Thursday, 24 September 2015

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.

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