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We are approaching VERY serious times

  • #81
  • Feb 20, 2009 1:55am Feb 20, 2009 1:55am
Quoting Gaston


This thread is hilarious.

The US may collapse, who the hell knows, we could argue that all day long....
God forbid that the chart is indicative of the overall economic situation and is a picture by that painter instead of somehow being the painter of the picture itself?
  • #82
  • Feb 20, 2009 3:19am Feb 20, 2009 3:19am
Dow futures -110 for 7.3k.

Dragon, I think you can change the thread's title to
"That's it, VERY serious times are here".

  • #83
  • Feb 20, 2009 9:31am Feb 20, 2009 9:31am
Yup think we are, just looking at Citi group today, S&P sitting on support at 766..........hope its got a parachute to slow it down

Picture paints a thousand words.........................


I just hope I am wrong
  • #84
  • Feb 20, 2009 12:15pm Feb 20, 2009 12:15pm
I'm in Italy at the moment, they have been saying " Banks are fine, we are not involved in the subprime...." NAAAAAAAA

Unicredit -10%, today
  • #85
  • Edited 11:43pm Feb 20, 2009 11:19pm | Edited 11:43pm
1) well considering that the value of many US companies has plummeted because of the pessimist outlook of traders(remember the federal government had to ban short selling on almost a 1000 companies back in 2008 because traders were selling just because everyone else was and thus killing the companies?)

2)Most traders take a good look at their charts before opening a position, even the fundamentalists.

3) The US economy is the sum of all the US companies.

4)If the charts says sell, and enough traders see it and agree, the economy tanks, regardless of weather of the fundamentals say sell too.

I've never heard of an instance where the fundamentals keeping a security strong when the technicals said sell, but everyone has heard of technicals trumping fundamentals.
  • #86
  • Feb 20, 2009 11:23pm Feb 20, 2009 11:23pm
Quoting Rabid
Thinking that fundamentals drive the market is like thinking that the road drives the car. Sentiment drives the market.
exactly.

to hell with the fundamentals, they mean nothing.
  • #87
  • Feb 21, 2009 4:54am Feb 21, 2009 4:54am
I agree that technicals might trump fundamentals, but that this crisis was created by the technical traders selling shorts.... mmmmm
Can not agree to that. The economy has been in an "inflated" shape for long time, where 9/11 filled up the bubble with gas, and the subprime crisis was the spark that blew it up. When people like Soros were writing books and giving interviews warning about it, people that are now blaming the technical traders were laughing about a possible crash and... ops... here we go.

If it is only a matter of traders selling shorts that caused all of this, is it possible that governments and central banks are loosing the fight against... us?
  • #88
  • Feb 21, 2009 5:20am Feb 21, 2009 5:20am
Quoting aicccia
exactly.

to hell with the fundamentals, they mean nothing.
Aicccia,

Be careful what absolute conclusions you come to on this issue, because it can distort your view of whats important in trading. Thinking that TA alone is all you need is mentally satisfying because it sounds so easy. The hard truth is that if you do not know what is going on in the very market you trade then those that do will find a way to extract your money from you.

You are saying that because everyone looks at a chart before they trade then the market must move because of information gained from the chart. Where you are mistaken is that, in reality, not everyone looks at a chart in the first place. Much of the large amounts of money that do actually move the market are not placed due to chart information alone, but information from many different sources, both public and private alike. You see, in the end there is simply too much information all discounted into the market for any human to fully realize. But instead of just submitting to the overwhelming amout of information available and just snuggling up with your comfortable chart, you just need to focus on the relevant and available resources. A chart is one of those resources, but so are fundamental numbers, financial news, political updates, etc. What can be gleaned from all of this is a general idea about what the masses are thinking. This is, as Rabid put it, sentiment. A chart alone might provide a glimpse of the sentiment in regards to trending/ranging conditions and what those represent, but there are greater agendas that exist beyond the bars in front of you.

A lot of new traders do not like to hear anyone say these things, as it usually means that they have to work and think a little harder. But if you think about that, then you may realize where an edge above your peers might be found. If it does sound daunting, my only advice would be to trade just one pair for a while. This will allow you to focus on just two economies and really get a feel for how they are moving in regards to the shifting of information.

Good luck,

Gaston
Headline: USD drops due to news of USD dropping!
  • #89
  • Feb 21, 2009 6:12am Feb 21, 2009 6:12am
Quoting aicccia
exactly.

to hell with the fundamentals, they mean nothing.
And what drives sentiment?
  • #90
  • Edited 7:09am Feb 21, 2009 6:52am | Edited 7:09am
Quoting aicccia
1) well considering that the value of many US companies has plummeted because of the pessimist outlook of traders(remember the federal government had to ban short selling on almost a 1000 companies back in 2008 because traders were selling just because everyone else was and thus killing the companies?)
Not entirely true. Traders/speculators/short-sellers, through the impact they have on price movements, are mere messengers and are rarely the cause of the problems. Also, in the UK, the short-selling ban on financials was arguably an adject failure, seeing as there were greater price falls after the ban was introduced than before.

The short-sellers aren't to blame for the collapse in UK banking stocks. The blame for this clearly lies with banks employing too much leverage, loading their balance sheet up with toxic assets, thereby rendering many of them as nothing more than zombie institutions.

Quoting aicccia

2)Most traders take a good look at their charts before opening a position, even the fundamentalists.
True, but those holding positions for the medium or long-term will always pay heed to the fundamentals.

Quoting aicccia

4)If the charts says sell, and enough traders see it and agree, the economy tanks, regardless of weather of the fundamentals say sell too.
In the short term, this statement holds a definite degree of truth, particularly on major down days when good stocks will get chucked out with the bad.

However, this brief market inefficiency will lead to scores of value investors, those with real money to put to use, picking through the debris for the tastiest morsels, meaning over the long-term fundamentals do matter a great deal.

Quoting aicccia

I've never heard of an instance where the fundamentals keeping a security strong when the technicals said sell, but everyone has heard of technicals trumping fundamentals.
Technicals are a representative way to ascertain current market sentiment. They are crucial to trading as they show us what is happening in the market, rather than what we think should be happening, thereby diminishing the risk of confirmation bias. However, that market sentiment is mostly driven by the wider fundamental story, especially so over the long-term.

It is crazy and very dangerous to ever think that fundamentals do not matter with regards to a stock or any asset price. If that were the case, why don't you go long on BofA, Citigroup and GM, seeing as the RSI on these stocks is now showing extremely oversold readings, in addition to the record gap between current price and the 200-week moving average?

Fundamentals do matter greatly. In the example of GM, their stock price is $1.77 because of the gross inefficiencies of their business model and decades of incompetent management, as well as a failure to face up to the threat of foreign competition. Therefore, the fundamentals drive the stock price, the movements of which, in turn, gives us all the bearish technical readings.

In the example of RBS, their stock price has fallen from £3.50 to £0.20 in under a year due to the fact they were a zombie institution, one which was, and probably still is, insolvent. The short-sellers, cast as villans by the British media, were only the messengers and did not force RBS to leverage its balance sheet to oblivion, with no regard to risk. Fundamentals, fundamentals and more fundamentals, my friend...
  • #91
  • Feb 21, 2009 6:58am Feb 21, 2009 6:58am
Quoting Gaston
Aicccia,

Be careful what absolute conclusions you come to on this issue, because it can distort your view of whats important in trading. Thinking that TA alone is all you need is mentally satisfying because it sounds so easy. The hard truth is that if you do not know what is going on in the very market you trade then those that do will find a way to extract your money from you.

You are saying that because everyone looks at a chart before they trade then the market must move because of information gained from the chart. Where you are mistaken...
Very good post!
  • #92
  • Feb 21, 2009 7:05am Feb 21, 2009 7:05am
I read this entire thread------my head hurts------I think I will go have a beer
  • #93
  • Feb 21, 2009 7:28am Feb 21, 2009 7:28am
Quote
Fundamentals, fundamentals and more fundamentals, my friend...

Yea, but none of that mattered in the bull market. The reason it took a ride to the basement was that the overall market sentiment took a dive, allowing short sellers to drive the market. In a bull market people ignore bad data, in a bear market people ignore good data. RBS was in the same leverage trouble 2 years ago, meanwhile it's stock was making new highs.

Fundamentals only matter in as much as sentiment is willing to follow them. For every bad organization properly corrected in this market, there's a dozen good organizations that have had their stocks pummeled by the bear market. Are you going to tell me that companies like Wal-mart are financially unstable? Of course not, yet their stock is down from over a recent 60.

Fundamentals are a road that sentiment can sometimes follow, when it wants to. There are a hundred or more chaotic things that can drive sentiment, but they don't all effect it all at the same time. So when trying to figure out "what's moving the market" you have to figure out what's driving sentiment and what isn't. Good luck with that, you're better off just flipping a coin with those odds.

At the end of the day, sentiment is king. It decides whether price goes up or down. For people that trade fundamentals... well it's only a matter of time till that stops working for you, if it hasn't already. Good luck, but history is littered with the corpses of value traders trying to counter the major trend.

In a bull market, buy. In a bear market, sell. Sentiment is king. Challenge it at your own peril.
  • #94
  • Edited 8:33am Feb 21, 2009 8:01am | Edited 8:33am
[quote]
Quoting Rabid
Yea, but none of that mattered in the bull market. The reason it took a ride to the basement was that the overall market sentiment took a dive, allowing short sellers to drive the market. In a bull market people ignore bad data, in a bear market people ignore good data. RBS was in the same leverage trouble 2 years ago, meanwhile it's stock was making new highs.
RBS was levered up two years ago, true, but the market value of those assets was far greater than their total liabilities. It's when the value of those assets plunged that their capital base was destroyed, leaving them insolvent. In recognition of the growing problems on their balance sheet, investors dumped RBS shares en masse. Short-sellers didn't drive the market in this case, as the share price of RBS fell more after the short-selling ban was introduced than before!

What caused those assets to plummet in value? Banks started to come clean and admit there was an increasing number of borrowers falling behind with their mortgage repayments, which gave the market the realisation that credit has been extended to individuals whom could never hope to service the debt. This coincided with a drop in home values in the US, as house prices started to revert to their long-term mean in relation to earnings - this adjustment is still taking place and will likely overshoot. Sentiment shifted dramatically in realisation of shifting fundamentals.

However, over a period of time, sentiment and fundamentals will converge, despite experiencing some great divergences in times of extreme exuberance or pessimism. Therefore, as I said, you have to use technicals as a tool to tell you what is happening in the market, rather than what you think should be happening, particularly so when trading short-term.

Quote
Fundamentals only matter in as much as sentiment is willing to follow them. For every bad organization properly corrected in this market, there's a dozen good organizations that have had their stocks pummeled by the bear market. Are you going to tell me that companies like Wal-mart are financially unstable? Of course not, yet their stock is down from over a recent 60.

A bad example. Chart the 12-month performance of Wal-mart against that of the DJIA. You will see it has out-performed the benchmark by 40% in that time. Why is this? Because of the strong fundamentals that support the business.

As I acknowledged in my post, good companies will get chucked out with the bad, but this throws up some excellent long-term opportunities when, for example, a company's dividend yield exceeds 5% (with ample cover from future earnings to meet these obligations), and they have a low price to realistic future earnings ratio, low debt levels, a robust balance sheet and a clear and visible business model, one that is strong and resilient, even in the face of a contracting economy. As an investment approach, one wouldn't jump in and buy huge quantities of this stock, but would instead scale in on a gradual basis, rather than attempting to pick an actual bottom.


Quote
Fundamentals are a road that sentiment can sometimes follow, when it wants to. There are a hundred or more chaotic things that can drive sentiment, but they don't all effect it all at the same time. So when trying to figure out "what's moving the market" you have to figure out what's driving sentiment and what isn't. Good luck with that, you're better off just flipping a coin with those odds.

At the end of the day, sentiment is king. It decides whether price goes up or down. For people that trade fundamentals... well it's only a matter of time...

Sentiment and fundamentals are not two different entities, in my opinion. Indeed, they will feed off the other and perpetuate moves in the market. The sentiment is ultra-bearish right now and this can come as no surprise to anyone that pays the smallest amount of attention to the fundamentals. Sentiment relates to confidence and confidence relates to the fundamentals.

The main point raised in my previous post on this thread relates to the crazy and dangerous notion of ignoring fundamentals. I always advocate using technical analysis with any trading or investment decision. For this reason, I believe it is also a crazy and dangerous notion for one to ignore technical analysis. The side of the road is littered with as many failed technical traders as fundamental traders that have fallen by the wayside.
  • #95
  • Feb 21, 2009 8:45am Feb 21, 2009 8:45am
Quote
Short-sellers didn't drive the market in this case, as the share price of RBS fell more after the short-selling ban was introduced than before!

But the ban didn't force people to buy... so the market pre-priced the return of short sellers in advance. That's why the short ban didn't really do anything, people weren't going to buy with the specter of returning shorts hanging over them.

Quote
Sentiment shifted dramatically in realisation of shifting fundamentals.

Sure, and sometimes that happens, sometimes it doesn't. That's the problem with assuming that fundamentals always drives sentiment, it doesn't.

In this case you're pointing out short examples in a down market, that's easy... you're trading with sentiment and using fundamentals as an excuse. Try doing the opposite, find strong fundamental companies and buy into them despite the bear market. Then you'll see how little they matter against the prevailing headwind of sentiment.

If you're planning to go long a stock, it makes more sense to wait for sentiment to shift positive again. You'll end up on the same spot on the price curve, but have the benefit of a recent low to hang your hat on.

Quote
A bad example. Chart the 12-month performance of Wal-mart against that of the DJIA. You will see it has out-performed the benchmark by 40% in that time. Why is this? Because of the strong fundamentals that support the business.

It's not a bad example, it's an outstandingly good example for exactly that reason. It's fundamentals are decent, but it's stock price has been hammered too. No matter how well it's performed, it's still negative.

Quote
Sentiment and fundamentals are not two different entities, in my opinion. Indeed, they will feed off the other and perpetuate moves in the market. The sentiment is ultra-bearish right now and this can come to no surprise to anyone that pays the smallest amount of attention to the fundamentals. Sentiment relates to confidence and confidence relates to the fundamentals.

Fundamentals are one of a hundred factors that can effect sentiment. Exactly what people consider "fundamentals" varies from person to person. Yes it can drive sentiment, but many times it doesn't. Many times sentiment moves independent of the fundamentals.

Sentiment is the end combination of market psychology. Confidence is a factor in that psychology, but it isn't the only one.

Quote
The side of the road is littered with as many failed technical traders as fundamental traders that have fallen by the wayside.

Technical trading is only as good as the sentiment it recognizes.
  • #96
  • Feb 21, 2009 8:55am Feb 21, 2009 8:55am
I am quite sure a collapse is imminent!!
  • #97
  • Feb 21, 2009 9:02am Feb 21, 2009 9:02am
Quote
Technical trading is only as good as the sentiment it recognizes.

So is fundamental trading. I am merely advocating a mixed and varied approach to trading and investing, which I believe will serve one the best over the long run. My definition of fundamental analysis is very broad and overlaps technical analysis and vice versa.

However, there are different ways of trading the market, many different approaches, so whichever works best for you and whichever works best for me, it's all good. Different strokes baby!

It's okay to disagree, which is just as well as I think we could spend the weekend countering the other's argument without coming close to any real agreement.

Good luck to you.

p.s. Wal-mart shares are actually flat over the past twelve months.

http://www.bloomberg.com/apps/cbuilder?ticker1=WMT%3AUS
  • #98
  • Feb 21, 2009 9:08am Feb 21, 2009 9:08am
Quote
So is fundamental trading. I am advocating a mixed and varied approach to trading and investing, which I believe will serve one the best over the long run.

Fair enough. I just think, in general, it's easier to gauge sentiment from TA than it is from trying to guess at how the fundamentals will be read. Marber's book "Marber on Markets" makes an excellent case for TA in that context.

Quote
p.s. Wal-mart shares are actually flat over the past twelve months.

Uhm. Actually no. January 02, 2009 we were at 57.18. Feb 6th, 49.63. Hit a low at 46, now we're at 50. If you go back to Sept 08, we had a new high. So the stock has taken quite a hit in the last few months.

Quote
It's okay to disagree, which is just as well as I think we could spend the weekend countering the other's argument without coming close to any real agreement.

Quite probably.
  • #99
  • Feb 21, 2009 9:14am Feb 21, 2009 9:14am
Quoting Rabid
Uhm. Actually no. January 02, 2009 we were at 57.18. Feb 6th, 49.63. Hit a low at 46, now we're at 50. If you go back to Sept 08, we had a new high. So the stock has taken quite a hit in the last few months.
haha....Nice try, but I used a twelve month example in my posts...

Anyway, let's not argue about semantics. You make some good points and argue your corner well.

Good weekend, friend
  • #100
  • Feb 21, 2009 9:18am Feb 21, 2009 9:18am
Quote
haha....Nice try, but I used a twelve month example in my posts...

Uhm, you said over the last 12 months. Which means at no point in the last 12 months has the stock moved. The stock has moved a lot in the last 12 months.

Quote
Anyway, let's not argue about semantics.

LOL. Cute.
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