Interesting Links

[Neil Stoloff]

Speaking of robots: http://www.computerworlduk.com/news/...ernment-paper/

"Algorithmic stock trading rapidly replacing humans, warns government paper

"Regulatory framework needs to be updated to keep pace with effects of technology"

UK report by The Foresight Panel, led by Dame Clara Furse, the former chief executive of the London Stock Exchange, found "'no direct evidence' that the computer trading in itself increased volatility,... but in specific circumstances it was possible for a series of events with 'undesired interactions and outcomes' to occur and cause massive damage."

[ilonaross]

http://www.nytimes.com/2011/09/18/bu...1&ref=business

[ilonaross]

Despite a large percentage move for the major indices last week, the tape leaves
much to be desired. While the Nasdaq and Nasdaq 100 climbed slightly above some
resistance levels last week, and a few select breakouts have succeeded, there
appears much more wrong than right with this tape:

First, the major indices lack any accumulation. Other than Friday's options
expiration -- which caused volume to surge -- and Thursday's higher volume
churning action on the Nasdaq, volume has been absent when the indices have
moved higher. This underscores the lack of demand for stocks from the big money
crowd. Moreover, the Russell 2000, NYSE Composite, Dow, and s and p 500 have
lagged considerably and created divergences that do not correlate well with a
market seeing high levels of money flows. Until this changes, caution is
warranted.

Second, leading stocks continue to form late-stage faulty bases. While
late-stage bases can work if the patterns are constructive, most of the leaders'
basing patterns have fundamental flaws such as wedging handles, low levels of
accumulations, or v-like structures. At a minimum, these stocks need more time
to correct these flaws and build proper bases.

Third, stocks that have attempted to breakout have acted rather sluggishly.
While a few names like ATHN and PSMT have broken out and advanced, larger liquid
leaders such as GMCR, MA, V, and PLCN have struggled when they have attempted to
breakout. In strong markets, liquid leaders will breakout and give a patient
investor little chance to buy them as they will advance rather quickly. The
sluggishness of these breakouts argues that -- at the very least -- the market
needs more time to base-build.

Fourth, the few stocks that are leading come from industry groups that are
rather defensive in nature, such as the auto-replacement part stocks, gold
miners, utilities, discount retailer and "dollar stores", medical stocks (which
tend to be of a more defensive posture), and large-cap consumer stapes like
Procter and Gamble and Colgate. When recession-proof defensive names are
leading the market, it does not bode well for a sustainable uptrend.

Fifth, stocks that are economic bellwethers have absolutely lagged this rally.
Names like Federal Express and Caterpillar have acted extremely weak and refuse
to rally with the broad market.

Sixth, emerging markets -- which have lead rallies the past few years -- refuse
to do so. The charts of Brazil, Hong Hong, mainland China, or the other Asian
emerging markets remain in horrid shape.

Seventh, the financial stocks still act highly distributive. While most of the
large banks have held their August lows, they cannot gain much traction and lack
any volume to the upside. While banks do not have to lead a rally, continued
deterioration in the technical patterns of these stocks does not correlate well
with a sustainable uptrend.



Despite the negative characteristics I described, it is always possible that the
market is in a "repair stage" similar to what we saw in the summer of 2010.

In 2010 (after a severe intermediate correction from May to July), the market
bottomed on July 1, followed-through, and had a similar rally to today's rally
with little power or leadership from growth stocks. Then, for the last three
weeks of August, the indices sold off aggressively, but did not undercut the
July 1 low. During those three weeks, the stocks that would provide leadership
for the fall rally began to tighten up and act constructively such as AMZN,
RVBD, CMG, SINA, and PLCN. The market staged a lasting follow-through on
September 1. Unlike the July follow-through, leaders broke out almost
immediately and began monster moves. The power from breakouts early in
September was the key ingredient that was missing from the July rally.

The recent rally has similar characteristics to the "flawed" July 2010 rally,
which ultimately set the stage for the "real" rally in September 2010. If that
is the case, we should watch closely for a wave of selling similar to August
2010, where the leadership tightens up, coils, and sets up to break out in a few
weeks.

Of course this is just one possibility and trying to predict where the market
goes or what course it will take is fool's gold. But, by examining the weight
of the evidence, I am left to conclude that the market's recent rally is
somewhat feeble, and not the "fat pitch" where the prudent speculator would want
to be aggressively long and expose large amounts of capital. THAT CAN CHANGE IN
A MOMENT'S NOTICE, but until powerful breakouts succeed (other than a few
exceptions), and quality liquid growth stocks break out of proper bases, the
prudent speculator should remain patient and be ready to seize this opportunity
when it occurs, whether it's next week, next month, or next year.

This email was sent by Edward Hornstein, 60 east 42nd street, suite 1144, ny,

[Pablo]

Despite a large percentage move for the major indices last week, the tape leaves
much to be desired. While the Nasdaq and Nasdaq 100 climbed slightly above some
resistance levels last week, and a few select breakouts have succeeded, there
appears much more wrong than right with this tape:

First, the major indices lack any accumulation. Other than Friday's options
expiration -- which caused volume to surge -- and Thursday's higher volume
..............................
This email was sent by Edward Hornstein, 60 east 42nd street, suite 1144, ny,

Interesting. I think we are in the firt scenario the author gives, I also remember 2010 and was kind of convinced it would break down, they came the QEII and the developments the Mr Hornstein relates as a consideration of what could be an alternative escenario.......... a rally resume mode.......... In early summer 2010 there were lot of indicator pointing to a posible doble deep as this 2011 summer, I consider this time is more clear will see contraction on GDP (yoy) one or more of these quarters ...... international developed economies talking ..........but just in case I´m too wrong and for the similar 2010 escenario is good to know that german Bundesbank has said today they envise a robust growth for the 3 quarter just about to end....... german economy is very open (Imports+Exports as % GDP are high, they are 2nd rank in export countries) and the guys in Bundesbank have good info or course.........

PD: I arrived here trough EB forum

[Adriano]

Quite impressive:
http://thingsappleisworthmorethan.tumblr.com/

[ilonaross]

http://www.huffingtonpost.co.uk/2011..._n_983156.html

Stay tuned.

[ilonaross]

I will have a full market update this weekend. However, I wanted to put out a
quick note to underscore two points.

First, and most important, is that high levels of cash and preserving capital
are key. In my past report, I discussed the characteristics that led me to
believe the market's rally off the August 8 lows was anything but a "fat pitch"
and lacked the power associated with a new uptrend. Since then, the market
indices have traded sideways, while institutions have rotated from sector to
sector distributing stocks en masse. It now looks plausible that the August 8
lows will be taken out and that another down leg in this bear phase is upon us.


While the mass media is now admitting this is a bear market, the market has
given us plenty of clues over the past few months that its tone was anything but
healthy. In fact, the tape is much worse than what the indices tell us- many
former leaders have fallen 50-75 percent while many financial and commodity
stocks are selling at levels not seen since the crash of 2008-09.

The bottom line is that we are in a bear phase for stocks, the market's trend is
down, and there continues to be serious damage and distribution almost every
day. Faced with these indisputable facts, preserving your capital, and
psychological capital is of utmost importance.

Second, while it is fruitless to predict how long the downtrend will last, the
good news is that this bear phase will end too. As we move lower, and selling
picks up, the doomsdayers will grow louder and louder that the world is ending.


The market has an incredible ability to forecast the future, so do not be
surprised when the market ultimately bottoms while all the news is bad. I can
promise you it will. I always maintain that these bear phases are a prudent
speculator's best friend- as they lay the foundations for future bull markets.
Our economy has survived many wars, political unrest, economic hardship, panics,
stock crashes, depressions etc. So to will it survive the various problems
facing it today. While significantly lower prices could be in store for the
market in the near future, a strong bull opportunity could arrive sooner than
people realize. (I will outline this over the weekend). While the negativity
is rampant as stocks go lower, remember the importance of preserving capital to
take advantage of the next giant opportunity that will most certainly emerge
from the depths of this bear market.

As always, please email me with any questions or comments.
This email was sent by Edward Hornstein, 60 east 42nd street, suite 1144, ny,
NY 10165, using Express Email Marketing.

[Billy]

http://www.schwab.com/public/schwab/...rs_101711.html
Key Points
Market volatility has spiked, starting with 2010's flash crash and culminating in this year's wild August, bringing asset-class correlations up with it.
High-frequency trading and the use of leveraged exchange-traded funds (ETFs) are the primary culprits, but the impact isn't all bad.
What are regulators doing and saying about the phenomenon?

Billy

[adam ali]

The failure of economic thinking/models by academicians; as relevant today as it was when it was written in 2009:

http://blogs.ft.com/maverecon/2009/0...#axzz1bbhiuJpi

The readers' comments are also interesting and instructive.