December 2016

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Dow Closes on new all time high!

Dow closes on all time high 14253! Previous high 14163 in Oct 2007, a new high took a cool 6 years to unfold! The rally in US equity is not being confirmed by other indexes, like Sanghai  Composite or HongKong's HSI or commodities like Crude, Silver, Copper, Gold. Unless there is a confirmation from all sector and we have a broad based advance on high volume, chances of a follow through are less, trading range rather than a roaring bull is more likely!

March 4th , Apple hits new 52 Week low.

The dow recorded second highest close in its history- 14127 , its all time high being 14160 something reached in October 2007. S & P is also less than 3% away from its all time high, but you would not know looking at the shares of Apple. The tech leader has been in the middle of fierce sell off. Last September the shares peaked at around $705, today they traded $419 and closed near the low! Such a change in fortune in few short months! It goes on to prove stock prices are driven more by emotions rather than fundamental.

A mixed market , March 3rd

S & P, Dow have been ble to find support every time they take a dip of 1%-2%, the same is not true however of currencies , commodities and some key stocks like Apple. Crude oil, Gold, Silver all are trading near the yearly low, currencies like Breitish Pound, Euro have broken to new low for the year , commotiy currencies like Australian dollar, CAnadian dollar are also near yearly lows. Copper is threatiening support level at $3.50. This is certainly a mix market and very soon something go to give.

Update on Yen Feb 25

Seemd like the market was betting agaiinst Yen in a big way,a classic hook formtion on the daily chart. First Yen trades to 94.50 this Monday , this spike up cleaned the weak longs, then Yen went the other way and killed the shorts. It bottomed out at 90.85, withing 36 hour , ouch!!  A false breakout in one direction leads to powerful move in the other direction.

Mathematical modeling continued.

In the last post we saw how a trade could be written as function of x1,x2,x3,x4 etc. Now if only trading was so simple.Each of these x1, x2, x3 can in turn be represented by a mathematical model. For example , let us take x1- the initial condition. On a broad  level X1 can be written as a function of x11,x12,x13.
X1= f(x11,x12,x13)
where x11 = Continuation type of trade
X12=Breakout type of trade
X13= Test type of trade.
One can extend the same logic further and write x11 as a s function of x111, x112, x113 and so on.
X11= f( x111,x112,x113, x114)

The selling continues

The selling that started yesterdfay continued into today's session. What to expect now? Well prices have slid through 9 day sma, 20 day sma and the next key support is at 50 day moving average which is 1474. So that is going to be the logical target for dwnside, that being said market can again just goes sideways, more back and fill and let the 50 day ema catch-up to the current prices. ..

The sell off is here, VIX rises sharply

As I had noted in the previous blog entry, VIX is due for a bounce and we should expect market to correct anytime . There were lots of warning signals, right from weakness in precious metals , to ridiculously low VIX, to overbought conditions. All the markets , right from S & P to Dow to Nasdaq to Russell 2000 to metals, crude, currencies you name it...sold anywhere from 1% to 3%. This marks an important reversal for equities, a wide range reversal. Where market engulfs previous days high and low and makes a new range in the opposite direction.

Trade and Mathematical representation

Here is a fun way to look at a given trade, the mathematical way. Being from engineering background this makes a lot of sense to me:-)
Y= f( x1, x2, x3,x4,x5,x6, X7).
Where Y= trade expectation
x1= Initial Condition, something like  bull flag on hourly charts.
x2= trigger- something like test of 20 period EMA., risk= 0.35 ATR.
X3=Time of Day ) For example, do not take trade during close, risk of whipsaws go up).
x4= Day of Week, for example do not take trade during PM session of option expiry- lots of whipsaws.

VIX at historic lows!

What a week characterized by seventh week of gain for S & P ( not happened since 1967!!!). if you look at S & P, you may think not much really happened, the low volatility in the indexe characterized by near all time low reading in VIX-12.5 something,  is actually hiding a lot of churning under the cover. Gold and Silver continue their sell off, Crude oil is hitting lower trading range of the past few weeks,  Yen continues to have wild moves- 1%, 2% up, down.