via Birinyi Associates, comes this great pictograph of the past month’s performance.
Major Equity Indices July 2006 Returns
click for larger graph
Note the breadth chart at bottom.
Major Equity Indices July 2006 Returns
August 6, 2006 8:57am by Barry Ritholtz
This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client. References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers Please see disclosures here: https://ritholtzwealth.com/blog-disclosures/
What's been said:
Discussions found on the web:Posted Under
Previous Post
Sentiment CyclesNext Post
Linkfest!
Is it possible that the macroeconomy operates according to near ideal noncomplex mathematical laws? Would this really be so surprising? Mightnít one expect natural laws as part and integral to a very nonrandom process that is ultimately quantified in the integers 0 through 9?
The alcove of the Economic Fractalist has posed such a hypothesis – that the global macroeconomy with its integrative money growth, money growth cresting, and ultimately money decline, that is, its credit cycle, is exactly represented by simple quantum fractal growth and decline natural laws directly reflected in the daily and weekly and yearly trading valuations of its great composite equity, bond, and commodity markets. In a prospective fashion a mathematical x/2.5x/2.5x discontinuous fractal growth has been identified that appears to represent the limits of the global credit cycle system.
While the integrative process is a complex mixture of facilitated debt and money creation, resultant asset and commodity inflation, ultimately limited by ongoing wages, consumption saturation, and increasing debt obligations via accelerating debt instruments, e.g., ARMS -the predictable evolution of the summation quantum simple patterns strongly appear to herald major directional changes.
Such a change occurred for the Wilshire 5000, the composite US equity proxy marker, on 5 May 2006. That day represented the secondary closing high for the Wilshire after its a 142 year credit growth cycle from its predecessor stock summation proxy indicators starting in 1858 and ending in March of 2000. 5 May 2006, the secondary high to March 2000, was marked by a minutely exhaustion gap with a closing high for the last 6 years.
Now on 4 August 2006, another possible minutely high exhaustion gap high has occurred accompanied by a very curious sequential exhaustion gap to the low side – covering the same trading valuation territory – all within the same day.
The x/2.5x/2.5x extended fractal evolution from the Wilshireís lows in 2002 and 2003 to its 5 May 2006 closing high has been well described in the serial posting of EF. From the October 2005 low, the daily fractal pattern has been:
x/2.5x/2x/1.5x or 12/30/24/18 days.
Day 18 initiated a new fractal sequence with a 21-22 day base.:
21/53/53 or x/2.5x/2.5x with day 53 of the third fractal growth sequence 4 August 2006.
Interestingly day 42 – exactly 2X of the 21 day base – of the second fractal growth sequence was 5 May 2006.
Was 4 August 2006 – the final x/2.5x/2.5x extended lower high representing the second shoulder of the 5 May 2006 second shoulder to the March 2000 high?
The US ten-year note has ominously inverted below the 3-month treasury for the last two trading days. Ten-year treasuries at near 5 percent in a massive deflationary environment would seem the prudent investment – and expected natural money flow move.
As always expect the discontinuous and the nonlinear -unexpected. Lammert
per garylammert:
“From the October 2005 low, the daily fractal pattern has been:
x/2.5x/2x/1.5x or 12/30/24/18 days.
Day 18 initiated a new fractal sequence with a 21-22 day base.:
21/53/53 or x/2.5x/2.5x with day 53 of the third fractal growth sequence 4 August 2006.”
I was with you until we got to this part- a new sequence was initiated why/how? This looks an awful lot like backfitting analysis to match history to me.
I would agree that something weird and possibly important happened Friday, but it seems to me that even if you accept that fractals provide some explanation of market movements, it’s backward-looking and of little practical use unless there is some way of accurately detecting whether the sequence has morphed.
It’s much easier and probably more useful to simply accept that cycles exist over the intermediate to long term and that given sectors exhibit typical behaviors at different points during a typical cycle. But that’s just a broad way of anticipating what comes next that does not involve any assumptions about the duration or amplitude of cycles.
But I’m listening if you care to expound on this.
garylammert, you had me at,
“integers 0 through 9 fractal sequential exhaustion gap to the low side”
I am afraid that I am not. If you must attempt to analyze the market with fractals, at least do it this way: http://www.ess.ucla.edu/faculty/sornette/prediction/index.asp#prediction
Sure, they threw in the towel with, “[w]e have discontinued the update since its was targeted at the “antibubble” which has transformed itself and the present Landau formulas do not apply anymore..” However, their approach had the advantage of not being gobbledygook.
Moreover, I am not as convinced that they are wrong about where the index goes: http://www.ess.ucla.edu/faculty/sornette/prediction/images/20050819_FigSP_pop.gif
I am, however, pretty sure that their market analysis, as distinct from their math, suffers from a lack of grounding and experience in the subject matter.
TLT was up 2.1% for the month.
And GLD was up 3.1%.
BSI87, i bought some TLT over a month ago, what are your thoughts if the Fed does not raise on Tues? do you think the curve will steepen? i don’t see how it can’t if inflation continues to threaten. I’m thinking of swapping my TLT for some SHY-
Lammert: I give you the wisom of Gartman:
“The greatest traders/investors we’ve had the honor to know over the years continue to employ the simplest trading schemes. They draw simple trend lines, they see and act on simple technical signals, they react swiftly, and they attribute it to their knowledge gained over the years that complexity is the home of the young and untested. ”
Here is the one thing I do I know: “I don’t know”
I don’t know whether the FED will pause or hike.
And frankly, I don’t care. Seems to me we are in a period of economic transition. In turbulent times, I want to pare back risk by hedging and trading smaller, allocating more to cash. I will be in long/short pairs going into the FOMC, very close to dollar value neutral, having sold the weakest sectors and bought the strongest. When a direction is established in the next higher time frame from what I trade, I will cut loose the hedges and let the other halves of the pairs ride until technicals indicate otherwise. Normally, I step aside altogether for FED days, but this one feels like we’ll get a substantial move once the intial volatility plays out, hence the pairs.
That’s not a bad scheme Alaskan Pete, but I’m not going to try to fully hedge just because my time horizon for SPY puts is March and I don’t mind seeing them red for a while if that’s what needs to happen. I’ve also got some XLE calls that will probably do okay regardless.
But I did put a little money into a currency trading subaccount and bought NZD against USD- the basic idea is that NZD is very high yielding and likely to jump if there is a Pause!, enough to hand me a one-bagger (because I am using a lot of leverage); if there isn’t a Pause!, then I’ll eat at least some of it but that’s okay because my puts will be sweet.
I was going to use a USD/JPY short for this, but backed out after I learned that there is a holiday in Japan this week and you never know how that’s going to impact things. At any rate, we’ll all find out what happens the hard way, but I will be watching the currency markets very carefully Tuesday morning for signs that the fix is in one way or another- I personally don’t think that everything is decided “at the meeting,” I think it’s worked out over the preceding days at least enough to determine the red/black part of things and that means that there will be a leak.
Phil
Depends on your situation. I bought some 30 yr bonds when they got up to 5-5.3% yield. It was to have some non correlated assets against equity positions.
TIP looks interesting compared to TLT. I have a small position in those.
The one thing to keep in mind is that IEF,SHY,TLT, etc could scream on the upside if we run into any financial situation like LTCM or the Thai currency meltdown. Not saying it will but I feel having some bonds takes some volatility out along with offering some risk mgt.
JMO.