQ Redesign & Free T/A Stock Screens

We’ve been doing a lot of behind the scenes tweaks to FusionIQ, and there are some wicked cool features coming in the fall. Meanwhile, the redesigned home page is up — its much lighter, cleaner, and easier to read. We are bringing the same critical eye to the redesign of the interior as well. I…Read More

Category: Quantitative, Web/Tech

Markets Down 6 Weeks Consecutively (and that means…)

History may not repeat, but it often rhymes. This table, assembled by Ron Griess of The Chart Store, shows what markets have done over the past century following any stretch of down 6 consecutive weeks. The data reads both binary and inconclusive: If the markets are merely oversold, then you get a nice snapback, and…Read More

Category: Markets, Quantitative

Financials as Percentage of S&P500 Market Cap

Earlier this week, we looked at the impact the financials had on the S&P. Today, I want to bring two charts to your attention that might give you some pause. The first is from Ron Griess (The Chart Store), showing NYSE market cap as a percentage of GDP. It indirectly relates  stock prices and valuation…Read More

Category: Economy, Markets, Quantitative, Technical Analysis, Valuation

ECRI: Global Slowdown to Hit by Summer

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Source:
Global Slowdown to Hit by Summer, Even for U.S., Says Achuthan
Stacy Curtin
Yahoo Daily Ticker
http://finance.yahoo.com/blogs/daily-ticker/global-slowdown-hit-summer-even-u-says-achuthan-130920838.html

Category: Cycles, Economy, Quantitative, Video

First Three Days in May

The equity market has made a little bit history in the first three days in May.  Only four other times in the last fifty years has the S&p500 opened May with three consecutive down days. Bespoke did some great work yesterday analyzing the first two consecutive down days in the new month and we thought we’d add…Read More

Category: Investing, Markets, Quantitative