Interim Update May 8, 2023

[SOL]

An update will be sent out in the next 12-24 hours. We have noticed two interesting developments. The first is a technical development that on its own would not carry significant weight. The second is a psychological development that when combined with the technical development becomes difficult to ignore. Both developments are positive. The technical development relates to the concept of a silent correction, a factor that experts usually overlook while focusing on the stealth bull factor.

The psychological development has taken place during the 2008-2009 financial crisis, the COVID-19 pandemic, and now. In both prior instances, the outcomes were positive. What is particularly noteworthy is that the current reading is significantly higher than the readings observed during the two previous occurrences.

In short, these developments (plus the numerous ones mentioned in the March and April Updates) indicate that we must adopt a more assertive approach but in a disciplined and organized manner.

[Cinnamon]

What other options are there for getting into the YEN, besides FXY and YCL. Are any of you looking at Japanese companies.

[Yodean]

What other options are there for getting into the YEN, besides FXY and YCL. Are any of you looking at Japanese companies.

my3c:

Nikkei looks like it may lead the U.S. equities the next leg up. Still, it looks like Nikkei is going to form a bit of a triple top formation on the weekly time frames in the near future around 30k at best, and i generally don't like to go long anything near triple tops. Could work, but risk/reward not worth it imo.

Also unless one is very experienced in currency trading, i would stay away - there are a lot of sharks/algos in the currency trading arena who watch the currency markets 24/7 (i know some of them), and you'll likely be at a significant disadvantage.

[outof thebox]

What other options are there for getting into the YEN, besides FXY and YCL. Are any of you looking at Japanese companies.

You could play Yen futures, but I would strongly advise against it, unless you excel in the Risk management area. More than 50% of trading futures comes down to managing your risk. All those loud mouths that talk about it being so easy or making a fortune are just losers trying to have their 5 minutes of glory. Larry Williams who i think was the only guy to ever take 10,000 and convert into to 1 million in 12 months (Documented results) speaks heavily on money management. I think he once said if you win 54% of the time in futures you are lucky. What I do is wait patiently for special setups. I incorporate a certain set of rules. One of which is Multi-time frame analysis. When the markets agree on several time frames. I wait for agreement on at least 4 time frames before I even look at the trade. Second I set time to come up with a solid Risk Management plan, without this no matter how good you are, ultimately you will lose.


These five quotes from Larry are excellent. My favorite is number 4, followed by 5

The most common bad habit I have seen in traders – good and bad ones – is the inability to react correctly to market action.
The moment you learn to trade reality, not desire, you will drill a wall of fire to become a successful trader.
The three traits speculators must learn to manage within themselves are confidence, fear, and aggressiveness.
Ultimately you don’t trade the market you trade your personality.
I look for a condition and then build a trading approach from that condition.

There are three options

Lower risk: via Japanese stocks and or investing in Index based ETFs such EWJ or directly via FXY
Higher risk: Leveraged Yen ETF's like YCL or purchase long term options on FXY
Very very high risk: Futures and currency trading. Futures is very high risk, currency markets are insane. I would recommend against option 3

[jlhooter]

Second I set time to come up with a solid Risk Management plan, without this no matter how good you are, ultimately you will lose.

OOTB,
If you or anyone can point to books, websites, YT, etc. to learn about Risk Management, I would appreciate it. I understand risk management in general, but I would like to see what others do and try to pick up learnings and build my own process. I get asset allocation and how to you have to reflect and dig deep into your inner self to determine your risk tolerance, but I want to capture what others do so I can interpret how I would define it for myself. I am just starting to set stop-loss and stop-gain levels as guidelines for my plays, but I know there is much more to it and need to dig. I feel of all (or maybe most) of everything investing, I actually have control over how I manage risk; everything else is a guess (keep in mind I am a weekend warrior at best when it comes to investing).

[outof thebox]

Second I set time to come up with a solid Risk Management plan, without this no matter how good you are, ultimately you will lose.

OOTB,
If you or anyone can point to books, websites, YT, etc. to learn about Risk Management, I would appreciate it. I understand risk management in general, but I would like to see what others do and try to pick up learnings and build my own process. I get asset allocation and how to you have to reflect and dig deep into your inner self to determine your risk tolerance, but I want to capture what others do so I can interpret how I would define it for myself. I am just starting to set stop-loss and stop-gain levels as guidelines for my plays, but I know there is much more to it and need to dig. I feel of all (or maybe most) of everything investing, I actually have control over how I manage risk; everything else is a guess (keep in mind I am a weekend warrior at best when it comes to investing).

I prefer simplicity in trading. Too much noise is made about all these charts loaded with data, images, etc. Most of these graphics only appear attractive with hindsight. I suspect that individuals who share this information on social media platforms, such as Twitter, are simply armchair generals with no skin in the game.

Certain data is useful but it should be something extreme. A massive surge in bearish sentiment, or individuals stockpiling cash like the world is going to end tomorrow is useful.


The best setup is when the individuals in the crowd are howling like impaled pigs, then its time to jump in big. COVID crash is a good example. You don’t get such situations often, so after that you have to set up a rule-based system. Based on my rules I should have scaled back in middle of 2021. While I took a decent amount of the table. I got a bit greedy and suffered a large draw down in 2022, which I later recouped. Whose fault was that? My fault. I deviated from my game plan; it won’t happen again.

I learned a great deal from the books recommended by Sol; lots of good stuff in the members section. The site also contains a great number of hidden gems(articles). Initially I thought he was nuts when he recommended Aesop's fables, but after I set time aside to really digest the material, it proved to be incredibly beneficial. I think Astuteshift said something similar. For a millennial he really knows his stuff; I usually take a closer look if he is discussing specific investments. Aesop's fables contains valuable psychological insights. It help us identify how our egos and personalities usually lead to our undoing

Ultimately as Larry Williams puts it you are trading against your personality. I will take it one step further and say you are trading against your Ego. Most individuals that talk loudly have big egos and nothing else.

Perhaps one of the most essential trading skills is determining your risk tolerance and having a backup plan in case things go south. Determine how much you are prepared or can afford to lose. Focusing on profit comes easy, but having a plan in case things don't work out is what counts. Hardly anyone bothered to consider the loss factor as in how much you're willing to lose or can afford to lose. Most investors live in Alice and Wonderland. They assume everything will work out as planned and have no backup plan. Their backup plan is to point fingers and whine like bunch of cry-babies when SHTF.

Books and all the theory in the world can only take you so far. You need real action to learn and if you get bloody nose consider yourself lucky, most get shot in the gut or in the nuts. You have to monitor yourself and keeping a journal is one of the best ways to do that.

Here is a book by Larry Williams that provides some good pointers, but don't take everything seriously. Take what you think you can use, ignore the rest. For example, John might find XYZ useful but it might not fit my trading style. I am not going to change my trading style based on some pie in the sky concept. If my current approach works, then all I am interested is in making it work better. I am not going to make major changes based solely on a book.

You might be able to download Larry’s book for free

https://vdoc.pub/download/long-term-sec ... 3ah1ueie4o

Although Larry provides useful information, he is also promoting his products. Take advantage of the free information and avoid paying for anything other than books or manuals.

This book is a great classic
Reminiscences of a Stock Operator.

If you want to really go big, then you can read this book, written over 300 years ago. At times you feel like it might have been written yesterday.

Confusion De Confusiones by Josef de la Vega

Its claimed to be the oldest book in trading.

Here a few Juicy excerpts
• On stock markets: “…this enigmatic business which is at once fairest and most deceitful in Europe, the noblest and the most infamous in the world, the finest and the most vulgar on earth. It is a quintessence of academic learning and a paragon of fraudulence; it is a touchstone for the intelligent and a tombstone for the audacious, a treasury of usefulness and a source of disaster, and finally a counterpart of Sisyphus who never rests as also of Ixion who is chained to a wheel that turns perpetually.”

• “…you will see that the stocks do not merely exist for fools but also for intelligent people.”

• The Dutch East India Company is the primary stock mentioned throughout the text. Established in 1602 by several merchants, the company was divided into shares. All profits were reinvested back into the company until 1612 when the first dividend was distributed. From founding to 1688 (publishing of the book) dividends payment amounted to 1,482.5% while stock price increased more than 5-fold. The author compares that return to a tree.

• “This treasure is compared to a tree, because it yields fruit [almost] every year, and, although during some years it has only produced blossoms, there have been other years when it has resembled the trees of Uraba which display their fruitfulness two or three times a year, and which competed with the Sibylines whose branches were of gold and whose leaves were of emeralds… However, I have come to see that it resembles the tree of life, because innumerable men earn their living in its shadow. And those who are satisfied with the fruits, and do not insist on pulling up the roots…will admit that they do pretty well in such a business.”

• Three types of people are found at the stock market: the investors (“financial lords”), the merchants, and the speculators. In time, some merchants became speculators and some speculators become gamblers as people began treating it like a game.

• The investors don’t care about price fluctuation as long they earn their dividends. — “They do not care about the movements in the price of the stock. Since their interest lies not in the sale of the stock but in the revenues secured through the dividends, the higher value of the shares forms only an imaginary enjoyment for them, arising from the reflection…that they could in truth obtain a high price if they were to sell their shares.”

• The merchants seem to be more concerned with capital gains, trying to time the market based on changes in the news. — “They consider their risk as much as their profit; they prefer to gain little, but to gain that little with [relative] security; to incur no risk other than the solvency of the other party in this forward contract; and to have no worries other than those bound up with unforeseen events.”



Okay that’s it for me, I have written more today then I usually write in two weeks, Peace out.

[SOL]

I must lend a hand to a close associate in Cambodia, so the update will be slightly delayed. However, in the interim, I have come across a development that is darn interesting. Instead of opening a new thread and adding to the pile, I will post it in this existing thread.

Jim Bianco of Bianco Research said the S&P 500 had a year-to-date return of 5.13% through April 26. The top eight FAANG+MNT stocks contributed more to this return than the other 492 stocks in the index combined. In fact, the "other 492" stocks had a negative return, dragging down the overall performance of the S&P 500

.

While it's true that only a handful of stocks are driving the index higher, this doesn't necessarily mean that the bull market is ending. In fact, a new bull market only begins when the old high has been surpassed. So, what can we expect to happen next?

We may see a stock rotation of sorts, although this shouldn't be confused with sector rotation. With only a few stocks leading the market, a pullback is bound to happen at some point, ranging from moderate to intense. Following that, stocks that have been underperforming in various sectors, such as technology, biotechnology, and specific commodities, will have their day in the sun.

In summary, the current market may seem top-heavy, but one should remember that a new bull market is yet to begin. A pullback is likely, but this presents an opportunity for underperforming stocks, albeit formerly strong candidates, to shine.

[SOL]

Confusion De Confusiones by Josef de la Vega

Its claimed to be the oldest book in trading.

That book is absolutely outstanding; its a masterpiece. I had forgotten just how much I enjoyed it. Your post has inspired me to search for my copy or purchase a new one if needed. Interestingly, it was originally published in Antwerp, near the residence of Mr Elastic or Flexible, also known as STEFK.

[jlhooter]

OOTB
Thanks. Getting the books and will recheck TI website

[Yodean]

https://youtu.be/SJ4vCoarvCA?t=1

*****

Pretty high-quality 34 minutes.

The speaker is a very good follow on Twitter, for those that use Twitter. He gives out a lot of free, valuable quant data on his feed, imo. I've been interacting with him intermittently for months now and bugging him a bit about taking a look at the current velocity of money and how this might fit in with other macro factors - a topic generally not often touched on by analysts.

He also discusses the market breadth issue (e.g. increasing concentration of price action of equity indices determined by fewer and fewer megacap stocks) and how this might be changing.

Also, some data on the energy sector - I believe there are quite a few TIT subs currently invested in this asset class - and what this might mean for the rest of '23.

I call him the Master of Quants.

[nicolas]

Also, some data on the energy sector - I believe there are quite a few TIT subs currently invested in this asset class - and what this might mean for the rest of '23.

Great video and interesting perspectives.

Might have to call the police though... and report a chart crime on that "S&P 500 Energy sector total shares outstanding".

I was intrigued so I checked the evolution of shares outstanding for a few energy companies. I couldn't find the same pattern.

Here's XOM for example:


I added the shares outstanding for the top 5 holdings of XLE (XOM, CVX, EOG, COP, and SLB) and found the same number from 2016 to now (roughly 9.1 billion shares.)

What does it even mean to add the number of shares from multiple companies?

How do I explain this graph? Probably some smaller companies with low share prices and little weight in the index diluted aggressively.

A valuable metric to track at the company level, but it loses all meaning as an aggregate for the whole sector.

[Yodean]

Might have to call the police though... and report a chart crime on that "S&P 500 Energy sector total shares outstanding".

I was intrigued so I checked the evolution of shares outstanding for a few energy companies. I couldn't find the same pattern.

I added the shares outstanding for the top 5 holdings of XLE (XOM, CVX, EOG, COP, and SLB) and found the same number from 2016 to now (roughly 9.1 billion shares.)

What does it even mean to add the number of shares from multiple companies?

How do I explain this graph? Probably some smaller companies with low share prices and little weight in the index diluted aggressively.

A valuable metric to track at the company level, but it loses all meaning as an aggregate for the whole sector.

Damn, you work fast.

[nicolas]

I found it really interesting when he's looking at debt through its serviceability instead of its total amount. Debt will naturally increase over time because of population growth, but when the % of late payments decreases you actually have deleveraging, even if the amount of debt increases. Never thought of it that way. I've subscribed to his channel, always good to hear from people who can look at data from a different perspective.

[Yodean]

I found it really interesting when he's looking at debt through its serviceability instead of its total amount. Debt will naturally increase over time because of population growth, but when the % of late payments decreases you actually have deleveraging, even if the amount of debt increases. Never thought of it that way. I've subscribed to his channel, always good to hear from people who can look at data from a different perspective.

yeh, seth of finom group is good with the quants. although he has a paid subscription service, he pretty much gives away all his stuff for free (twitter, yt), in pieces, on a time-delayed basis.

but most of that data isn't that time-sensitive, in any case, so one doesn't really need to pay to get the data.

i'm learning a lot from the data he presents - some of the quant stuff is pretty interesting and helpful.

[AstuteShift]

Im paying close attention to bitcoin currently, weekly charts on GBTC don’t look good so I’m hoping for more blood in the fall and it should set up the next baby bull.

Wallstreet so en trenched in the crypto that imho is safer to invest than China and more importantly the risk to reward ratio is greater in terms of taking a good bet with minimal risk. I need to see more crypto kids crying first

The greater the fall, the greater the opportunity