Posts filed under “Trading”

Too Bullish or Too Bearish?

One of my favorite pastimes is dissecting accepted Wall Street wisdom to see if it contains any value for investors or traders. Often, upon examination, the widely held beliefs turn out to be closer to magical thinking than financial acumen.

One of the more recent examples is the way some analysts use data on sentiment to determine how much an investor should allocate to equities. The problem is that the sentiment data is inconclusive and sometimes contradictory. There is no signal within the noisy data.

Sentiment is extremely difficult to use as an indicator because it is only rarely at the extreme readings needed to generate a reliable trading signal. Recall the March 2009 low, where every measure of sentiment was deep in the red. Or October 2002, by which time the Nasdaq Composite Index had fallen almost 80 percent from its high and everyone hated tech stocks. These extreme events are rare.

One of the analysts who has observed these phenomena for many decades is Laszlo Birinyi, formerly of Salomon Brothers, and now of Birinyi Associates. In this weekend’s Masters in Business interview, Birinyi describes why so many sentiment measures are worthless. There is no usable signal in the American Association of Individual Investors bull/bear survey, Birinyi says. Many other such polls also lack a consistent methodology or are otherwise flawed. They are useless to investors, he says.

Continues here

 

 

Category: Markets, Sentiment, Trading

Get Ready for the Shanghai Composite Break Out

  China is on the verge of breaking out from its pattern of consolidation, at least according to the monthly chart book from the analytics team at Bank of America Merrill Lynch. If you look at the chart above you can see that the Shanghai Composite Index is in the midst of transitioning into an…Read More

Category: Markets, Technical Analysis, Trading

Best & Worst Trades of All TIme

Nice graphic showing the 10 greatest — and worst — trades of all time. The lure of these outsized billion dollar wins seems to affect the psychology of many investors and traders, looking for that one giant score.

 

click for full infographic
Jesse Livermore
Source: 888 Markets

 
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Category: Digital Media, Trading

Why Long-Term Investors Beat Short-Term Traders

No matter what, the long-term investor comes out ahead of the short-term trader Barry Ritholtz Washington Post, August 10, 2014   Last time, we looked at why traders are at an almost insurmountable disadvantage against investors due to short-term capital gains taxes. Many of you wrote in to note several factors that would have allowed…Read More

Category: Apprenticed Investor, Investing, Trading

HFT: Jumping the Queue

click for full image Source: WSJ

Category: Digital Media, Regulation, Trading

Another look: A short-term trader won’t beat long-term investor

  My Sunday Washington Post Business Section column is out. This morning, we revisit the advantages the long term passive indexer has versus short term active traders. The print version had the full headline The trader can narrow the gap but won’t win, while online, it was called No matter what, the long-term investor comes out ahead…Read More

Category: Apprenticed Investor, Investing, Trading

Last month, I spilled a considerable number of pixels explaining why Rupert Murdoch’s Time Warner bid had no significance to whether or not this is a market top. My short list included complaints of cherry picked data that somehow ignored most of Murdoch’s M&A activity over the past half century; a laughably small sample size…Read More

Category: Cognitive Foibles, Investing, Markets, Psychology, Really, really bad calls, Trading

Have We Reached the End of the Bull Market?


Source: Bloomberg, Aug. 1 2014

Strategas Research Partners Managing Director Christopher Verrone and Former Council of Economic Advisers Chairman Alan Krueger discuss the markets on “Bloomberg Surveillance.”

Category: Trading, Video

Largest One Day Increases (30%+) for VIX: 1990-2014

Source: Bespoke Investment Group

Category: Data Analysis, Options, Trading

Correction? Yes. When? Nobody Knows.

Welcome back from the long holiday weekend. Before we left for our nation’s birthday celebration, markets had a little party of their own: The Dow had broken 17,000, the Standard & Poor’s 500 Index had touched a record high and was spitting distance from crossing 2,000. Even the small-cap indexes such as the Russell 2000…Read More

Category: Investing, Markets, Trading