Post-discovery, from 20200326:
Screen CAGR GSD MDD UI
TechGrowers_20200326_rdutt 44 86 -56 25
SP1500EqualWeight 46 22 -16 2
https://gtr1.net/2013/?~TechGrowers_20200326_rdutt:h21f0.4::…
https://gtr1.net/2013/?~SP1500EqualWeight:h63f0.4::pref%28sp…
This may be what the market is doing, but I don’t see how the Fed can raise rates substantially given the debt load. Every quarter point raise squeezes out spending somewhere else.
I don’t see how the Fed can raise rates substantially given the debt load. Every quarter point raise squeezes out spending somewhere else.
Isn’t that kinda the point? To cool off inflation by reducing demand/spending?
This may be what the market is doing, but I don’t see how the Fed can raise rates substantially given the debt load. Every quarter point raise squeezes out spending somewhere else.
Perhaps in a rational situation, Every quarter point raise squeezes out spending somewhere else. But we are not rational. Every quarter point does not squeeze out spending, but just adds to the national debt. The government can do this with impunity because it just prints the money to pay the interest on the national debt. Ultimately it will default on the national debt in one of two ways:
1.) Keep printing and thereby inflate the debt away.
2.) Just do an outright default and cancel the treasury bonds openly.
Option 2 is more honest (if you can use the word in this situation), but politically unacceptable, so they will just continue with option 1.
Every quarter point does not squeeze out spending, but just adds to the national debt. The government can do this with impunity
Not really. Or at least, not to a first approximation.
Ignoring the current bout of purchases of bonds by central banks, which is (we hope) not about to become normal in the Weimar sort of way,
governments can set short term rates but markets set long term rates.
A bit of an overgeneralization, but not that much.
The main way governments can control long term rates is by doing things that will cause inflation to rise or fall.
Places with higher inflation will have to offer higher rates to tempt bond buyers.
Jim
hey mungo,
how those bottom indicators looking now?
feel like we are close to a bounce soon.
Dreamer
how those bottom indicators looking now?
Looks like it will make some “short term bottom” noises today, but not in a serious way.
Less emphatic than December, for example.
And of course they often run for several days in a row.
The major bottom signal still far from triggering.
These models have built into them that things have to be bad (in some ways) for a minimum amount of time.
The recent turn has been too abrupt for the model to believe that anybody is seriously at the capitulation stage yet.
It takes a while for people to build despair.
Jim
Looks like it will make some “short term bottom” noises today, but not in a serious way.
Less emphatic than December, for example.
And of course they often run for several days in a row.
Feels like a short-term bottom to me also.
bounced
NQ 13800
SPX 4250 ish
ES_F was 42xx
So NQ back up to 15800 or so, test things out, and fall on back and test this low.
Something like that.
May be a long and choppy 1H of the year anyway.
Dreamer
how those bottom indicators looking now?
feel like we are close to a bounce soon.
At the start of January I was planning to buy some BRK-B and gift 10 shares to each of our kids. That was about $3000, as BRK was right at 300.
But before I got the chance, BRK popped up to 305, and went marching up day after day up to 325. The idea was to give them each $3000, not $3250.
So I put in a GTC limit order at 300, hoping that the price would swing back down at some point.
Friday, after the market got crushed a few days in a row, BRK got down to 305, so I figured it would hit 300 soon.
But Sunday night I looked at things especially the volatility and thought maybe it might drop a bit more, so I changed my bid to 297. Figured it that didn’t fill by noon I’d just take whatever it was near 300.
Big bounce intraday. Low of 296, closed at 304. We’ll see what tomorrow brings. But now our gift to the kids is on track.
how those bottom indicators looking now?
The ‘extremely simple’ NYSE bottom indicator that was tested / used during the 2020 carnage also signaled a minor bottom today (using data from the WSJ Markets Diary). This is the first signal since 23rd March 2020.
For those that would like to refresh memories the description & 2020 performance is here (the whole thread is also pretty interesting for a potential ‘get out of the market’ indicator that I should look at for recent performance also).
https://discussion.fool.com/simple-bottom-detector-performance-3…
The ‘extremely simple’ NYSE bottom indicator that was tested / used during the 2020 carnage also signaled a minor bottom today (using data from the WSJ Markets Diary). This is the first signal since 23rd March 2020.
It’s also worth noting that the equivalent date in 2020 would have been 26-27 February 2020 (and although the speed of collapse seems remarkably similar to that timeframe I’d hesitate to use that disruption as a model for ‘modern bear markets’). This first signal would have been far too early to invest on that occasion & so it seems worth keeping Jim’s following point in mind (from above) …
The recent turn has been too abrupt for the model to believe that anybody is seriously at the capitulation stage yet.
It takes a while for people to build despair.
Perhaps patience & an open mind?
Jim,
Given that the S&P 500 touched its all time high just earlier this month(January 4, 2022), wouldn’t the 99 day rule suggest that the current drawdown is temporary?
As you noted in the link below, “It has been only a month since a fresh high? An ongoing bull market is a good guess. A year? Deeply dubious.”
https://discussion.fool.com/it39s-very-easy-to-overtune-a-signal…
If my interpretation is correct, do you have a sense of how robust the 99 day rule is?
Thank you for all your contributions.
how those bottom indicators looking now?
Looks like it will make some “short term bottom” noises today [Jan 24], but not in a serious way.
Less emphatic than December, for example.
And of course they often run for several days in a row.
The major bottom signal still far from triggering.
Just following up.
Looks similar today (Jan 27): tagged as possible short term bottom, but not a strong signal, just a weak one.
Jim
Just following up.
Looks similar today (Jan 27): tagged as possible short term bottom, but not a strong signal, just a weak one.
Update later in the day…
Now it’s saying a fairly normal strength “short term bottom” for today.
Some breadth metrics deteriorated further during the day, leading to the interpretation of short term capitulation.
This level of signal happens about 2.4% of days.
Average forward 1 month is CAGR 28%, median CAGR 30%.
Obviously annualizing one month returns is a bit dubious, but it’s usually a nice positive number for a while.
I closed a few shorts today.
Jim
some macro takes I find interesting:
https://twitter.com/INArteCarloDoss/status/14868038151101644…
https://twitter.com/donnelly_brent/status/148573120035027763…
https://twitter.com/Norseman1/status/1486768123151892487?s=2…
and while Nick Givanovic doesn’t put much out on free twitter, he has sub service including weekly videos, and the levels he called for test/bounces on Monday (video was available on Sunday) were very accurate.
https://twitter.com/NickGiva
It is all probably just confirmation bias, but I am not a seasoned macro investor, but my commonsense has been screaming internally about nonsensical valuations for a while. They were an issue in mid-2019, were scaling back up pre-covid, got knocked down dramatically for a hot minute, and then in middle of a pandemic they all inflated even more. Some peaked Feb 2021, but others like NVDA or DDOG bounced hard in May 2021 and are still way off those lows.
The Saul growth chasers want to have their cake and eat it, too:
Apparently we just had 6th largest outflow in QQQ history:
https://twitter.com/sentimentrader/status/148669318251560141…
I just don’t believe we had capitulation yet. Close.
While it would hurt short-term, I welcome another huge leg down, as I do believe it will present great entry points to ride for next 12-24 months. Will see.
Appreciate your posts. Understand no one can call the bottom really, outside of lucky timing, but I just want to get within throwing distance of it, and all the data points help.
Dreamer
Please, do you know where I can get the inflow outflow data historical values for ETFs?
Thanks,
jcb
Please, do you know where I can get the inflow outflow data historical values for ETFs?
As a side point, don’t forget that fund flows into and out of funds (ETFs especially, but also mutual) aren’t net buying and selling.
It’s nothing but money sloshing back and forth between those who buy ETFs and those who buy individual stocks within them.
ETF units are created and destroyed by an arbitrage process.
A pinch of extra or lesser demand from one of those two populations–one tick worth–causes the number of ETF units to swing up or down.
Those are slightly different investing populations in terms of behaviour, so there is no doubt some predictive power of something in the net unit creation figures.
But it’s not “money moving out of equities” or anything like that. It’s just “ETFs became less popular as an investment method last month”.
Which could also be phrased as “increased relative demand for individual equities last month”.
That could happen with rising prices or with falling prices.
Jim
Not really.
It’s a function of retail traders dumping to market makers who are creating units.
Not really.
It’s a function of retail traders dumping to market makers who are creating units.
Technically “authorized participants”, not market makers, but yes.
But how and why are they doing that? For the arbitrage money.
Because the price of the basket is momentarily a hair higher than the price of the set of underlying stocks.
They can buy the stocks [slightly cheaply], create a unit, and sell it on the open market [slightly expensively], and make a small profit.
That pricing disparity is a result of a small shift in the relative demand for the basket relative to the demand for the underlying stocks.
Which is what I noted.
There is no reason to think of the aggregate demand for equities as having risen or fallen in either situation: they’re both equity exposure.
It’s just a shift in preference of the WAY to hold them.
Jim