Wednesday 30 September 2015

Top Tweets Today: 30/09/2015

I found this funny that on this day 34 years ago the US was grappling with high inflation and interest rates and subsequently all those years later till the present day we debating whether the Fed should finally lift interest rates off the floor of 0-0.25%  which seemingly is causing turmoil in financial markets.

The interest rate set a record for the highest government yield issued which doesn't seem likely that it could be matched anytime soon. I think the difference between today and 3 decades ago is there was much less debt back then whereas today markets are swimming in the stuff. We forget that the famous monetarist economist Milton Friedman warned against the effects of an expanding money supply. Printing money will not save the world, being productive will, something I think the world at present has lost its appetite for.
I saw a particular piece of commentary last night where an analyst who was discussing the resources rout described what could be the start of the Commodities Crisis.  Garth Mackenzie of Traders Corner gave an insightful overview of what he thought are signs of distress within the commodities sector.

I've posted the video for those who might be interested to hear what he had to say of which I thought he made very valid points especially regarding the markets reaction to Glencore overladen debt situation.
Following from that story I missioned around twitter to find some chart of significance that maybe help indentify where this market could take us. This particular tweet by veteran investor Karin Richards indicates exactly Garth's point that there is shakiness within the resources sector.

The chart found below is that of BHP Billiton listing on the Johannesburg Securities Exchange, so the stock is denominated in Rands. A monthly view shows that a head and shoulder pattern is prominent with a break to the downside already initiated.

BHP Billiton is the largest mining in the world and seeing these patterns unfold does send a chill down the spine. Its weighting on the JSE is one of the largest which means that if it were to fall, it could weigh heavily on a few JSE indices painting a bearish sentiment.
Posted by at No comments :

Samurai Summary: Tops Tweet 30/09/2015

Green energy's golden boy Elon Musk has done it again by launching a new edition to his already existing product line of electric powered cars. The Model X is a 7 seater SUV targeting the family orientated car market. The car goes from 0 to 60mph in just over 3 seconds putting to rest the belief that electric cars can't match the power output that a fuel powered car can.

Musk, who is known for pushing boundaries, has conceptually designed a car that mimics the exact standard of car utility seen today but powered by electricity. I think it's quite courageous for someone to tackle a market such as the US which is known for its brute muscle engines with a gas guzzling nature. He hasn't only proven to the world it's possible to do but his actually brought it to market for sale, a feat not many can say within the field of green energy.

I feel the sector possesses vast amounts of potential however we need to move away from awareness campaigns and get into action. It's enough talking about the damaging effects humans have on the planet but not enough has be done which is why the developments happening around Tesla sets the precedent for others to come forth to match or even improve on those technologies, a catalytic moment that could drive forward the progression of human engineering.
I found this tweet intriguing for one reason that the BTFD sentiment seems to have gone silent over the past few weeks with many abandoning the thought of an attempt after being crushed by market volatility. It is evident that global markets have initiated the first leg lower, a move which if observed properly, has damaged long term technical areas. Should we be concerned?

Yes indeed we should. The basic assumption tells us when it comes to technical analysis the longer the timeframe the more reliable it becomes, so it doesn't matter if shorter timeframes indicate bullish direction, the market has now enter a phase where selling pressure has intensified and if the bulls are to prove their worth they going to need quite a bit of fundamental backing behind them something we aren't hearing too often these days.  

My good trading pal Petri Redelinghuys of Inkunzi Investments expressed his worry last month at the amount of losing trades he had been incurring at no fault of his own. Probably the greatest challenge a trader will face is knowing when it's the right time to starve off trading activity and let the market work itself through it's tempered condition.

So when I heard he had gone into cash I had to applaud the man for his brutal honesty not only with his clients and friends but most importantly himself. It seems from current conditions there is a sense of relief on his part observing from the sidelines with only time to tell when the right conditions provide the conducive environment to begin trading once again. We'll be following him closely.

I reported yesterday that Glencore management had released a statement quashing claims by analysts that said the company could face crunch time when it comes to paying its debts. Management said that the company was robust, had a cash generative balance sheet and the ability to service all its debts should the need arise.

This was taken up nicely by the market who has favoured the upside but left me puzzled. What has changed since Monday that investors feel more confident than they were 2 days ago?  If the statement has relieved many by asserting their trust in the company why was that trust tested on Monday by plunging the price 31% ?

Clearly there is a degree of irrationality going on in the market at present with outcomes like what has happened having detrimental effects on those trading the stock. Perhaps it's best to be in cash if market participants can't trust themselves.  
Posted by at No comments :

Tuesday 29 September 2015

Top Tweets Today: 29/09/2015

Glencore has hit back at its critics saying that it is committed to cutting back its debt from $30 Billion to $20 Billion and remains on course to reach that target and the company's balance sheet is in a sufficient state to service all debts due to its long serving relationship with finance houses.

It also stands behind its belief that the nature of the commodities market at the moment is merely short term turbulence and expresses the view of a recovery in the medium to long term. The market took the share as high as 20% in London on the back of the company's reassurance. This on the back on news that CEO Ivan Glasenberg lost more than $500 million in the turmoil yesterday, something many assumed would shake the commodities man but his stuck to his guns so far.

I decided to concentrate on my charting today and tweeted this particular index, the JSE Resources 20 index which includes the 20 largest resource companies listed on the JSE weighted by market capitalisation. I decided to go long term on the monthly as it would give context to the level  of technical damaged it has experience during the past year.

I recall drawing the chart early last year with a tight range between 45 000 and 60 000 and saw a break below 45 000. That break would suggest a move of 15 000 to 30 000. As you can see we are almost at those levels which has started to make me turn bullish on mining companies. However there is still much needed to prove itself.

Concidently the 30 000 support marks the lows of the financial crisis of 2008/09, if the index were unable to retain above that level things could get nasty but I don't see the possibility of that happening given the existing 33% drop from the 45 000 but even more so the 50% drop from the 60 000 highs made during 2014.

Another chart of interest I found was the Nasdaq which has now officially crossed the "Death Cross" point following its counterparts of the S&P 500, Dow Jones Industrial Average and the Russells 2000. What is a "death cross" you say?

It is a technical analysis term for when the 50 SMA (Simple moving average) crosses underneath the 200 SMA. The significance of the move is that medium and long term investors observe the levels carefully and this would go down as a sell. The signal creates a flurry of selling which in turns leads the index lower.


Looking on longer terms charts you'll notice how the confluence between the price and the SMA's suggest we are moving into a downward market. The Nasdaq made headlines earlier this year by finally returning to the all time high it made back in 2000 before the crash. My concern right now is that the price has stalled at that high and headed on it's way back down. There has also been a sustained bull run leading up to that high which does question how much longer can the trend continue...
Posted by at No comments :

Samurai Summary: Top Tweets 29/09/2015

Volkswagen is to be removed from the Dow Jones Sustainability Index at the end of next month reports said on Tuesday as the carmaker goes on a massive drive to contain the reputational damage done thus far after they admitted to intentionally deceiving US emission regulators.

I believe that the company has done extensive long term harm to their brand which has been at the top, probably even revered amongst most other automotive manufacturers. The world has come to trust the Volkswagen brand known for its reliability and being part of the family that the company has honed in over the years which is why many have been left shocked and disappointed after the company's admission. The two simply don't match up, it's as if you were mixing oil and water together.  

If you've taken a look at the major world indices on a long term basis you're bound to have noticed the amount of technical damage done over this extended period of selloff. I thought this tweet was appropriate by Assad Tannous in the sense that long term trends being broken are signs of an aging bull run. If participants are unable to support prices at levels while the selloff continues its a sign that the bulls have lack of conviction.

It's clear that the game has changed and so should the way you trade, if you fail to see that the market condition has transcended from Buy the Dips to Sell the Rallies you are jeopardizing your trading capital as well as your trading psyche.


I thought this was an excellent piece by Galen Woods who used the Seven Deadly Sins in the context of trading. The first and probably most recognized emotion is greed which I think has undone more trading than stock crashes in themselves.

Going through the rest of them does highlight the importance of being aware of what you are thinking and feeling during and after the trading process. Trading is not a typical activity you pick up on very quickly as the author emphasises, it requires copious amounts of time and dedication, something very few people possess.
Posted by at No comments :

Monday 28 September 2015

Top Tweets Today: 28/09/2015

I've been following the Glencore story over the past week as things have taken a turn for the worst with today being disastrous for shareholders as the stock price plummeted over 25%. It's clear now that there's distress between shareholders which can't bode well for management confidence. What I don't clearly understand at present is why the price is receiving a drubbing when there are plans in place to reduce debt levels. Do investors feel management can't pull a rabbit out the hat that they've so promised to do?

Analysis Andrew Todd tweeted this today saying that CDS (Credit Default Swaps) had gone as high as 550 basis points and back in the flurry of 2008 crash, 400 basis spelt trouble.  

For those of you who don't know what a credit default swap is, I'll briefly explain;

When an issuer of a debt security issues a bond, at the time of issuance they can safely assume that they can make regular payments on their debt, a company would not issue debt it couldn't afford, besides the market wouldn't buy into it. However things change as time passes, which means the company's profitability may have been adversely affected by any event which makes them prone to default.

The buyer will obviously face a degree of risk, so in order to mitigate this risk the buyer could enter into a contract with a seller of CDS that stipulates that the seller will pay the buyer the value of the bond and interest payments should a default occur. In return for the protection the buyer will pay the seller annual payments for assuming the risk. Basically its insurance.

If you'd like to find out more you can do so at Investopedia.

In Glencore's case, the debt they've racked up doesn't have the same terms of maturity, chances are they accumulated it over many years. However because of the resources slump profitability has taken a nose dive but the debt levels have stayed the same. Because of the speed of the selloff it hasn't allowed the company to take decisive action to arrest the purge. So now the company is sitting with huge amounts of debt and lower potential revenue which cannot cover interest and principal payments of debt which is why the CDS have surged to 550 bps.

The selloff started when analysts at Investec said that they saw the value of Glencore hitting zero. Shareholders responded with a big kick up the...


Does this commentary justify a 31% drop in shareholder value in just one day?

Ivan Glasenberg sunk serious cash into the recent rights issue, totalling $200 million of his own money to show his confidence in management's plan but is it enough to save this company from folding?

Only time will tell.
Posted by at No comments :

Samurai Summary: Top Tweets 28/09/2015

A shake up in Spanish politics has left one region in the hands of pro-independence party under the leadership of Arthur Mas. This served a heavy blow for Marione Rajoy of Popular Party, the current national government prime minister who has had his hands full trying to prevent his country from exiting the eurozone.

The region of Catalonia has been divided by a political group vying for independence from the eurozone but it would be an extremely hard feat to achieve given they only control one region of Spain for which the won majority but not the all important 50% mark, they fell just short of that figure. However what it does suggest is that Spanish politics could be in for a bumpy read as general elections are nearing closer only 3 months away with the ruling party facing stiff competition from Mr Mas's party.

The news was received by the market with very little impact however I do feel that this does have the potential to evolve into a bigger crisis for not only the country but the entire Euro region. The economic stability within the eurozone has been mute for a while as policymakers try in vain to revive activity within the region that suffers from chronic deflation. But one really starts to wonder if the concept around the idea of having a united Europe may be crumbling before our eyes with those in charge being brutally bombarded with extremist opposition views.  

I think this may have been coming for some time, a possible merger between Telkom and Cell C, however we do not have facts yet what the state of play is at this point in time. The move would strategically boost Telkom's mobile telecommunicative business which has failed to capture many new subscribers in a very saturated market.

It must be noted that Telkom held a significant stake in Vodacom but subsequently unbundled it a few years back believing the company had reached full value, a call which has been called into question many times over as well as the management who was behind the decision.  Fixed line voice communication is a dying market, an area where Telkom is largely exposed too and in need of a richer stream of revenue to bear profits from.

The company has blossomed under the management of Sipho Maseko who has tackled problems facing the state owned enterprise with vigour in a mission to bring back costs to industry standards, something previous CEOs have failed at due to meddling from government.


It's often heard "This time is different"whenever there's a pullback in the market and I suppose there's a degree of validity to that phrase since every pullback doesn't contain the same news flow as the previous as story developed, some go away others stay a little longer to wreck havoc while others are forgotten.

But one things always been certain over the past 6 years of this magnificent bull run...there'd come a time where buying the dips would payoff handsomely and the next move upwards was the target for moves to come. We haven't seen that sentiment come through over the past few months as the market has suffered from a severe bout of volatility and heavy selloffs that make all the right moves for a bear market.

Carl Icahn, an investor activist and billionaire has come out guns blazing by calling the Fed out for keeping interest rates low for too long and failing to lift those rates 6 months prior. He isn't the first prominent financial figure to do so and certainly won't be the last but what we do know is that the market has been playing up since the Fed stopped their massive QE program late last year.

What becomes of the market in the future nobody knows, but its clear the precedent has been set and the market ready for a rumble the real question now is; Are you ready?    
Posted by at No comments :

Sunday 27 September 2015

Top Tweet Omnibus for the Week Ending 25th September 2015

Every day I dissect the news of the day into bite sized snippets using Tweets I find on Twitter. My goal is to make sense of the news so that the reader has an easier time understanding it better and thus better placed to use that information more efficiently.

 For those of you who may not have the time to follow my blog everyday I will post up an omnibus every weekend for your convenience to catch up. So let's jump right into thing;

 Monday 21st September 2015

 Samurai Summary: 21/09/2015
Top Tweets Today:21/09/2015
Tribute to Mark Douglas 

 I reported on Monday that following Alexis Tsipras election victory on Sunday we would likely see more pressure on his government by EU leaders who have been struggling to get full co-operation from him in avoiding a debt crisis which hinges the well being of the entire Euro Zone. Greek voters helped secure Tsipras a comfortable 40% majority win with this being the third hurdle cleared in less than a year, the previous 2 being the decisive prime minister election he won to snatch away power from an opposition together with the crunch referendum vote.


 

 I also posted a tribute to the late great Mark Douglas, who passed away earlier in the month. I gave account of the first trading experience I encountered with my emotions riding along the way and described how identifying the importance of emotions in trading helped me begin my journey to trading success, something I believe Mark started when I read his outstanding book, Trading in the Zone. His insight in the field of trading psychology will sorely be missed. 

 Tuesday 22nd September 2015

 Samurai Summary: 22/09/2015
Top Tweets Today:22/09/2015

 It's been a tough week for carmaker Volkswagen AG who admitted over last weekend that they had deceived US emission regulators by installing software on the car's computers which gave out inaccurate readings to the emissions being produced by the car. The story started developing on Monday but continued into Tuesday with the share price in Germany falling as much as 38% from Friday's close. The level of seriousness of this admission is such that prosecutors may be obliged to institute criminal charges against those who are held responsible as if this the least of the company's worries as it's now left with a reputation in tatters.


 

  I used the opportunity to highlight some trading wisdoms around the Twittersphere because I thought that in the tough market environment we've been experiencing there was bound to have some positive to take of of it. From issues of overtrading to flawless accounts of the markets memories were just some of the topics I decided to discuss. 

 Wednesday 23rd September 2015

 Samurai Summary: 23/09/2015
Top Tweets Today:23/09/2015

 I highlighted an interesting chart drawn by Aksel Kibar CMT, who showed that the MSCI All Countries Index is stalling around a very important resistance mark on a monthly basis. This is worrisome as it could indicate the global appetite for stocks may be waning but also that if it fails to overcome it, it may result in world equities falling into a sideway market for a number of years to come. The index is traded in dollars which may have had a hand in slowly down impressive momentum the index has seen since the lows of the Financial Crisis in 2009. 

 Mario Draghi reiterated that he is willing and able to prop up the level of quantitative support of the euro zone economy if needs be as the trading bloc battles with severe bouts of deflationary activity. The comment was much expected by many participants by came as a relief because it creates the possibility of an extension to the program which is scheduled to end next year September. Draghi also said he needed further evidence from economic data that a need for more stimulus is warranted. It's my belief that the market has become too accustomed to zero percentage interest rates which can't be healthy in the long term as policymakers are only delaying the inevitable further along the line.


 

 Thursday 24th September 2015

 Samurai Summary: 24/09/2015
Top Tweets Today:24/09/2015

 The guys over at ZeroHedge presented a very good case as to why Volkswagen AG may be in for tough times but also the ripple effect it could have on the German economy that prides itself on its automotive engineerity. They go on to show how the company is sitting with abnormally high levels of finished inventory, much higher than that of 2008/09 when the Financial Crisis took hold of the world. They explain that automakers have been expanding production rapidly to tap into the Chinese market but with the recent turndown things have been going sour.


 

 Are indicators a trader's' best friend?  It depends according to TradingBuddy.com who says that in the current market environment a traders edge is not only his/her ability to execute based on indicators but rather the way they interpret the indicators in this particular environment. I've mentioned a few times over the past 2 weeks that things are getting difficult and suggest that it may best to take a sideline view for now while the markets resolve themselves. 

 Friday 25th September 2015

 Samurai Summary: 25/09/2015
Top Tweets Today:25/09/2015

 Janet Yellen spoke after the US markets closed on Thursday evening presenting a clearer outlay of how she sees the Fed lifting rates over the course of time. She stated that she still expects the Fed to begin hiking this year with only 3 months left but also said that the Fed had no way of how aggressive the headwinds from external headwinds eg China would be and their likely impact. The market seemed to take a sense of comfort from it with indices opening in the green after a horrendous week.

 

 I also commented on the current weakness being felt within the emerging market currencies as a result of speculation over the Fed's intended hike. It has caused much of a stir but not as much as the Chinese devaluation of the Yuan last month which sent shockwaves reverberating through the global financial system. I think this space may still be a hot topic of discussion for the next few months and the actions of the central bankers in those countries will be telling of the fate of many of their currencies. 
Posted by at No comments :

Friday 25 September 2015

Top Tweets Today: 25/09/2015

It seems as if Glencore CEO Ivan Glasenberg is on a mission to return the company to profitability as it struggles with a heavy debt ladened balance sheet. The company who has successfully concluded a right issues to raise $2.5 Billion announced today that it was in talks banks to help it sell off it's agriculture business.

Many are calling the move an urgent action needed to be taken as debt repayments gobbles up shareholders profit which is as a result of the commodities slump. Coasting on the backing of this news flow is other major mining houses such as BHP Billiton, Anglo American and Rio Tinto who have all had their own issues to deal with.
Chinese President Xi Jinping met up with his US counterpart Barack Obama at the White House in a meeting that will be watched by billions around the globe as this represents the world's largest economies.

There'll be a range of issues on the table namely the current turmoil being witnessed in the Chinese financial markets which is bound to be a hot topic of conversation.

I think this is a bold step by the US who want to court the Chinese rather than seek them out as their competitors as they ascend the ranks of economic hierarchy, currently second behind the US but catching up very fast with no doubt that in a few decades from now will probably be the world's biggest economy. The US needs to strategically place itself with a good footing when it comes to China so that it isn't caught on the wrong foot when they eventually take over.  
Posted by at No comments :

Samurai Summary: Top Tweets 25/09/2015

This is something that comes up a lot with many traders I talk too when they breakdown aspects of their trading that worked for and against them. I've found that traders tend to pick trades with enough edge to work for them but fail to set a target which leaves the realm of price possibilities open for debate. If there's one frustration that's difficult to work with it's exactly that.

Often a trade will work out nicely however the trader is left with the question; "Is this the correct exit level?"

You might get lucky and pick the right level or worse you exit too soon and the trade would've worked out even better had you held on longer.

Having a set point where you 'd like to exit tells you that you have calculated some realistic measure of  movement you expect to be reached as well as prepared yourself to follow the trade through without stressing if your target will be reached thus eliminating uncertain feelings.

Fed Chair Janet Yellen gave a statement yesterday after US markets were closed which seemed to filter through the markets in a more positive light than last week's announcement of no increase in the Fed Funds rate. Yellen was assertive that she saw an increase likely to happen this year but went on to express uncertainty over external factors that had held back the Fed's decision.

I believe this is what the market was looking for rather than a morbid picture painted of the global financial system in turmoil. If we look at the performance financial markets have given back after QE ended it's not difficult to understand there is a concern that the market is relying too heavily on free money.

The Fed has been confident is its policy over the past 6 years which the market relies on to guide them. However not lifting rates would suggest that the Fed fears that doing that would have a negative impact on the US economy but in the same breathe singing an optimistic tune of improvements made.
It seems there's no stopping the emerging market currency rout as the selloff deepens. Fears over when the Fed will lift rates has tempered the Bears into overdrive as many of these emerging economy's lack the sufficient growth themselves to begin lifting there own interest rates.

We stuck in a catch 22 situation, either they lift rates to keep the difference between developed economies and theirs at a reason width and at the same time strangle the little economic activity that is left or keep them on hold and burden the public with inflationary imports. One things for sure, I'm glad I'm not a central banker at the moment.
Posted by at No comments :

Thursday 24 September 2015

Top Tweets Today: 24/09/2015

I've been following the USDJPY currency pair closely recently as there's been a pick up of commentary surrounding the pair and it's correlation to equities. This graph I found puts things into perspective. It would seem as though the pair is becoming strongly correlated again which would mean we could see some serious downside coming. Watch this space.

Shares in BMW plunged on a report by a German automotive magazine that stated the emissions given off in their X3 model emits more than permitted under EU stature. Investors remained weary after Volkswagen came forward admitting to hoodwinking regulators. If this report is true it could widen the net to incriminate more automotive companies and would lead to a huge clean up within the sector.
 Continuing from the story above there seems to be panic created from the motor manufacturing sector which represents a significant weighting in the DAX 30 index. The index is sitting on major long term support and should it give way it would definitely impose critical technical damage. The German economy has been seen as the bedrock of the Euro Zone but the developments that have been evolving have the potential to produce negative consequences.  

Here's a summative list of the weightings, I thought it was key to understanding what's moving the German market at the moment. We could also investigate the strength of each share excluding the automotive manufacturers to ascertain if we will see the all important break or hold.
Posted by at No comments :

Samurai Summary: Top Tweets 24/09/2015

The guys over at ZeroHedge wrote a great piece on the Volkswagen debacle and the impacts it's going to have on the German economy.  They cite a number of measures to back up their analysis including the a chart of Volkswagens inventory on hand of finished products which has climbed to decade highs.

The thinking behind this is that vehicle manufacturers have ramped up production to cater for the increasing demand for cars by the Chinese however if we observe the happenings within the commodity sector that have resulted from a slump in economic activity, it's not hard to see the knock on effects it has on car sales. This has left car manufacturers with excess production capacity and lower utilisation.

In the case of Volkswagen the effect of the scandal could have a much wider impact on not only the company but the German economy as a whole. With inventories sitting at high levels one can envision that this scandal has the power to curb sales in the US which reached 600 000 last year alone. Should that happened it would result in a mass retrenchment program, a sector the German economy heavily relies on to keep its economy flowing.

If you thought financial markets were the place to be to make a quick buck well think again. Bloomberg reported that the Qatar sovereign wealth fund could have wiped out billions of dollars in just two days due to it's exposure to Glencore Plc and Volkswagen AG which has seen both share prices plummet more than 15%.

 Make hay when the sun shines is a familiar phrase heard when the markets are in full bull mode yet at present even the blue chip champions have been taking strain. What's the moral of the story?
Quite simply anything can change at a whim so if you've been thinking of joining the contingence of profit seeking traders perhaps do a little more homework before you get started because nothing dents your confidence as trading in chaotic market environment.
You'd have noticed that in the last few sessions I've made references to how difficult trading has become of late. It seems as if the market has switched off from the norm and completely changed the way it moves upward and downwards. It begins not to make sense which eventually leads to you becoming frustrated.

If this sounds all too familiar it's because it happens when the market is transitioning from one condition into another and your system is now caught up in the process.

In this article written by Mercedes Van Essen , one of many insightful articles in my mind, she goes into details about indicators and how the trader interprets those signals. However she also tells how indicators in themselves are flawed in that when they are caught in market conditions as we are currently experiencing, they have an ability to throw a trader off balance and lead him/her to a state of frustration and ultimately more likely to quit.

 I was particular interested to read about our interpretation of indicator signals, especially when highlighted that most believe that given a signal without any further knowledge will generate infinite profit. This cannot be true when proven in current conditions which is why their is a need on the part of the trader to actively observe the way indicators behave and come to a realisation that although indicators are good tools when it comes to trading they are not the be all and end all, you need a great deal of adaptability to mould your trading process to the way that the market metamorphosizes every a change is at hand.

Posted by at No comments :

Wednesday 23 September 2015

Top Tweet Today: 23/09/2015

A quite frightening piece of technical resistance I've seen in awhile which could be telling for equity markets in the medium term. Brilliant charting by Aksel Kibar who has drawn a long term chart of the MSCI All Countries Index. The reason this chart has so much appeal right now is down to the direction most markets seem to be heading...down.

  This is of major concern as a move downward would lead many to believe that world equity markets might be stuck in a range bound environment for years to come. We must be aware that this index is denominated in dollars, so it would mean that in dollar terms. This is important especially for markets such as the JSE (Johannesburg Securities Exchange) where the most followed index, the Top 40 index which tracks the largest 40 blue chip companies by market capitalisation, has seen an uptrend in Rand terms but if you convert it into dollar terms it's pretty much been flat.

Talking from a personal experience from someone who resides in South Africa, I would certainly say that if an investor were to look at the stock market and then the economy there is much divergence between the two and I would imagine the same across other economies too.

Judging the effectiveness of QE from the Fed who pumped trillion of dollars into the system only to result in subdued growth and fears from the market that should they lift rates it could harm the balance of things even if it's by the smallest increment possible, I'd say they failed.

Speaking in a press conference today, ECB president Mario Draghi reiterated that the central would be ready and able to expand its bond buying program if need be as signs of weaker demand are seen showing in the inflation rate.

The EU has been plagued with low inflation over the past years as an aging population and government social security system has taken off in a big way stunting growth in the economic area. Added to this recently was the Greek debt debacle which saw EU leaders.frantically rushing to find a solution whilst the world was dealing with its own problems namely the oil plunge and China.

Trading the market of late has really been a drag on me, especially with high levels of volatility and lack of conviction behind the moves. A few trading pals of mine have said they happy to sit on the sidelines for now and let the market do its thing. The market will remain in place.
Posted by at No comments :

Samurai Summary: Top Tweets 23/09/2015

Following on from the global selloff yesterday on concerns of a drastic Chinese economic slowdown, manufacturing PMI data released today showed that Chinese industrial production dropped more than what was expected creating yet another volatile Asian session with investors running for safety.

Many fear that the stimulus that has been injected into the Chinese economy thus far has not taken hold with further drops expected in the months to come. However in saying that we must bear in mind that even if Chinese authorities continue their stimulant process which I have no doubt they will it is still early to ascertain whether those measures have worked their way through the system. In theory it would have done so immediately but we're not working in a perfect world.


So I said I'd be following the USDJPY currency pair closely as I suspected the close correlation between itself and equities could provide clues to the directions of markets in the near term. This chart by J.C. Parets shows that there has been a consolidation after a steep sell down with the important point here being the low being made.

I believe we could possibly see another leg to the downside for equities and this chart backs up my belief. However its also important to note that this particular pattern, symmetrical triangle, can go either way so we can't rule out any upside. Let's see how this one unfolds...
Another dreadful day for Volkswagen as it's all hands on deck to clear the air after it was made known to the public that the company had lied to US emission regulators by switching on software programmed onto the vehicle's computer while it was being tested then turning off when it was done thus not reflecting the accurate reading.

It appeared as if CEO Martin Winterkorn had resigned earlier yesterday but those rumours were squashed causing chaos in dealings with Volkswagen shares. The feeling at them moment is there is going to be a clean of top management but replacements are not known which is making investors worrisome.
Posted by at No comments :

Tuesday 22 September 2015

Top Tweets Today: 22/09/2015

When you watch the scope of the downturn in crude oil prices you're bound to think of the knock on effects it has on other industries built around the recent boom of shale gas. When I saw this article by Bloomberg it caught my eye by explaining how the collapse of oil had led to a downturn in the market for sand.

I must admit that I had very little knowledge to the process of how hydraulic fracturing occurred but reading the article I found it interesting that sand is used to blast through the rocks to open gaps for the gas to escape. But I digress.

The real tragedy is the bust happening in small towns in and around the US who have seen a surge in sales of an otherwise unexpected commodity in relatively quick period of time with folks gearing themselves up to profit from but now staring down the barrels of bankruptcy as oil sinks to multi year lows.  Capitalism can be so cruel sometimes...

Massacre; that's the word that would describe the selloff in commodity producers today as the Asian Development Bank lowered its growth forecasts for China. The worst of the bunch was Glencore falling to it's lowest ever price since its IPO in May 2011. The company who successfully completed a rights issue recently is grappling with an overburdened balance sheet geared towards Chinese growth which has yet to materialised.

 I've may have mentioned this before in previous blogs that what we are seeing here is mining companies who have heavily invested in expanding production basing their expectations on projections that China would grow at 12% consistently who are now suffering the consequences of those decisions.

The future is very hazy for the time being and I wouldn't be an investor of these stocks at the moment based on the uncertain outlook. What they need now is time for management to fix up their balance sheets and stability in resource prices something I find hard to see anytime in the near future.
 If you're a trader here's one reason why risk management is so important when speculating the direction of a move in any security. Had you been trading Volkswagen on Friday you'd have no knowledge that the company had been lying to US regulators as to the amount of emissions being discarded from their vehicles. Fast forward 4 days later and the stock price is now 38% lower with you being poorer had you not applied common sense.

The moral of the story here is as a trader you have no control over the move of any security and by entering the trade you accept full responsibility that anything and I mean ANYTHING can happen whether it be positive or negative.
Posted by at No comments :

Samurai Summary: Top Tweets 22/09/2015

I thought I'd shake things up today and instead of focusing on news I'd like to put out some pearls of wisdom I found in the Twittersphere relating to trading and ways in which we all can improve ourselves especially in times we are seeing at the moment where trades are hard to come by and turning a buck over takes a little more than just effort, it requires you stretch your trading ability to the maximum.

The market can be a vicious creature exhibiting conditions of absolute calmness to maddening maniac. However it doesn't know who you are, your personality type, your style of trading or even the amount of risk you should be taking. It is merely a platform to contain the chaos it creates from which you and I profit from.

So if you feeling like it's giving you a hard time, it's not. Any given market condition can be changed at a whisper and if you're not prepared you'll get caught up. The market rewards discipline and punishes the unplanned.  The market isn't out to get you, it's there to test your ability.

This is something I'm finding as a common theme amongst traders during these tough times, overtrading. The problem comes in where the market volatility picks up significantly and begins to generate signals for a variety of different systems however because the volatility is severe you get stopped out quite often only for another signal to generate a few periods later. A real frustration that every trader will experience however this is where your trading intuition kicks in.

If you feel that the market isn't producing the quality you'd like to match with your system, there's no crime in sitting out until things settle down again. You sit in the driving seat and dictate what you want to do.

Our attitude to losing makes all the difference when it comes to profiting over the long term in trading. Managing your risk so things don't get out of hand is probably the most understated yet important parts of the trading process.

In different times when everything is turning up nicely with no worries bothering the balance of things, the market leads you into complacency in believing that there is no concerns over your positions not working out because there is nothing to fear. Going back to what Douglas Kass said about the market having no memory, it's exactly this conviction that falls trap to many traders who only realise the error of their mistakes when fear is driven back into the market and they sit with huge losses.

Bravery is not a tool for outsmarting the market, you need humility for that.
Posted by at No comments :

A Tribute to Mark Douglas

I recall the day I executed my first trade as a rookie over three years ago blindly entering the first instrument I found hoping that the direction I choose was the right. My mind went into overdrive with mixed emotions on every tick movement that went by causing a kind of battle between the good and the bad feelings. 

It started working in my favour, the trading adrenaline that so many had spoken about had bitten me for good. It felt like I was a natural even though I had maybe 30 minutes of screen time.  What could these so called experts be on about with daft expressions like “school fees” and “mastering your emotions.”

The next trade I doubled up on the opportunity by taking 2 trades feeling confident from my previous experience.  They both started to work nicely; it felt like the whole concept around trading fitted my personality so easily because I had a natural aptitude to do it. My job would simply be to click a button and viola profits would appear until…

The wheels came off in motions as profitable trades turned into rotten apples and suddenly I was devoid of the euphoric feeling I felt not so long ago. How could this be possible that the market could feed me profits in one way yet abruptly steal them away in another? 

I think there’s conformity when it comes to trading stories detailing our encounters with our trading mindset for the first time.  There’s a mystery about the way the market flirts with us then hurls us around at will that almost flabbergasts traders at any given moment. It was with this thought that I set upon debunking the mystery behind it all which took me of a journey to the unexpected.  

My search into the field of trading psychology lead me to game changing book called Trading in the Zone by Mark Douglas which had a profound impact on my attitude to trading so when I heard that Mark had passed away I felt a deep sense of sadness and belief that the trading world is all the more poorer because of his absence.  

Mark taught me that fear is an emotion created within our own minds, we instinctively allow our minds to control whatever it is we feel threaten over to avoid encountering a similar situation. 

However this instinctive reaction is the root cause of why so many fail at trading.  We have a fixed set of attitudes to the way we experience losses, to the idea of missing out when we not in a trade, the fear of not knowing what will happen next and hoping the money left on the table will somehow translate into more profit.  This is what Mark called the 4 primary fears of trading. 

Fear is one of the strongest emotions to deal with, it has the ability to stop you in your tracks and prevent you from reaching what you really want. However knowing that fear was created in your mind and that you acknowledge its presents, understand the imbalance it creates then logically switch it off with confidence is the single greatest weapon in defeating it.

 It’s this mindset that Mark had so aptly taught me to use in my own trading that has afforded me the opportunity to continue on my own pathway to trading success, a journey of self-enrichment not only in a monetary form but also on a personal level by tapping into the emotions that identify the realities and actively confront them to make us all better people striving for the same goal.


I owe Mark a huge amount of credit for setting me on this path although I will admit that it has yet ended and my belief is I’ve only touched a fraction of what lies ahead. However I do not feel afraid or worried about the task ahead because I know that by consistently applying the principles Mark has shared with thousands of traders around the world gives me the confidence to reach my desired goal.

Thank You Mark 
Posted by at No comments :

Monday 21 September 2015

Top Tweets Today: 21/09/2015

Something that's been making my life harder as a chartist is exactly this fact stated by Ryan Detrick that the S&P 500 had alternated between up/down movements for 11 straight weeks. The problem is you never get a clear direction on which way the market can go plus it makes technical charts look like a kindergarten drawing session. Incredible frustrating for anyone but it's comforting to know that no one market condition stays in tack all the time, it's bound to change so let's hope we get some more clarity going forward as we head into the last quarter of the year.
How long has it been since the Fed lifted interest rates? Probably so long that US  borrowers have forgotten what it feels like to pay hefty interest payments. This tweet I found to be very creative exaggerating that fact.

The Fed delaying hikes has left markets wondering if this year will definitely be the year that we do see an increase as the Fed cites external factors such as China and energy prices weighing heavily on their decision last week Thursday.
If you take a look around the market of late and can't notice anything bullish about it you haven't been looking hard enough with US  10 Year Treasury surging on the announcement of the Fed deciding not to rise rates and don't look to be fully convinced that we will see a rise anytime soon.

Bond prices and yields work inversely to one another meaning a decrease in rates will increase the price of bonds. However I don't think the US is anywhere near decreasing rates as they are at historical lows (0-0.25%) by holding off those hikes and adjusting forecasts about the pace at which the Fed intends to initiate each hike has cooled down speculation which in turn has made Treasuries look promising again.

I believe the majority of the market has been pricing in hefty hikes at a considerable pace which cannot be sustained if one looks at the strength of not only the US economy but that of its global counterparts. Trying to assess the rate cycle based on previous occasions will fall short of what is expected as the situation which has evolved since 2008 cannot be compared to normal because its far from it.


Posted by at No comments :

Samurai Summary: Top Tweets 21/09/2015

In a stunning turn of events, Alexis Tsipras has hit back at his critics by comfortably securing victory in Greece's Sunday election. It would seem that Greek voters are being sympathetic to Mr Tsipras cause as he cleared his third major hurdle in less than a year.  However the victory doesn't come without it's own problems as his party Syriza have suffered huge defections of party members who feel that Mr Tsipras handled  the Greek debt deal made with EU partners very badly by conceding to tougher austerity measures to be imposed on the ailing nation.

The downfall of Toyota in the US came not so long ago when huge scandal broke surrounding a defect in the accelerator cable which the company choose to ignore but ultimately cost lives and damaged the company's reputation. In a similar case, Volkswagen AG said on Friday that it had been deceitful when it's car went for emission tests and altered results by programming software to run only when the tests were taking place not reflecting the true details.

Shares in the company tumbled 17% on the news of a barrage of possible fines and litigation against the company who has been trying to regain lost market share within the US car market.
I've been noting the amount of charts going around and one in particular is the USDJPY due to it's correlated properties to equities. The general idea is, the higher the USDJPY goes the higher equities go. However the general concern around at the moment is without the backing of QE to support the market, equities are looking much weaker which could signal a protracted downturn in the medium term.  Obviously we are at the top of waning looking charts that have produced 3 years of good return so any significant pullback would naturally be in order. Something to follow closely.

Posted by at No comments :

Sunday 20 September 2015

Top Tweet Omnibus for the Week Ending of 18 September 2015

Every day I dissect the news of the day into bite sized snippets using Tweets I find on Twitter. My goal is to make sense of the news so that the reader has an easier time understanding it better and thus better placed to use that information more efficiently.

 For those of you who may not have the time to follow my blog everyday I will post up an omnibus every weekend for your convenience to catch up. So let's jump right into thing;

 Monday 14th September 2015

 Samurai Summary:14/09/2015
Top Tweets Today:14/09/2015

 The week started off with a look into the argument that Chinese officials may be distorting economic data to suit policymakers who are battling to jumpstart a sluggish economy that has seen a massive selloff in Chinese equities since June 12th this year which has spread into global markets causing concerns over the health of the Chinese economy. Growing skepticism has lead to analysts feeling in the dark for accurate readings of the national accounts of the world's second largest economy.  

 Now that the bears are in town it would seem every analyst or media outlet are taking their chance to call massive discounts in the price of vulnerable securities with this week Barron's calling an extra 50% drop in the price of Alibaba. We saw a similar stance taken by Goldman Sachs last week when they called oil sinking as lows as $20. Alibaba's management responded angrily to these suggestions and made some very good points why the data Barron's used was invalid for their company.


 

 Tuesday 15th September 2015

 Samurai Summary: 15/09/2015
Top Tweets Today:15/09/2015 

 Shock ousting of Australian Prime Minister Tony Abbott by own members of his party left the markets surprised at the unexpected move although there had been pressure from the public months leading up to it. He has been replaced by fellow party member Malcolm Turnbull, former communication minister who has promised to deliver leadership with a change. He inherits an economy that has suffered from the downturn in commodity prices as a result of China's sub par economic activity.


 

 Every trader faces those demonic days where everything they touch turns into a pile rubbish which has a disheartening feel to it. This is how I would perfectly sum up my Tuesday however I decided to turn things on their heads and see the more optimistically part of things instead of concentrating on the negatives. 

 Wednesday 16th September 2015

 Samurai Summary: 16/09/2015
Top Tweets Today:16/09/2015

 Following the developments on Chinese equities on both Monday and Tuesday I had been watching things closely and lone and behold  on Wednesday stocks decided to produce a 5 % rally however not without a frown. I found some great stats by fellow Tweeters that exhibit the height of volatility in Chinese stocks at the moment. Initially it seemed as if a comment made by MSCI CEO Henry Fernandez that Chinese A list stocks could be included in their global indices sooner than expected buoyed the market on to lift stocks higher.



However I went on to show how the margin debt held by brokers has fallen considerable which does support the argument that government is supporting the market and not retail investors. Government seems to be a mission to purge the market from any "impurities" that could affect its stability by not only threatening but enforcing a law that makes any person "spreading rumours" resulting in a collapse of stock prices, criminally liable to prosecution. 

 In an arena where the movements seen is driven largely by fear and greed it really isn't smart to add pettiness to the normal order of the day. It only serves to increase the level of fear even higher...  

 Thursday 17th September 2015

 Samurai Summary: 17/09/2015
Top Tweets Today:17/09/2015

 The day of the big announcement from the Fed over whether they would lift rates for the first time in 9 years. I decided to dedicate my whole day to covering this event as I felt it had the potential to change the course of future developments. The commentary I followed seemed in favour of no rate hikes because of global turmoil stemming from China however I did go on to highlight some of the risk that it posed for the Fed should they not lift the rate. 

 I predicted that I didn't think the market would react to whether rates stayed the same or raised but rather the statement made Fed Chair Janet Yellen which proved to be true with the markets at first feeding on Yellen's dovish tone until realising later on in the question session that she didn't seem to be painting a very positive outlook for the US economy as was expected and then decided to sell down the market in a flurry. Many say this wasn't the case as quadruple witching was due for the next day but one cannot simply negate such importance from this event given the nature of the build up.


 

 Friday 18th September 2015

 Samurai Summary: 18/09/2015
Top Tweets Today: 18/09/2015

 The Fed Hangover was the name of the day for most markets looking to digest the news out the US late session on Thursday. I even highlighted a tweet by popular option & trend trader Steve Burns posting a picture of the difference between a tennis match and current market moves. 

 I also noted that Koos Bekker, former CEO of Naspers, whose stock price has seen a phenomenal surge over the  past few years, sold off a significant stake of his holding. Bekker rid himself of his holding while he was on a sabbatical for a year only to return a year later in a new position of Chairman of Naspers. Questions have been raised to the confidence in the company matching previous years performance if the leading man behind superb growth selling off a mighty chunk is bullish for investor sentiment?

 
Posted by at No comments :
Subscribe to: Posts ( Atom )