The Number Game

I was reading an article in the night yesterday when the S&P was at its high of 1060. It mentioned that the S&P was up on strong overseas advice and some decent economic numbers. Correct me if I am wrong but I thought it is only our prerogative to say that Asian markets are up because of strong US market performance. I had never expected this from the US daily note writers. This way we can all keep going up on the back of strong performance of the other in some kind of crazy virtuous cycle.

The other thing I wanted to talk about was economic data. If you ask me then US should stop its obsession with statistics. Numbers keep coming out every day. Manufacturing index, service index, unemployment numbers, GDP numbers, inflation data etc... I have lost count. Dozens of analysts pore over every detail with the intermediate goal of predicting where the economy is headed which eventually leads to a prediction for the market's fair value. All this would be fine but for the fact that numbers keep coming every day and the entire process needs to be done all over again.

In this crazy number filled world of ours the only way to maintain my sanity is therefore to simplify all this data to just a handful of numbers and create a system that I can trade. The system tells me that S&P is still trended down. The Dollar Index is currently still trended up but is about to change its trend to down again but only if it breaks below yesterdays low. Commodities are trended up.

Nifty is trended down. Only if we have a higher close than yesterday in the first hour of trading and then proceed to take out the high of the hour will I cut my short positions in the Nifty.

Finally to end this note, I continue with the belief that the S&P is nicely set for a further fall. And you know what? The daily note writers in India can then use the fall in the S&P to explain the fall in the Nifty.