This presentation was on November 10, 2011 on "Traditional and Unique ways to use Relative Strength"
Hit me up if you would like the slides that accompany it or have any questions
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Presenter's Bio: Linda Bradford Raschke is President of LBRGroup, Inc., a CTA, and president of LBR Asset Management, a CPO. She began her professional trading career in 1981 as a market maker in equity options. LBRGroup has been a registered CTA since 1992. Ms. Raschke was recognized in Jack Schwager's critically acclaimed book, The New Market Wizards, and is known for her own top selling book, Street Smarts - High Probability Short-Term Trading Strategies. She has been featured in dozens of financial publications, radio and financial television programs, has served on the Board of Directors for the Market Technician's Association and was President of the American Association of Professional Technical Analysts. Ms. Raschke has presented her research and lectured on trading for the Managed Futures Association, American Association of Professional Technical Analysists, Bloomberg, Market Technician's Association, International Federation of Technical Analysis, Canadian Society of Technical Analysts, TAG, Omega World, International Online Trading Expo, AIQ, Futures Conference, and has lectured in over 16 different countries for Dow Jones.
Relative Strength Summary Suggested Rules:
-For investors look at 6 & 12 month look back periods; 4 weeks is the worst period (least return)
-Be careful as using it increases Beta on both sides (gains and losses)
-Works best in up-trending markets with good volume
-Works in stocks, sectors, and commodities
-Be extra careful using after an extended trend as rotation will often take place at peaks and troughs
-Doesn't work in downtrends (longs are already loaded up...liquidation can be quick)
-Can use on short term trades using first 30 minute strength
-Very good strategy with relative performance models that follow benchmarks and /or are constrained by investment options.
-Needs constant updating depending on time frame
Slide 8- Dax made a lower high in late Aug and thus showed relative weakness, which set up a good trade into the Sept lows. Nasdaq showed strength by not making lower low early Oct like other indices. Rallied strongest into October as well.
Slide 10- 3M vs Intel early Oct lows...INTC didn't make new lows and was a lot stronger during the rally...AMZN similar...both made higher lows vs. lower low of 3M
Slide 11 (my 2 cemts)- Coke vs. Pepsi...great tool for sector/industry analysts...she used 180ma just for structure (could be your pay period or performance period? or any MA you wanted)...swap out s&p with your benchmark. Potential to look at st.dev of ratio around 180 day to help know when to scale back and manage money? Divergences may be good signals too.
Slide 17: answer=Amazon. The tough think is you had to pay up for AMZN since it gapped and took out near term highs...but the thrust helps you make that decision.
Slide 19: Walmart was not overbought just b/c it went over 75 on RSI...Alcoa would have killed you, but Walmart stayed up.
Slide 22: Volume by 30 minutes (vertical) by day (horizontal)
Slide 23&24: 7am time period on futures pretty good at showing trend of day; is it holding or failing or oscillating?
Slide 29: Franc long out-performing well before it went parabolic...relative strength helped show it; Home Run trade!
Q&A:
-Even though correlations are at all time highs, RS still works...all things can go up, but some still outperform
- Gary Anderson's done a lot of work on Relative Strength (google him)
-
Showing posts with label MTA Webcast. Show all posts
Showing posts with label MTA Webcast. Show all posts
Thursday, November 10, 2011
Wednesday, November 2, 2011
MTA webcast series summary: Intermarket Relationships
Below is an email summary I prepared of the latest MTA webcast presentation by John Murphy from October 19 2011.
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Hey all. Today I attended a webcast presentation by John Murphy (of stockcharts.com & MTA). John has been around a long time and is famous for his intermarket relationships analysis (one of which is required reading for the CMT). http://en.wikipedia.org/wiki/John_Murphy_(economist)
If you are at all interested in the macro environment or economics and how it ties to the stock market, then his intermarkets book, may be for you. It is great at tying together the financial markets, business cycle, and technical analysis all together.
http://www.amazon.com/Intermarket-Analysis-Profiting-Relationships-Trading/dp/0471023299/ref=sr_1_1?ie=UTF8&qid=1319048257&sr=8-1
I have attached the slides, which are pretty self explanatory and an easy flip through to see what's going on with a lot of different markets (contact me to obtain). You likely have already recognized some of them, but it helps to put correlations in easy to read charts. Below is a short summary of the slides in pretty much order with the presentation...
Intro: "You have to go back to the 30's to find similar correlations as today". Most "traditional" relationships have broken down in the last decade (starting with the Asian Crisis). The reason behind this is the deflationary theme we are currently in compared to the primarily inflationary period of the past. He cites 3 major deflationary events recently, the Japanese bubble bursting (1989), the asian contagion, and the US property bubble burst.
Slides 4&5: There was a paradigm shift around the time of the Asian Crisis. Bond yields and stocks started to move together. He cites a deflationary environment as the primary reason. He doesn't expect this relationship to revert back to the "norm" until deflation is out of the picture. Slide 5 shows that same relationship in 2011. In august 2011, bond yields didn't confirm the rally, which gave a hint stocks would see new lows.
Slides 6&7: Stocks and Commodities are positively correlated (extremely). This has not occurred since the 1930s. There is no other real good example in history and is one of the reasons he sees us in a deflationary environment. Commodities, like yields, seem to be leading stocks. He comments simply that Bernanke wouldn't talk about it so much if it wasn't a concern and prevalent.
One of the most reliable inverse relationships is the dollar/commodities; Recently a similar relationship has occurred between the dollar and stocks.
Slides 11&12; Stocks peak when energy outperforms...This occurred through the summer 2011. Rotation into safety, also has occurred...too early to tell if rotation into safety is over and downturn is "complete", but that cycle is longer term. Stocks are in red on slide 11 and the business cycle is in green.
Slides 14+; US stocks outperform foreign stocks when the dollar rises; however, they both fall. The Euro is something like 56% of the US Dollar Index and the majority of the 5 components.
Euro stocks are leading the US stocks right now
Ratio charts are a great way to see what is really happening and driving prices (I agree).
Q&A session...
-A China revaluation would result in inflation in America & decline of the dollar
-Use the 10 year bond when comparing across countries because most others don't have 30 year bonds.
-Expects "deflationary environment to continue until proven otherwise". Will look at bond/stock relationship to help tell.
Take care everyone and good luck! Let me know if you have any questions.
Chad
__________________________________________________________________
Hey all. Today I attended a webcast presentation by John Murphy (of stockcharts.com & MTA). John has been around a long time and is famous for his intermarket relationships analysis (one of which is required reading for the CMT). http://en.wikipedia.org/wiki/John_Murphy_(economist)
If you are at all interested in the macro environment or economics and how it ties to the stock market, then his intermarkets book, may be for you. It is great at tying together the financial markets, business cycle, and technical analysis all together.
http://www.amazon.com/Intermarket-Analysis-Profiting-Relationships-Trading/dp/0471023299/ref=sr_1_1?ie=UTF8&qid=1319048257&sr=8-1
I have attached the slides, which are pretty self explanatory and an easy flip through to see what's going on with a lot of different markets (contact me to obtain). You likely have already recognized some of them, but it helps to put correlations in easy to read charts. Below is a short summary of the slides in pretty much order with the presentation...
Intro: "You have to go back to the 30's to find similar correlations as today". Most "traditional" relationships have broken down in the last decade (starting with the Asian Crisis). The reason behind this is the deflationary theme we are currently in compared to the primarily inflationary period of the past. He cites 3 major deflationary events recently, the Japanese bubble bursting (1989), the asian contagion, and the US property bubble burst.
Slides 4&5: There was a paradigm shift around the time of the Asian Crisis. Bond yields and stocks started to move together. He cites a deflationary environment as the primary reason. He doesn't expect this relationship to revert back to the "norm" until deflation is out of the picture. Slide 5 shows that same relationship in 2011. In august 2011, bond yields didn't confirm the rally, which gave a hint stocks would see new lows.
Slides 6&7: Stocks and Commodities are positively correlated (extremely). This has not occurred since the 1930s. There is no other real good example in history and is one of the reasons he sees us in a deflationary environment. Commodities, like yields, seem to be leading stocks. He comments simply that Bernanke wouldn't talk about it so much if it wasn't a concern and prevalent.
One of the most reliable inverse relationships is the dollar/commodities; Recently a similar relationship has occurred between the dollar and stocks.
Slides 11&12; Stocks peak when energy outperforms...This occurred through the summer 2011. Rotation into safety, also has occurred...too early to tell if rotation into safety is over and downturn is "complete", but that cycle is longer term. Stocks are in red on slide 11 and the business cycle is in green.
Slides 14+; US stocks outperform foreign stocks when the dollar rises; however, they both fall. The Euro is something like 56% of the US Dollar Index and the majority of the 5 components.
Euro stocks are leading the US stocks right now
Ratio charts are a great way to see what is really happening and driving prices (I agree).
Q&A session...
-A China revaluation would result in inflation in America & decline of the dollar
-Use the 10 year bond when comparing across countries because most others don't have 30 year bonds.
-Expects "deflationary environment to continue until proven otherwise". Will look at bond/stock relationship to help tell.
Take care everyone and good luck! Let me know if you have any questions.
Chad
Thursday, October 13, 2011
MTA webcast series summary: The LongWave
I decided I will start capturing the notes I take during webcasts or meetings I attend that are relevant to this blog's purpose.
Below is a summary I sent in email form on the webcast I just attended concerning the LongWave presented by Ian Gordon of the LongWave Group. Typically there are also slides that accompany the presentation. If you are interested in these or have other questions, please contact me and I will send to you directly...keep in mind that these are notes I took as a 3rd party and are the presenter's thoughts, not necessarily mine.
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Today I had the pleasure of listening to a webcast of the Longwave theory (also known as the Kondratieff Wave) which has to do with generational economic cycles. This theory was first proposed by a Russian Economist (Kondratieff in the early 20th century) http://en.wikipedia.org/wiki/Nikolai_Kondratiev and is pretty famous, especially because it's expectations are playing out in similar time frames and because it analyzed back to the 1700's and the beginning of the US and continues to play out.
This theory breaks an economic period into 4 seasons (Spring -rebirth, Summer -growth, Autumn-Speculation/inflation, Winter-Crash/Cleanse) of roughly 60-80 years and the attached chart should be read from the bottom up and used while reading the summary below. I think it is apparent that the interest rates help show the potential long waves through time and the ebb and flow of cycles and how those rates effect other markets. According to this theory we are in our 5th winter since the Revolutionary War and it is far from over (really just begun according to the author).
Here is a summary of the notes I took below...
-Summer is always the season of inflation/interest rate peaks (latest one was the 60s/70s) and autumn of speculation (90s/2000s)
-Entering the 30s depression, the US was actually in pretty good shape. Debt was pretty low, and it was primarily govt. debt (instead of consumer). The debt/GDP ratios are misleading back in the depression because GDP fell 45%...so the main driver of the ratio peaking, wasn't debt, but was GDP dropping (denominator effect).
-It allowed for the govt. to increase its debt because it could be paid back from GDP growth (since GDP could realistically be expected to grow thru time and thus the decline by the 50s to less than 150% D/GDP). This time is different, it is debt driving the ratio of GDP and it is unclear GDP will ever get to a level that sustains the debt increase at 350% GDP.
-The winter period typically cleanses the debt that was built up during the speculative autumn period; in the 50's there was very little consumer and corporate debt (coming out of winter and entering spring)...a very conservative and scared of reverting generation-apprehensive...fuel to kickoff spring. In the previous winter season over 10,000 banks went under
-A peak in interest rates tells us that autumn is around the corner (and that interest rates will soon fall); biggest bulls occur in autumn (1980)
-The autumn period is the speculative period. It is when debt explodes because confidence is high and most assets (stocks, bonds, real estate) do well (1982-2000)
-There is typically a small recession after the summer period before autumn kicks off (1866, 1920, 1981)
-Autumn speculative themes: 1820s- midwest US land grab; Canal buildings; 1860s- railroads (many went bankrupt in the next winter); 1920's- industrial expansion/consumer starts borrowing from corps/US largest creditor; 1990s-internet boom/housing
-The fed has interefered with true stock and asset valuations...delaying the inevitable; Yes, things are different than the Great Depression, but not necessarily any better. US is now largest debtor nation when in the 20s it was the largest creditor...maybe not even richest...globalization/competition pressures...a lot larger now so growth is slower (the Microsoft effect)...
-The longwave group expects things in the future to be much worse than Great Depression because of debt...whether that is a longer time period or a deeper pain is yet to be determined...likely a combo of both. Now debt is on the consumer versus then it was on the govt which will be a major issue going forward.
Some investment themes the LongWave group holds:
-Dow 1000 expectations gotten from a number of different ways, but primarily because of the 1:1 Dow:Gold Ratio expectation that has held through time (2nd page of presentation). Gold over the long run does opposite of stocks, so basically an investment decision should be either/or not both.
-In previous winters, the market fell to almost 50% of the previous season's low...1921=Dow ~$65 and bottom at ~$40 in 1933; 1981=Dow 800 so projection =Dow 400 at winter's bottom.... which means on 30 stocks with a P/E of 5 would mean about $2.60 earnings on average per company...not sure about this methodology with fiat currencies.
-"Sure not going to see Dow 14,000 any time soon.
-"I'm convinced stock market will eventually reflect reality TPTB (the powers that be) won't be able to control forever like they have interfered the last 12 years"
-"Greenspan messed with rates and bottom should have been a lot sooner and harder after 2000 top"
-Stocks are best in Spring and autumn
-Gold is best in Winter (now) and Summer
(my 2 cents) keep in mind that it is a ratio which doesn't mean that they both can't go down...just that one will perform better than the other and/or go down less
-Every major longwave bottom had a 1:1 Dow:Gold price except the 1930s. This is because the fixed price of gold was at $20.67...if was at market would have hit 1:1 (my 2 cents: it hit 2:1 for arguments sake...so maybe that is the conservative target)
-Expects deflation and debt will overwhelm govts eventually creating a new monetary system; expects Euro to fail..similar to 30s when Austria and Britain currency status quos were upheaved
-(my question) - The timing of the waves is not near as important as the events...need to know where events occur in the cycle to know when seasons will change; things like fiat money and human lifetimes throw the timing off making it less reliable. If US was on gold standard like in the 30s would have been completely different today
-"you can predict price or you can predict time, but you cant predict both"
-Expects 2012 to be a bad year...primarily due to GANN cycles and the 20 year and 2nd year in the decade cycle (1932, 1982, 1992, 2002)
In full disclaimer he got his clients all into gold in 1999 with the expectant coming winter...he got out of stocks. he has been in gold since and will continue to hold until the Dow/Gold ratio is 1:1 (he expects to actually undershoot it because of the overshoot of the ratio in the 90s). he suggested that land, food, guns, etc will be other good investments...things to become self sustainable. Expects currencies to basically stop working and industry shuts down preventing transportation of goods, etc.
Below is a summary I sent in email form on the webcast I just attended concerning the LongWave presented by Ian Gordon of the LongWave Group. Typically there are also slides that accompany the presentation. If you are interested in these or have other questions, please contact me and I will send to you directly...keep in mind that these are notes I took as a 3rd party and are the presenter's thoughts, not necessarily mine.
--------------------------------------------------------------------
Today I had the pleasure of listening to a webcast of the Longwave theory (also known as the Kondratieff Wave) which has to do with generational economic cycles. This theory was first proposed by a Russian Economist (Kondratieff in the early 20th century) http://en.wikipedia.org/wiki/Nikolai_Kondratiev and is pretty famous, especially because it's expectations are playing out in similar time frames and because it analyzed back to the 1700's and the beginning of the US and continues to play out.
This theory breaks an economic period into 4 seasons (Spring -rebirth, Summer -growth, Autumn-Speculation/inflation, Winter-Crash/Cleanse) of roughly 60-80 years and the attached chart should be read from the bottom up and used while reading the summary below. I think it is apparent that the interest rates help show the potential long waves through time and the ebb and flow of cycles and how those rates effect other markets. According to this theory we are in our 5th winter since the Revolutionary War and it is far from over (really just begun according to the author).
Here is a summary of the notes I took below...
-Summer is always the season of inflation/interest rate peaks (latest one was the 60s/70s) and autumn of speculation (90s/2000s)
-Entering the 30s depression, the US was actually in pretty good shape. Debt was pretty low, and it was primarily govt. debt (instead of consumer). The debt/GDP ratios are misleading back in the depression because GDP fell 45%...so the main driver of the ratio peaking, wasn't debt, but was GDP dropping (denominator effect).
-It allowed for the govt. to increase its debt because it could be paid back from GDP growth (since GDP could realistically be expected to grow thru time and thus the decline by the 50s to less than 150% D/GDP). This time is different, it is debt driving the ratio of GDP and it is unclear GDP will ever get to a level that sustains the debt increase at 350% GDP.
-The winter period typically cleanses the debt that was built up during the speculative autumn period; in the 50's there was very little consumer and corporate debt (coming out of winter and entering spring)...a very conservative and scared of reverting generation-apprehensive...fuel to kickoff spring. In the previous winter season over 10,000 banks went under
-A peak in interest rates tells us that autumn is around the corner (and that interest rates will soon fall); biggest bulls occur in autumn (1980)
-The autumn period is the speculative period. It is when debt explodes because confidence is high and most assets (stocks, bonds, real estate) do well (1982-2000)
-There is typically a small recession after the summer period before autumn kicks off (1866, 1920, 1981)
-Autumn speculative themes: 1820s- midwest US land grab; Canal buildings; 1860s- railroads (many went bankrupt in the next winter); 1920's- industrial expansion/consumer starts borrowing from corps/US largest creditor; 1990s-internet boom/housing
-The fed has interefered with true stock and asset valuations...delaying the inevitable; Yes, things are different than the Great Depression, but not necessarily any better. US is now largest debtor nation when in the 20s it was the largest creditor...maybe not even richest...globalization/competition pressures...a lot larger now so growth is slower (the Microsoft effect)...
-The longwave group expects things in the future to be much worse than Great Depression because of debt...whether that is a longer time period or a deeper pain is yet to be determined...likely a combo of both. Now debt is on the consumer versus then it was on the govt which will be a major issue going forward.
Some investment themes the LongWave group holds:
-Dow 1000 expectations gotten from a number of different ways, but primarily because of the 1:1 Dow:Gold Ratio expectation that has held through time (2nd page of presentation). Gold over the long run does opposite of stocks, so basically an investment decision should be either/or not both.
-In previous winters, the market fell to almost 50% of the previous season's low...1921=Dow ~$65 and bottom at ~$40 in 1933; 1981=Dow 800 so projection =Dow 400 at winter's bottom.... which means on 30 stocks with a P/E of 5 would mean about $2.60 earnings on average per company...not sure about this methodology with fiat currencies.
-"Sure not going to see Dow 14,000 any time soon.
-"I'm convinced stock market will eventually reflect reality TPTB (the powers that be) won't be able to control forever like they have interfered the last 12 years"
-"Greenspan messed with rates and bottom should have been a lot sooner and harder after 2000 top"
-Stocks are best in Spring and autumn
-Gold is best in Winter (now) and Summer
(my 2 cents) keep in mind that it is a ratio which doesn't mean that they both can't go down...just that one will perform better than the other and/or go down less
-Every major longwave bottom had a 1:1 Dow:Gold price except the 1930s. This is because the fixed price of gold was at $20.67...if was at market would have hit 1:1 (my 2 cents: it hit 2:1 for arguments sake...so maybe that is the conservative target)
-Expects deflation and debt will overwhelm govts eventually creating a new monetary system; expects Euro to fail..similar to 30s when Austria and Britain currency status quos were upheaved
-(my question) - The timing of the waves is not near as important as the events...need to know where events occur in the cycle to know when seasons will change; things like fiat money and human lifetimes throw the timing off making it less reliable. If US was on gold standard like in the 30s would have been completely different today
-"you can predict price or you can predict time, but you cant predict both"
-Expects 2012 to be a bad year...primarily due to GANN cycles and the 20 year and 2nd year in the decade cycle (1932, 1982, 1992, 2002)
In full disclaimer he got his clients all into gold in 1999 with the expectant coming winter...he got out of stocks. he has been in gold since and will continue to hold until the Dow/Gold ratio is 1:1 (he expects to actually undershoot it because of the overshoot of the ratio in the 90s). he suggested that land, food, guns, etc will be other good investments...things to become self sustainable. Expects currencies to basically stop working and industry shuts down preventing transportation of goods, etc.
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