CLASHES OF TWO CULTURES. TECHNICIANS VS. FUNDAMENTALS

In other words I can say speculators versus investors. Both schools believe their own rules and totally ignore the other school ideas. I would say I am more fundamental, but sometimes I use technical analysis too and I have serious concerns about the daytrading and scalping because in this trading strategy only the bookmaker/your broker makes significant size of money.

Why am I not technician? I have some arguments below and I hope this list help you understand better my approach:

1. Show me any billionaire in this business who is solely technician. All the great legendary investors are more fundamentals like Soros, Buffett, Paul Johnson, Peter Lynch, Jesse Livermore. 
2. Before the computerisation age of ’70s there were many thousands of profitable traders and they used only their pencil and a piece of paper.
3. The worst technicians are the daytraders and scalpers. They pay a huge amount of money for commission and as the old rule says „Nobody can serve two masters” You want to pay high commission or you want to make nice performance? Both doesn’t work at the same time.
4. The fast get in get out technician approach says we can predict the future, but it is a crap. Nobody knows what holds the future, we all are just guessing. Financial markets are far more complex than we could imagine. 
5. I met with thousands of technical traders and what I saw they are fully convinced by their system and if it goes wrong they start to blame the market not the system. 
6. The short term speculation, the basic part of technicians couldn’t work. It is impossible to forecast the short term market fluctuations.
7. Investing not a science so I guess the computer doesn’t help at all in this process. 
8. Long-term investors must be more philosophers rather than technicians.

All in all the Wall Street is only a gambling area for many traders, as they use enormous size of computers, different algorithms. But it is still just a financial gambling. For most technicians the stock market is not far from Las Vegas.

The BFM Assets Team.

LET’S HEAR SOME BUBBLE TALK

After all that US indices are in negative territory YTD. Most analysts are insane and still talking about some kinds of bubbles. I have seen some bubbles in my carrier, but it doesn’t look like a bubble at all. Within few days we close the Q1 2014 and I am sure that all indices will finish this period with losses, no gain so far at all on YTD. The market in March doesn’t move at all. In terms of SP500 the range is pretty broad this year 1840-1880.

Yesterday during the Europaen session and very beginning of US session everybody went to the candy shop and just buying and buying, but later in the US session the stocks started the fall like flies again. The US opening session doesn’t like the bulls, the gains soon evaporated.

- SP500 1,852.56, -13.06, -0.70%
- Nasdaq 4,173.58, -60.69, -1.43%

The Nasdaq -1.43% finished the day 60.69 points. The tech-heavy index turned negative for the year and is now underperforming the benchmark S&P 500.

The interesting that some arbitrage occurs now, the US market leads by Nasdaq are on the ground and Europeans are excluding FTSE performing well and tonight the Nikkei made a nice rally too. In bigger perspective seems this year won’t be the best for US markets but might be much better for Europeans.

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The BFM Assets Team.

GO-GO YEAR OR STOP & GO YEAR 2014?

We are the anniversary of five years bull market. Fiesta. It means anything? Really not, it only means if we look at the rear mirror we have seen nice performances year by year. All five years were go-go years, meaning with smaller or bigger corrections the market came up steadily and closed in December on higher price than in January. That was the past. Look at now into the future and forget the rare mirror approach. 

There are many arguments why the market shows lower strength in Q1 2014 than was for instance last year. The market is not performing well in recently. Doing up and down movements with high volatility. So in our view we are expecting stop & go year which means close to zero performance on major US indices.



I wouldn’t say the market is pricey, I only say fair pricey and at this level the downside is getting more risky. The SP500 is currently trading at 16.7 times forward earnings estimates. In other words, investors are ready to pay 16.70$ for every dollar of corporate profit. That’s more expensive than the average price over the past century. In the .com bubble in 1999, at the end of bull market, the S&P 500 traded at an expensive 27 times forward earnings. So I wouldn’t say it is a bubble, just note it is in the middle, not cheap and not terrible expensive.

We put bigger stake on European markets because they have 10-20% discount on P/E ratio and the emerging markets has at least 30% discount comparing the Wall Street. We are bargain hunters and don’t like to see above 20 P/L ratios and now that is the amount in US. We do prefer good bargain and undervalued markets which now seems to us the Europeans and Brasil or Turkish markets. There are many good set up points now around us.

The BFM Assets Team.

STOCKS DROP LIKE FLIES

On Monday it was a great sell off in all sectors again. The leading sectors are performing horrible and some defensive are doing better. The rotation just got started, which is not a good sign. The big picture doesn’t look good. The Nasdaq which usually needs to be the flagship did the worst performance yesterday with -1,20%. Biotech and internet stocks were the biggest losers. Out of the last 10 days the Nasdaq dropped 6 days. It is not a bullish market anymore.

• Dow16,277 -26 0.16% 
• Nasdaq 4,226 -51 1.19% 
• S&P 500 1,857 -10 0.51%

Last Friday US markets made a bearish reversal day as prices opened higher and made a new high, then reversed to close lower. That was only a bull trap. Finally, it made a double top pattern which makes me Hmmmmm... Normally a day like that has some follow-through on the sell side and it happened yesterday. The outlook isn’t rosy.

The huge intraday volatility has occurred in the last couple of weeks, which means the market is pretty nervous, there is great fight between the bulls and bears. Plus the yo-yo up and down movements proves clearly the long side momentum has weakened pretty much in 2014. This year it is impossible to make more than 10% yield on SP500.

Now our expectation is that we will continue to the downside and anticipating some larger correction down to 1,700 territory.

The BFM Assets Team.

WHO ARE YOU? FOX OR HEDGEHOG?

The fox and the hedgehog is an ancient fable. Originally by Aesop was fox and cat, but in the anglo saxon’s heritage is more common as the fox and the hedgehog. The story is that how many tricks they have if the hunter comes with their dogs. The fox is so proud of the its many tricks and the hedgehog has only one simple trick. Finally, the hunter and the dogs appear and only the hedgehog survive with his simple trick and the fox dies because he is not able to use any of his tricks. The moral that in time of danger one trick proves more efficient than many options. The fox knows many things the hedgehog only knows one great thing and beats the fox.

In the investment business there are many super intelligent, well skilled, Harvard Business School educated doctors and MBA fund managers. They have thousands of skills with brilliant ideas how the market works, they understand the charts, the inflation waves, unemployment cycles, etc. They know everything. They are the fox. And, there are the hedgehogs like Warren Buffett, John Bogel, Martin Zweig, Peter Lynch, Jesse Livermore, etc. They only know one thing, but perfectly. You have to have a position in trend and hold it forever. They are the hedgehogs.

I am absolutely sure about they will survive and foxes won’t. Why? Because their system is simple and one dimensional and understand the infinity of market’s structure.

I am much less intelligent than any great guys at Morgan Stanley or Deutsche Bank, they know far more than I could ever imagine. They have huge analysis department, huge marketing budget and department and many wiles. But, and here comes the big but I know one thing - “OWN THE MARKET IN THE TREND”. I am sure about only one thing as the great heroes. Namely the good trader’s best friend is the time and if occurs the trend don’t trade both side of the market. If you want to be a hedgehog and beat the market in each year, you have to understand the simplicity the market and don’t create super complicated trading systems because it won’t work. There is no doubt.

Be hedgehog and you will win. The poor fox is the yesterday and the hedgehog is the tomorrow.

The BFM Assets Team.

STUPIDITY OF THE MASS

We are human being with hundreds of weaknesses. We are fully irrational, but we love to believe in the opposite, but most of the decisions in our life we make emotionally. That is the harsh reality. We are not rational at all. Think about when you choose a party at the election or a soccer team. Doesn’t matter how they perform we love them and get stuck at them in irrational ways.

In our investment decisions probably we are worse. If we deal with money our greediness and fearful feelings dominate our decisions big time. Look at this cartoon below, it is familiar isn’t it? How many times we sold the bottom and bought the top. But the rule is well known by everyone Buy low, sell high – but we do always the opposite. Why? It is the cause of our emotions, which drive us.

We are fully emotional individually, but if we are in the mass we are acting like a total idiot. This is the best cartoon ever made about the stupidity of the crowd. This is my favourite carton at all.

The first time was printed in 1989 in Baltimore Sun by Kevin Kallaugher. In one report he said „It was so funny because it was so true.”

This picture describes better the psychological factor of trading than thousand words. Most of the guys only follow the mass, the gossips and tips. Shows precisely how one sentiment runs through the market. We tend to overreact the good and bad news in the market too.

This cartoon made 25 years ago, which confirms again the great rules of the market never change as Jesse Livermore said once "There is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again."

So buy the low and sell the high that’s it. Sounds easy, but hard to do that.

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The BFM Assets Team.

AROUND SIX MONTHS!

That was the only thing what market heard yesterday from Yellen’s speech. Which means probably start to increase the interest rate sooner than earlier had been expected by analysts. Not in 2100 just in 2050. Ho-ho-ho. Market’s answer was selling on that FED’s update.

On this Yellen’s speech the market couldn’t make the third day rally in row and finally close in negative territory. Tonight Asia turned into red too. The risk off mood stopped for a while maybe for one or two days. This is a now the new fear not the Russian invasion on the market. The market couldn’t exist without fear at all investors are always looking for new scary things and news. The up and down movement is continuing further. And the volatility stays with us for few months.

The BFM Assets Team.

SMART MONEY & DUMP MONEY

There is a great fight always on the market between smart and dump money. There is a negative correlation, if the smart money buys, the dump money sells and vice-versa. The smart money means corporate insiders, not brokers, and dump money means the small investor, an average rookie or looser from Wall Street.

What usually does the smart money? Buy low and sell high.

And what dump money does? Buy high and sell low.

Always in bad timing. Close their positions at the lowest point and open positions at highest point. It sounds crazy and you might think it is easy not to do that, but believe me it is not so easy. I have done that hundreds of times when I was rookie. They think they can predict the market and have a perfect timing, but it is absolutely not true.

They miss totally the big rally and just jump in the stage of „Greed” and holding in the whole period of falling and cover with a brutal loss the position at the point of „Despair” usually at the lowest points.

All the dump money movements could be nice contrarian indicator. We have to do the opposite what they do, watch and study when they get in and get out from the market. One fascinating thing now that the vast majority of business insiders are pretty bearish on their own shares. It means anything or not? We will see within few weeks.

The BFM Assets Team.

10 RULES I LEARNED FROM JOHN TEMPLETON

Sir John Templeton was the funder of Templeton Growth Fund and one of the greatest investor and trader in the 20th century. He was the friend and mentor of Jim Rogers. He was always very concerned about the technical analysis and used to be a real fundamental guru and great stock picker. He always had concerned about the herd movements and tried to ignore those traps. He used to be a real contrarian and tried to buy when the pessimism was high and everybody sold. Here is one example about his trading approach. At the World War II, in 1945 he borrowed 10,000$ and bought 140 stocks under 1$ in the Wall Street. Finally, he made 40,000$ profit and lost only on four of them. He did it when the sentiment was fully bearish in the NYSE.

He lived a very humbled life like Warren Buffett he drove his own car, never flight on business class or private jet and he donated some project as a philanthropist with more than 1 billion dollar. He was a great poker player and he loved to travel, after the college he travelled around the world. He only died one and a half year ago in November 2012.

Here are below I collected 10 great rules which I learned from him and really do guide me in the trading:

1. Buy the pessimism. Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.
2. Be contrarian. If you want to have a better performance than the crowd, you must do things differently from the crowd.
3. You have to have a bargain-hunting mentality. We have to always find the cheap stocks and forget the popular and expensive ones. 
4. Broad social and political awareness. Read and think a lot about the major mainstream social trends and try to understand why the mass is pessimistic or optimistic. 
5. Flexibility. Don’t hold your position if your are losing on it. Close that and open in the opposite direction. Never argue with the price. 
6. Patience. Patience is the best friend of a good trade it helps you don’t jump too early in positions. 
7. Simplicity. Your system needs to be simple and primitive. Complexity breath confusion. 
8. Take always advantages of the crisis events. Like it happened in the past Black Monday 1987 Crash, United Airlines LBO Failure (1989), Persian Gulf War (1990), Tequila Crisis (1994), Asian Financial Crisis (1997-98), September 11, Financial Crisis 2008-2009 
9. Diversify your investments. Don’t buy only US stocks or German Bunds or whatever. Allocate the risk in different assets and in different countries. 
10. Invest into long term. He said before this century is over, the Dow Jones Industrial Average will probably be over one million versus around 10,000 now. So for the long-term, the outlook is tremendously bullish if you buy stocks blindly to keep for a century.

The BFM Assets Team.

S&P500 FALLEN BY MORE THAN 1% FIFTH TIME...

… in 2014. Which is not a disaster because the average amount is seven by the middle of March, but it is not a bullish sentiment sign neither. Honestly it means to me the 2013 bullish momentum is not existing further in the first three months of 2014. Just take a close look at the 2014 S&P500 chart. Is it a bullish chart? I doubt that. I would say this is a widely ranging volatile market. The pattern looks different than it was in 2013 when the upside strength was obvious.

The 1% or bigger daily drop is a significant rule of thumb. Between 1990 and 2012 there were on average 32 day per year with a 1% or bigger drop, so far in 2014 we have seen five. In the whole 2013 year the market had only 17 1% or bigger drop, and massively underperform the average 32.

I see two conclusions from these data:

• First the volatility has increased and much higher than it was in 2013 and we are expecting more and more. The market is very nervous and some key fundamental issues are increasing the volatility like emerging market headaches, riots in emerging markets all around the world, which means political instability and finally the interest rate raise by central banks is peripheries. 
• Second the general fear about the inflation in US and possible interest rate increase by FED in 2014. For this year we need stronger nerves to make money and forget the fascinating easy trading market like was the last year.

The BFM Assets Team.

MASSACRE

As we anticipated a few days ago the correction will be more severe than we have seen in 2013 any of it. We can imagine a double digit correction easily in SP500, which means 1,700 territory. This kind of sell off period could take few weeks. The recovery won’t be fast and easy. The pendulum now is on the sell side. But the pessimism is not yet major sentiment between the investors. We are able to find easily many articles in the mainstream media about the SP500 will go jump back again to 2,000 or 2,100. When the vast majority of traders will be pessimistic at that point will come the recovery. But the sentiment changes slowly in many cases it takes weeks. Until that time the decline is going to be with us.

Just yesterday the market made a brutal massacre, Dow dived with triple digit and don’t forget the SP500 closed below 1,850 which is not a good sign. Today might come some slight bounce back. But that is only a dead cat rebounce effect only.

• Dow 16,109 -231 -1.41% 
• Nasdaq 4,260 -63 -1.46% 
• S&P 500 1,846 -22 -1.19% 

Take a look at the DJIA H1 chart, it doesn’t show any upside strength. Massive fall and some consolidation during the night and this morning without any significant recovering:

The BFM Assets Team.

DOES PRACTICE MAKE YOU BETTER TRADER?

I am not sure about that. I know different kind of losers and winners. Some winners spent only 1-2 years with trading experiance and making much more money than other who is in this business for decades. I don’t say the practice and experiment is not important, I just want to emphasise far not the most important part being profitable trader.

We have to have some bad positions to learn from our mistakes, but smart enough people learn faster from their mistakes than others. I have met some traders who spent already more than a decade in this business and year by year make the same mistakes and repeat and repeat again and again.

All of you heard about 10.000 hour rule by Malcolm Gladwell, which suggest being really good and reach the top you should practice for 10.000 hours. Sounds long, doesn’t? If we count with 5 trading days per week and 10 hours trading day you have practice for more than 4 years. I doubt that.

If you learn fast enough from your mistakes and learn how not to do stupid things within 3-6 months you can be a quite a profitable trader. What is the rule and secret? Don’t hope just cut the loss and let the win ride. Most of the time we make wrong decisions – just look at Dennis Gratman’s statistics, he is 75% of time wrong but he is profitable, because he covers the losing position if it is against him. That’s it. And how the market sends you a massage your are wrong. YOU ARE LOSING MONEY. It’s that simple.

So don’t believe by the longer time you are going to be a better trader, it is not the fact. Learn fast and change your attitude and learn always from your mistakes.

New studies prove that you don’t need 10.000 hours practicing. They studied former chess players and musicians and pointed out that there is huge variation in how long it took to get to the level of a chess master. One player for example, "took 26 years of serious involvement in chess to reach a master level, while another player took less than 2 years to reach this level," they write. There are many other factors not only the practicing.

Take a look at our Swiss Managed Account Fund and begin to invest with us!

The BFM Assets Team.

THE CORRECTION JUST GOT STARTED

Across the board all major indices are diving, no exception. This is not a surprise, if you followed closely the behavior of the market. I have some arguments below why we have bad weeks forward.

1. The Nasdaq as a leading technology index didn’t perform well in the last weeks
2. The last Tuesday rally upon the Russian troops withdrawal was only a bullish trap
3. Last Friday tried the market goes up again to new highs but within an our the market turned around and since that time just has been falling – that was an another bullish trap.
4. The whole year the SP500 lost the momentum and couldn’t gain in the same pace as last year
5. The market went too much up and spent the whole 2013 without a double digit correction.
6. In the last two month the gold gained much – which showed some Risk Off mood so far.
7. On the emerging markets there were severe interest rates increases which slows down the whole world economy

All in all I am expecting a very bearish March and April in middle term we won’t see new highs. We have to experience the more than 10% drop very shortly.

The BFm Assets Team.

FLAT LIKE A PANCAKE

If you just slept in the last 6 days you haven’t lost anything. These days are about the fight between optimism and pessimism in other words bulls versus bears. Recently I don’t have a faintest idea which and when will win.

Take a look at this S&P500 H1 chart.

What a ranging! Since last Tuesday when the market made a nice rally the index stays in a pretty narrow channel between 1,868 and 1,887. The market and investors are just hesitating which way to go. Some days need to come for the breakout and that breakout must be stormy and within minutes we are going to see clear massage about the direction. This up and down pattern is only good for traps. I have some friends who has lost significant money in this ranging mood in the last couple of days. They tried to catch the long and than the short side and vice versa. These days are black and red casino so until I have a clear indication about the breakout I am just waiting.

Yesterday data:

• Dow 16,419 -34 -0.20% 
• Nasdaq 4,334 -2- 0.05% 
• S&P 500 1,877 -1 -0.06%

The BFM Assets Team.

DO YOU REALLY NEED TO USE ANY INDICATOR?

My short answer might be no. But here below my longer answer.

As everybody I did start the trading with many indicators too. My hypothesis was that if I use properly my indicators and my whole system, I could be solvent and profitable. After a while - it took me four years - I abandoned all of my indicators. Why? Because simply they didn't deliver the numbers at all. In most cases, the same indicators with the same settings delivered different signals if I used different time frames. The H4 chart argued with the H1 chart or with the daily chart. It basically gave me huge frustration which I know understand well was a Cognitive Dissonance in my mind (about CD a bit lower)

So the signals argued with each other's and I was absolutely confused. I started to analyse the indicators because I could not believe no existing the holy grail, the accomplished indicator. I have a mathematician friend who prepared to me many statistics in principle about the most popular indicators, like MACD, RSI, Bollinger, CCI, MA's...etc. And you know what happened? He demonstrated that any of the indicators are not able to do better performance than if flip the coin or throw the dice. Anyone them couldn't do more than 50% hit rate in long term. If I would say in one sentence what was the lesson, I would say doesn't matter when and in which direction you open your position, sell or buy. What only matters? Only the money management - Cut the loss immediately and confess to yourself you made a wrong decision. On the other hand let the win ride. It's that simple. All in all I am totally against all the indicators, they are only lagging, they don't add any more information about the market. I am sure many of you still believe that once finding the holy grail or find the magic indicator. I don't know too many things about the market, but what I know for 100% sure is that the perfect indicator never existed and never will.

We can’t predict the future. The market is a dynamic random system. So quite often we need to random as well. I have a favourite example. You know what do if two statisticians were to lose each other in a forest, the first thing they would do is get drunk. That way, they would walk more or less randomly, which would give them the best chance of finding each other. Such considerations belong to the statistical theory of “random walk” or “drunkard’s walk,” in which the future depends only on the present and not the past, which means indicators doesn’t hold anything about the future.

The mental side of traders and the Cognitive Dissonance

I had a friend who once told me. „When I decided I am going sit on the whole day and just trading and stay focused and doing nothing else, basically those days were my worst days in terms of profitability. When I left the market and let it work itself and didn't care about the running position I made nice profits."

I started to think about his story because plenty of times I had the same experiment. Why happens this? I guess the reason is when he was at the computer in the whole day he was much more scared and he cut the winning position earlier than needed to be. Why he was so scared? Because it is part of our mental side of traders. We are human beings with many mental weaknesses. The Psychology call this Cognitive Dissonance. When simultaneously holding two or more conflicting cognitions: ideas, beliefs, values or emotional reactions. As traders we feel very often this "disequilibrium": frustration, hunger, dread, guilt, anger. A key assumption the traders want their expectations to meet reality, creating a sense of equilibrium so they want to make profit, but if not happens or simply the markets goes against us we started to be anger, frustrated...etc.

Try to ignore those bad feelings and skip them all as much as possible. I really know it is hard, but try to close out all the mental, emotional actions out of your trading. LESS EMOTION MORE PROFIT. How can we reduce our Cognitive Dissonance? Easily. If you are disciplined and sitting in a losing position take the loss and don't hope anymore. In this case, you will reduce the mental stress of the trading significantly. In bigger picture if you really want to be profitable trader the first step you have to do in this long way that ACCEPTTHE FACT THAT YOU CAN LOSE. YOU CAN NOT ALWAYS WIN. If you understand that you are going to be more patience and much more profitable. If you don't hold for too long time your losing positions you don't need to wasting your energy anymore on losing positions. You are going to have more energy to focus on the winning profitable positions and your frustration will disappear.

The BFM Assets Team.

WARS AND THE STOCK MARKET

Let’s take a closer look how affect wars on stock markets after this week turbulence of Ukrainan invasion by Russians. Is there any kind of correlation between those events?

Yes, there is. If take a retrospective adventure back 200 years – with the chart below, we find that during this period there is one common conclusion. At the beginning of the war the stock prices diving first, but quite soon recovers and goes to new highs again. So the proper approach is to buy the first days or weeks of all war times. As Baron Rothschild reportedly said, "The time to buy is when there's blood in the streets." He made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon. The interpretation is the worse things seem in the market, the better the opportunities are for profit. We need to be fully contrarian and act against the mass in those days if we want to make money.

The big picture:

Below we collected some charts about the war and Dow Jones correlations. Those prove that the war is a great investment opportunity. It sounds horrible and morbid that the capital markets create profit from blood and pain, but that is the harsh reality. And, right after the wars the prosperity and booms got started always with great performances.

Take World War I. as an example. The stock market closed for 4 months and at reopening the Dow Jones was down 30 percent, but in 1915 it was back up to 80 percent.

At Korean War after 2 weeks dip the market went up new highs again and recovered rapidly.

In the Golf War right after the US troops invaded Kuwait the market jumped higher and made a great bullish rally.

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GOOD NEWS, BAD NEWS, NO NEWS. MARKET IS GOING UP AND UP.

Wednesday disappointing economic data couldn’t push lower the markets. US indices traded in a narrow range after the severe rally on Tuesday; markets were taking just a pause yesterday. There is not any event which can hold the bulls. Yesterday all indices doing nothing, but that is a quite a good omen after a great Tuesday rally. The Dow is lagging a bit compared with SP500 or Nasdaq, so it is a good bargain to buy now, there is a nice arbitrage deal.

• Dow 16,360 -36, -0.22% 
• Nasdaq 4,358 +6, +0.14% 
• S&P 500 1,874 +0, +0.00% 

If the market is doing anything means more than doing something. Yesterday was that kind of typical template of that. Let’s focus on Friday data which will give us clear indication about the bullishness pace. We are going to have Non-Farm Employment, Trade Balance and Unemployment Rate. Yes, only the pace is the question because that is pretty sure the SP500 will hit the 1,900, the only question is when.

TheBFM Assets Team.

 

FAST RECOVERY

US indices finished the yesterday with the best gains in 2014. SP500 closed at a record high for the 49th time in the past 12 months. And, now we are only 27 points from Goldman’s forecasted year end target of 1,900.

The week started with a great diving, but hasn’t been violated any bullish trend line, so the market is still in uptrend momentum. No question. Yesterday the market erased the whole Monday’s sell off and recovered easily, which shows the strength of the bulls.

• Dow16,396 +228 1.41% 
• Nasdaq 4,352 +75 1.75% 
• S&P 500 1,874 +28 1.53% 

There is a risk appetite sentiment again between the investors. Okay, the volume in Dow was lower with 20-30% than normally, but made the best performing day since 18th December 2013. In Dow all 30 components closed higher, which is a good marker of deep bullish sentiment. Nasdaq closed at the highest level since 2000.

What is it, if it is not a bullish market, don’t believe for the sceptical and crying babies. There is always someone who is complaining about “the market is too expensive” That is a bla-bla. If you are a trend follower, just one simple thing you have to do: BUY and HOLD. It’s that simple. Seems all selloffs are just temporary and give us great opportunities to buy.

The BFM Assets Team.

BLACK SWAN EVENT

We call Black Swan Event in the market, when happens something unpredictable and abrupt. The totally non rational event which was not calculated at all by no one. It is impossible to predict this event. It creates very strong and volatile move on the markets. This is the magic of randomness of the market. This called a Black Swan problem and you should read the best seller book about this theory by Nicholas Taleb.

He identifies Black Swan events like this: 

• The event is a surprise for everybody 
• The event has a major effect on the markets.

Guess what Black Swan Event was this weekend? Right. The Russian military invasion of Ukraine. Nobody expected this last week. All markets closed Friday the week with really nice gain and there was optimism and on the weekend after the Ukrainian news all markets dropped brutally and the pessimism now the sentiment. That was a free falling Monday. The market opened with gap and the whole day was diving further without almost any correction.

• Dow 16,168, -154, -0.94% 
• Nasdaq 4,277, -31, -0.72% 
• S&P 500 1,846, -13, -0.72% 

The US indices are quite okay, but Nikkei and the European indices were in free fall mood. What is gonna happen now? In our view the market was bullish last week, and still bullish today and will be tomorrow. On the weekend only the sentiment changed to due to fear of war in Ukraine, but the trend is still long so this choppy Monday was a good dip buy opportunity for us.

On the contrary all commodities made great rally on oil, gold, wheat, soybean, corn ... etc. WTI oil jumped from 102 to 105 within a day.

The BFM Assets Team.

2014 FEBRUARY PERFORMANCE

We hit again an eminent profitable month. For our clients we made only in February between 3,17% and 13,38%.

The SP500 in that month only made 4,31% after the bad January.

• On yearly basis - YTD - we have done between 5,56% and 25,65%. 
• On YTD the S&P500 made only 0,60%.

Our performance: http://www.bfmassets.com/performance

In each quarter in the last few years we beat the market and beat the alpha. How could we do this fascinating performance so far in 2014? Because we bet on commodities like oil, gold, coffee..etc. Because we saw some bullish patterns in last December and as we are trendfollowers we sit on the positions and still holding so far.

If you want to be our investor and want to take part from our success, you can open an account here at our Swiss Managed Account Service: http://www.bfmassets.com/managed-accounts

The BFM Assets Team.