It was another up and down week in the markets. Is this a bottoming process or a downside continuation setting up? That’s the big question for markets across the globe.
We’ll examine that and more in this week’s ‘Top Trading Links’.
MARKET INSIGHTS
It’s shaping up to be a rough September, if the first day of the month is any indication. The environment is absolutely there for an awful month. Bulls need to respect risk.
Are we close to a bottom?
In the short term, @MarkArbeter notes the consolidation pattern in the major indices. To end the week, we dipped below it the lower bound of the triangle. Stocks appear to be setting up to re-test the lows this week. Also note how the market would have none of the pre-holiday seasonal strength trend.
We’ve seen a pretty hearty correction of late. Are stocks cheap? via @CharlesSizemore. The answer? A resounding NO.
@CiovaccoCapital charts out the numerous bottoming processes of the last 25 years. Obviously, we’re not that close to one yet.
THE FED
@MktOutperform notes that when the VIX spikes over 40 in the last ~30 years, the Fed has refused to rock the boat by raising rates. The question is, why would that change now? (see graphic to right)
@cullenroche explains why a rate hike shouldn’t even be considered right now. His argument is extreme and suggests that a rate rise may further exacerbate the global economic slowdown. This flies in the face of the zero interest rate policy (ZIRP) leads to global overcapacity argument. Maybe the overcapacity argument is over hyped.
@bill_emmott looks at the disaster that seems to be EVERY emerging market. The key theme here is NOT JUST the drop in commodity prices, but a lack of political leadership, economic structure and stability.
This show of relative strength in cash could be a huge change in the market. Does anything else signal a bear market like this? Hat Tip to @snyder_karl.
What happens after a crash via @JLyonsFundMgmt:
I think the reason why Dave suggests this is because in tough times dividend stability is an extension of balance sheet stability. Also, the balance sheet is just a much more critical piece to the puzzle than excess cash flow.
@allstarcharts thinks energy is set to outperform the broad markets going forward. This chart caught my attention and price action in various stocks suggests investors are stepping in. Relative out-performance doesn’t suggest prices will go up, but it’s still time to do some work on the group.
@EvergreenGK discusses the potential ripple effects of the Yuan’s devaluation. This is a much bigger deal to financial firms across the globe than we really understand right now.
@calculatedrisk breaks down the August jobs report. The numbers are solid underneath the ugly surface, but cracks are apparent. Remember that the market is a discounting mechanism and it’s likely once again a step ahead of the economy.
MARKET OPERATOR INSIGHTS
”There has been no psychological correction” via @davebudge.
@chicagosean sat down with Dr. Brett Steenbarger in the latest Stocktwits #TheMustFollowPodcast. Here are a few of my notes:
- Traders don’t achieve inconsistent returns not just because of emotional ups and downs, but because markets are inconsistent. We have to understand different market environments.
- Pattern recognition is a function of the amount of observation and the degree of focus during that period of observation.
- When volatility expands it’s normally due to an increase of market participants in the market.
- In any career field, effort is correlated with success.
- However, smart work is more important than hard work.
- The majority people who fail in markets have not found an edge.
- Confidence is earned.
Live life how you want to trade via @steenbab.
”If possible, give yourself time to make decisions since research shows that emotions are short-lived and humans typically go back to “baseline states” after some time” – via Fastcompany.com
@millennial_inv shares a list of 25 books that helped him think deeper and differently.
Jim Harbaugh is all the rage in the college football world these days. He’s an elite performer and many of his principles can be translated into success in the markets.
Sometimes, you just have to live to trade another day. Cold streaks, changing markets; It happens to all of us. Via@MercenaryTrader
Charlie Munger is the one of the most well rounded thinkers in the investing world. @trengriffin has shared an excellent collection on him with ‘Charlie Munger Week’. Be sure to check it out.
NEWS & RESEARCH
China’s government is doing whatever it takes to keep stocks afloat. Including buying stocks every afternoon. Check it out:
Why we should use Synthetic Biology to modify crops.
A convergence of technological advancement is occurring that could accelerate the practicality of robotics.
Another look at more Blockchain potential uses:
Motorists will save 1.4 Billion dollars at the pump this year versus Labor Day last year.
Thanks for reading!
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