Trading Systems blogs

A reader left the following question/comment;

If we are looking to play defense against a falling market does the casual link works like this:

rising oil = inflation = rising rates = faltering stock market

If the above holds then I would think a defensive position should be in oil companies with proven reserves.

As part of a defensive strategy sure but yesterday oil was up, the market was down and so were a lot of energy stocks. This corrected some toward the end of the day but the sector may not work perfectly in the role of defense.

Looking at just one day is not exactly right of course. If oil goes higher or just stays where it is it creates some measure of headwind for the economy, perhaps not deathblow,

Foreign Bonds
at 2006-07-09 19:47:55

In the last twelve hours I have had one email and one comment on the blog about foreign bonds (the email also asked about foreign currency exposure too).

I can not imagine that an individual investor would be better off buying an individual issue as opposed to some sort of product that owns foreign bonds. In many cases there are high minimums for a domestic broker to take an order. While I am not sure what the minimums might be, how many people should put $100,000 into one foreign bond?

I look at this part of the market as trying to capture a particular effect that becomes more important in the face of problems in the US. There are plenty of funds (OEF and CEF) that are easy to access and relatively cheap (you are not going to find a fund that charges 8 beeps like an S&P 500 fund).

The currency OEFs do have some merit but over longer periods of time they may not move a whole lot. Given that I view currency investments a

That ADP Number
at 2006-07-09 19:47:55

Well, so much for the utility of the ADP number as a predictor of the gubment number.

The report was really bad, weak growth plus a high increase in wages. This report of course now means that the Fed absolutely, positively will--wait, it probably means nothing.

Whatever the report indicates for the Fed could easily be reversed by some other number that comes before the next Fed meeting.

The last time I wrote about the Fed being data dependent a reader left a comment asking whether the Fed is always data dependent, implying that the newness of the term is silly.

British Pound
at 2006-07-09 19:47:55

I have mentioned reading commentaries from Jyske Bank in the past. In today's currency report (the link is to a PDF) they reference an IMF report, that I was unable to find, that shows the British pound has been attracting flows as a reserve currency at the euro's expense. Without saying why, Jyske sees the trend continuing.

I have written quite a few times about the dollar having to share the role of world reserve currency in the future, most likely with the euro. I hadn't thought about the pound in this light and will try to find more on this. If you come across anything along these lines feel free to leave a link.

If this idea ends up bearing fruit, there is an ETF that owns the pound that trades under ticker FXB.

By the way Bob Pisani just gave a stagflation shout on the air, so much for my Bo

Out In The Blogosphere
at 2006-07-09 19:47:55

Bill Cara has an interesting post up called Surviving A Market Meltdown in which he says he expects the Dow to drop by 20% in the next couple of months and he also gives some specific idea about how to position your account during this move he is expecting.

I know that Bill is good at getting the direction right, I do not know his track record for being right on magnitude (not saying good or bad, I'm saying I don't know).

Here is the list of what he says to do (I used fewer words);

Buy index puts on up days
Sell popular stocks with high RSI and relatively high p/e ratios
Sell stocks with visibility for bad earnings
Scale back core holdings on up moves
Don't write puts unless you really want to own the stock
Avoid emerging markets now, be ready to buy soon
I

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