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The Commodities Bull market

Jim Rogers says the bull market in commodities might last for another 10 years.

Other than historical precedent, why do you see the bull market in commodities lasting about 18 years?
This is not a prediction. If history is any guide, the shortest bull market I found lasted 15 years, and the longest lasted 23 years. The average has been 18 years. If history is any guide, this bull market will last until sometime between 2014 and 2022.

Weekend reading

Posted on 1/23/2006
I spent the weekend reading the entertaining book Hedgehogging by Barton Biggs.
The book deals with the authors experience of starting a hedge fund. It takes you behind the scene and gives a good glimpse of the funds of funds, large investors and their decision making, the people who run hedge funds and their lifestyle, strategies used by them and many other glimpses in to the inner working of hedge funds.
The writer has excellent sense of humor. I highly recommend Hedgehogging to anyone associated with trading.

Stock Watch

Posted on 1/18/2006
There is mini panic in the market pre open today. One thing I have learned over the years is panic is good buying opportunity.
One of the best book on how to use panic to profit is Practical Speculation by Victor Niederhoffer, Laurel Kenner. Let me be upfront this book is not easy read, it is poorly written. But it has some good valid ideas.

Victor Niederhoffer often quotes Henry Clews when it comes to market panic:

Henry Clews wrote in Twenty-Eight Years in Wall Street (1887):
“But few gain sufficient experience in Wall Street to command success until they reach that period of life in which they have one foot in the grave. When this time comes, these old veterans of the Street usually spend long intervals of repose at their comfortable homes, and in times of panic, which recur sometimes oftener than once a year, these old fellows will be seen in Wall Street, hobbling down on their canes to their brokers’ offices.

“Then they always buy good stocks to the extent of their bank balances, which they have been permitted to accumulate for just such an emergency. The panic usually rages until enough of these cash purchases of stock is made to afford a big “rake in.” When the panic has spent its force, these old fellows, who have been resting judiciously on their oars in expectation of the inevitable event, which usually returns with the regularity of the seasons, quickly realize, deposit their profits with their bankers, or the overplus thereof, after purchasing more real estate that is on the up grade, for permanent investment, and retire for another season to the quietude of their splendid homes and the bosoms of their happy families.”

Should you buy All Time High

Posted on 1/17/2006
Last week I received this unsolicited study on trend following. Essentially it says if you buy all the breakout to All Time High you will outperform the market.
The idea of buying All Time High has been around for long time. The logic being there is no overhead resistance at all time high.The Market Wizard, Ed Seykota has also bee n often sited for his observation - take note when the market makes all time high. William O'Neill has also been an advocate of this method.
So should you buy All Time High? The problem is on a given day there are more than 100 All Time Highs. More than that this concept of overhead resistance is unsubstantiated assertion. If a stock has to go up it will go up no matter what. If you take the top 100 yearly performers for last 25 years you will find stocks have made substantial gain even though they had significant overhead resistance.
There is a way to make the All Time High breakout system more profitable and workable. The clue to that is in Jesse Livermore book.
Note: Here is the Livermore Book I was refering to.
As mentioned in my earlier post, Jesse Livermore offers a better way to play the All Time High signal.
"For instance, let us say that a new stock has been listed in the last two or three years and its high was 20, or any other figure, and that such a price was made two or three years ago. If something favorable happens in connection with the company, and the stock starts upward, usually it is safe play to buy the minute it touches a brand new high."

Earning picture for 2006

Posted on 1/04/2006
Zacks has the latest update on earning picture for 2006 and things at this stage look bright.
Measured either by total net income growth, or by the growth rate of the median firm, the S&P 500 is expected to post double-digit growth for both 2005 and 2006. However, on a median basis, earnings growth is expected to decelerate from 13.4% in 2005 to 12.5% in 2006, while on a total net income basis, growth is expected to rise to 13.4% from 10.6% in 2005. The differences between these measures indicates a somewhat better performance for mid- to large-cap companies in 2005, but a better relative earnings performance expected in 2006 for mega-cap companies. For 2005 earnings growth has largely been about the energy sector, which accounts for 42.6% of the overall earnings growth, with only two other sectors pitching in double-digit contributions to the total growth (Industrials 15.2%, and Financials 13.5%). For 2006, the growth is expected to be much more balanced with five sectors making double-digit contributions to the total incremental earnings pie and the incremental earnings more closely matching the total 2005 earnings.

10 Day reprieve for market

Yesterdays action sets up the market for next two weeks. Market tends to sell off and then thicken up again. The earning season will start in earnest soon, so the market is setting itself up for that.
Yesterdays action has over 25 stocks on my scan list signaling entries. Some good shorts are also setting up over next 10 days.
Here are some stocks on my radar for next two weeks

New Year Brings New Trends

Does the start of the new year herald new trend in the market. Lot of asset allocation decisions are made on yearly basis by the big institution and investors and policy changes also are linked to new year, so some very good long term trends start at beginning of year.
Last year the biggest trend for the year which caught everyone on the wrong side, the USD reversal started at beginning of the year. The oil price trend which dominated bulk of this year again started in January.
So lets see what happens this year. I am mostly on the sidelines for last few weeks.