The markets have been on a killer run. The earnings are coming in better than expected for many companies. All earnings are not created equal, and we need to ask ourselves – Where are these earnings coming from?The earnings are driven primarily by cost cuts and reductions in workforce. If I look at my own steel business, net earnings were phenomenal in the 1st and 2nd quarters. They were great because of a huge reduction in workforce and massive overhead cuts that we made in 4th quarter of 2008. This is why I can tell you that no way we will meet or beat the earnings we saw in 1st half of the year going forward.
Here is the chart I receive each month from our freight companies, reflecting what is called the Freight Indexes. They measure the demand for Truckload services compared to the number of trucks on the road. The index begins in April 1994. When a reading is above prior years’ level it means there is more freight demand relative to available capacity. When a reading is below prior years’ level, it means there is less freight demand relative to available capacity.As you can see, 2009 (Red Line) is down by a huge margin. Although we saw an uptick in May and June it is nowhere close to average.The private company I am involved in has only recently seen the slightest of upticks in business activity – while selling for minimal or no profit margins. The steel companies have recently worked off old inventory and now they will need to see demand in order to replace that inventory.For now that demand is seen only in a few small areas – it is not broad based. This appears to be a rebound from cost cuts and not demand-driven. Cost cuts have a one-time impact on profits until demand reappears. It should be interesting to see how things will develop now that Q2 earnings come to pass and we must look forward to Q3.
I have a Crystal Ball and it works! Only in hindsight J… Here it is I pondered if BRCD would run to $8 on 4/15 before what I consider to be a bear market rally runs out of steam… BRCD-bull or bear-y Eric F. Looks like the rally has got more room to run. But the BRCD daily chart is flashing some interesting signals…I digress, I don’t want to get caught up in semantics, I don’t really like to use the term bull market or bear market, it is sort of like a label because I can be both based on what time frame I am looking at. I think the market is either trending higher or lower or chopping about going sideways.All I can say about this week is WOW! What goes up fast tends to come down fast also! I would not be surprised to see all these gains wiped out to set up a “double bottom” for some… at this intermediate pull back point…”We shall see said the blind man” is my mantra. The monthly indexes are showing the uptrend to sideways chop is intact and I figure it will likely be several months before value is reached and another major direction may be set…Now back to the BRCD chart at hand…Not sure when this thing will run out of gas but it is looking to me like a weak advance…The 52 week high lies at $8.42 all former gaps in the daily are now closed…Somebody once said- “sell new highs”…Looks like a short opportunity may be coming in this one…Good Trading,Eric F
[this email came from a Member in London]Dear Kerry and Alex, Just like to say how much i’m enjoying SpikeTrade from the UK, I find your daily/weekly updates help to confirm my market bias, while also enlightening and useful. I very much enjoy “How I Got My Gold”, the Video Vault and especially seeing how other traders pick, execute and manage their trades, the self analysis is something I tend to do a fair bit of!I’m coming to the end of my first tumultuous year of trading in July, I have a diary and spreadsheet of over 200 trades to prove it and also to hit myself over the head with! My most successful strategy is based around MACD histogram divergence gleaned from “Come Into My Trading Room”, my trading account currently shows a 70% profit, I’ve made some great trades and I’ve also made some of the worst ones possible, fortunately my profit to loss ratio is 2.4…at the moment.To sum up so far, I’ve been on an individual journey of enormous proportions struggling to control my impulsive human basic instincts while at the same time battling with volitile and constantly changing market conditions…trading is, in my humble opinion, the ultimate challenge.Kind regards from the East End of LondonMark
Dear Spikers & Members,hello from Cape Breton, at the northern tip of Nova Scotia. Some of you have asked me to post a few photos from this roadtrip. Now, keep in mind, this post is completely not-trade-related. Simply, a few snapshots from the road.What the pictures do not show is how I remain in daily contact with Kerry, planning new enhancements for SpikeTrade. You will be seeing the results very soon!Best wishes from Canada,Alex
Sometimes it doesn’t have to be complicated. I take these types of short-term trades whenever they popped up. FXC. the Canadian dollar ETF isn’t right for a Spike trade so I thought I post it. FXC had a strong bull run and now we’ve gone through a 17-day grind down, about a 50 % retracement. We’re testing support for a couple of days and looking for FXC to
I recently reviewed John T’s presentation to the Spiker Group. In his presentation he touched on a stock scan using MACDH Divergences and New High/Low criteria.I have been attempting to create such a scan in Trade Station for several weeks to no avail. I have searched the TS support forums and tried to copy and paste code but my proficiency level is sub par.Are there any TS Spikers who can assist me with constructing such a scan? If so, I thank you in advance and will look forward to reading your reply’s to this post. And thanks to John T’s presentation and drawing attention to this scan. Otherwise I would still be (and continue to be) a student of TS programing code.Regards,Danny B
A question on fundamental analysis. The latest issue of The Economist, one of my favorite magazines, has the cover story on Debt – The Biggest Bill in History.
It begins: “THE worst global economic storm since the 1930s may be beginning to clear, but another cloud already looms on the financial horizon: massive public debt. Across the rich world governments are borrowing vast amounts as the recession reduces tax revenue and spending mounts
Market BehaviorI am a new but active trader, both with day trades and swing trades daily. In developing my trading skills, I have noticed a recurring pattern and am interested in what the behavior is behind it.This week, I had a good trade with Nabors Industries (NBR.) I went in , short, Thursday afternoon when it was testing resistance at the $19.15 level. There was tremendous buying pressure throughout the last part of Thursday, with a clear sell-off late in the day. I held off taking profits, given the sell-off pressure, to take my exit Friday morning. The wait was well worth it, with the stock falling in early trading to below $18.00. I took my profit and did not look back.My question for the group is this – I have noticed this type of price pattern with some regularity – very strong buying one day, with very strong selling the next. What is the basis of this behavior?As a novice, I am assuming, a large fund or arbitrage has approval to buy a lot of stock in a particular range and does so on a particular day. Within this buying there are a lot of shorts riding the upward pressure. Then the next day the shorts are taking their profits – as I did. However, the sell-off the following day is at a much larger volume than I would expect. Is there something else going on in this pattern? I have made several successful trades following this pattern, but I would feel more comfortable if I understood the reasons for such price swings over two days – often without any news releases tied to the swings. Any suggestions are appreciated.David L
I was wondering if anyone has had any experience with pair-trading or statistical arbitrage. I am interested in it because I have an opportunity to learn from some local traders in my area through an extensive course. In all of the introductory trading books that I have recently read it is not mentioned at all. Nor have seen any statarb books in particular.The only things I have read about it are the wiki entries and other brief summaries. I was hoping someone had more experience in this. I became very interested when reading about a trader who posts on trade2win (a trading forum with a pretty bad signal:noise ratio, like all forums), grey1 (iraj), who said he liked arbitrage methods and was very successful. His posts were inspiring to say the least. My interest in statarb is not to use institutional money to trade, but just to use my own money.Thank you in advance for your replies.
Hell for me would be forced to trade large when the SPX closes to the 200 SMA. I hate it! Now, there are many theories about why the market jerks and chops as it bounces around the 200 SMA–big institutions, hedge funds, etc. Doesn’t really matter. I just know that chop and churn is what we’re in for when the SPY comes within 5 % of the venerable 200 SMA, so I try my best to stay away, to “sit on my hands” as Alex says.Here are two charts that show this behavior. The first is from May 2008 as the SPY closes on a flattening 200 SMA. Note the price candles with shadows and tails and nothing much happening–this is churning–up big in the morning, selling off in the afternoon, or the next day, down in the morning, up in the afternoon. Notice too, that momemtum is ebbing, and we have a triple bearish divergence on the MACD-H leading to evenutal price failure. This time around, we’ve spent a month churning in a consolidation, then popped through a declining 200 SMA. Things look a bit shaky now; we may have a false break out developing. Note again the triple divergence in the MACD-H.I’ve noticed this chop and churn behavior around the 200 SMA over the years and always wondered what causes it–maybe some day, I’ll find out, but I just know that I’m better off trading small or staying away until prices clear in one direction or another from the 200.