Macros really effect on markets or not?

For many many years I have been in favour of André Kostolany’s quote that „The relation between stock exchange and economy is like a man walking his dog. The man walks slowly, the dog runs back and forth.” But I have to revise my thinking, because I have found some remarkable statistics about why it is not true always. Sometimes it is, but plenty of times not at all.

First that chart below looks confusing. Just look at that, there’s no correlation at all as my previous hypothesis said. It appears that slightly negative the correlation between the fundamentals and market movements.

This chart proves me again and again the markets are inefficients and driven by the mass not by the micro or macro facts and data. We are all as speculators not rational human beings at all. We are totally irrationals. We ignore the facts in most cases. We are making decisions emotionally. But as Warren Buffet says „…Returns decrease as emotion increases…”

And what is the lesson for the future from this fact? As a speculator we should always hold economic news at a bit distance when considering our investments. That is why I never care about the news itself. I don’t like to interpretate right after issued the news because in this case it would be only a red-black casino. But what I am really interested that how the market reacts upon that news. All in all I don’t care about mine of any others interpretation, I only care about the market’s interpretation.

Forget all the news fellows!!!

Nasdaq new historical high, Dow best day in 8 weeks ... what is that optimism?

U.S. indexes climbed again on Monday. The SP500 has made its longest win streak since July and Nasdaq hit a new historical high. The Dow rose with +0,9% to 15.063, which is the best performance in the last eight weeks. The SP500 rose by +1,0% climbed to 1.671. The Nasdaq Composite gained by +1,26% rose to 3.706.

The strange thing is the volume is still solid, volumes are pretty low. In a broader picture SP500 is in a real apathy, no volume at all. The same volume was at 1998. Since the Lehman's insolvency the volume has been tumbled a lot constantly. That is a good marker that the big size of investors are still off-side. So there is a power on the buying side. Most of the investors still waiting for jump in or not. Their concern about the FED tapering helps a lot for the bullish sentiment. This month started much better after the losing August - SP500 lost 3,1% in that month. By now, many Wall Street pros are back at their desks after the summer break, but my bet is the low volume and high volatility is likely to continue.

In terms of technical side, the Dow is still lagging behind the Nasdaq so we are expecting big upward movements in the following couple of days. Our short term target is at 15.440, we might see this level untill this Friday. That means 350points profit from the current levels.

What do you think?

If you want to check at real time our profitable trading. Contact us at and monitorize it for free during 2 weeks. http://blindfoldedmonkey.webs.com/test-us

EURUSD DAILY STRATEGY

Direction: long

Target: TP1 – 1,3240

Protection: SL – 1,3140

Our setup: 1,3170

Background: The cross was strengthening a lot in last week. Finally made a double top on Friday so the general trend seems further short but today might be a correction day, so we bought this morning the pair and waiting for some upside movement.

DO YOU WANT EARN OVER 30% PER YEAR?

Invest into our fully regulated swiss fund: http://blindfoldedmonkey.webs.com/our-fund

Lord Keynes as a speculator

"The market can stay irrational longer than you can stay solvent.”
We know him as a revolutionary economist, but many of you don’t know that John Maynard Keynes was a great speculator. Below I share with you couple of things I have learned about investing from Lord Keynes.

He made all of his money from speculation. When he published his remarkable book, The Economic Consequences of Peace, he sent a letter to his publisher asking for an advanced cheque for £1,500 and with this money he was able to continue the trading. Why? Because as many of us he lost all his money first in the market. He had learned the valuable and painful lesson, markets can act perversely in the short-term. His quote later famously commented - "The market can stay irrational longer than you can stay solvent.”This is an uncommonly brilliant statement about the investment and speculation. Because he was a great longterm analyst, but thanks to the short random moves of the market he was burned out few times. Dennis Gartman, the great investor says corollary that „The market can stay far irrational than you and I can stay solvent”. Which is true and all of us have to agree with that. That is the harsh reality of the market.
Keynes’s statement that themarkets are irrational means the markets are not efficient. You could be the smartest analyst with myriads of great theories and maybe you are going to be right, but before that the market move in your favour, you had stopped out. This is the part of this business. Keynes was totally right. It is a really great case of point. All of us remember the irrationality periods of the market, like dot.com bubble, tulip bubble, Gold bubble…etc. I shorted the Nasdaq in 2000 and 2009 too. I needed to learn the lesson over and over again, the markets are irrationals and could go farer than any of us dreamed of that.
The next thing what I learned from him is. „… if the market change I have to change too…”. Each year in the 30s he made presentations at his university in UK about the markets and mostly he talked about only one stock. Explained fundamentally, technically why it needed to buy. He told everybody to buy that stock. Next year at the same auditorium he came back and recommended the same stock to sell it. One guy stood up and asked him "How can you do that Mr. Keynes? Last year you recommended to buy and this year you recommend not just sell it, but sell it short?” And Keynes made a brilliant statement when he said „Sir, the facts have changed. When the facts change I change and what do you do Sir?”
Most of us don’t understand that if the facts change we normally don’t change. The price is changing not going up anymore. THE PRICE, this is the five letter word, this is the most important fact of them all. All informations are in theprice. We only need to look at the price and read as an open book.
Those are my lessons from Maynard Keynes, it is very subjective, but I do believe since I am following those rules I am better and more disciplined trader.
Have a good trade for the next week

USDCAD DAILY STRATEGY

Direction: short

Target: TP1 – 1,0515

Protection: SL – 1,0545

Our setup: 1,0530

Background: The pair after a long bull run int he last 4 days only was able to make consolidation period. Could make any new highs. So in our humble opinion the the cross could come off a bit int he european session today. Our target is not far buti t seems a quick and easy target for the morning.

DO YOU WANT EARN OVER 30% PER YEAR?

Invest into our fully regulated swiss fund: http://blindfoldedmonkey.webs.com/our-fund

GBPUSD DAILY STRATEGY

Direction: short

Target: TP1 – 1,5470

Protection: SL – 1,5575

Our setup: 1,5550

 Background: The Cable is still in up and down mood and doing a big range. For today we see some options for short side testing back first the 1,5530 and the key support level at 1,5470. Yesterday afternoon in US session we had a great marabuzu candle and the cross was not able to close above so far that candle. The recovery seems to us weak on the long side.

 DO YOU WANT EARN OVER 30% PER YEAR?

Invest into our fully regulated swiss fund: http://blindfoldedmonkey.webs.com/our-fund

CNBC is a good marker of Bull Market?

The CNBC published last month the rate how many people are watching them. You should have to know that normal investors and new runners love to watch CNBC, they believe in that there is wisdom, and love to listen to the experts. I have a statement here, if more people involved in the markets, more people need to watch the CNBC that is the positive correlation.

Since 2008 we are in a brutal bull market. The biggest reason is the cheap money thanks to the central banks. But it is strange thatthe mass still doing nothing with stocks and as my experience says it is a good sign. Normally happens that in the bull markets the CNBC is loved by everybody, when the bubbles are growing the CNBC is getting to be more and more popular. CNBC experts, reporters and anchors act like rock stars they are the hero of millions. Everyone knows them.

This August CNBC touched very low ratings against that the SP500 gained more than 16% in the last year. The rating is in 20 years low. NY Post found that there is only 37k viewers (age 25-55) on daily base.

The flagship magazines of CNBC - Fast Money, Mad Money and The Kudlow Report - are in all time low. That means the mass doesn't care about the market at all, not yet.

Ok, I know people get started to use Twitter and Internet, but this kind of huge backdrop means something. This low sentiment tells me the last period of turbulence, the parabolic movement of the market is still ahead of us

All in all the indexes are close to all-time highs and the confidence and TV ratings are low - in my interpretation is another sign this bull market could have a long way to go.

DO YOU WANT EARN OVER 30% PER YEAR?

Invest into our fully regulated swiss fund: http://blindfoldedmonkey.webs.com/our-fund