Things change pretty quick

Well, I don't really know what to say... things change fast. One minute you have a diamond in your hand, then next minute you drop it and it disappears. That however is a metaphor for a situation I don't really want to get into. Life tests our ability to stay resilient, I think. Every time we overcome a challenge, we are presented with a bigger one. This is the nature of life and we need to learn to be ok with it. The bigger the challenges become, the more progress we make in our personal growth. So in a sense we should be grateful that we have these challenges to start off with.

Does the Dow Theory say we can worry yet?

A few months ago I posted about the Dow Theory and how according to it at the time there was not yet anything to worry about. A link to that post can be found HERE. 

In there I looked at the S&P500 and the Russell 2000 and whether they were breaking to new lows roughly at the same time. Well I've still been looking at them and since then, the picture has changed somewhat.

Again based on daily closing prices, the first index to break the lows (which incidentally is no longer the most recent significant low as I am still using the same lows of October 2014) was the Russell 2000.

7 Days ago the Russell 2000 took out the October 2014 lows.

And roughly at the same time (i.e. today), the S&P500 also broke to a new low... temporarily at least.

S&P500 pierced below the lows of October 2014 but managed to close above the level.

Looking closer we see that the lows have not been broken yet, well, not entirely anyway.

Could it perhaps be the hammer of destiny?

Well, ok then. So what now? I think we wait for the weekly candle to close on Friday and we look again once the weekly candles are formed and use those to tell us if this is the making of the greatest hammer formation I have ever seen, or, according to Dow Theory, is the beginning of the end of our 7 year bull market.

5 life lessons from the gym locker room

I've recently started going back to gym and today for the first time in, well, probably 20 years, I made use of the shower facilities at the gym. Not that I have not been at the gym for 20 years, but I have not used the gym locker room and showers for, well okay maybe not 20 years, but definitely more than 10. I have tended to avoid this penis parade for most of my life so far for a few, what are in my opinion, very good reasons. 

Firstly, well, I mean dude, nobody wants to see your junk. Put it away, use a towel, wear underpants, do something. Just get that shit under control and out of my sight please. Secondly, why is everyone looking at me funny because I haven't freed willy? Leave me alone man, I'm not here to make friends or to 'hang out'. Is this some sort of cult that I am refusing to be a part of, or just 'man stuff' that I don't understand? Who cares? Fuck off. It's mine and I'm not comfortable with you looking at it.

Anyway, all that awkwardness out the way, there are some valuable lessons I learned this morning. I am seeing them as lessons in manliness, and I now share them with you:

1. Walk around with your shit all hanging out because that's what men do.
2. Use the word 'oak', or 'oke' a lot. For example: "Okes just leave their bags all over the place boet."
3. Make small talk with people you don't know. Okes love talking to weird naked strangers while they're rubbing cream all on their junk. 
4. Talk about how loose and/or stupid woman are. This is an important one I would imagine, because statements like "chicks are hornier than us oke" and "they can get dick at any time boet, you gotta be careful", or "Sandton chicks are daft oke, they grew up too rich, you must just fuck them and leave them, use them for what they're good for", are met with enthusiastic nodding and varying grunts of general agreement.
5. Tell people how expensive your holiday is going to be. Don't, and I mean DO NOT mention an actual figure of what your holiday is going to cost. In fact, if someone asks you outright, avoid answering this question by any means. Although, you must tell the other okes that is it going to be fantastic and very expensive.

I imagine that as time goes by I will probably learn many more valuable lessons. So as and when I learn them I will keep you updated. For now though, stick to these 5 rules and I think you will survive.

Day in the life of a trader

A little while ago I had the privilege of presenting a JSE Power Hour. To be honest, this was one of the most humbling experiences I have had in my life so far. I am very grateful to have had the opportunity to share some of my journey with people whom it may be able to inspire. 

I have received some feedback that in the video of the presentation on YouTube, the slides are not synchronised with the speech. So if you would like to listen to the presentation while going through the slides, you are welcome to listen to the video below while flipping through the presentation. 

The presentation can be downloaded by clicking on the link below:

Day in the life of trader presentation

And the video can be found here:

Sometimes

Sometimes life gives you something so great that you sit wondering how on earth you could have deserved it. Sometimes it takes from you something that has become the cornerstone of your purpose in an instant. Sometimes you can slowly see that coming. Sometimes you can do nothing about it and choose to bury your head in the sand in an attempt to avoid the inevitable. Sometimes the inevitable is not inevitable. Sometimes things work out better than you expected. Sometimes things work out differently to what you wanted and that turns out to be better than what you were hoping for. Sometimes you have to choose to do what is difficult and uncomfortable in order to get a shot at something that may or may not work. Sometimes it's worth it. Sometimes you need to walk through hell with a brave smile on your face. Sometimes you must choose uncertainty over absolutes. Sometimes it's easy to do that. Sometimes it's not. Sometimes doing things that are out of your character and against your nature is the only way in which you can grow. Sometimes you have to force yourself to grow. Sometimes you have to make incredible sacrifices without knowing if they will ever be made for you in return. Sometimes you just have to take that chance. Sometimes things are worth risking everything for. Sometimes you have to accept that you are not in control. Sometimes you have to give life the space it needs to unfold at its own pace.

So what about U.S. interest rates?

There is no shortage of people speculating about what is going to happen with regard to the U.S. interest rate hike situation so I figure I may as well through my 2c into the pond as well.

The way I see it is that the Fed had said that they are looking at two major factors before they can increase interest rates. These are (paraphrased of course);

1. a reasonable expectation that inflation will reach 2% within 12 months

2. full employment in the economy

So addressing these:

1. Now ok, we know that inflation in the U.S is rather stubbornly low, although we have been seeing it creep up the page a little. Lot's of mixed data coming out in terms of PPI and CPI and so on, although it does seem that the current near zero interest rates is and has been allowing consumers to spend like there is no tomorrow. I am no expert on this but I think that if nothing changes, within 12 months we could see 2% inflation in the U.S.

2. We've seen that Non-Farm Payrolls came out much lower than what was expected for the month of August. We also saw that Unemployment Claims came in lower than expected for the month of August. So what this is telling me is that fewer jobs are being created, but at the same time less people are unemployed. Sure you will never be able to get completely 100% rid of unemployment, but what it looks like is that the U.S. economy is approaching full employment.

So taking these two factors into account, I would say that we are likely to see a 0.25% increase in interest rates when the Fed makes their announcement later this month.

That's my 2c.

@TraderPetri 

Dow Theory says nothing to worry about ... yet

I've been very worried about the market at large and that what we are seeing is perhaps the beginning of another 2008 type scenario. I wasn't around when the last crash happened, well I was around, I just wasn't involved in the markets (I bought my first share in 2009 - if only I never sold it...). Anyway, I've been looking at the charts and freaking out about the news like most people I suppose and started to really get worried about the world markets at large, thinking that they are about to come crashing down at any second.

This may still be lingering in the back of my mind, although I have found some comfort that we do not yet have confirmation of the end - according to Dow Theory - yet.

One of the rules of Dow Theory is that there needs to be confirmation of new highs or lows on two various indices before one can comfortable say that a new trend is forming. These two indices were once the Dow Industrial Average and the Dow Railroads Average. Times change though and in modern times a more accurate measure of the U.S. markets would be to use the S&P500 and the Russell 2000. Now the basic idea here is for both of these indices to break to new lows roughly at the same time before we can confirm that the overall market trend (primary trend) is changing.

Looking at the S&P500, we can see that the last major low has not been taken out yet.

The most recent major low is indicated by the red line and until that line is broken by price, we cannot say that a major new low has been formed.

When looking at the Russell 2000, we can also see that no major new low has been formed yet.

The most recent major low is indicated by the red line and until that line is broken by price, we cannot say that a major new low has been formed.

So based on the concept of confirmation as stated in Dow Theory and adapted to our more modern market, we cannot say that the Primary Trend has changed yet.

This does little to soothe the nerves, although it does add some perspective. Only one those lows are taken out on both indices at roughly the same time can we confirm that the general market is moving from Bull to Bear mode.

*Note the the red lines (for confirmation) are based on daily closing prices and not on intraday spikes.