Indonesia approves permits for 29 firms to export coal, metals
http://www.cnbc.com/id/41658824
Friday Look Ahead: G20, Central Banker Speak in Focus Ahead of Long Weekend
http://www.cnbc.com/id/41654583
Equities in a Multi-Year Bull Run; Buy US Stocks: Expert
http://www.cnbc.com/id/41638335
Soros’ Favorite Stocks May Rise Up to 40%
http://www.cnbc.com/id/41648821
What Will Kill a Bull Market? Good News
http://www.cnbc.com/id/41647691
Crude Prices: Is the Brent-WTI Spread Unwinding?
http://www.cnbc.com/id/41652421
High Net Worth Investors Listen Up!
http://www.cnbc.com/id/15840232?video=1801303720&play=1
U.K. Pound May Rise to $1.63, Mizuho Says: Technical Analysis
http://www.bloomberg.com/news/2011-02-17/pound-could-advance-to-1-63-on-breakout-mizuho-says-technical-analysis.html
Dollar to Reach Six-Week Low on Triangle: Technical Analysis
http://www.bloomberg.com/news/2011-02-18/dollar-may-drop-to-six-week-low-versus-yen-on-triangle-technical-analysis.html
Worst of food inflation may have passed: economist
http://www.marketwatch.com/story/worst-of-food-inflation-in-asia-may-be-over-2011-02-17?dist=markets
Friday, February 18, 2011
Jesse Livermore's Trading System
Best Financial Markets Analysis ArticleA butcher never chops with a blunt knife, yet it is common to see a trader operates with an unsound trading system. The fastest way to get a winning system is to steal one from a successful trader, and for that matter, there is no better candidate than legendary trader Jesse Livermore, because his method was very simple: it contained only three components, which are respectively known as the reversal pivotal point, the continuation pivotal point, and the symptoms of weakness. Their application would be explored in this article.
1. Reversal Pivotal Points
The first component of Livermore’s system is the reversal pivotal point, which is defined by Livermore as “the perfect psychological time at the beginning of a new move, representing a major change in the basic trend.” However, confirming a market turn in real time is not easy, e.g. when there is a rally in a long bear market, how can you tell whether it is just temporary, or the bull market has returned? You can use the following four steps to justify:
1. The bear market rally does not get retraced below its starting point. 2. Within two weeks after the initial rally, an even bigger rally follows. 3. The volume of this subsequent rally is significantly higher than previous days. 4. This subsequent rally usually breaks the trend line of the previous bear market.
This monumental subsequent rally is exactly what Livermore called a reversal pivotal point, because it marks the return of large investors into the market, and although the market often corrects on furious volume immediately afterwards, it usually rebounds soon and begins a new trend.
2. Continuation Pivotal Points
The second component of Livermore’s system is the continuation pivotal point, which concerns the time to enter the market. While a reversal pivotal point marks a trend reversal, a continuation pivotal point confirms that the trend continues.
According to technical analyst R. N. Elliott, a trend is composed of impulsions and corrections: whereas impulsions are the parts in which the price drifts rapidly with the trend, corrections are the consolidation parts in which stocks are accumulated before the market takes off again, and this breakout from consolidation is known as the continuation pivotal point, where a trader should get in and follow the trend.
Stock expert William O’Neil believed that buying at continuation pivotal points is one of the greatest secrets in trading stocks, because the price seldom falls for more than 10% after a genuine breakout. Therefore, the primary job of a trader is to recognize a genuine breakout from consolidation, to identify which O’Neil listed out three clues to look for:
Clue 1: A Sound Pattern:
The consolidation is usually in the form of a sound chart pattern. The most common pattern, according to O’Neil, is the cup-and-handle formation, where the price forms a concave shape of a bowl (the “cup”) with a small pullback at the end (the “handle”). Patterns formed within seven weeks are usually weak and should be considered carefully. Limited by the size of this article, please refer to How to Make Money in Stocks by William O’Neil for more discussion on chart patterns.
Clue 2: A Tight Accumulation:
A good breakout depends on the “tightness” of the accumulation (e.g. the “handle” part of a cup-and-handle). If the consolidation has a narrow day-to-day change relative to the weekly range, it is then considered more reliable than a “wide and loose” one.
Clue 3: A High Volume upon Breakout:
Most importantly, just as for a reversal pivotal point, a true breakout at a continuation pivotal point is usually accompanied with a higher volume than the previous few days.
3. Symptoms of Weaknesses
The last part of Livermore’s system is called the symptoms of weakness, which concerns the question of when to exit. As Baron Rothschild had allegedly said, “I never buy at the bottom and I always sell too soon.” The best time to sell is upon the signals of trend exhaustion when the following symptoms of weakness appeared in the market:
Symptom 1: Head-and-Shoulders
William O’Neil pointed out that head-and-shoulders are the most common pattern in a topping market, where the peak of the market (the “head”) is surrounded by two lower peaks (the “shoulders”) on both the left-hand and right-hand side respectively, especially when the right shoulder is lower than the left shoulder. Sometimes, the market will perform what is known as a “head test” when the price rebounds immediately after the right shoulder is formed, and tests the “head” level of the pattern before falling again. Examples of the head-and-shoulders pattern are the Dow in August 1987 (without head test) and in July 1976 (with head test).
Symptom 2: Period of frequent distribution days.
The distribution day is a highly accurate weakness signal, especially if preceded by a successful rally. A distribution day is where the large investors unload a part of their shares under the perception that the market is topping out. A distribution day is best characterized with a wide high-to-low spread and a heavy volume, but it never closes too much higher than the previous day. In addition, it usually has a small open-to-close difference, a shape known as the “doji” by candlestick experts. When you see a lot of these days in a period of modest momentum, it usually means that the trend is probably over.
Symptom 3: Failed rallies.
The last sign of a topping out market is that, after an overall head is formed, the subsequent rallies often end with a weak momentum, as demonstrated by a diminishing increase in price accompanied by a decreasing volume, and each day the close is usually away from the intraday high. This is a sign that the large investors are not very keen in buying the pullbacks.
Summary
Over his legendary career, Livermore obtained two important insights in trading: firstly, he often lost when he entered a position before a pivotal point was formed, and secondly, the big money could only be made by capturing big trends, thus he developed the discipline to avoid any personal opinion until a pivotal point appeared, as well as to hold onto his positions until he was shown the symptoms of weakness. In short, this is how Livermore traded:
1. Trend confirmation: he never trade against the trend as indicated by the reversal pivotal points. 2. Careful entry: He only entered the market when a sound breakout appears. 3. Let the winners ride: He held onto his positions until the symptoms of weakness appeared.
And you are very unlikely to be doomed in trading if you follow these rules.
Selfgrowth Expert Page: http://www.selfgrowth.com/experts/victor-chan_wai-to
Victor Chan Wai-To is a currency trader based in Hong Kong.
1. Reversal Pivotal Points
The first component of Livermore’s system is the reversal pivotal point, which is defined by Livermore as “the perfect psychological time at the beginning of a new move, representing a major change in the basic trend.” However, confirming a market turn in real time is not easy, e.g. when there is a rally in a long bear market, how can you tell whether it is just temporary, or the bull market has returned? You can use the following four steps to justify:
1. The bear market rally does not get retraced below its starting point. 2. Within two weeks after the initial rally, an even bigger rally follows. 3. The volume of this subsequent rally is significantly higher than previous days. 4. This subsequent rally usually breaks the trend line of the previous bear market.
This monumental subsequent rally is exactly what Livermore called a reversal pivotal point, because it marks the return of large investors into the market, and although the market often corrects on furious volume immediately afterwards, it usually rebounds soon and begins a new trend.
2. Continuation Pivotal Points
The second component of Livermore’s system is the continuation pivotal point, which concerns the time to enter the market. While a reversal pivotal point marks a trend reversal, a continuation pivotal point confirms that the trend continues.
According to technical analyst R. N. Elliott, a trend is composed of impulsions and corrections: whereas impulsions are the parts in which the price drifts rapidly with the trend, corrections are the consolidation parts in which stocks are accumulated before the market takes off again, and this breakout from consolidation is known as the continuation pivotal point, where a trader should get in and follow the trend.
Stock expert William O’Neil believed that buying at continuation pivotal points is one of the greatest secrets in trading stocks, because the price seldom falls for more than 10% after a genuine breakout. Therefore, the primary job of a trader is to recognize a genuine breakout from consolidation, to identify which O’Neil listed out three clues to look for:
Clue 1: A Sound Pattern:
The consolidation is usually in the form of a sound chart pattern. The most common pattern, according to O’Neil, is the cup-and-handle formation, where the price forms a concave shape of a bowl (the “cup”) with a small pullback at the end (the “handle”). Patterns formed within seven weeks are usually weak and should be considered carefully. Limited by the size of this article, please refer to How to Make Money in Stocks by William O’Neil for more discussion on chart patterns.
Clue 2: A Tight Accumulation:
A good breakout depends on the “tightness” of the accumulation (e.g. the “handle” part of a cup-and-handle). If the consolidation has a narrow day-to-day change relative to the weekly range, it is then considered more reliable than a “wide and loose” one.
Clue 3: A High Volume upon Breakout:
Most importantly, just as for a reversal pivotal point, a true breakout at a continuation pivotal point is usually accompanied with a higher volume than the previous few days.
3. Symptoms of Weaknesses
The last part of Livermore’s system is called the symptoms of weakness, which concerns the question of when to exit. As Baron Rothschild had allegedly said, “I never buy at the bottom and I always sell too soon.” The best time to sell is upon the signals of trend exhaustion when the following symptoms of weakness appeared in the market:
Symptom 1: Head-and-Shoulders
William O’Neil pointed out that head-and-shoulders are the most common pattern in a topping market, where the peak of the market (the “head”) is surrounded by two lower peaks (the “shoulders”) on both the left-hand and right-hand side respectively, especially when the right shoulder is lower than the left shoulder. Sometimes, the market will perform what is known as a “head test” when the price rebounds immediately after the right shoulder is formed, and tests the “head” level of the pattern before falling again. Examples of the head-and-shoulders pattern are the Dow in August 1987 (without head test) and in July 1976 (with head test).
Symptom 2: Period of frequent distribution days.
The distribution day is a highly accurate weakness signal, especially if preceded by a successful rally. A distribution day is where the large investors unload a part of their shares under the perception that the market is topping out. A distribution day is best characterized with a wide high-to-low spread and a heavy volume, but it never closes too much higher than the previous day. In addition, it usually has a small open-to-close difference, a shape known as the “doji” by candlestick experts. When you see a lot of these days in a period of modest momentum, it usually means that the trend is probably over.
Symptom 3: Failed rallies.
The last sign of a topping out market is that, after an overall head is formed, the subsequent rallies often end with a weak momentum, as demonstrated by a diminishing increase in price accompanied by a decreasing volume, and each day the close is usually away from the intraday high. This is a sign that the large investors are not very keen in buying the pullbacks.
Summary
Over his legendary career, Livermore obtained two important insights in trading: firstly, he often lost when he entered a position before a pivotal point was formed, and secondly, the big money could only be made by capturing big trends, thus he developed the discipline to avoid any personal opinion until a pivotal point appeared, as well as to hold onto his positions until he was shown the symptoms of weakness. In short, this is how Livermore traded:
1. Trend confirmation: he never trade against the trend as indicated by the reversal pivotal points. 2. Careful entry: He only entered the market when a sound breakout appears. 3. Let the winners ride: He held onto his positions until the symptoms of weakness appeared.
And you are very unlikely to be doomed in trading if you follow these rules.
Selfgrowth Expert Page: http://www.selfgrowth.com/experts/victor-chan_wai-to
Victor Chan Wai-To is a currency trader based in Hong Kong.
@IHSG: Weak Bullish Continuation vs @DJIA: Extend Bullish
Thursday, February 17, 2011
"Stocks pullback imminent, cyclical bull to continue"
Near Term Analysis:
Let's start by looking longer term.
Cyclical stocks bulls historically end when/with:
Inflation over 4%
10 year treasury yields over 6%
Stock market topping process accompanied by weakening breadth
Yield curve abnormal
Overtightening of interest rates
Whilst these are only guidelines, it should be noted that in Western markets we have some way to go on all, so we might not expect the cyclical stocks bull to end any time soon. Supporting this, as detailed in my post of February 11th, there are multiple tailwinds for stocks:
QE/Pomo until June
Leading indicators are positive and stable
Money supply growing, money velocity stable
Financial conditions index positive
Latest earnings season has delivered a beat rate in excess of the last 3 quarters
Stocks are cheap relative to bonds historically
Stocks are in the presidential cycle sweetspot in 2011, particularly the first 6 months
One thing has changed since that post, which is the bull market sustainability index reading, which now points to a pullback, and I'll come on to that later. So, the environment for stocks is currently positive and we have some tools to measure when the cyclical bull is approaching conclusion, so let's turn to forecasting when that conclusion might be.
The strength of this cyclical bull off the March 2009 low historically suggests this will be a prolonged bull of large returns. Laszlo Brinyi's analysis suggests that it should last around 4.5 years, taking us to 2013. The table below shows how such bull markets typically make 4 phases or quartiles (reluctance, digestion, acceptance, exuberance) and that our first phase from March 2009 through to April 2010 was amongst the strongest of any in history. The second phase typically produces much more mediocre returns than the first and should last roughly to June 2011. This phase has so far seen an increase of around 9% so it may be that consolidation lies ahead rather than a continued run up.
John Hampson, UK
Financial Markets Trading At The Global Macro Level
Future Studies
Forecasting By Amalgamation: Bringing Together All Disciplines That Influence Our Future
Let's start by looking longer term.
Cyclical stocks bulls historically end when/with:
Inflation over 4%
10 year treasury yields over 6%
Stock market topping process accompanied by weakening breadth
Yield curve abnormal
Overtightening of interest rates
Whilst these are only guidelines, it should be noted that in Western markets we have some way to go on all, so we might not expect the cyclical stocks bull to end any time soon. Supporting this, as detailed in my post of February 11th, there are multiple tailwinds for stocks:
QE/Pomo until June
Leading indicators are positive and stable
Money supply growing, money velocity stable
Financial conditions index positive
Latest earnings season has delivered a beat rate in excess of the last 3 quarters
Stocks are cheap relative to bonds historically
Stocks are in the presidential cycle sweetspot in 2011, particularly the first 6 months
One thing has changed since that post, which is the bull market sustainability index reading, which now points to a pullback, and I'll come on to that later. So, the environment for stocks is currently positive and we have some tools to measure when the cyclical bull is approaching conclusion, so let's turn to forecasting when that conclusion might be.
The strength of this cyclical bull off the March 2009 low historically suggests this will be a prolonged bull of large returns. Laszlo Brinyi's analysis suggests that it should last around 4.5 years, taking us to 2013. The table below shows how such bull markets typically make 4 phases or quartiles (reluctance, digestion, acceptance, exuberance) and that our first phase from March 2009 through to April 2010 was amongst the strongest of any in history. The second phase typically produces much more mediocre returns than the first and should last roughly to June 2011. This phase has so far seen an increase of around 9% so it may be that consolidation lies ahead rather than a continued run up.
John Hampson, UK
Financial Markets Trading At The Global Macro Level
Future Studies
Forecasting By Amalgamation: Bringing Together All Disciplines That Influence Our Future
Wednesday, February 16, 2011
Update Daily Investment News 16-02
Forex and Dow Jones Recommended Levels
Written by FXtechtrade
EUR/USD
Today's support: - 1.3450(main), where correction is possible. Break would give 1.3429, where correction also may be. Then follows 1.3408. Break of the latter would result in 1.3388. If a strong impulse, we would see 1.3354. Continuation will give 1.3318. Today's resistance: - 1.3540, 1,3581, 1.3603 and 1.3637(main). Break would give 1.3667, where a correction is possible. Then goes 1.3686. Break of the latter would result in 1.3728. If a strong impulse, we'd see 1.3749. Continuation will give 1.3770
USD/JPY
Today's support: - 83.40, 82.91 and 82.57(main). Break would bring 82.32, where correction is possible. Then 82.03, where a correction may also happen. Break of the latter will give 81.88. If a strong impulse, we would see 81.65. Continuation would give 81.43 and 81.22.Today's resistance: - 83.94(main), where a correction may happen. Break would bring 84.13, where also a correction may be. Then 84.34. If a strong impulse, we would see 84.48. Continuation will give 84.60.
DOW JONES INDEX
Today's support: - 12195.07 and 12158.30(main), where a delay and correction may happen. Break of the latter will give 12135.94, where correction also can be. Then follows 12122.73. Be there a strong impulse, we shall see 12087.36. Continuation will bring 12048.62 and 12015.20.Today's resistance: - 12251.30, 12287.81, 12307.50 and 12334.22(main), where a delay and correction may happen. Break would bring 12366.70, where a correction may happen. Then follows 12382.25, where a delay and correction could also be. Be there a strong impulse, we'd see 12403.13. Continuation would bring 12424.19.
Written by Admiral Markets
The Daily Wave AnalysisCurrency pair EUR/USD
By the present moment descending movement of euro which has begun in the beginning of February, has almost generated the Zigzag which, within the limits of alternative, can be the correctional wave [ii] of C. If the assumption is true, after its terminations, it is possible to expect the new wave of growth of pair as the impulse [iii] of C
Currency pair GBP/USD.
Within the limits of the alternative scenario, ascending movement which is formed from the beginning of new year, can be the impulse [i] waves With of of (Y) of [X]. If the assumption is true, by the present moment the correctional wave [ii] of C was generated and, hence, it is possible to expect growth of the cable as the impulse [iii] of C. At the same time, considering modest enough depth and duration of correction, there are all bases to assume, that at the given stage, the part of the wave [ii] of C is generated only.\
Currency pair USD/JPY.
Probably, within the limits of the presented alternative, the impulse (ะก) of [3] in which frameworks development of the Double Three 4 of (C) resembles by the end is formed. If the prospective wave 4 of (C) and remains the Double Three after its terminations, it is possible to expect the beginning of falling of the price as the impulse or the Diagonal Triangle 5 of (C) of [3].
Currency pair USD/CHF
It is not excluded, that the impulse or the Diagonal Triangle With of (Y) of [B] is already formed. Probably within the limits of its development, by the given moment of the complete the correctional wave [ii] of C. If the assumption is true, it is possible to expect falling of US dollar as the wave [iii] of C.
Gold Will Correct, Then Hit $1,500 by Year-End: Strategist
http://www.cnbc.com/id/41614678
Wednesday Look Ahead: Investors Itching for a Pull Back May be Disappointed
http://www.cnbc.com/id/41610988
JPMorgan May Climb 25%, Boost Dividend
http://www.cnbc.com/id/41603537
Europe Stocks Set To Open Higher on Earnings Hope
http://www.cnbc.com/id/41600742
Euro May Weaken Versus Dollar on `Head and Shoulders': Technical Analysis
http://www.bloomberg.com/news/2011-02-15/euro-may-weaken-versus-dollar-on-head-and-shoulders-technical-analysis.html
Oil Gains First Day in Four as Drop in U.S. Supply Signals Demand Recovery
http://www.bloomberg.com/news/2011-02-15/oil-trades-near-11-week-low-in-n-y-on-forecasts-u-s-fuel-supply-to-rise.html
The Question That Could Spark a Crash
http://dailytradealert.com/2011/02/13/the-question-that-could-spark-a-crash/
Gold May Weaken on Speculation One-Month High to Deter Buyers
http://www.bloomberg.com/news/2011-02-16/gold-may-weaken-on-speculation-advance-to-one-month-high-to-deter-buyers.html
Written by FXtechtrade
EUR/USD
Today's support: - 1.3450(main), where correction is possible. Break would give 1.3429, where correction also may be. Then follows 1.3408. Break of the latter would result in 1.3388. If a strong impulse, we would see 1.3354. Continuation will give 1.3318. Today's resistance: - 1.3540, 1,3581, 1.3603 and 1.3637(main). Break would give 1.3667, where a correction is possible. Then goes 1.3686. Break of the latter would result in 1.3728. If a strong impulse, we'd see 1.3749. Continuation will give 1.3770
USD/JPY
Today's support: - 83.40, 82.91 and 82.57(main). Break would bring 82.32, where correction is possible. Then 82.03, where a correction may also happen. Break of the latter will give 81.88. If a strong impulse, we would see 81.65. Continuation would give 81.43 and 81.22.Today's resistance: - 83.94(main), where a correction may happen. Break would bring 84.13, where also a correction may be. Then 84.34. If a strong impulse, we would see 84.48. Continuation will give 84.60.
DOW JONES INDEX
Today's support: - 12195.07 and 12158.30(main), where a delay and correction may happen. Break of the latter will give 12135.94, where correction also can be. Then follows 12122.73. Be there a strong impulse, we shall see 12087.36. Continuation will bring 12048.62 and 12015.20.Today's resistance: - 12251.30, 12287.81, 12307.50 and 12334.22(main), where a delay and correction may happen. Break would bring 12366.70, where a correction may happen. Then follows 12382.25, where a delay and correction could also be. Be there a strong impulse, we'd see 12403.13. Continuation would bring 12424.19.
Written by Admiral Markets
The Daily Wave AnalysisCurrency pair EUR/USD
By the present moment descending movement of euro which has begun in the beginning of February, has almost generated the Zigzag which, within the limits of alternative, can be the correctional wave [ii] of C. If the assumption is true, after its terminations, it is possible to expect the new wave of growth of pair as the impulse [iii] of C
Currency pair GBP/USD.
Within the limits of the alternative scenario, ascending movement which is formed from the beginning of new year, can be the impulse [i] waves With of of (Y) of [X]. If the assumption is true, by the present moment the correctional wave [ii] of C was generated and, hence, it is possible to expect growth of the cable as the impulse [iii] of C. At the same time, considering modest enough depth and duration of correction, there are all bases to assume, that at the given stage, the part of the wave [ii] of C is generated only.\
Currency pair USD/JPY.
Probably, within the limits of the presented alternative, the impulse (ะก) of [3] in which frameworks development of the Double Three 4 of (C) resembles by the end is formed. If the prospective wave 4 of (C) and remains the Double Three after its terminations, it is possible to expect the beginning of falling of the price as the impulse or the Diagonal Triangle 5 of (C) of [3].
Currency pair USD/CHF
It is not excluded, that the impulse or the Diagonal Triangle With of (Y) of [B] is already formed. Probably within the limits of its development, by the given moment of the complete the correctional wave [ii] of C. If the assumption is true, it is possible to expect falling of US dollar as the wave [iii] of C.
Gold Will Correct, Then Hit $1,500 by Year-End: Strategist
http://www.cnbc.com/id/41614678
Wednesday Look Ahead: Investors Itching for a Pull Back May be Disappointed
http://www.cnbc.com/id/41610988
JPMorgan May Climb 25%, Boost Dividend
http://www.cnbc.com/id/41603537
Europe Stocks Set To Open Higher on Earnings Hope
http://www.cnbc.com/id/41600742
Euro May Weaken Versus Dollar on `Head and Shoulders': Technical Analysis
http://www.bloomberg.com/news/2011-02-15/euro-may-weaken-versus-dollar-on-head-and-shoulders-technical-analysis.html
Oil Gains First Day in Four as Drop in U.S. Supply Signals Demand Recovery
http://www.bloomberg.com/news/2011-02-15/oil-trades-near-11-week-low-in-n-y-on-forecasts-u-s-fuel-supply-to-rise.html
The Question That Could Spark a Crash
http://dailytradealert.com/2011/02/13/the-question-that-could-spark-a-crash/
Gold May Weaken on Speculation One-Month High to Deter Buyers
http://www.bloomberg.com/news/2011-02-16/gold-may-weaken-on-speculation-advance-to-one-month-high-to-deter-buyers.html
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