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The US rallied overnight. The Dollar fell. Commodities rallied. And as I write this note, Shanghai Composite has rallied from exactly all the support levels that I had talked about yesterday. While it is too early to say that the supports will hold, the rally from exactly those support levels is uncanny.
This does indicate a rally in world equities and commodities as long as Shanghai behaves. My problem is that I am not entirely certain that this rally in Shanghai is sustainable. It is possible that the supports will hold for a few days and then give away. Suffice to say that we are still on the proverbial knife's edge.
I did go short yesterday when we broke below 4350. I might have to cut the short positions some time today. Going long is another matter. I will wait I guess.
Even in commodities we have seen Crude making new highs and Copper surging towards it. It is therefore a period of time for almost all asset classes when we have not seen trends continue for more than a couple of days.
Since I have come to the conclusion that Shanghai is still poised I looked at the Baltic Dry Index to give me a better understanding of the markets. This index has been moving down for the last couple of months. The Freight rates must be a function of volume of trade between countries which in turn must be an indicator of the strength of the economy. I am not completely certain this logic holds all the time but I must be largely right. Then this divergence between the BDIY and the commodity prices-specially in the last couple of months is difficult to explain.
Man, I am getting more and more into looking at different indices to get a clue of what is happening in equities. Tomorrow I might look at Treasuries and also the CDS markets to get a better picture.
What is happening to me? I am beginning to see in me a need to get explanations for what is happening in equities. A need to be able to prempt the moves in Nifty rather than act on the moves in the Nifty. This need to be able to explain every squiggle in the Nifty. This problem- yes this is a mental affliction- I will call the Shanghai Syndrome.
I wonder who gets afflicted by this syndrome and what determines the intensity of this affliction. After a lot of research-which included staring out of the window for 2 minutes in deep thought- I have come to the conclusion that this syndrome usually afflicts the trader whose P/L is not healthy. And the strength of the affliction is inversely proportional the profits in the book. This I will call the Shanghai Syndrome Law.
Now that I have discovered the Syndrome and the Law that governs it why not find the cure to this syndrome?. Again deep research has led me to the conclusion that the cure lies in just trading each asset on its individual merit without worrying about the correlation across asset classes. Just follow the rules of trading for the individual securities. A couple of weeks of this single minded effort has been found to be very effective of ridding oneself of this syndrome.
Can you imagine!!! In one morning of writing these notes I have discovered a Syndrome, found the law that governs it and even discovered a cure. Just think what can happen if I continue to write these notes for a year!!!.
This does indicate a rally in world equities and commodities as long as Shanghai behaves. My problem is that I am not entirely certain that this rally in Shanghai is sustainable. It is possible that the supports will hold for a few days and then give away. Suffice to say that we are still on the proverbial knife's edge.
I did go short yesterday when we broke below 4350. I might have to cut the short positions some time today. Going long is another matter. I will wait I guess.
Even in commodities we have seen Crude making new highs and Copper surging towards it. It is therefore a period of time for almost all asset classes when we have not seen trends continue for more than a couple of days.
Since I have come to the conclusion that Shanghai is still poised I looked at the Baltic Dry Index to give me a better understanding of the markets. This index has been moving down for the last couple of months. The Freight rates must be a function of volume of trade between countries which in turn must be an indicator of the strength of the economy. I am not completely certain this logic holds all the time but I must be largely right. Then this divergence between the BDIY and the commodity prices-specially in the last couple of months is difficult to explain.
Man, I am getting more and more into looking at different indices to get a clue of what is happening in equities. Tomorrow I might look at Treasuries and also the CDS markets to get a better picture.
What is happening to me? I am beginning to see in me a need to get explanations for what is happening in equities. A need to be able to prempt the moves in Nifty rather than act on the moves in the Nifty. This need to be able to explain every squiggle in the Nifty. This problem- yes this is a mental affliction- I will call the Shanghai Syndrome.
I wonder who gets afflicted by this syndrome and what determines the intensity of this affliction. After a lot of research-which included staring out of the window for 2 minutes in deep thought- I have come to the conclusion that this syndrome usually afflicts the trader whose P/L is not healthy. And the strength of the affliction is inversely proportional the profits in the book. This I will call the Shanghai Syndrome Law.
Now that I have discovered the Syndrome and the Law that governs it why not find the cure to this syndrome?. Again deep research has led me to the conclusion that the cure lies in just trading each asset on its individual merit without worrying about the correlation across asset classes. Just follow the rules of trading for the individual securities. A couple of weeks of this single minded effort has been found to be very effective of ridding oneself of this syndrome.
Can you imagine!!! In one morning of writing these notes I have discovered a Syndrome, found the law that governs it and even discovered a cure. Just think what can happen if I continue to write these notes for a year!!!.
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