Emotions run high

It is difficult to comprehend my mixed emotions at the moment. 

Steeped in sadness recently that I would be leaving Seattle soon. People that I've come to know and LOVE over the last few months would be yet another page in my history book. I must convince myself that this must be seen in a positive light - I'm so grateful for the people and the experience here. It had inspired me and reminded me what I've always wanted so dearly. Without this experience, I would not actually move!

My first-ever flight to China is in 6 days. It would be my first time back in more than 11 years. Perhaps I can trace a certain sense of guilt in my thoughts. I could not explain why has it been so long. They were my family and had loved me dearly. Yet that love I was unable to requite. It brought me to tears when my grandfather, through a quivering voice, reminded me he is currently 76 years old. 

But my chief concern is the sense of isolation that I'm so afraid to experience - China and its culture had changed in last 11 years. But more importantly I have changed since I was a teenager. I wonder how I'd fit in. I do not know how I would perceive everything that will happen. I feel the experiences will undoubtedly fall outside of my range of expectations. So I should bear no expectations. Let experience take me away.

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I opened a stock chart on my screen. It is so remarkably simple and pure. It is why I love it.

Keep the fighting spirits alive

Life really sucks when you're expected to have preferences while you actually have none. When you should have cared or said something, but you didn't, because you thought it's not all that important, or you're just reserving your words. The lack of preferences and caring makes you so numb that it's beginning to shield you away from such joyous experiences in life.


It is perhaps a disadvantage for me (every disadvantage comes with an advantage, if you choose to believe). I'll just have to find my niche. And I must be willing to admit it and fully embrace it.

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I was reminded today by a friend that I'm still young and I must not settle. His enthusiasm and optimism really inspired me. I know I should accrue more risk and let the chance work in my favor.

Indeed, just like in sports, games, and businesses, you apply the more risky strategy first, and then the conservative strategy (if you are ahead). If you're behind, you will not be behind by much.


I was reminded to be a five year old.

reason for the sell-off

We have a broad market sell-off today, resulting in a trending day. This should be totally expected and should not come as a surprise. Both currency and equities markets edged below some important technical levels. It could be argued the strength of the dollar lead the decline. Though I would not rely on that as a trade thesis. It's merely an after-the-fact confirmation/observation.


The pundits are too eager to tag a reason to the sell-off: "China", "Greece", "sovereign risk", "credit tightening", "jobs", etc. While it is interesting to speculate, the fact is, there is no right answer and it doesn't really matter. Some people out there sold, and the rest followed, or were forced to sell. 

Tomorrow is a Friday. Thursday's broad sell-off is not good new for the bulls heading into the weekend. There's reason to expect another trending day. You just need to be positioned to take advantage of it as it happens. As Richard Dennis puts it,

"Success in the market is not about ability to forecast, one just has be ready when it happens".

 

AUD/USD broke important support level right about 1 hour before 6:30AM PST

 

S&P futures followed the trend of AUD/USD, started trending before 6:30AM open

rationality, game theory, etc.

I actually liked a recent story on NBC News: Congress had voted to spend $2.5Billion to continue building Boeing C-17's despite the President and the Pentagon had urged to stop building them because there's already a huge excess.

Why waste $2.5B on C-17's that nobody needs? Congress voted in the name to save jobs! See, C-17 parts come from 44 states. Non of the politicians in Washington wants to be blamed for jobs lost in their states! In addition to the 43 planes built since '06, That's 53 C-17's (excess of $12Billion in aggregate) to save... 20,000 jobs! Nice played, Congress!

This is sort of like Prisoner's Dilemma, in which every politician acts on his own interest but collectively have achieved a worse outcome. It might be wise to use that $12B to create new jobs!

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On another note, while reading a book on game theory, I was inspired to develop a game theory model for approaching relationships. I wasn't getting anywhere far - human emotions are kinda difficult for a beginner (modeler, game theorist) like me to model. I wonder if there are any work on this... While I was searching on the net, I wonder how useful such a model actually is. Any empirical data on this?!

A voice of Fischer Black rings in my ear:

In the end, a theory is accepted not because it is confirmed by conventional empirical tests, but because researchers persuade one another that the theory is correct and relevant.

Schwager wrote another non-fiction

I finally began reading Jack Schwager's authoritative "Complete Guide to the Futures Market". Unexpectedly, it is a really fun read, humorous at times. I like how Schwager injects rationalities and personalities into the market participants. It was like reading a non-fiction. Even more difficult concepts are explained in a frank manner. It is seriously a good guide.

"King of the World"?! (Not so fast!)

Judged by apparent success of "Avatar", James Cameron is king of the world, says Business Week. I was listening to Business Week's Behind the Week's Cover podcast (I'd been a fan while John Byrne was hosting). But you have to ponder deeper into their verbiage.

I've not seen "Avatar", and only heard very few things about it (people claim it's worth seeing). Regardless I'll try to be as objective as I can.

Apparently, a lot of people like this film. Business Week says that it has brought $1.6B in revenue, sure to surpass another Cameron's classic and highest revenue'd film of all-time, "Titanic". It seems surprising to people that this is happening. The film must be THAT good in order for this to happen. I think otherwise.


Not saying it's bad movie. It doesn't have to be that great. Unquestionably it is the beneficiary of "winner takes all" effect that is so common occurring today. You know, people go to see this movie just because a lot of other people have seen it. I wonder if there is an estimate on that number. If they rank movies based on that number, Avatar would probably come on top.

Business Week reminds us that the money spent on this movie, the time it took, and the filming technology used was unprecedented for such a movie. This is what's making this movie stand out, and thus deserving of $1.6B revenue. Wrong. They fail to realize that there had always been a film in history that was "unprecedented". "Star Wars" was "unprecedented". "Titanic" was "unprecedented". "Spider Man" was "unprecedented". There was nothing unique about this film being "unprecedented".

It got worse when they brought up the 3D movie arguments. They say 3D movie experience will be a big hit, thanks to technological advances in professional film making. It will be the "differentiator" from current home theaters. But don't they know that there will be advances in technologies in consumer electronic? And often happens at a faster pace? Didn't we already have consumer P&S cameras that can capture 3D pictures (and perhaps movies) announced at CES this year? It's still a risky bet on 3D for movie studios/private equities. The fact that it is based on a new technology does not guarantee a safe investment.

Nothing new here. Let's move on.

trending days

The day's not over yet. I'm done for the day fairly early today as I do not want to get into emotional trading. Best thing is to stay away.

We now have two huge trending days in a row! My guess is that we're not going to see much of a bounce today, if at all.

Last Friday's market action (previous blog) was an early warning. We got congestion in that 113-115 range. Market fails to make new highs with great volume - often signs of market top. The breakout of that range makes a great directional trade and should be indicative of what's to come in the following weeks, if not months.


Yesterday was a good day. Shorted before the Obama news. The market was going to drop despite the news. The difference is that it makes a good "news" - newsheads now have something to talk about - the REASON market fell.

I was actually not aware of the news. Suddenly I see financials took a dive, especially GS, which had earnings that morning. Terrible for me, because I actually finished shorting, having just covered COH, FCX, BUCY, and now reversed to going long on EBAY and UNP. Admittedly, it was a quick scalp trade. Not waiting for exit signs/signals, I'm out of those trades before I knew it. Financials is supposed to lead, not lag. GS I was already having an outsider reversal at that time. I was out with minimal losses. Without the Obama press conference, EBAY and UNP could have worked out. It's perfectly fine that they are losers. It's part of the game. Unpredictability must be factored into the trading process.

This morning's open was below yesterday's low. Just on that, I thought today was going to be another trending day. I thought I was wrong at 8am when market made a new high for the day.

My shorts didn't go well. I waited a bit too long to cover on MON, resulting larger losses than usual.

Turned out today IS a trending day, a big one. Volatility spiked 23% (as of now)... and I missed many signals during the day. My conservative SPY June put is up 23% as well.


Why did I ...

Hindsight kills.