Dow 2006

Had a short on the S&P futures since 15.33 which I have just covered for a 2 point loss. Market is certainly focusing on the MSFT results and not the "glitch" data. Whether today is going to be a trending up day I don't know.My feeling is we got a lot of short-covering from hedge funds who were banking on us breaking 10680. Oil is another factor. It is again well above $67, but, of course that boosts the oil sector (which is the second largest in the S&P)
 
Prospects for Monday? Check out this simple recent analysis based on yahoo.com/finance historical data for the DOW. I have noticed a tendency for the Low on the first day of a new week to be well below the prior weeks close. OK, it's just the last 13 weeks, but it's worth further investigation certainly!

Basically, for ALL of those last 13 weeks, it has been possible to short at the Friday close, and make a good pip profit from the low of the following Monday ( or Tuesday if there was a bank holiday ). The average pip drop using this method has been -76.

I am not suggesting a method for timing the low, I am simply highlighting the opportunity, and speculating whether the likelihood of a ( at least an initial ) fall at the start of the week is greater than the likelihood of an initial rise. OK it needs more historical testing! Which I will do...

Anyway, just an interesting bit of fun to ponder over the weekend. Oh and yes - I am short above 10900 this weekend, just incase... :)

Does anyone have any suggestions for why this might be happening? I can only think that there may be a common desire to book profits at the start of the week, after strong runs upto the end of the prior week and/or digestion of weekend news&analysis...???

P.S. This has happened for the last 13 weeks despite an eventual rise by the end of the day for about half of these start of week sessions...

End of week close ; Start of week low ; From close to low
28-Oct-05 10402.77 ; 31-Oct-05 10372.67 ; -30.10
04-Nov-05 10530.76 ; 07-Nov-05 10488.74 ; -42.02
11-Nov-05 10686.04 ; 14-Nov-05 10618.89 ; -67.15
18-Nov-05 10766.33 ; 21-Nov-05 10708.86 ; -57.47
25-Nov-05 10931.62 ; 28-Nov-05 10839.37 ; -92.25
02-Dec-05 10877.51 ; 05-Dec-05 10766.57 ; -110.94
09-Dec-05 10778.58 ; 12-Dec-05 10707.18 ; -71.40
16-Dec-05 10875.59 ; 19-Dec-05 10781.70 ; -93.89
23-Dec-05 10883.27 ; 27-Dec-05 10754.16 ; -129.11
30-Dec-05 10717.50 ; 03-Jan-06 10650.18 ; -67.32
06-Jan-06 10959.31 ; 09-Jan-06 10906.33 ; -52.98
13-Jan-06 10959.87 ; 17-Jan-06 10841.17 ; -118.70
20-Jan-06 10667.39 ; 23-Jan-06 10607.36 ; -60.03
 
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Meltdown imminent

Overseas markets, Transports, Russell at record highs. Nikkei melts up.

This can only mean one thing......

The bear is about to strike!!

And it won't be cuddly!


 
EGO2 said:
Prospects for Monday? Check out this simple recent analysis based on yahoo.com/finance historical data for the DOW. I have noticed a tendency for the Low on the first day of a new week to be well below the prior weeks close. OK, it's just the last 13 weeks, but it's worth further investigation certainly!

Basically, for ALL of those last 13 weeks, it has been possible to short at the Friday close, and make a good pip profit from the low of the following Monday ( or Tuesday if there was a bank holiday ). The average pip drop using this method has been -76.

I am not suggesting a method for timing the low, I am simply highlighting the opportunity, and speculating whether the likelihood of a ( at least an initial ) fall at the start of the week is greater than the likelihood of an initial rise. OK it needs more historical testing! Which I will do...

Anyway, just an interesting bit of fun to ponder over the weekend. Oh and yes - I am short above 10900 this weekend, just incase... :)

Does anyone have any suggestions for why this might be happening? I can only think that there may be a common desire to book profits at the start of the week, after strong runs upto the end of the prior week and/or digestion of weekend news&analysis...???

P.S. This has happened for the last 13 weeks despite an eventual rise by the end of the day for about half of these start of week sessions...

End of week close ; Start of week low ; From close to low
28-Oct-05 10402.77 ; 31-Oct-05 10372.67 ; -30.10
04-Nov-05 10530.76 ; 07-Nov-05 10488.74 ; -42.02
11-Nov-05 10686.04 ; 14-Nov-05 10618.89 ; -67.15
18-Nov-05 10766.33 ; 21-Nov-05 10708.86 ; -57.47
25-Nov-05 10931.62 ; 28-Nov-05 10839.37 ; -92.25
02-Dec-05 10877.51 ; 05-Dec-05 10766.57 ; -110.94
09-Dec-05 10778.58 ; 12-Dec-05 10707.18 ; -71.40
16-Dec-05 10875.59 ; 19-Dec-05 10781.70 ; -93.89
23-Dec-05 10883.27 ; 27-Dec-05 10754.16 ; -129.11
30-Dec-05 10717.50 ; 03-Jan-06 10650.18 ; -67.32
06-Jan-06 10959.31 ; 09-Jan-06 10906.33 ; -52.98
13-Jan-06 10959.87 ; 17-Jan-06 10841.17 ; -118.70
20-Jan-06 10667.39 ; 23-Jan-06 10607.36 ; -60.03

For a start, the yahoo data is wrong. Try the data frome here:-
www.eoddata.com

For example,
28-Oct-05 10402.77 ; 31-Oct-05 10372.67 ; -30.10

should be

28-Oct-05 10402.77 ; 31-Oct-05 10,403.17 ; +0.4
 
Bigbusiness said:
For a start, the yahoo data is wrong. Try the data frome here:-
www.eoddata.com

Yikes, hasn't anybody at Yahoo noticed? :)
Thanks for the tipoff. I will do some more analysis with their data and post again...

P.S. Talking of weekend news affecting open, noticed this on marketwatch.com this morning ;

"SAN FRANCISCO (MarketWatch) -- During the first 12 months of Alan Greenspan's tenure as chairman of the Federal Reserve in 1987, the stock market slumped 20%.
As Ben Bernanke takes over from Greenspan on Feb. 1, there's concern that equity markets could be dented again on uncertainty that a new hand on the monetary rudder could steer the economy off course."
 
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Bigbusiness said:
For a start, the yahoo data is wrong. Try the data frome here:-
www.eoddata.com

Hi Again,
OK, I have used your suggested datafeed to do some longer period analysis, and I am very pleased to report that this more accurate data, over a whole year, does indeed support my suggested method. Below are the results from eoddata.com ( apologies for a long list ).

>>> What is interesting is that over the last 51 weekend tests of Friday Close to Monday Low, 43 exhibited the weekend drop from Close to Low, totalling -1697 pips, so an average of -39 ( with the biggest fall being -120 pips). But only 8 weekends showed a rise from Close to Low ( ie the Low never went below the previous close). <<<

The 43/8 split is statistically interesting, as it should be pretty even eg 26/25 if no effect was present.

So, it's still early days for this method, but it's already looking interesting. I will simply call it the "Dow Weekend Short". Stops and exits need clarifying, and more analysis is required, though a simple exit target could be set to the rolling average of the last years weekends, ie -39 pips at the time of writing... What does anyone else think about this??? Comments please.

Friday Date and pips between Friday Close and Low on first day of new week, source eoddata.com ;

28/01/2005 1.56
04/02/2005 -16.40
11/02/2005 -22.83
18/02/2005 0.00
25/02/2005 -111.13
04/03/2005 -9.09
11/03/2005 -19.95
18/03/2005 -95.61
01/04/2005 -47.59
08/04/2005 -22.90
15/04/2005 -66.58
22/04/2005 0.81
29/04/2005 -4.44
06/05/2005 -25.26
13/05/2005 -1.84
20/05/2005 -5.84
27/05/2005 0.00
03/06/2005 -30.00
10/06/2005 -38.25
17/06/2005 -60.69
24/06/2005 -44.35
01/07/2005 -20.79
08/07/2005 0.46
15/07/2005 -65.84
22/07/2005 -59.63
29/07/2005 -30.02
05/08/2005 -33.12
12/08/2005 -42.44
19/08/2005 -35.27
26/08/2005 -47.92
02/09/2005 0.00
09/09/2005 -14.47
16/09/2005 -120.76
23/09/2005 -9.48
30/09/2005 -45.07
07/10/2005 -54.51
14/10/2005 -17.53
21/10/2005 0.89
28/10/2005 0.40
04/11/2005 -10.33
11/11/2005 -11.76
18/11/2005 -5.28
25/11/2005 -49.99
02/12/2005 -66.84
09/12/2005 -43.47
16/12/2005 -49.95
23/12/2005 -106.78
30/12/2005 -33.05
06/01/2006 -14.88
13/01/2006 -84.27
20/01/2006 -1.04
 
Hi EGO2,

There is still a problem here. If there is a gap up on the Monday morning, you can't get out at zero loss.

Some of those days in your list will look like a small loss but you would have to take a larger loss in reality.

I have seen the cash index go below the previous days close when the futures have gapped up and have never reached that level. I think the reason for this is that not all of the 30 stocks in the DJIA open at the same time, so the index can record a negative or flat number when the futures are positive.

The only way to test your idea properly is to use futures data.

If you don't have that data, I hope one of the expert back testers who read this thread can check this out for you.
 
Caution

"Fully 75 percent of US family income is earmarked for recurrent monthly expenses. Even if they are able to trim around the edges, families are faced with a sobering truth: every one of those expensive items--mortgage, car payments, insurance, childcare--is a fixed cost. Families must pay them every month, through good times and bad; there is no way to cut back from one month to the next, as with spending on clothing or food. Short of moving out of the house, withdrawing their children from preschool, or canceling the insurance policy altogether, they are stuck. In other words, today's family has no margin for error. There is no leeway to cut back if one earner's hours are cut or if the other gets sick. There is no room in the budget if someone needs to take time off work to care for a sick child or an elderly parent. Their basic situation is far riskier than that of their parents a generation earlier. The modern US family is walking a high wire without a net."
Professor Elizabeth Warren, Harvard University.

Real consumer spending is at the heart of the economy. A slowing of real consumer spending will precede a recession which will trigger a stock market sell-off. If we can see what drives real post inflation consumer spending, then we can get a real heads up on the cycle. Individual hourly earnings obviously influence the amount that people can spend. Inflation determines how much "real" spending they can do. If your salary goes up 2% and food goes up 2%, then you are spending the same "real" amount on food. Real consumer spending is a combination of real hourly earnings plus what they can borrow. That drives corporate profits & industrial production/services, which drives both employments and the stock market.

By the time employment starts to turn down, the stock market is already in a swoon. By the way, employment confidence is a big factor in consumer borrowing. In 1999, real hourly wages turned down but the recession and bear market was held off for over a year because of the wealth effect (and subsequent borrowing) from the stock market. And I suspect that we are seeing much of the same phenomena today, except that the wealth effect is from housing. And as we saw cash out mortgage financing dropping precipitously last quarter, we see that consumer spending is dropping as well, something I suggested over two years ago would eventually happen. The link between housing prices, consumer confidence and borrowing is even stronger than the link between the stock market and the consumer.


What is the data saying? Let's look at 10-7



1. Real hourly earnings downtrends of a year or longer have been a generally reliable leading indicator of consumer-spending downtrends. Real hourly earnings gave particularly notable advance warning of the 2000-2002 economic downturn.

2. Real hourly earnings are reported on a pretax basis. Therefore, in the mid-1980s and 2003-early 2004, strong gains in consumer spending despite slowing real earnings were an anomaly reflecting federal tax cuts in those periods."

"The renewed downtrend in year-over-year real average hourly earning comparisons--attributable largely to higher energy costs--suggests that growth in consumer spending, which has weakened in recent months, will slow further in 2006. Just as wealth effects from stock-market gains in 1998-2000 postponed but ultimately did not prevent the consumer-spending slowdown of 2000-2001, the recent wealth effects from housing gains are not likely to prevent consumers' recent slowing real earnings gains from occurring during the next 12 months."

"Without borrowing and with rising energy prices, with increased borrowing costs for those with adjustable rate mortgages which reset this month, with increased credit card costs, higher local taxes, there is very little discretion left in discretionary spending. The market shrugged off the weak GDP numbers. Evidently, the thought that interest rate hikes may soon be over is a heady drug. Profits seem to be coming in relatively well now, which is part of the reason. But revenues are being guided lower in a significant number of firms. You can work profits for a few quarters, but revenues are harder to play with in a world of Sarbanes-Oxley. Higher interest rates and energy costs will squeeze corporations as well. I continue to think the market ends up lower this year and potentially much lower in anticipation of a much slower economy later in the year".
Joe Ellis, former Wall St #1 rated Retail Analyst
 
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U.S. IN TECHNICAL DEFAULT
by Dr. Chris Martenson)
January 27, 2006

In a shocking development, the Treasury Department website is openly stating that as of January 24, 2006 our national debt stood at $8,185.3 billion and on January 26th at $8,190.5 billion.

http://www.publicdebt.treas.gov/opd/opdpenny.htm

Yet the US national debt ‘ceiling’, the maximum amount of debt the US government may hold at any one time, stands at $8,184 billion – a full $5.5 billion less. Although called upon by John Snow, Congress has not yet passed an expansion of the debt ceiling and so the US government is now operating in technical default. You may recall that when last the debt ceiling was approached in the months surrounding the 2004 elections, the Treasury department furiously employed every accounting trick in the book (and then some) to avoid breaching the limit. They even went so far as to take the unprecedented step of borrowing $14 billion from the Federal Financing Bank to cover up the shortfall. But they never breached the ceiling.

On January 24th 2006 they breached it brazenly and openly and with nary an accompanying explanation.

I suppose we could write this off as merely an unsurprising development from a government that no longer bothers to even appear to be adhering to rules, laws and procedures, let alone actually doing so. But the silence is all the more troubling because there is an unprecedented level of government borrowing on the books for 1Q06 with next 2 weeks (Feb 1st to Feb 9th) an especially busy period of time. An ambitious ~$70-$80b in Treasury paper will hit the market.

The federal government does not have the legal authority to borrow above the statutory debt limit, which raises the prospect of emergency congressional action to avoid a full-fledged default.Congress will probably attach a rider to a “must-pass” defense appropriation bill and ironically title it “The Fiscal Responsibility Amendment of 2006”. And if they do, $50 says they do it very late on Friday night. Since the debt ceiling has been raised 50 times over the past 40 years, hoping for some rational debate on the matter would be an extravagant indulgence. Time spent wishing pigs could fly would offer a far better potential return.

Another odd facet of this story is the deafening silence from the financial press (and I use that term loosely) regarding this matter. Leaving aside the issue of a technical default, one wonders why questions aren’t being asked about the rate of debt accumulation and whether it’s sustainable. The last debt-ceiling adjustment was $800 billion and was passed in November 2004. Now, on January 24th 2006, it is entirely gone. $800 billion in only 16 months for an average of $50B a month.

Factoring out the plundering of excess social security contributions, the US government borrowed $52B in 3Q05, $96B in 4Q05 and expects to borrow $171B in 1Q06. A trend nearly as mind-boggling as the soon to be discontinued M3 series.

Why do I even bother to pen such distressing factoids? Because in all my time studying economics I have determined only one thing; there’s no free lunch. Pay now or pay later but pay we will.

Or we hope that our kids will, and not stiff us for the bill. But if they did, who could blame them? I, for one, would not be shocked.
 
Very interesting articles Kriesau. May I enquire their source? Are they both from the same site? Thanks
 
The federal government does not have the legal authority to borrow above the statutory debt limit,

and when did that ever matter to them? :rolleyes:

the figures yesterday have been explained away as being not dependable or a mistake or any other adjective to mean they don't want to listen.

The dow will probably soar because this is unimportant to everything.. earnings do not matter apart from a brief moment. Then they are disregarded to the next time. Earnings estimates are adjusted so they can meet or beat them and all sails along perfectly happily because if you don't tell anyone the bad news they won't know about it or act on it.
 
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Bigbusiness said:
Hi EGO2,
If there is a gap up on the Monday morning, you can't get out at zero loss.

... I hope one of the expert back testers who read this thread can check this out for you.

Hi again,
Thanks for the feedback. I think you misunderstand me though. I don't mean trade from the Friday close to literally the next weeks open ( ie market open, and the gap up problem you mention above ). I mean that the data shows a low below the Friday close is possible most of the time somewhere during that first day of the week. So it may be 9.30am, or it may be 3pm. I guess this means a risky approach without any kind of stop loss - so probably not really tradable. But there's no denying that in most cases ( 43 out of the last 51 anyway ) an average difference of at least 30 pips is possible between Friday close and "some point during the following weeks first trading day". Hope that clarifies what I'm suggesting. I just find data anomolies like this intriguing...

If an 'expert back tester' is willing to help, that'd be great... I suppose minute by minute DOW historic data would enable proper stop and exit strategy to be set. Perhaps there is a time element required, eg the low must occur by midday or such like. I'll keep digging into it anyway!

Cheers,
EGO2
 
kriesau said:
U.S. IN TECHNICAL DEFAULT

....Another odd facet of this story is the deafening silence from the financial press (and I use that term loosely) regarding this matter. Leaving aside the issue of a technical default, one wonders why questions aren’t being asked about the rate of debt accumulation and whether it’s sustainable. QUOTE]

Yes Kriesau, but GOLD has noticed this false accounting and that is why it will go over $1,000. The BEAR will strike this year and the Dollar is doomed.
 
Sounds good SP! Techs don't look good just for the matter of season, but, just for the record, i'm selling this market at every chance. Got my fingers burnt on Friday, though (20 points) on NQ.

I'm doubling in.

Never add to a losing position?

Marketology.............it's all you need!
 
Bears point to the lessons of history

"Bears point to the lessons of history

Research by Abhijit Chakrabortti of JPMorgan on stock market corrections (where the S&P 500 falls by at least 10 per cent) provides more gloomy reading. He believes a “momentous” market correction is on its way, and that earnings disappointments provide the final necessary catalyst.

On his reading, another catalyst is already in place. Of the last 10 corrections, seven occurred when interest rates were rising, or when the Fed had just finished tightening.

Historically the market declines badly at the end of a Fed tightening cycle. And almost everyone expects the Fed to stop tightening sometime this year."

http://news.ft.com/cms/s/72050bd2-8f76-11da-b430-0000779e2340.html
 
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