DOW UNDER 17,000 AGAIN

Which is not a disaster, just a slight consolidation after the last week stormy rally. DJIA is just got back below the 17,000 for the first time after the great bullish momentum. This modest drop doesn’t mean anything. The European indices dropped more and show more weakness than the Wall Street. The Euro Stoxx 600 fell to the lowest level since end of May and extending a three-day loss to 2.6%. Yesterday started the earning season in US and Alcoa, the largest aluminium producer kicked off earnings season with its report after the market closure. Due to these earning reports, the market might be much choppier.

Stocks closed broadly lower:

• Dow ends below 17,000: -0.7%
• S&P500: -0,7%
• Nasdaq: -1,4%

On technical side the condition of the market is still the same. The DJIA is still bullish the uptrend so far has not been violated, so we only have to hold our long positions. At 16,930 there is a key support level and the next resistance level is at 17,060. Between this tight range nothing will happen. We are going to react if the index index leaves this territory in any direction.

The BFM Assets Team.

DOES LOW VOLUME INDICATE BEAR MARKET?

There is a common knowledge that the low volume means not enough investor on the buying side and lack of confidence in bulls so the market main trend is bearish and it needs to come down. In the last couple of years always heard the echo "lack of confidence", "prices are too high", "no volume, no bulls”, etc. But the fact is the Dow is over 17.000. So, what is wrong with this volume issues?

If you look at the chart below by Tabb Group, you can find there is a negative correlation in terms of volume and market decline. The top of the volume was in 2009, 12,3 billion share/day dropped to the recent level of 5,8 billion share/day. It means 200 million share/day more or less. That is bigger than 50% decline. Surprisingly the highest volume was at the financial crisis.

The one billion dollar question, why is the volume coming off? It seems to me couple of reasons:

• High frequency trading is falling since the top of 2009. Dropped that kind of volume by around 13%. 
• More money is being invested in index funds and less in the actively managed stock funds. The flagship and pioneer of this invention is the John Bogel’ Vanguaard 500 fund. 
• The investors are prefer the futures and options instead owning single stocks. While stock trading declined, the opposite has happened with equity futures and options. 5 times higher volume on futures now than it was in 2009. 
• Since the 2009 mortgage crisis the big banks reduced their speculative exposure. Due to the Dodd-Frank regulation that restricts banks from proprietary and speculative trading. 

All in all don’t take too seriously the volume indicator and honestly we have been never fearful about the concerns of volume because the market since 2009 was obvious for us just buy and never sell.

The BFM Assets Team.

EUROPEAN AND ASIAN OUTLOOK

Due to Friday closure of Wall Street and US benchmarks the futures stayed at the high territory without any significant moves. So, today we take a short look at Asian and European updates. In Europe stocks fell a bit after the biggest weekly rally since March. After the German industrial production data this morning which missed the expectations and spurred worries that Europe’s economic engine is losing steam. The losses came after data showed industrial production in Germany dropped 1,8%, marking the biggest monthly slide since April 2012. This morning all Europaen indices are slightly in a negative territory, but that is really a modest consolidation.

In a technical perspective the DAX still consolidating a narrow wide range of 10,000 and 9,900. We would be bullish again if the market will take the resistance level at 10,000 out.

• FTSE 100 6,852 -11 -0.16% 
• DAX 9,988 -27 -0.27% 
• CAC 40 4,452 -19 -0.42% 

The Asian markets details:

• Nikkei 225 15,379 -58 -0.38% 
• Hang Seng 23,541 -5 -0.02% 

Hong Kong stocks seesawed between small gains and losses Monday morning, without the U.S. markets indication. The Hang Seng Index 0,02% is absolutely flat.

Today it seems all indices pretty quiet and till US opening we don’t expect any volatility.

The BFM Assets Team.

DOW JONES IS JUST OVER 17,000! HOLY COW!

What an extraordinary day, as we expected the Dow crossed the line at 17,000 – new historical record. Maybe the 17,000 is just a number, but proves again and again the market is in a strong bullish momentum. SP500 hits new record as well and closed only 15points from the magical 2,000.

Yesterday I couldn’t being checking the whole day the market because I was travelling, but honestly I was super sure, without any doubt, that the employment data from US would push higher to record levels the US benchmark indices. When I turned on my computer at the closing bell, I just needed to basket the nice profit. How was I so sure? The reason is simple, for all kind of bad news the market doesn’t drop effectively, but for any good news the market’s reaction is a strong upward movement in the last couple of weeks and yesterday it happened the same once more. The investors obviously welcomed the strong employment data.

The market said for this great data, “Yabadabadu!” After the data release, the Dow jumped over 17,000 and then stayed comfortably above the 17,000 milestone. It finally was a nice green day:

• Dow 17,068 +92 +0.54% 
• Nasdaq 4,486 +28 +0.63% 
• S&P 500 1,985 +10 +0.53% 

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The BFM Assets Team.

SOME GREAT RULES TO BEAT THE 95%

Below there are four great rules which really do guide me in the couple of last year. Without them I would be in the loser majority of 95%. With these rules we can beat the market and alpha each year and make more than 40% profit consistantly on yearly basis.

We are not Wall Street guys, but we beat most of the traders in New York each year. We follow some basic rules like the followings:

• We never put our all money at one time. We are buying only small positions first and test how the market works. With this cautious system we do better than 95% of traders who start investing with the whole capital. Our highest exposure is never ever higher than 40%.
• We buy indices. They are much cheaper than stocks and not as volatile as stocks. We are not spending more than 0,2% on commissions per year. We are not able to make 10% per day, but we cannot lose 10% neither within a day. If you don’t have 4-6 hours per day to analyze your stocks, trade the indices.
• Just trade the flagship indexes like DJIA, SP500, Nasdaq, FTSE, DAX, NIKKEI. Forget the small markets, they are more pricey and they mostly follow the big indices.
• Keep cash always on your account to be ready for randomly occurred buying opportunity.

These four rules are so simple and easy to follow them but you are going to realize it helps you making better returns.

The BFM Assets Team.

THE MOST HATED RALLY IN THE HISTORY

Yes, true it is not a typing error. Every trader, fund manager and small investors are depressed in a huge bull rally since 2009. Nobody wants to believe this could happen and they are waiting for a huge correction maybe not each day, but each week. They are concerned about FED policy, the condition of economy, inflation, house market ... etc. But this is a bull market, no doubt. The DJIA is flirting with the 17,000 points, the S&P500 with the 2,000 level, we haven’t seen a double digit correction for a long time, Nasdaq, S&P500, DJIA are on historical record levels. The DJIA just did a breakout in 2013 after a 14 years consolidation.

Old runners from the floor who spent decades in the business and saw many up and down cycles say this hate is supremely similar to 1980’s when after a fifteen-year bear market no one wanted to believe is over. But it was and occurred one of the strongest rally until the .com bubble of 2000.

When is the end of this rally going to be? I don’t have a faintest idea. Nobody does. Cause the US market is fairly pricey, but not superpricey and rich and we still see huge possibilities in the long side bullish trend. Why? Since against all the bad news, the markets are steadily just gaining week by week, just take a close look only at the last week horrific US GDP numbers and what was Mr. Market reaction? GAINING FURTHER. That is the behaviour of a bull market.

The BFM Assets Team.

2014 Q2 SUMMARY

U.S. stocks ended June and the second quarter higher as well. During this quarter vast majority of experts, anchors and analysts had huge concerns about the market is in bubble. Maybe, but I doubt that. If it is really a bubble that doesn’t mean will burst any time soon, remember all the market exuberance periods, when the market does 2-5% gains within one day. But recently the market seems not in exuberance. The market is just steadily gaining. The SP500 hasn’t closed up/down by more than 1% in the last 50 sessions. So there is not any euphoria at all.

This market does not discount for any kind of negative macro news. Anything below any 10% drop - we had couples this year - in an index is not a correction just a noise and consolidation by definition. All in all the bullish uptrend is not violated yet so we are expecting more gain in US, European and some benchmark indices further in this recent year.

Summary of Q2:

• The SP500′s 4.7% quarterly advance is the strongest Q2 since 2009
• SP500 recorded the fifth consecutive month of gaining
• Nasdaq closed at its highest level since April 2000
• SP500 made a 1.9% monthly rise in June
• DJIA rose quarterly 2.2%
• Nasdaq gained nearly 5% in Q2

On YTD the picture is more or less the same as Q2 numbers. The market is bullish not as strong as was last year, but reasonably long and is in a strong upside momentum. All indices YTD turned higher after the brutal sell off in January when Nasdaq hit the 10% drop.

This week will be shorter week due to the July 4th holiday on Friday.

The BFM Assets Team.