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The quest for edge

Posted on 3/31/2006
The million dollar question facing strugling traders or beginers is how to find an edge and Michael Taylor has some sound advise based on his personal experience of playing golf.
Isn't it amazing that it took trading to teach me that "magic" next level? In fact, learning to trade has been eerily similar to my golf experience. Reading trading books and studying the best charts for many endless nights than I care to share. Searching and searching for that one thing...that one edge that would take me to the next level.

I assumed that talent and a perfect edge is what would take me to the next level both in golf and now trading. Thankfully, I have finally found the one thing that can take you to the next level. And I'll even be so gracious to share it with you...

Don't follow the gurus

There are more gurus than traders. So which one should you follow ? There is some sound analysis here.
Can analysts, experts and gurus really give you an investing/trading edge? Should you track the advice of as many as possible? Are there ways to tell good ones from bad ones?
In summary, recent research indicates that the average "expert" has little to offer individual investors/traders.
Finding exceptional advisers is no easier than identifying outperforming stocks. Indiscriminately seeking the output of as many experts as possible is a waste of time. Learning what makes a good expert accurate is worthwhile.

The 100 fast movers

AIRM AKS AMN ANDE ANDS
APFC ATHR AVM BID BITS
BKHM BONT BWNG CCOI CDE
CENX CHAP CLZR CYBS DRQ
DRRX DXPE EDAP EMIS ENG
ERS EVST EZPW FNSR FTEK
FTO GEMS GLBC GMTC GPI
GRA HANS HBX HL HYTM
ICE ICTG IFSIA IIG IIIN
INTN IPSU IRIX IVAC KKD
KNOL LMLP LPSN LVLT MED
MEND MFRI MGAM MGN MTW
MYG NCTY NEU NG NICH
NOIZ NTCT NTES NUAN NUE
NVAX NVDA OATS OPTC OS
PEIX PRLS RACK RMBS RMTI
RTI SIL SKX SLW SMSI
STLD STXN TFR TIE TWTC
TWW TXCO USAP USEG VIMC
WTSLA WTZ XNPT XRTX ZOLT

What is on move

Posted on 3/30/2006
Commodities. Every thing in commodities is on fire. Look at the sector moves- Gold, silver, copper, iron, aluminum and oil and gas. The other sector shaping up well is Casinos.
There are number of individual stocks at good buy points. Look at NVAX, SMSI, MED,GRS and so many others (total breakouts in scan= 232). I also noticed some sector rotation from large cap to technology.
Update Chasing the move on commodities here may not be helpful. If you were positioned ahead of time in to it, then only you would have benefited from it. Many of these stocks had breakouts a month or 15 days ago which was the ideal time to get in to them.

Why it's important you see the big picture

I always keep an eye on the macro analyst. I seldom trade based solely on these kind of analysis, but it helps to keep the mental pantry well stocked. One of the analyst I track regularly is Mark Boucher. In my opinion his book- Hedge Fund Edge is a must read for every trader.

We live in interesting times. Ones that I believe more than ever REQUIRE a full understanding of the big picture macro environment and its vulnerabilities. The most massive fiscal and monetary stimulus since Hitler has been injected into Japan, a major economy with global implications. The most massive CONCERTED GLOBAL central bank stimulus program since WWII is winding down. In my opinion, there has never been a time in my life when understanding the macro situation has been more critical than in the period of the next few years ahead.

There is a new blog on Wall Street- (hype alert)

The gold rush is on for Wall Street blogs.With the amount of advertising dollars at stake, new funded entrants are entering the field. There is a new hyped entrant- Dealbreaker
DealBreaker is an online business tabloid and Wall Street gossip blog. It seeks to cover the personalities and culture that shape the financial industry, offering original commentary, news and entertainment.

Here is what the celebrity editor has to say it is going to be about.


What? You were expecting flashing lights? Big ticker symbols scrolling across the middle of the page? Serious commentary? Stevie Cohen on a stick?

We don't really do that. But here's what you will find: posts about the precise size of the guitar collection on Paul Allen's yacht spaceship, posts about the disparity between what Aswath Damodaran thinks is the dark side of valuation and what we think is the dark side of valuation (hint: high-quality cocaine), banker body counts (thank you, John Mack), interviews with people about how much money they make and whether they sometimes buy things just so they can throw them away, sightings of Eliot Spitzer, pitchbook origami, fun with league tables, and so on. And occasionally we'll break news or do something that's otherwise useful. Which will be entirely an accident. We apologize in advance.


Update The funniest part on most blogs is in the comment section. In case you missed read this.

When a market makes a multi year high .......................

Gold touched a 25 year high , and silver nudged a 22 year high as the US dollar slipped and the silver price benefited from investors buying the metal ahead of an expected launch of a silver-backed exchange traded fund in the US.

Silver topped $11 an ounce for the first time since 1983 Wednesday, and gold rallied on demand by investors seeking better returns than stocks or bonds.

Silver has surged 58% in the past year, and gold reached a 25-year high last month as investors bet precious metals will outperform stocks and bonds. Commodities climbed an average 5.23% a year from July 1959 through 2004, compared with 5.65% a year for stocks and 2.22% for bonds, according to a study by the University of Pennsylvania and Yale University.

"In bull markets, everything makes an all-time high, and silver is going to do so again in the next 10, 15 years," says Jim Rogers, chairman of Beeland Interests who also co-founded the Quantum hedge fund with George Soros.

This bull has legs

Posted on 3/29/2006

Today's action was impressive. So next two weeks are going to be interesting. I have over 300 stocks in my breakout scan today. Those who were fully invested reaped the max benefit out of this. As the rally will run through the earning season there will be some rockets taking off post earnings.
Most of the time I look at two weeks horizon for planning, that way it is easier rather than having a very long view on market.For next two weeks the trick will be to be present in as many runaway moves as possible to milk the up thrust. Ultimately stock selection can make a lot of difference to final performance. The metals sector looks to be idealy positioned for runaway move currently.

Pre announcements Season Alarm



Now that the quarter is over, look forward to the start of the pre announcement season. It can be a treacherous period for sector moves, often your stock ends up with collateral damage due to a pre announcement by prominent movers. It is also a fun to watch some companies timing their pre announcements with major precision to squeeze bears. IBM is one company which has mastered this game well.
Also pre earning drift will start for many stocks. As the market is in pullback phase expect more upward drift during this quarter.

Anticipating a move and profiting from it

Today is an ideal example of anticipating likely moves and profiting from it. As I mentioned sometime ago, I had my alarm of quarter end some time back and in anticipation of a pop, plus a feel for market direction had me putting in lots of positions ahead of time for last week and today that has paid off- the portfolio is up double digit.
Even though I am primarily a system trader, over the years I have developed a good feel for the market and use it in conjunction with the system to vary position sizes and total leverage.
Current open positions: MED, ZUMZ, GAIA, NOIZ, RTI, DNR, CLZR, ICON, TIE, IRIX, HYTM, NETL, CHAP

Goldilocks Economy is back


Now that the FOMC is over lets get back to the benign environment. Ideal for the market. The year should see some monstrous rallies.

So far, the benign, moderate-tightening scenario is playing out nicely in the United States. Growth is staying at a sustainable trend rate of about 3.5 percent, and inflation has remained within a moderate range that is acceptable to the Federal Reserve. The absence of perceived macroeconomic risk lowers the long-term real interest rate, itself a moderate stimulant to the real economy, as Fed governor Ben Bernanke reminded the New York Economic Club in a speech on March 20.

Can this continue forever? No. Can it continue a lot longer than we expect? You bet it can. The longer the benign, low-risk scenario persists, the less risk is priced into asset markets and the higher they will drift until, eventually, demand growth presses inflation a little above the FedÂ’s strongly desired target range. Then we will (re)learn what tight money is.

Why short selling is losers game- Ed Seykota


Ed Seykota has this in response to why not to use a short selling technique. I have tested hundreds of systems and my conclusion is similar- in the stock market short selling is losers game
In general, long-term simulations on Trend Following systems tend to show better results on the long side.
This correlates with the observation that volatility is proportional to price, so when you play from the long side you are starting with lower volatility and therefore a better reward / risk possibility

Chinese foreign reserves to exceed $1 trillion

The policies of China - the 800 pound gorrila matter as much as FOMC.
CHINA’s foreign exchange reserves, swollen by its huge export earnings, have outstripped those of Japan to become the world’s largest and are on course to exceed $1 trillion (£570 billion) before the year’s end.

China’s reserves finally overhauled Japan’s in scale at the end of February, climbing to $853.7 billion, the country’s China Business News said yesterday

Key factors in the ballooning of the reserves has been the rapid growth in China’s exports, together with its continued intervention in foreign exchange markets to thwart any strengthening in its yuan currency.

China has continued to invest a large part of its huge reserves in US bonds and assets. It held $262.6 billion in US government treasury bonds at the end of January, making it the largest single investor after Japan.

The initial move is usually the false move

The initial move after FOMC statement is usually a false move. Also keep in mind the quarter end . So get ready for lots of drama and squeezes.
The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 4-3/4 percent.
The slowing of the growth of real GDP in the fourth quarter of 2005 seems largely to have reflected temporary or special factors. Economic growth has rebounded strongly in the current quarter but appears likely to moderate to a more sustainable pace. As yet, the run-up in the prices of energy and other commodities appears to have had only a modest effect on core inflation, ongoing productivity gains have helped to hold the growth of unit labor costs in check, and inflation expectations remain contained. Still, possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures.
The Committee judges that some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance. In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Jeffrey M. Lacker; Mark W. Olson; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen.
In a related action, the Board of Governors approved a 25-basis-point increase in the discount rate to 5-3/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Dallas, and San Francisco

Breakouts

Posted on 3/27/2006
Not recommendations. Just a list to generate long/short ideas.
Total= 96
ADES ALDA ALDN ANAD BANR BIOS
BMET BZF CACB CALM CBIZ CHRW
CLZR CMED CPSS CPT CYBS DIL
DXCM EDAP EGLS EGO EMKR ERS
ESL FFH FII FORD FRNS FTEK
GGI GLBC GPI HAST HDY IBA
ICON ICTG IGLD IIIN INVX IPAR
IRIX JDO JMBI KOPN KRY LAYN
LNOP LNUX MCRI MFN MGN MTEX
MTLM MYOG NAB NAU NAVG NCTY
NEU NIHD NSSC NWRE NZT OBAS
PYX RBY RMTI RUTH SA SCLN
SFP SKX SMSI SNTS STAN STLD
STNR STRC SWKS TFSM TGE TSP
TTWO TWTC UCBH UIC UTIW VCP
VIMC WRNC WWIN XING ZILG ZOLT

Breakouts

Not recommendations. Just a list to generate long/short ideas.
Total=106

ABMD AEHR AIZ ALA ANAD AP
ARGN BEAV BIOS BPO BRNC BSM
CAC CACB CBEY CCL CESI CPB
CPST CRTX DDD DNR DPW ECIL
EDAP EGLS EGO EMIS EMKR ENWV
EQIX EWP FCF FELE FICC FIZ
FOE FRNS GAP GGI GHL GLBC
GLGC GMTC GPI HL HLIT ICTG
IKN INT INVX ITMN KZL LAYN
LAZ LBIX LGN LOOK LPSN MANT
MATR MEND MFRI MINI MLS MTA
MVL NCTY NPSI OYOG PAL PFWD
PKY PNI PRLS PSEM PXD QDEL
QVDX RESC SCM SFP SHOE SLW
SMSI SNMX SNX SSD SSS STSI
STXN SUNH SVI SWKS TRX TUES
TWTC TXCO UACL UIC WGRD WOLF
XNPT

London gains over New York and Frankfurt

Posted on 3/25/2006
London apparently is the fastest growing financial center in the world today. Its raining jobs over there.
The increase in jobs - which has been accompanied by the return of big bonuses in the Square Mile -also reflects the fact that London has been gaining market share from other financial centres, including New York and Frankfurt.

Gordon Brown acknowledged the City'’s success in his budget speech. A Treasury report, Financial services in London: Global opportunities and challenges, said London, supported by regional financial centres, was "“succeeding in meeting the challenges of globalisation"”.

"“No other financial centre can match the scope of Britain'’s financial markets,"” it said, "and the government is committed to supporting and promoting these strengths around the world."” Gerard Lyons, head of research at Standard Chartered, welcomed Brown'’s acknowledgement of the City'’s success. "It is good that, at last, he is recognising it," he said.

According to the Treasury document, London is the location for 70% of the global secondary bond market, over 40% of the derivatives market, more than 30% of foreign-exchange business, over 40% of cross- border equities trading, and 20% of cross-border bank lending.

Two weeks ago The Sunday Times quoted James Cayne, chairman of Bear Stearns, the investment bank, saying London had "a shot"” at overtaking New York as the worldÂ’s financial centre.

Will we be in debt to Martians next?- Mark Cook

Mark D. Cook is very bearish on the stock market.

The fact is that this foreign buying has suppressed the long term rates and created this inversion. The foreigners have more market power than our Federal Reserve at setting the rates? My wallet has a headache!

Secondly, let's look at the stock market. Just the facts! The most obvious is the length of time the S & P has not had a 10% correction. It is over 3 years! Markets need to cycle, that is the nature of a free market, is it still a free market? One does wonder! If I hear the infamous words one more time, "This time it is different" I am going to go postal.

Why hasn't a normal correction been seen? Once again foreign monies have chased our stocks upward. I grew up on a farm with cattle. There is a literal rule of herding a bull. Never let it turn on you! This is very true and in the abstract sense applies to the current stock market.

Europe’s Ailing Social Model: Facts & Fairy-Tales

An excellent analysis on what ails Europe and remedies for the same. The problem always is these kind of major changes happen only if there is major crisis or a new leadership emerges.
Europe'’s present social model is unable to tackle the modern challenges of globalization, and has left Europe with gigantic problems: an unsurmountable public debt, a rapidly ageing population, 19 million unemployed, and an overall youth unemployment rate of 18%. The unemployment figures may easily be doubled to account for hidden unemployment. The untold reality is that Europe'’s real unemployment stands at the level of the 1932 Depression.

Where there is demand there is a supply

Last year, a new ETF came on the market each week, according to data compiled by the Investment Company Institute. That has some advisers and money managers concerned the field is getting saturated.

"The average consumer is going to be more confused than ever," said Jon White, president of Beacon Hill Financial in Orlando, Fla. "It's getting to be like mutual funds, where people are going to be inundated with choices."

In the past three years, net assets in ETFs have nearly doubled. At $312.8 billion, they're still a shadow of mutual funds' $9.2 trillion. But they're growing faster. From the end of 2004 through last month, open-end fund assets grew 13.4% compared with 38.3% for ETFs


IBD has a story about proliferation of ETFs. From time to time some thing catches investors fancy and then the wall street machine churns out enough supply to meet the growing appetite. It was also an ideal product for mediocre money managers to push to clients.

Supported by large scale advertising and efforts by money managers and advisers, investors have believed ETF is the solution to investing problem. Life is never so easy. An trading instrument or vehicle is never an answer to investment strategy.
Investors/traders are better off focusing on developing stock picking strategies than blindly buying the ETF hype.

Breakouts

Not recommendations. Just a list to generate long/short ideas.
Total= 97
Munis on fire
  1. ABMD
  2. AFB
  3. ALJ
  4. APOL
  5. ARGN
  6. ASTM
  7. AVM
  8. BAY
  9. BBX
  10. BLX
  11. BSD
  12. BVF
  13. CACH
  14. CBEY
  15. CHAP
  16. CKH
  17. CLK
  18. CMED
  19. CMRG
  20. CRXL
  21. CRZO
  22. CTU
  23. CWST
  24. CXE
  25. DLX
  26. DV
  27. DWA
  28. EDAP
  29. ELNK
  30. EMIS
  31. ENL
  32. ENZ
  33. EW
  34. FCGI
  35. FDO
  36. FELE
  37. FIX
  38. FRED
  39. GAIT
  40. GIGM
  41. GNBT
  42. GPI
  43. HA
  44. HBG
  45. HCM
  46. HKF
  47. HLIT
  48. ICBC
  49. IEX
  50. IIG
  51. IOM
  52. IOTN
  53. IVAC
  54. JBL
  55. JNY
  56. JUPM
  57. KZL
  58. LBTYA
  59. LBTYK
  60. LPMA
  61. LVLT
  62. MAV
  63. MERC
  64. MFRI
  65. MGAM
  66. MMP
  67. MVT
  68. NEU
  69. NFX
  70. NXZ
  71. ORH
  72. OYOG
  73. PALM
  74. PKY
  75. PMF
  76. RGS
  77. RICK
  78. RIV
  79. RUN
  80. SAX
  81. SBGA
  82. SCSS
  83. SHR
  84. SPEC
  85. SPEX
  86. SRT
  87. SUPG
  88. SVI
  89. TLK
  90. TXUI
  91. UIC
  92. VLCM
  93. WEN
  94. WOR
  95. XRTX
  96. ZIPR
  97. ZP


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Month End + Quarter End= ?

Month End+ Quarter End has high probability of bullishness on index and some stocks. I have an alarm set for such things in Yahoo calendar and it helps to keep this information handy while making decision. So if the market has to roll over it will happen nearer or at the end of quarter. Similarly I have alerts set in advance for retail sales numbers. The retail numbers often lead to start of good rallies, or reversal on retail stocks.
My indicators are showing rollover zone for the indexes.

Breakouts

Not recommendations. Just a list to generate long/short ideas.
Total= 113
ACTS
AF
AKOA
ALA
ALJ
ALOG
ANGO
ANX
ARD
ARGN
ASCA
ATU
AVCT
AVM
AVNC
AXL
BDOG
BEAS
BID
BKD
BLTI
BMY
CBEY
CEG
CEPH
CHAP
CKH
CMED
CMVT
CNTF
CNTY
CORS
CPT
CTCO
CTIB
CTL
DIL
DITC
DRS
EDAP
EDGR
EDP
EMAG
ENWV
FDG
FELE
FNSR
GEMS
GLBC
GLH
GPI
GRVY
GTN
HCM
HLT
HMSY
HYC
IEX
IIG
IIIN
ILSE
IMMC
INTL
IPG
IWB
IYT
JSDA
KONA
LCC
LEA
LII
LNN
LORL
LPMA
LSCP
MBRX
MGI
MMP
MS
NABI
NCS
NKE
NOIZ
NSSC
NVGN
NVO
NYC
ONXS
OO
OPLK
OVTI
PCR
PFWD
PRZ
QADI
RDY
SFP
SMSI
SNY
SPI
SPSN
STKL
SVI
TMG
TOPP
UIC
USIH
VRX
WRES
WRSP
WWIN
XING
ZP

GOOG a buy here

Posted on 3/21/2006
Since the bull market started in 2002 the internet sector has been the leading sector. So if the market continues to rally GOOG has to participate. Here are some reasons to look at GOOG again at this level.
1 Everyone is now negative on GOOG. Analyst claiming 2000 price on GOOG are history.
2 GOOG remains the 800 pound gorilla in terms of innovation in the internet field.
3 Large scale advertisers are now moving in to internet advertising. I have been studying search results across many categories and in many cases small niche players are being pushed aside by larger companies. The dynamics of advertising industry is such that if Home Depot makes major push online the number two and three have to follow. The players complaining are the niche web only retailers who had the field to themselves till now.
4 Having learned its lesson last quarter GOOG will beat its earning estimates handily.

Blog Roundup

Posted on 3/20/2006
Ron Sen on Dollar , Yen and inflation.
The last time the US economy weakened, the Fed had the luxury of slashing rates from 6.5% to 1%. This time it won't be so fortunate. At the beginning of the last easing cycle the Japanese 2-year was around 0.5% and the Japanese 10-year was below 2%, and both were falling. This time, both are rising. Will foreign investors accept a Fed Funds rate of 1% if the Japanese 2-year is above 1% and the Japanese 10-year is around 3%? In that scenario, money would likely pour out of dollars and into yen, weakening the dollar relative to the yen and severely hindering Japan's ability to sell goods to us. Of course, the Japanese could cut rates to be in synch with us (like the US did with Great Britain in the 1920s to help keep the UK on the gold standard), but they've been fighting rate hikes for so long that if they're ready to proceed with them now, they must really fear that inflation is a concern. So again this would present global central banks with the choice of inflation if they keep rates too low, and deflation if they keep rates too high.


Trader-X explains his way of looking at candlesticks.
I love candlesticks. At one time, I thought they were the holy grail. Almost ten years ago, I spent a lot of time studying Nison's books and videos and became an "expert". Now I know they are not the holy grail, but they are still an important part of my trading and I would never trade without them.


While on the topic of candlestick, Trade Ideas introduced 12 Major Japanese Candlestick Patterns recognition alert a few weeks back. I don't use TI. Nor do I use candlesticks in my trading.

Bill Cara has his take on various markets:
I believe the equity markets are at a crossroads now that remind me in a way of 1999. The issues have been resolved: Does that great equity bear attack now or is it going to be impeded for a time by a mountain of paper money being printed by central bankersÂ… To cut to the chafe, I think the equity markets are not yet ready to go bearish. I see (i) certain ones like Japan and the U.K. basing solidly, (ii) the U.S. markets going through a rolling bear with signs of accumulation on the dips, and (iii) hesitancy on the part of the commodities-sensitive markets like Canada, Brazil and Australia, but none with clear bear signals being given. If equity markets don't go bearish then - given that markets never flat-line - I think they are going higher, just like Dec-99.


At BlogginWallstreet there is a bad news for Madd Money fans. Non-Lightening Round Picks No Better Than Index

Whats in news

China's yuan rose to the highest since a peg to the dollar was scrapped in July, as U.S. senators arrived in Beijing to seek a stronger currency.

Merrill Lynch believes it would be in the best interests of investors if companies dropped quarterly earnings guidance. Market participants need to see it for what it is – a rough assessment of one indicator of a company’s well-being. Earnings guidance dictates an outcome and discourages debate. Worst of all, this one number cannot possibly convey the subtle forces that shape a wise capital allocation decision and ultimately investors are let down.

India is drawing up its most ambitious plan to date to remove all remaining capital controls on the partially convertible rupee in the latest signal of burgeoning confidence in the country’s economy.

Superior trader, a born talent or can be taught?

Posted on 3/19/2006
At Elitetrader there is an interesting discussion going on about: Superior trader, a born talent or can be taught? This is my take on it:
We live in an optimist culture where people are made to believe that anything is possible and everything can be learned if you put in enough effort or get the right teacher/guru/mentor you will learn anything.

Its almost sacrilege to say some people are born gifted or have inborn talent for something. Trading is one such profession along with many others.

There is an X-factor that superior traders have which is very difficult to explain but you know when you see it. That is why most attempts at teaching to trade fail.

The teachers/mentors/gurus would not like to admit this as it is fundamentally against their world views, business interest and their over powering need to have followers.

Superior traders have a world view about markets they trade and life in general which is different from those of ordinary traders and it has nothing to do with whether their style is quantitative based or qualitative based.

Even if you were to be taught by a superior trader you may not get his world view unless you are gifted. Given a same market situation or quantitative data the Superior trader interprets it differently than the ordinary trader.

Sooner or later most trader realise it in their heart, but many may not want to accept it. Till then the illusion is very mesmerizing.

Sex and inflation

WSJ has an article explaining inflation reality verses perception. The most important information in it is in last few paragraph.
Not so long ago, inflation preoccupied Americans. A check of the Factiva electronic archives -- jointly owned by Dow Jones & Co., publisher of this newspaper, and Reuters Group PLC -- found 760,288 mentions of "inflation" from 1986 through 1996 in all publications tracked, outnumbering 636,074 mentions of "sex."

Then inflation receded. In the past 10 years, "sex" has been mentioned 3,317,716 times and "inflation" just 3,085,544 times.

But the complaining -- about the inflation measures, that is -- never stops.

Pilot fish in forex market

The Chinese yuan has rallied by about +0.2% to 8.0377 yuan/USD in the past 2 sessions, which is a sharp move by yuan standards, after Chinese Premier Wen Jiabao said on Tuesday that China will not sharply revalue the yuan but will start letting the market play a bigger role in setting the yuan. Although any continued increase in the yuan is likely to be glacial, the fact that it is moving at all is bearish for the dollar and bullish for other Asian currencies. China revalued the yuan by 2.1% last July to 8.11 and the yuan then slowly crept higher over the following 8 months by 1% to a high of 8.0307 yuan/USD on March 2.

Will this start several new trends?
Update I just saw this report. So something is brewing on this front. History of currency market is good indicator of how the current account deficit overhang will get cleared, with another co-ordinated global currency adjustment.
WASHINGTON (MarketWatch) -- Three U.S. senators will visit China next week before deciding whether to proceed with a March 31 vote on legislation that would slap punitive tarriffs on Chinese goods in retaliation for Beijing's currency practices. "We can't tell you anything until we go ... before we ask for the vote we want to go to China," said Sen. Charles Schumer, D-N.Y. Sen. Lindsey Graham, R-S.C., the co-sponsor of the tarrif legislation, and Sen. Tom Coburn, R-Okla., will also go on the trip where they will visit with top government and business officials. The trip comes as the Bush administration and lawmakers increase pressure on China to further loosen the peg between its yuan currency and the U.S. dollar.

Zacks earning watch

Posted on 3/14/2006
I always keep an eye on this Zacks report as it gives very good indications of sectors likely to lead and lag.
Stick a fork in it, the fourth-quarter earnings season is done, with 97% of the reports in. So far, 485 S&P 500 firms have reported. Despite some high profile misses, the results were strong. Positive surprises have out numbered disappointments 304-106, with 75 hitting expectations exactly. The median growth rate was 14.5%. This will marks the 15th straight quarter of double-digit earnings growth for the S&P 500. Positive surprises outnumbered disappointments by almost a three to one margin.

However, it looks like this may be the last quarter of double-digit growth, as earnings growth is expected to decelerate sharply in the first quarter. Every sector but Materials is expected to post lower growth in the first quarter than in the fourth quarter. Materials was the lowest growth sector in the fourth quarter, and is not exactly expected to light the world on fire with growth of 4.6% in the first quarter, even if it is up from the fourth quarter. The median S&P 500 growth expectation for the quarter is only 8.9%, well below the 14.8% posted in the fourth quarter.

Playing the Market

Posted on 3/12/2006
I read about this on Slashdot. Sounds interesting.
Playing the Market is a recent experimental music recording by Emerald Suspension. The project features audio compositions based on patterns found in the stock market and in economic data.
"Long Bond" is a requiem string solo. Notes in this piece are based on the pattern of interest rates since 1926 as represented by the yield of the 30-year Treasury bond. Higher notes equate to higher interest rates and lower notes reflect the lower rates experienced over time.

Too late to short to early to go long

Posted on 3/10/2006
At the current stage of the market it is too volatile for both side. The short trade should have been done many days ago. The long plays are risky as breakouts fail or do not follow through. It might be a good market for short term traders, but for my style of trading it is time to be on sideline.
So here are some thoughts on what I see currently:
1 Everyone is bashing GOOG. Last time it happened was at IPO time. Those who chickened out due to press and analyst bashing missed out on 400% move. That's the way the street works. For all you know some of the big employers of these bashers might be adding to their position. The stock is down around 25% from the top, and support might emerge here.
2 The retail, telecom,drugs, and biotech sectors are setting up for a move once the selling abates. I see lot of potential plays in these sectors and holding on to some profitable positions and adding to them.
3 The Dow is within 1% of its high, S&P 2% of its high, Russell 3% of its high, and the NASDAQ 4% and the perma bears are already dancing in the street.

Monitoring Top sectors

Posted on 3/09/2006
A look at top 39 sector gives clear idea about sector rotation. The energy sector and metals sector has seen significant correction. But there are new sectors emerging and the new leaders will be from these sectors. The boldfaced sectors look interesting.
Independent Oil & Gas
Oil & Gas Refining & Marketing
Oil & Gas Drilling & Explorat
Oil & Gas Equip & Services
Steel & Iron
Copper
Aluminum
Industrial Metals & Minerals
Gold
Silver
Home Furnishings & Fixtures
Foreign Regional Banks
Investment Brokerage-National
Investment Brokerage-Regional
Asset Management
Accident & Health Insurance
Reit-Diversified/Industrial
Reit-Residential
Drug Delivery
Biotechnology
Specialized Health Services
Farm & Construction Machinery
Machine Tools & Accessories
Metal Fabrication
Cement
Heavy Construction
General Contractors
Specialty Eateries
Catalog & Mail Order Houses
Building Materials Wholesale
Industrial Equipment Wholesale
Electronics Wholesale
Drugs Wholesale
Rental & Leasing Services
Security & Protection Services
Major Airlines
Railroads
Computer Based Systems
Data Storage Devices
Healthcare Information Service
Semiconductor-Memory Chips
Semiconductor-Integrated Cir
Communication Equipment
Internet Service Providers

Slower earnings growth ahead ?

Posted on 3/07/2006
Zacks.com is indicating growth slowdown for next quarter.
The fourth quarter earnings season is over 96% done. So far, 482 S&P 500 firms have reported. Despite some high profile misses, the results look pretty strong. Positive surprises have out numbered disappointments 303-104, with 75 hitting expectations exactly. The median growth rate of the firms that have reported is 14.5%. It now seems clear that this will mark the 15th straight quarter of double-digit earnings growth for the S&P 500.

With 96.2% of the precincts in, we are making a call on this “election”. This was a good quarter for corporate earnings growth. With almost a 3:1 ratio of positive surprises over disappointments, it looks like it is shaping up as a landslide.

However, it looks like this may be the last quarter of double-digit growth, as earnings growth is expected to decelerate sharply in the first quarter. Every sector but Materials is expected to post lower growth in the first quarter than in the fourth quarter. The median S&P 500 growth expectation for the quarter is only 9.0%, well below the 14.5% posted in the fourth quarter.