Alpha to Beta

Facts You May Like To Know

There is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. Indymac will eat up roughly $8 billion of that.

Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion.


Source: MISH'S Global Economic Trend Analysis

The Quote of Today

"Capitalism demands the best of every man – his rationality – and rewards him accordingly. It leaves every man free to choose the work he likes, to specialize in it, to trade his product for the products of others, and to go as far on the road of achievement as his ability and ambition will carry him."

-Any Rand

Some Thoughts on entries and exits

There are many ways to evaluate market conditions. Personally, I think relative strength, sentiment, and market correlation dynamics are three most important factors. I use them to evaluate market and sector conditions, then use the price action of individual markets to choose markets for entries. Here are my three ways for entry:

1. Regional breakout.

2. Relatively strong in a weak market (accumulation) and relatively weak in a strong market (distribution).

3. Extreme reversal.

One thing that is very important to the entry is to choose a right time and a right price to enter a position, a right position. If a position has a good profit right at the start, it means I have a right position with the market. Then I hold the position. If the position has a loss or struggles to have a profit after I enter it, the market tells me that I have a wrong position. Then I exit it.

Ways for Exits are much more challenging and difficult to define than those for entries. Here are my three ways for exit:

1. one of effective ways to exit is to close a position when a market has a extraordinary move with a huge volume (at least more than 10% price move and more than triple average volumes) in my favor direction. This kind of move is normally an exhaustive move. Also I have a windfall profit, then take it.

2. Swing high/low stop.

3. Multiple ATR trailing stop.

The Quote of Today

"The secret of happiness is freedom. The secret of freedom is courage."

-Thucydides

Loan Pawns Have Good Business

When the economy conditions are tough, lots of people sometimes don't have enough income sources to support their daily life. They also have difficulties to borrow money from credit lines. So they might temporarily take loans from loan pawns, even pay quite high interest rates. Look at the stock chart of a loan pawn below. It seems prospering.

EZPW

Short Selling and Market Behaviors

Short selling can drive the stock price sharply low, but it also work as a support force when the short covers. From this point of view, the short selling might make a stock more volatile.

XLF



I wonder what happens when a stock doesn't have the support force from either inside buying or short covering with poor general conditions. It might just keep drifting down.

Divergences Between Commodity and its Commodity Stocks

Today, Crude Oil, Soybean, and Copper close to all time high. But most of commodities stocks, which are also recent leaders of stock market, close sharply lower. This type of divergence happens not quite often.

Copper and FCX





Soybean and a Fertilizer Company





Crude Oil and a Energy Company

My Favorite Quotes

"There is only one side to the stock market; and it is not the bull side or the bear side, but the right side."

"For when I am wrong only one thing convinces me of it, and that is, to lose money. And I am only right when I make money. That is speculating."

"My losses have taught me that I must not begin to advance until I am sure I shall not have to retreat. But if I cannot advance I do not move at all."

"The game taught me the game."

"If the unusual never happened there would be no difference in people and then there wouldn't be any fun in life. The game would become merely a matter of addition and subtraction. It would make of us a race of bookkeepers with plodding minds. It's the guessing that develops a man's brain power. Just consider what you have to do to guess right."

"I can't tell you how it came to take me so many years to learn that instead of placing piking bets on what the next few quotations were going to be, my game was to anticipate what was going to happen in a big way."


-Jesse Livermore