NFTRH29 starts off with a little introspection, inspired by subscriber feedback. This segment, entitled 'NFTRH Introspects' is reproduced at the end of this post. We then transition into a daily and big picture monthly look at the broad US market, also taking into account the similar status of most global markets. This segment ends with a look at the major US bank index, which of course holds the 'assets' of the primary global financial culprits.Commodities are then reviewed with a review of those on the way to target, those at target and still others that are non starters. NFTRH views hedge fund rotation as a factor here. But risk is rising, at least for short term corrections of the positively correlated stuff and the gold-silver ratio remains front and center. I believe Hope '09 will have a chance at a pretty good run, but things are stretched at the moment in the world of commodities and stocks.
Precious metals sentiment is coming along nicely and a new indicator is introduced along with a new charting service I have subscribed to that will augment the stockcharts.com subscription I use. This helps refine and improve the tools NFTRH uses and will provide more enlightening views into sentiment. As for the gold sector, let's just say it is time to be open to bullishness now that sentiment is declining rapidly.
NFTRH29 covers the US dollar and some final thoughts before reviewing the state of the capital preservation and speculation portfolios. NFTRH29 out now. Check out NFTRH for a month and you might just find yourself sticking around.
NFTRH Introspects
I think a quality financial market newsletter should evolve over time. A key factor in this evolution is in understanding strengths and weaknesses so that strengths, which subscribers are likely relying upon, are emphasized and weaknesses are not put forth too often with the unrealistic expectation that they will do anybody much good, given the wealth of other information sources available.
Why the introspection? Well, this week on the blog I asked for reader input on the dynamics at play in the ultra-short Financials ETF, SKF. What I got were some highly informative responses from NFTRH subscribers. This led directly to the following exchange with an NFTRH subscriber:
Peter: I was under the impression you were aware of this, but just in case you're not, the key to understanding why the two don't correlate too well is similar to the fact that a decrease of 50% in something followed by a 50% increase does not get you back to the original starting point (100-50-75). Since these 'double' funds (including the double short silver you were/are using) target % daily returns, they only track if the path up/down is a straight line. A lot of back and forth kills those correlations (I've done the math/simulation in an excel sheet, if you're interested I can send it to you). Fyi over at Minyanville (where as far as I can see Kevin Depew is basically my -cheaper- view into the thinking of the elliott wave guys) call them trading crack, only to be used over very short time periods, probably less than a week... All reasons why I use the regular short funds, not the double ones to keep for an possibly extended period of time, like now with gold :-)
Gary : Yes, send the spreadsheet along if you get the chance. I am going to strictly day trade this stuff if I touch it at all. I am more interested in getting the big pic right and that is coming in nicely.
Peter : Here you [go]. It's got a few scenario's in it, some quite [interesting] (if you're fairly sure of a large move, even a hedged position will do well). The one you're looking at is at the bottom of the tab, when it goes up and then back down (or vice versa), you'll see that's a money [loser]...
Gary : Ah, a MATH guy! You will note that I am a psychology guy and a looking at pictures guy. Definitely not a real numbers guy. I will try to make sense of [your spreadsheet] though. :-)
Peter : LOL, big time numbers guy :-))))) Economist by training, but I've recently learned to appreciate the psychological side of things. Before that I was more in the Otto camp, but I can now see the value in the technical analysis (as the underlying is really mostly psychology), hence why I like the added-value provided by your newsletter!!!!
Gary : If only the markets were rational and stuck to the numbers. According to my pal Otto copper would still be on the mat. Luckily, it is not all just random. Usually the pictures are dancing with one another and more often than not make sense if viewed through the lens of sentiment. I am a bit of an oddball in that I am not able to become expert at any singular thing, but I am able to make sense of many things all juggling at once.
Peter : Not a skill numbers people are know for :-) which is why I (need to) surround myself with people who do have such skills...
That is how NFTRH sees itself; as added value in a world full of quality analysis of PE ratios, high risk and lower risk bonds, measures of money supply, cyclical sector analysis, global macro analysis and so many other well defined aspects of the world of finance.
I believe this added value is vital because markets are not always what they seem and they do not always act rationally in any given short term segment. The ‘misperceptions’ you have seen me write about over and over again are the result to too many people accepting the easily dispensed bromides of an industry that is geared to get as many people on the wrong side as possible. The winners need a counter-party after all.
Sentiment and technical analysis play a big role in leveling the playing field. I do not know if you have ever seen me use the term ‘PE ratio’ before today, and there is a reason for that. You have however seen me write in sometimes cartoon like fashion about casinos and herds with the odd flying pig image thrown in for good measure. I am trying to illustrate. NFTRH is trying to paint a picture. A picture that never ends but just keeps filling in more color and depth. I will use raw data, as you saw when I put up that money supply, TED and LIBOR data week after week during Armageddon ’08 (which is, along with Hope ’09 really just another image in support of NFTRH’s sentiment analysis). I will certainly use ratio data between asset classes however, as this is an overlooked and extremely useful tool for determining what is going on beneath the surface of markets. I think ratios take TA to a whole new level.
NFTRH will always seek to understand macroeconomics from a big picture standpoint and work its way down through the daily, weekly and monthly grind of navigating markets by using this understanding in conjunction with technical analysis and sentiment psychology to keep us on the right side of markets that can be downright confusing more often than not.
As a side note to the above, Otto took his cameo in the email exchange above in the spirit intended, as I would have expected. I think the world of this man's market analysis as well as the way he views the world.
