Mini-Introduction
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major topic from P1 to P5 below--OR--scroll down to
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P1
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P3
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P4
(Business-Economic Cycles)
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trading model-Pivot Points)
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P4 Keywords:
business cycles
, business
cycle graphic
, business cycle
revealed
, Key Business Cycles
revealed
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Cycle revealed
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Slow-Down cycle
, business cycle diagram
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4-Y Presidential Cycle
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Management based on knowledge
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regression analysis for
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"There
is an economic cycle in the United
States, that was first identified by W.D.
Gann in 1943, that is one of the most solid examples
of periodic (reoccurring) behavior that I have ever
seen, and while there is no guarentee that this cycle
will continue it's historically high degree of
accurate predictability into the future, it currently forms
the back-bone for
my long term forecasting method."
-more key business cycle-
"Roll Over Rover,
the Big Dog in Economic Cycles
is headed our way."
(1999)
Andrew J. Quiggly
|
--Please scroll
down to Risk Management--
PTR's Risk Management
for
Investors and Traders
Stock market analysis using
business cycles
and economic
cycles in conjunction with capital
risk management
"Human beings, who are almost unique in
having the ability to learn from the experience of others,
are also remarkable for their
apparent decision to not do so.”
Essays:
First Series
by Ralph Waldo Emerson
(1847)
"The major
RISK for most part-time investors is only knowing a small
portion of the overall forces acting to
influence the price of stocks, while
there are a larger group of professional speculators
who are acting on methods
and theories that they
are totally unaware of."
Into The Looking Glass
-"Risk is Real"
(1999) Andrew
J. Quiggly
|
--Please scroll down to continue--
THE
definition of "risk management" can mean a lot
of different things to different people, but
that last quotation, above, fairly well identifies
the general definition we place on it. That
is to say, if an investor or trader is
attempting to "win," or at least make a profit,
in "the Great Game" when they do not know all the
"rules," or "tricks," they will be hit with, then
they are placing themselves and their capital at a
serious disadvantage to the other "players."
By the way, make no doubt about
it, being in the stock market is "playing
the game," whether you want it to be or not. In
this game for someone to "win," and take money out year
after year, and quarter after quarter, then someone
else must loose that same amount, since "the market"
is always a zero sum game to the "mean." After all, who does
everyone think pays for all those multi-million $dollar salaries on
Wall Street...the tooth fairy?
Without a doubt,
RISK is real, and controlling risk does cost money,
but failing to do so can be even more
costly. One of the most disturbing things we
see in the stock market today is that so many
investors are using nothing, or nearly nothing, to
"price in" or "limit" their RISK, and the reason for this
is very simple: they have the illusion that none exist,
while in reality just the opposite is true.
While there
are dozens of definitions and precarious
explanations I could use to get at this point,
allow me to define it my using one simple
"three point" question and one real life "old war story,"
or maybe more appropriately I should say: "one
old stock market story. "
In the late
fall and winter of 1999 and 2000, the
1990's Bull Market in U.S. and world wide stocks
was on a major ride, and the news media
was eager to proclaim "the terrific news" of
"record company earnings," another brisk economic "expansion"
with low inflation, high productivity, and
"still easy access to capital" being provided by
the world's central bankers. The conditions were
commonly being described by the financial and main
stream media as "excellent for stocks," "wonderful,"
and "the beginning
of a new Bull Market."
However, behind
the hype, a feeding frenzy for computers
and software during the run-up to Y2k had sucked
the oxygen out the air, and the fire was already starting
to die out.
During that spring
of 2000 period there appeared one of the clearest
"red flags" that a trader will ever see for a major
economic top, the "inverted yield curve" occurring with
FED rates over 5%, yet many Wall Street Perma-Bulls
and Polly-Annas were screaming "buy" on Amazon at $500.
My question is simply
this: 1) when just about everything
sounds to good to be true, is the RISK of a major top
increasing or decreasing? 2) do mutual
fund investors have higher or lower RISK than active
traders and speculators? and 3) just what
kind of percentage of the total number of investors
do you believe actually saw that "possible top" in 2000
coming and "actually" took defensive action in the face
of that RISK? Lets come back to these questions
later on.
Rather than run-on
in a lengthy mini-novel for this short introduction,
I'll quickly cut to the chase and say that
the reason I made the radical transformation
from value investor to full blown stock trader
was to
"reduce"
and "limit" the huge RISK that I was running
into.
For example, my "old war story" began
in 1997, and eventhough I had done massive
amounts of "fundamental" research on a U.S.
company called BritePoint Communications, and
I was "fat and happy" with it's current results
and it's future expectations, I was blind-sided
by a slow and steady decline that suddenly turned into
a full blow panic and massive drop.
While I was using "stops,"
I keep lowering them as the stock slowly declined
because the fundamental news was "so wonderful,"
something I now know as a trader is a major
no-no, and on the day it "crashed" it opened down 50%
and blew right through my stop loss order. So,
before I knew it, the stock had plunged from $24 to
$7, and before I finally decided to sell, it was down to
$4, which was, of course, the absolute bottom.
Needless to say, the "real news"
followed a few days "after" that bottom, which
was that the company was being forced to shut
down it's operations in China when that market
was being hyped as a "limitless opportunity." Needless
to say, I knew I had been had...BUT how and by whom?
Now, that was not the
only loss I had to eat over the years,
since I had been active investing and trading
(sort of) on fundamentals ever since 1984, but that
is when the lights really come on and I said
to myself: Hey dude, something else is going on here
and you better find out what it is!
Well, for those who understand
the full implications of technical
and geometric pattern analysis, I had bought
"that wonderful" stock "just after" it had
made the right neckline of a massive head and shoulders
topping pattern, and after a brief run up, which I now
know is called "the last get out rally," the price came back
down and broke that neckline, drifted back up to "test it,"
a few dozen times from below, and then CRASHED.
After
my epiphany, it took me nearly two years of
a fairly massive educational quest, and many
hundreds of dollars spent on books and magazines,
to where I found out just how STUPID I had
been. I had finally, by pure chance, run into,
purchased, and read Technical Analysis of
Stock Trends , by Edwards and McGee, and right
there, near the front of the book, was an exact "road
map" example of what had happened to Britepoint, and my
$14,000.
In reality, there was a huge
neon sign pointing to Britepoint that was telling
all the "informed" traders and spectaculars to "get
out of Dodge," while at the same time I through everything
was wonderful and my RISK was going down and not up...sound
familiar?
Needless to say, while I may have
been one of the fools who bought into this "scam
job," there had to be many, many, more then just yours truly.
As you might
expect, that loss was a life changing experience
for me, and every since that time I have
been studying, testing, and applying many types
of technical analysis, pattern analysis, and even
many new forms of fundamental analysis in a effort
to limit my "REAL WORLD RISK" when I make a trade or
add money to my 401K-IRA.
A few of the key points which
I have learned over many years and many thousands of hours
of research can be summed up by these few axioms,
or tenets, of Stock Market Risk Management:
1) The major RISK within the stock
market is only knowing a small portion of the
overall forces acting on and influencing
the price of stocks while there is a larger group
of professional investors and speculators who
are acting on methods and theories that you are totally
unaware of.
Sound familiar?
2) Above all else, either
learn what the RISK are and keep abreast
of them with your own research, or hire someone
who knows how to do it for you and keep tabs on
them from time to time.
3) Always use stop loss
settings IF you are actively trading stocks,
options, or any other entity where that can be
done. However, don't forget that any
stock can blow right through a stop loss order, just
like good old BritePoint did to me.
4) For mutual fund investors,
there are no "stop loss settings," except
for mental stops, and except for those who
are truly the long term buy and forget type investors,
which most people should not be, you must
be at least casually engaged in the active protection of
your investment capital.
Remember, most stock funds
remain 100% invested at all times, and that
means that anytime you have all your capital in
a stock fund, or even many different funds, you are 100%
long and totally exposed to all RISK that
can topple a market.
Many aspects
of life cannot be delegated to auto-pilot,
and nearly all types of investing fall into
that category. If you try to sticking
your head in the sand and hope for the best
then the chances are you are not only setting up the
picture perfect target for a good kick in the hinny, but
that kick could easily cost you a lot more than $14,000.
Did
anyone here buy a boat load of XYZ anything at
the 2000 top? Liars! I could recite
dozens of horror stories related to me
by just my family and friends that would make my own
"reckless" foray into BritePoint look like a well
planned weekend outing. Needless to say, what
happen in 2000 is water over the dam, and what needs
to be done now, and I mean now if you are one of those
doing nothing to get informed and limit RISK, is forget
the past and starting protecting what you have now.
One of the most important rules of investing
or trading is that one way to make money is
not to lose what you have.
While
I don't want to throw anyone into a full
blown panic, I'm going to say something
here, on 1/2/2007, that I feel with every bone
in my body. While I may end up being totally wrong,
I fully expect to be proven right when I say: "The U.S.
stock market is now at, or very near to, a condition
that carries the highest REAL WORLD RISK that I have ever
seen, and one of those times in history where RISK needs
to be assessed and acted on." For example, lets just
consider the following statements taken from our weekly
MarketView analysis, and see what
you think the RISK are going forward:
Long term
interest rates were falling from 1981 (17%) to
2003 (4.5%), "and that was bullish for stocks"!
The U.S. dollar index was
gaining from 1988 to 2000,
"and that was bullish for stocks"!
During most
of the 1980's and 1990's the world was experiencing
mild deflation
"and that was bullish for stocks"!
The
Cold War ended in 1988-1990, the U.S. military
was down sized,
"and that was bullish for stocks"!
For much of the 1990's,
the U.S. government was able to reduce
the yearly budget deficits and limit the growth
in the national debt,
mainly due to deflation and military down sizing,
"and that was bullish for stocks"!
Crude oil
prices were flat to falling from 1979 to 1998
because of increased production and conservation,
"and that was bullish for stocks"!
Geopolitical
RISK premium...remember
that one, peaked in the 1970's and was in
a long decline until 2001
,
"and
that was bullish for stocks"!
And NOW?
None of
the above
!
BUT
nearly everyone is bullish
on stocks...right?
WRONG!
When the cards you see being played no longer
make any sense then the probability is
high that someone is dealing off the bottom of the deck
and NOT that the game has become a "new era."
Unfortunately, this stock market
house of cards could easily fall IF
interest rates break out above that 23 year
declining triangle (near 6%), which is another well
known "reversal pattern." As for "risk," I only ask:
if the US is "so afraid" of one old Arab-Muslim,
on a kidney dialysis machine I might add, who is hunkered
down and hiding in some backward cave or spider hole in the
wilderness of Pakistan, then way in the hell are they "so
unafraid" of the other 2.499999999 billion that are not?
This is "denial" at it's
highest, and with REAL WORLD RISK rising at
a time when the stock market is being driven
back up to near record valuation metrics, by
the FED artificially controlling interest rates to
near forty year lows, one only has to ask
themselves three questions:
"WHAT IF," interest
rates breakout to the upside with nearly
all valuation models showing stocks "will
flip" to overvalued if rates rise to just 5.5% to
6.0%, which have historically been very near the "mean,"
or average, rather than a low.
"WHAT IF," a religious
terrorist, or a financial terrorist, blows
up one major oil refinery, one major pipeline,
or one major oil transfer terminal anytime
next summer, or next summer, or next summer?
"Are either of these
events probable, and have any of their
RISK been price into a market that is
at, or near, all time highs"?
DOES this mean I'm a big bear
and everyone should bail out of or avoid the stock market
here in early 2007? NO, absolutely not! All I'm
saying is DON'T put your head in the sand and rely on the media
spin headlines, and do the work so as to keep abreast of what's really
going on in fundamentals, technicals, AND interest rates...since
"ONLY" INFLATION can kill a bull market.
I would venture to say that everyone
who has read this short introduction now
knows what we mean when we refer to Stock
Market Risk Management, and we cover more
of this topic in our section introductions
and make regular comments to it in our weekly analysis.
Furthermore, for those who want as little
"active involvement" as possible, in order
to avoid the "the actual bad news," we maintain
both a "Risk Alert, " and a "Crash Alert," based
on the sum of all our knowledge and analysis.
The world’s master investor over
recent decades, Warren
Buffett, has publicized his two rules
of investing:
Rule One: Do not lose what
you have.
Rule Two: Do not forget
rule 1
By the way, while everyone
should go back over their own answers
to that three part question we asked at the beginning
of this little essay, we will give your are
short answers:
1) While I don't know who
said: If it sounds to good to be true,
it probably is, that surely must apply to the
stock market.
2) As for who has the higher
RISK, that answer will always be highly
speculative, however, since most mutual funds
stay 100% invested, and, usually, 100% long, investors
in these funds are 100% exposed to everything
that can bring the market down; eventhough, many mutual
managers are completely unaware of any technical aspects
that can dramtically affect RISK.
That is to say, the traders
and speculators should be knowledgeable of
the same fundamentals used by the Mutual Fund manager,
but also have knowledge of that whole Parallel
Universe of Technical and Pattern Analysis that can also
be a key contributor to RISK. Therefore, I'm
very inclined to believe that traders and speculators,
on average, actually have less risk than buy and forget
investors.
Now, there
is nothing wrong with Mutual Fund investing,
and it's clearly the better way for many investors,
but the only thing I'm saying here is
that you also need to keep informed of the RISK and
take action yourself from time to time.
3) While I have no real
idea of how many investors had seen, in advance,
that 2000 was "likely," or even "somewhat
likely," to be a major top, my pure estimation
would be "around" 20%, or 1 in 5, and that estimate
is only slightly higher than the number of Bulls
verses Bears recorded for 1/10/2000, at 61% to 15%
(with 24% neutral of course).
If you were in that small
group of "Bears" then good for you, but
if you were not and you are still shooting in
the dark with fundamental or value analysis only,
then I suggest you look around from time to
time to see if there is an "
invisible
" neon sign flashing: "Hey dude, wake
up"! "The final get out rally is in progress."
|
"Statistically
speaking, the bad thing
about dodging bullets is
that for each one you dodge the
probability increases that
you won't dodge the next one."
Into the Looking Glass-
Iceberg Dead Ahead : (1999)
B. Bonfoey
|
For the
PRICE-TIME Review
Andrew J. Quiggly Co-Editor
All content is copyright(2004-7) PriceTime
LLC
|
--Please scroll down to continue--
Economic and Fundamental
Analysis:
with PTR's Business
Cycle diagram and Periodic Business Cycles list.
"Between 1948 and 1991.
the U.S. economy has experienced nine
major business cycle contractions and four
minor slowdowns in the rate of economic growth. The
average duration of these business cycle swings
has been 3 to 4 years. Nonetheless, certain activities
seem dominated by longer-term swings in demographics.
Some colleges, for example, have expressed concern
that their enrollment may decline sharply in the years
ahead because of slower population growth. On the
other hand, fluctuations can be quite short such as the interyear
or seasonal swings in business activity"
Forecasting Financial and Economic Cycles
by Michael
P. Niemira (Author), Philip A. Klein (Author) 1995
"INFLATION in the United States is now limited
to only those items that don't rise in price or that
can be excluded on the basics of volatility."
(2007) By Bernard Bonfoey in The
Price-Time Review
"One of the most basic concepts
about business cycles and economics that I have learned
over the years is that all, and I mean all, Bull Market tops
in the stock market will come as a result of INFLATION...real
or only 'perceived.'
While some may dispute that
assertion, it would be my opinion that should an atomic
bomb wipe out New York state in the middle of a bull market trend--with
moderate or low inflation--then that Bull would continue right
on up UNTIL inflation showed it's ugly head.
THEN, and only then, would
the FED be forced to, and I mean "forced" to," stop printing
up easy money in order to limit it...regardless of how
reluctantly they would face the facts of having to do their
duty and full-fill their 'only mandate by law.'
While this may not have always
been the case, since the U.S. and the World went off
the Gold Standard, in 1972, there is nothing but I-N-F-L-A-T-I-O-N
to stop any country from printing themselves continuous prosperity
out of thin air...regardless of the production and consumption
balances. Just think about it! "
B. Bonfoey
Founder and Editor of: "Into the Looking
Glass" (1999-2001)
Founder and Co-Editor
of: "The Price-Time Review" (2003-5-?)"
|
--
Please scroll down to continue--
The three BIG DOGs in U.S. Business Cycles
The
chart at this first link, below,
shows the key 10-11 year recession, and/or
depression, cycle in the U.S. economy, and for those
who never made it through college or who didn't bother
to buy you're own MBA when you got out, this one chart will
level the playing field...believe it, it's the real deal!
By the way, a cycle period is measured from a "trough," low, to another
trough-low; even if, the peaks may at time follow the same time span
or "period."
<Economic LongWave(tm): KEY "Business Cycle"
in the U.S.>
There is also a economic
mid-term Cycle "trough," low, that "usually" comes in somewhere near
the MID-TERM, or center, of that key 10-11 year economic cycle. While
this cycle tends to be less periodic and reliable than the Big Dog,
10-11 year cycle, and having less influence on the markets, it does many
times produce a "slow-down" or minor recession.
We call this unrulely cycle simply the "U.S. 5-Year Bond
Cycle," and I bet you can't figure out why? Hum! Anyway,
the graphic, at this next link, shows you the appearance of this cycle
on a chart of the 5 Year T-Note going back to 1960, and on it, as you
may recall, there were four "recessions" between 1970 and 1982. These
four recession were "centered" on 1974-1975, with the 1970 recession being
a low in the 10-11 year cycle, 1974 and 1979, being a "double dip" to the
mid-term cycle, and 1981-82 being another, and very nasty, low for the
10-11 year Recession-Depression Cycle.
<Important 5Y Economic SLOW-DOWN cycle in U.S. >
By the way, if these last two paragraphs, and the two graphics
to go with them, didn't knock many trained economist on their butts then
I would be very surprised...as it sure did that for me when I finally
came to "see it." Oh, one more "free-bee" point to make here is
that when comparing the 1930's to the 1970's, "think" in terms of the
"centers" of the recession-depression lows. See it now?
IF
those two charts didn't bring you up to
the economic educational level of Sir Allan GreenSpam,
or his buddy, Lord, "trickle down," Linsey, then let
the information on this next one, below, burn into your
brain and you can start teaching economics at Harvard
in the fall.
<Key U.S. Stock Cycle: "Presidential" 4-Year
cycle>
While the KEY cycle in the U.S. stock market,
the 4-Year Presidential Cycle, is not "exactly"
an economic or business cycle, it does, needless to say, have an direct
or indirect influence on the economy.
As you would expect, this cycle is based on the
U.S. Presidential elections every four years, AND "re-elections" if they
occur every EIGHT YEARS, and while some market news writers seem to think
its "influence" is fixed and can be forecast well in advance, I do not
agree with that "assumption, " and classify it the same as all cyclical
"influences."
That is to say, the "strength" of these cyclical
influences, positive to boost market prices or negative to depress
prices at times, can result in anything from a "sideways consolidation"
(like 1962-1994), to a major market crash and burn job (like 1970, 1974,
1982, 1998, 2002), or even a full "cycle blow-out" (like 1986). Therefore,
it's the "time period" for these cycle lows and highs that we use in
our forecast, and our "expectations" for it's "strength" or "influence"
is based on other factors, including economic fundamentals and technical
indicators.
Eventhough I was just kidding
about the last part of those upper three paragraphs,
of course, I'm dead serious when I say that knowing
what's on those three charts, and remembering them forever,
goes a long way to breaking you out from the cattle
herd.
Once that
is done, you will be able to "finally see" that the
cattle herder didn't put up the fence to keep the wolves
out: he put up the fence to keep the cattle in!
While
most of us will never become a "Cattle Herder," since
this position is being reserved for the blue blooded sons
of the blue blooded "old money," and is being protected by
the full
force of "your government tax dollars,"
we must find solace in the fact that we are at least
no longer "regularly scheduled" to meet their big
wooden hammer in the little red barn...if you know what I mean
by that crude anology?
Enjoy
it , it's a gift from the bear, who is
tracking the wolves, who are guarding the barn yard...for
the Cattle Herder!
B.B onfoey
Co-Editor
|
“You don’t see what you’re
seeing until you see it, but when you do see it it lets you
see many other things.”
(2000)
Dr. William Thurston speaking on the proof
of Poincaré’s
Conjecture, a mathematical enigma fundamental to the "proof"
of Einstein's theory of General Relativity.
William Thurston of Cornell, the author
of a deeper conjecture that includes Poincaré’s, and that is
now apparently proved, said, 'Math is really about the human mind,
about how people can think effectively, and why curiosity is quite
a good guide," explaining that curiosity is tied in some way with
intuition.
NY TIMES article:
"Elusive Proof, Elusive Prover: A New Mathematical
Mystery"
By DENNIS OVERBYE
Published: August 15, 2005
|
THE services that we
subscribe to and comment on
in our economic analysis, "occasionally," are: Value Line,
VectorVest, Zacks Investment, Briefing.com,
The Conference Board (for leading economic
indicators), and The WallStreet Courier (indicators).
However, the single biggest, and most important, contribution
that this site makes from the view point of business
economics is THAT " KEY U.S. business CYCLE" itself,
and the "mid-term," slow-down, cycle linked to it.
This KEY BUSINESS and ECONOMIC CYCLE, a
10-11 year cycle which "actually exist," is a monster
that no investor or trader can afford to be "uninformed"
about (ignorant of). If you don't know "IT,"
then bend over, put your head between your legs, and kiss
your hinney goodby...end of story.
By the way, this
next link, below, takes you to the actual active web page
for our MARKET-VIEW MISC-POSTINGS. While
the links are all for subscribers only, this page and heading
menu will give you a good idea of just how far our service
spans across the realm of economics and fundamentals; as well
as, the technical and pattern analysis that is our corner stone.
PTR web site: Market-View
Misc-Postings as of 6/23/2006>
|
"Although most people may
not fully understand the formal definitions,
theories, interactions, and distinctions among
economic cycles, the effects of these swings are
felt all around us. Witness the layoffs in certain industries
when business activity slows and the swings in mortgage
interest rates at different times in the business cycle. Observe,
too, that labor strikes seem more prevalent when economic
growth is healthy. These and many similar occurrences are all related
to the business cycle."
Forecasting Financial and Economic Cycles
1995
by Michael
P. Niemira (Author), Philip A. Klein (Author)
IT is well know in
the scientific community that there is always an "unknown point" in
any empirical model that represents the finite amount of data points
that are needed to make the model even "useful"...let alone accurate.
Therefore, there are very few
models with a relative low number of "repetitions" to their historical
data that can be said to be "accurate for forecasting purposes,"
and the historical stock data of most individual stocks and stock
market indices fall into this category. The reason for this
is that they have "typically" only repeated their long term patterns
once every few decades and they do not have a long history in relation
to this wide periodicity.
However, it is my opinion that some U.S.
stock indices, and a few individual stocks, have acquired enough
data points so that an "approximate," or "tentative," model can
be constructed in which the projections can be verified or refute
by price-time action yet to come, and our forecasting service is base
upon this belief.
Andrew J. Quiggly and Bernard
(Ben) Bonfoey
Co-Editors of: The Price-Time Review
|
This area
of our service will also include a few charts
and comments to highlight certain topics that
we feel are very important to investors.
For example, what is a stock really worth? Do
PE's actually reflect the level of value in stocks?
What is the most widely used mathematical model used
by the big money to determine a stocks value?
Our
information in this area is not the same
old same old stuff you've heard before, and it
"may" open you eyes as to why the professionals think
the market is undervalued while everyone else thinks
their nuts. There will be a lot of information
posted here and links to any "excellent" web pages that
we happen to run into.
BY
THE WAY, do you know what "I think" the best "intermediate
term and long term economic indicators are"? Of course,
not! BUT it's the intermediate term and
LONGWAVE charts of the DOW Jones Industrial Average
. After all: "the stock market LEADS the economy,"
by anywhere from 6 months for the short cycles to 3-5 years
for the long cycles.
That is to say, as a general rule, the economy
in the not to distant future is being "forecast" by the current conditions
in the stock and bond markets. Of course, there will be a few rare
times when even the total concensus of all world stock and bond traders
"get it wrong," or some extraordinary event voids this "forecast."
However, the economic and stock data in the U.S. "seems" to support
the "assumption" that even an "extraordinary event," or even the
now common out-right manipulation by the Federal Reserve will, more often
than not, only shift the time for those economic peaks and troughs, as
"predicted" by the stock and bond markets, rather than out-right eliminating
them.
"Forget
the market fundamentals and the so-called "value"
metrics, it's the herd mentality that drives stocks
price."
My Most Important Discovery---
A Psychological
Crowd .
By
Edson Gould
Full
essay
is in the FunnyMentals section of the Price-Time Review
(for subscribers only)
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Economic and Fundamental
Analysis:
WHILE I'm no college professor
in this discipline, and neither is my associate,
with both of us being Engineers and Scientist by profession, no
trader or investor should venture too far into the
unknown without at least keeping abreast of the current
business economics and the overall general economy.
In my opinion, even if
all the technical indicators, Gann squares, Elliott
Waves patterns, and Fibonacci Trends are in alignment
they are still unlikely to over-ride a major trend
in the economy.
This
is where we differ from many other
technicians, analyst, and forecasters who believe
that those "technical influences" can actually dominate
and "override" the macro economic trend. Which
is also saying, indirectly anyway, that we don't believe
that any indicator, system, or theory can
give an absolute prediction of the future; eventhough,
investors are clearly just members of the Herd without them and
the Herd always gets slaughtered...eventually!
As I just said, we do believe that both Gann,
Elliott, and Cycle theory have a "very significant
influence" on that future...up to a point.
After all, if one hundred thousand traders use
and believe in those theories then it really doesn't
matter if they are based on fact or fiction, they
will have a significant impact on the markets....period,
and end of story! In addition, from what I see,
they are clearly becoming more of a major force in the markets
rather than declining in "influence."
In this area we will "lightly" touch on what
we see as the most critical parts of the economy,
and we also will cover some areas that are not
covered by many, if any, other services.
For instance, DRAM price trends, foundry
prices for bulk silicone wafers, the price of shipping
containers, and a few other indicators that can "sometimes"
give a "peek" into the "real" future of the
NEW economy.
One
of our favorites to keep tabs on, and
which is not covered by the talking heads,
is total electrical power usage within the United
States. The FED and the Bureau of Statistics are totally
full of %#*~ as far as I'm concerned, but EPRI, NSA,
and SA put out this power usage data and I doubt they
have an agenda, since they probably don't think anybody
is paying any attention to their mundane "monthly" reports
anyway.
While we are yet to place even a reasonable
"overall thesis" to this data, if power usage
is still going down from it's 1998 peak, and it is as
of this writing (11/21/2004), then what does that
say about the "real," or underlying state of the economy?
Unfortunately,
this data is delayed by two months,
so we still don't know for sure if the "real"
economy is still shrinking or not, but it
was still contracting as of the November, 2005, data;
eventhough, it did look like it was trying to turn back
up or sideways...for awhile.
By the way, the
total electrical power usage is still near the
levels last seen in 1985, and if anyone gets the idea
that conservation may be the reason for this decline,
I’ll just say that the data does not, in any way, even
come close to supporting that thesis. I had actually
thought that some conversion to gas was a large factor,
but that wasn't the case either.
In this section, we also post our
Business Cycle Diagram , which gives
a "good" to "excellent" graphical indication
of what groups or industries will "most likely"
be in favor during different time periods of
the business cycle. The full graphic is only available
to subscribers, but the next link shows enough of a partial
view of it for someone to get the general idea of what it will
show.
<PTR Business Cycle Diagram>
Below, is a link to our "Free"
menu and there are usually some "economic" essays listed
there that serve as an example of the economic
analysis mixed with pattern analysis that we
do.
<PTR: Free Menu 2004>
<PTR: Free Menu 2005-2006>
All content is copyright(2003-2007)
PriceTime LLC
|
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Statistical and Historical Analysis
with PTR's key "market" indicators
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"Every movement in the market is
the result of a natural law and a cause which
exists long before the effect takes place
and can be determined years in advance. The future
is but a repetition of the past, as the Bible plainly
states: 'The thing that hath been, it is that which
shall be; and that which is done is that which shall
be done, and there is no new things under the sun.'
Eccl. 1: 9 Everything moves in cycles as a result
of the natural law of action and reaction. By a study
of the past, I have discovered what cycles repeat
in the future."
Truth of the
Stock Tape (1923) and the Master Trading Course (1933
) both by W.D.
Gann.
"There is an economic cycle in the United
States, that was first identified by W.D.
Gann in 1943, that is one of the most solid examples
of periodic (reoccurring) behavior that I have ever
seen, and while there is no guarentee that this cycle
will continue it's historically high degree of accurate
predictability into the future, it currently forms
the back-bone for
my long term forecasting method."
Into The Looking Glass--Roll
Over Rover,
the Big Dog in Economic Cycles is headed
our way .
(1999) B. Bonfoey
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HISTORY does repeat itself
in the financial markets, and this is an area
that is too often overlooked by many traders.
It requires a lot of work, but is one of the best market
"timing" tools that we know of. When the market
is "consolidating," or is "moving sideways"
or is just plain trend less, or so it may seem, this information
can soothe the internal beast that wants "do something."
AT the
Price-Time Review we
use this information as a major determinant
in how close to set our stops, as well as
for other purposes. If I ask this question:
"If the Dow Jones Industrial Average made a
6% weekly gain by the end of the first week of trading
this August, what would be the likelihood (i.e.
probability) that we will see that gain exceed again in
the month of August"?
Now, if that 6% is near the
historical maximum gains for all the months of August
going back to 1930 (73 of them, of course), then you should
not be expecting much more gain...right? At
the beginning of each quarter, we post the "distribution"
curves for monthly and weekly gains and losses for
the DJIA going back to 1930, and the Nasdaq Composite going
back to either 1971 (monthly) or 1984 (weekly).
We have one
key indicator to anchor this section, an
"excellent" software program called OmniTrader,
by Nirvana Systems (Ed Downs), and it is top notch
when it comes to applying over a hundred different
technical "determinants" to a stock, or an index,
for the purpose of generating a new long signal,
short signal, confirming signal, or an exit signal.
This software
uses it all, candles, trading band crossovers,
ma crossovers, chaikin flows and divergences,
volume indicators, Kirshenbaum bands,
and many more. We never buy or short without
reviewing this signal, which we call the REFLEX SIGNAL,
and rarely go against it. The unique "indicator" that we
have derived from this program
is that we setup a list of 130 stocks, a mix of
the old and the new, and kept a log of the total signals generated
for the last two years. We call the summation of these
130 signals the OmniTrader Summary, and while it's short term forecasting
value is nothing to write home about, it's an excellent confirmation
to DOW THEORY and the intermediate term trend.
Now, we have
a good statistical data base to help determine
the "depth" of a trend in the overall market.
For example, if the last three major tops
occurred "not long after" the ratio of "all confirming
long signals" to "all confirming short signals"
exceed the ratio of 2:1 and then turned down below 2:1,
then we will be getting ready to play the next change in
trend "when" it does it again. This signal is timely
and many times it is "slightly leading" in nature.
Also, this is the signal
we use to alert us when to start a small position in the
direction of that expected change. In the Review,
and within the "Educational Section of the Review, I'll comment
more on my recommendation to "always have at least a small
position in the market," to prevent the desire to "chase"
a stock late in the trend.
In addition these "indicators,"
we have four other "trading system models" which we identify
and share on a regular basis. One of these is our
"aggressive trading model," A3-
MSAR
, which is up 867% since 1997, as of 1/2007, eventhough
the SPX is up only about 10% over that same period.
How
about them-thar FED Repo’s and "Securities Lending,"
does anyone think they don't have an material
effect on the U.S. markets...as as the FED
claims? Well, we just started tracking
this data late in the fall of 2002, and it's already
obvious that it doesn't correlate well to the bond
market, as claimed, but it sure does correlate to the
stock market big time...anyone surprised?
While we have not
yet accumulated enough data to set out a valid thesis or hypothesis about
this "action" by the FED, we do show our summary of the
FED's "current record" on a weekly basis. In
this area of the report, we will discuss our data and
the market effects, if any, that we think that data may point
to.
By the way, for anyone looking for a "real' government
conspitory theory" TO RESEARCH, just dip into the FED...but take a
barf bag with you because you will need it. In that "research
trek," I can assure you that such phases as "free markets" and "ample
liquidity" will quickly give way to some like "outright manipulation"
and free "PUT protection for always bullish HERD."
Oh, for those who do not known the "real" action
of the FED's REPO (repurchase) program, the condensed explanation is
that: 1) on a very short term--daily--basis they "accept" bonds
as collateral for low interest money. 2) this money then "appears to
be" used to purchase STOCK FUTURES or proxies, like OEX, SPX
(spy), Nasdaq (qqqq) or DOW (dia). 3) These loans only go to some
pre-approved "broker dealers," and my observations seem to indicate
that they are all perma bulls...buy side only.
Needless to say, this is, essentially, an all out
effort to day trade and manipulate both the short term and long term
direction of the U.S. "Stock Market," and NOT the bond market, and is,
most likely, the funding for the so-called Greenspan PUT and the notorious
PPT, Plunge Protection Team.
Of course, since "they" are not a private bank, a securities
dealer, or a government agency, then over sees their actions? Congress?
Ho, ho, ho!
All content is copyright(2003-2007) PriceTime
LLC
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All material contained herein is orginal content,
except as noted, and Copyright(2003-6) PriceTime LLC, or
it's editors:
Andrew J. Quiggly or B. Bonfoey
-all rights reserved-
certified and recorded for record on January
22, 2006
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The
vast majority of information that we discuss and
the opinions we state in regard to that information can be
considered a form of "forward-looking statements," very similar
to those identified in Section 27A of the Securities Act of
1933, as amended, and Section 21E the Securities Exchange Act
of 1934, as amended. Such forward-looking statements are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995.
"Forward-looking statements"
describe future expectations, plans, results, or strategies
and are generally preceded by words such as "may," "future,"
"plan" or "planned," "will" or "should," "expected," "anticipates,"
"draft," "eventually" or "projected."
You are cautioned that
such statements are subject to a multitude of risks and
uncertainties that could cause future circumstances, events,
or results to differ materially from those projected in the forward-looking
statements, including the risks that actual results may differ
materially from those projected in the forward-looking statements
as a result of various factors.
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