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Archive for November 2011

29
Nov

Book: What Works on Wall Street

What works on Wall Street? According to James O’Shaughnessy, he explains his findings in his book “What works on Wall Street: the Classic Guide to the Best Performing Investment Strategies of All Time.” More on that after the break. Read more »

27
Nov
weekly-calendar

Weekly Analysis – Week 47

Week 47: November 21-25, 2011

Bar-by-bar analysis Summary
Trading ahead of the Thanksgiving break is quickly showing a reversal signal, pointing to a bullish run next week. Professionals used the opportunity to sell their Treasury bond position on Friday to turn bullish in Equities. Because of the low liquidity conditions in the equity markets, they began dumping 30 year Treasuries first. This should follow through next week with strong buying in Equities.

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21
Nov

Wealth Inequality – Increasing Gap

Economic inequality comprises all disparities in the distribution of economic assets and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The issue of economic inequality is related to the ideas of equity: equality of outcome and equality of opportunity. The main instrument which diminishes economic inequality, progressive taxation, has been demonstrated to be effective in international comparisons of income compression and wealth distribution. It is a contested issue whether economic inequality is a negative phenomenon, both on utilitarian and moral grounds. A book published in 2009 claims that negative social phenomena such as shorter life expectancy, higher disease rates, homicide, infant mortality, obesity, teenage pregnancies, emotional depression and prison population correlate with higher socioeconomic inequality.

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20
Nov
weekly-calendar

Weekly Analysis – Week 46

Week 46: 11/14/11 to 11/18/11

Bar-by-bar Analysis Summary
This week’s action marks price weakness. If the next bar closes lower, we would have a failed test. It would mean a major sign of weakness. Focus on shorting on any pull back next week if this happens. However, a higher close would confirm a successful test and it would be a reversal. Read more »

14
Nov

Pitfall – Fooled by Randomness

 

How do I know that my trading performance is not just due to luck? If the last 50 trades I took had made money for me consistently, then should I worry about any random component that might be contributing to my performance? For example consider the following equity curve that was generated by taking random trades with fixed holding period of 5 days.

I’m making the computer pick a number between 0 and 10 and if the number is higher than 5, I go long, if the number is lower than 5 then I go short. Here is how the equity curve looks on a single run of this strategy with a fixed holding period of 5 days:

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13
Nov
weekly-calendar

Weekly Analysis – Week 45

Week 45: November 7-11, 2011

Bar-by-bar Analysis Summary
Late in the week confirms that Wednesday’s price action was a shakeout. Stay cautious if price trades below Friday’s low. For now, the direction is bullish, but a lack of buying could spell confusion. We could still trade under price consolidation. Read more »

8
Nov

Unemployment Trends – 2007 to 2011

The unemployment mess has been one of the deepest since the Great Depression. The employment change did not bottom out until about 3 years (36 months) after the recession began in December 2007. Howevever, we now can look at individual components of the employment change statistics over time.

We find that Mining actually gained jobs in the beginning, bottomed first, and not only that, it also has created more jobs since the recession. Most components are now growing. The only components not yet growing are Government and Information. I also expect that this component will not grow for a while since they are typically slow to react to the recession. However, the journey back to creating more jobs than pre-recession times will be long one, perhaps over another 24-36 months.

6
Nov
weekly-calendar

Weekly Analysis – Week 44

Week 49: October 31 – November 4, 2011

Bar-by-bar Analysis Summary
Price action has been showing market consolidation. A move above Thursday’s high would constitute a successful test and is bullish. However, a move below Thursday’s low would mean weakness. Get ready to take action soon. Read more »