Tag Archive: The Stock Market

How the Asset Bubble Could End – Part 1

We recently pondered the markets while trying out our brand-new electric soup-cooling spoon (see below). We are pondering the markets quite often lately, because we believe tail risk has grown by leaps and bounds and we may be quite close to an important juncture, i.e., the kind of pivot that can generate both a lot of excitement and a lot of regret all around.

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The Stock Market and the FOMC

As the final FOMC announcement of the year approaches, we want to briefly return to the topic of how the meeting tends to affect the stock market from a statistical perspective. As long time readers may recall, the typical performance of the stock market in the trading days immediately ahead of FOMC announcements was quite remarkable in recent decades. We are referring to the Seaonax event study of the average (or seasonal) performance across a...

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The Santa Claus Rally is Especially Pronounced in the DAX

Every year a certain stock market phenomenon is said to recur, anticipated with excitement by investors: the Santa Claus rally. It is held that stock prices typically rise quite frequently and particularly strongly just before the turn of the year. I want to show you the Santa Claus rally in the German DAX Index as an example. Price moves are often exaggerated in the German stock market, which leads to quite pronounced – and hence profitable –...

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Is a Rapid Advance in the Japanese Stock Market Imminent?

The Japanese stock market is quite unique: it would need to rally by approximately 80% to reach its former historical peak. What’s more, said peak was attained on the final trading day of 1989, more than 25 years ago. In short, Japanese stocks have been anything but a good investment in recent years.

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The Donald Can’t Stop It

The Dow’s march onward and upward toward 30,000 continues without a pause. New all-time highs are notched practically every day. Despite Thursday’s 31-point pullback, the Dow is up over 15.5 percent year-to-date. What a remarkable time to be alive. President Donald Trump is pumped! As Commander in Chief, he believes he possesses divine powers. He can will the stock market higher – and he knows it.

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1987, 1997, 2007… Just How Crash-Prone are Years Ending in 7?

Bad Reputation. Years ending in 7, such as the current year 2017, have a bad reputation among stock market participants. Large price declines tend to occur quite frequently in these years. Just think of 1987, the year in which the largest one-day decline in the US stock market in history took place: the Dow Jones Industrial Average plunged by 22.61 percent in a single trading day. Or recall the year 2007, which marked the beginning of the GFC...

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Stocks Up and Yields Down – Precious Metals Supply & Demand

Keith Weiner’s weekly look on Gold. Gold and silver prices, Gold-Silver Price Ratio, Gold basis and co-basis and the dollar price, Silver basis and co-basis and the dollar price.

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21st Century Shoe-Shine Boys

Anecdotal Flags are Waved. “If a shoeshine boy can predict where this market is going to go, then it’s no place for a man with a lot of money to lose.” – Joseph Kennedy It is actually a true story as far as we know – Joseph Kennedy, by all accounts an extremely shrewd businessman and investor (despite the fact that he had graduated in economics*), really did get his shoes shined on Wall Street one fine morning, and the shoe-shine boy, one Pat...

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S&P 500 Index: A Single Day Beats the Entire Week!

Many market participants believe simple phenomena in the stock market are purely random events and cannot recur consistently. Indeed, there is probably no stock market “rule” that will remain valid forever. However, there continue to be certain statistical phenomena in the stock market – even quite simple ones – that have shown a tendency to persist for very long time periods.

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Is Historically Low Volatility About to Expand?

You have probably noticed it already: stock market volatility has recently all but disappeared. This raises an important question for every investor: Has the market established a permanent plateau of low volatility, or is the current period of low volatility just the calm before the storm?

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Prepare for Another Market Face Pounding

“Better than Goldilocks” “Markets make opinions,” goes the old Wall Street adage.  Indeed, this sounds like a nifty thing to say.  But what does it really mean? Perhaps this means that after a long period of rising stocks prices otherwise intelligent people conceive of clever explanations for why the good times will carry on.  Moreover, if the market goes up for long enough, the opinions become so engrained they seek to explain why stock prices...

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Russell 2000: The Dangerous Season Begins Now

Readers are surely aware of the saying “sell in May and go away”. It is one of the best-known and oldest stock market truisms. And the saying is justified. In my article “Sell in May and Go Away – in 9 out of 11 Countries it Makes Sense to Do So” in the May 01 2017 issue of Seasonal Insights I examined the so-called Halloween effect in great detail.

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“Sell in May”: Good Advice – But Is There a Better Way?

If you “sell in May and go away”, you are definitely on the right side of the trend from a statistical perspective: While gains were achieved in the summer months in three of the eleven largest stock markets in the world, they amounted to less than one percent on average. In six countries stocks even exhibited losses!

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“Sell in May and Go Away” – in 9 out of 11 Countries it Makes Sense to Do So

An Old Seasonal Truism Most people are probably aware of the saying “sell in May and go away”. This popular seasonal Wall Street truism implies that the market’s performance is far worse in the six summer months than in the six winter months.

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Strange Moves in Gold, Federal Reserve Policy and Fundamentals

Something odd happened late in the day in Wednesday’s trading session, which prompted a number of people to mail in comments or ask a question or two. Since we have discussed this issue previously, we decided this was a good opportunity to briefly elaborate on the topic again in these pages.

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Boosting Stock Market Returns With A Simple Trick

Trading methods based on statistics represent an unusual approach for many investors. Evaluation of a security’s fundamental merits is not of concern, even though it can of course be done additionally. Rather, the only important criterion consists of typical price patterns determined by statistical examination of past trends.

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Speculative Blow-Offs in Stock Markets – Part 2

As noted in Part 1, historically, blow-patterns in stock markets share many characteristics. One of them is a shifting monetary backdrop, which becomes more hostile just as prices begin to rise at an accelerated pace, the other is the psychological backdrop to the move, which entails growing pressure on the remaining skeptics and helps investors to rationalize their exposure to overvalued markets.

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Speculative Blow-Offs in Stock Markets – Part 1

Why is the stock market seemingly so utterly oblivious to the potential dangers and in some respects quite obvious fundamental problems the global economy faces? Why in particular does this happen at a time when valuations are already extremely stretched? Questions along these lines are raised increasingly often by our correspondents lately. One could be smug about it and say “it’s all technical”, but there is more to it than that. It may not be...

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How to Outperform Hedge Funds with Just a Few Trades

In their efforts to beat the market, many investors are spending a lot of time searching for rare undiscovered gems or sophisticated trading rules. There is actually a simpler way. I will show below how one could have beaten the market by a sizable margin over approximately the past 90 years – with only two trades per month, while being invested only one third of the time and without employing any leverage.

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Incrementum Advisory Board Meeting, Q1 2017 and Some Additional Reflections

The quarterly meeting of the Incrementum Advisory Board was held on January 11, approximately one month ago. A download link to a PDF document containing the full transcript including charts an be found at the end of this post. As always, a broad range of topics was discussed; although some time has passed since the meeting, all these issues remain relevant.

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