Category Archives: Markets

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Inside Chinas Surreal Housing Bubble on 60 Minutes

This is a great 60 minutes piece on China’s housing bubble. The middle class is turning towards real-estate for investment so builders are constantly putting up new buildings, developments and cities. But with only a privileged few buying multiple apartments, there is nobody to occupy these new developments who remain ghost towns for months and years.

As a side question: what would happen to the world markets if the Chinese economy was to implode?

Quandl

Graph of Market Cap AnalysisI have recently discovered Quandl, which, per their website description:

[…] has indexed millions of time-series data from over 400 sources. All of Quandl’s datasets are open and free. You can download any Quandl dataset in any format that you want. You can also visualize, save, share, authenticate, validate, upload, index, merge and transform data. Our long-term goal is to make all the numerical data on the internet easy to find & easy to use.

Read More …

Computational Investing, Part I at Coursera

I posted a little while ago about a Coursera class I took which covered financial analysis done with Python. The course was called Computational Investing, Part I. I find the topic interesting so I figured I would highlight what I enjoyed the most in a short series of posts.

The course, offered by Tucker Balch, an associate professor at Georgia Tech, covered various topics of portfolio management including several drawn from: Active Portfolio Management: A Quantitative Approach for Producing Superior Returns and Controlling Risk by Richard Grinold, Ronald Kahn.

Active Portfolio Management, by Grinold and Khan

We can breakdown the course in two distinct portions:

  • Lectures and theory :: The lectures covered a number of topics relating to instruments and portfolio valuations like:
    • Market mechanics
    • What is a company really worth
    • Capital Asset Pricing Model (CAPM)
    • Risk and Sharpe ratio
    • and more.
  • Practical work :: On the practical side, several homework was given where we explored computational techniques using Python, Pandas and QSTK:
    • Intro to Python/Pandas
    • Manipulating data with Numpy
    • Manipulating market data with QSTK
    • and more.

The lectures were well adapted for a beginner audience. Someone who understands the concepts could easily skip or fast forward through some of the lectures. I would sill consider the course useful as long as you are getting what you need from the practical homework.

Some students clearly did not have enough background with scripting and coding and struggled with the assignments. Yet they still benefited from the lectures and know more now about market mechanics, portfolios and risk.

Overall, I was very satisfied with the material presented in the course. Not perfect in any way but easy to adapt depending on your current situation and skill level. The lectures were interesting and provided some background information and more than enough leads for the curious mind to follow and research in depth.  One of the hardest thing to do when learning something new is motivate yourself to write useless code for the sole purpose of learning and practicing. This class provided the motivation required since the homework assignments forced me to code on deadline.

It is following the basic topics of the course that I embarked on my mission to dig deeper into Python, Numpy, QSTK and analysis of financial data using these tools.

In the next post, I will explore QSTK’s basic functionality.

Previous and related:

Next on topic (this is work in progress, most posts will show up in the weeks to come):

  • more to come…

What does one half second of trading look like?

Great piece in Smithsonian.com which covers work done by Eric Hunsader at NANEX.

NANEX produced a great video which shows one half second of JNJ order flow. It was slowed down so we can visualize the flow and see fast the top of book changes at each exchanges. Make sure to watch in HD and full-screen to improve the experience:

According to Eric Hunsader:

Each box represents one exchange. The SIP (CQS in this case) is the box at 6 o’clock. It shows the National Best Bid/Offer. Watch how much it changes in a fraction of a second. The shapes represent quote changes which are the result of a change to the top of the book at each exchange. The time at the bottom of the screen is Eastern Time HH:MM:SS:mmm (mmm = millisecond). We slow time down so you can see what goes on at the millisecond level. A millisecond (ms) is 1/1000th of a second.

This video was part of Mr. Hunsader presentation at the Wired conference.

Coursera and MOOC

I have recently signed up for a class on Coursera. The class is Computational Investing, Part I and so far I am having a great time.

The class is made up of video lectures, usually 10-15 minutes long, posted each week. The lectures are usually split in modules making it easy to break up your work on the class in small chunks. You do not have to lock up 2-3 consecutive hours to get the class down. I break up my work in small chunks based on free time.

MOOCs or massive open online courses have been around for a little while. They are a great way to start learning something new or increase your knowledge in a field you know well already. Sometimes just the collaboration with other students and having to do reading and homework is a great way to keep your brain sharp.

I may have a few more posts about this course in particular.

Trading List for Monday, April 21

Here is trading list for today.

This list is powered by StockTickr. Learn more.

Long UVV

I have no positions in UVV yet but I am considering it as a long. It popped on my Candidates list this morning and I thought it was a nice chart. First the big picture:

From this BigChart, we see a wide 10pts base. The price stayed in that 45-55 range from August 2007 up until early February. At that last up swing, it broke right through the 55 resistance and reach levels from a year ago.
On the candlestick chart:

Based on several factors (the size of the base, the ADX/DMI indicator and the size of the pullback), I still consider UVV in a pullback only which means the trend should resume shortly. A good to play this stock would be an entry above the open 2 days ago (around 66 for 4/3) with a safe up move to last resistance levels (68). At that level, keep the stops a lot tighter and watch for another reversal but ride it until the next pullback.

Post-market 3/25/08

An overall very low volume day. Feels like everyone took a breather and a back seat trying to see where this was going. A complete loss of momentum is not what you want in the middle of what people considered a recovery. As usual, main stream media was very quick at making the last three bars poster boys for bull markets but the reality is not this clear. I guess up and down sells news more than indecision.
Lets look at the daily chart to see where we are:

The DOW is sitting right at 12,530, barely passed the 50 days EMA. We had two strong and long candles but today, we traced a very short candle with low volume. We just barely broke to several key marks on my chart (EMA-50, downtrend line) and we are reaching for two more (EMA-200 and top b-band) but we will not make it with volumes like this. Nothing on the ADX/DMI indicates a trend yet so I still consider us sideways. When sideways I pay more attention to the oscillators and in this case, the Slow Stochastic is getting near overbought. Overall, I am losing a little faith in the current market.
Similar concerns on the SPX:

Dropping volume coming to the trendline and the 50 day EMA is nothing to build confidence in the market. Nothing on the ADX/DMI and Slow Stochastic also getting oversold. We are losing steam.
Lock in some profits on your swings and position trades and keep your stops tight.
Happy Trading!

Post-market 3/18/08

Big day on the board. There was a fed announcement today and another rate cut. 75 basis points this time so the new rate is 2.25%. I didn’t read the entire policy but it seems like the decision was far from unanimous and that 2 member wanted even less the 75 points, making 3/4 the compromise. The wording is being picked apart everywhere so I am not going to bother here.
Overall, things are not looking too too bad. The market showed resilience yet again when the fed delivered a cut under expectation. It was widely known that the full-monty was priced into the market by 2pm.
On the other hand, the dollar is still very weak, the oil is still high and I see no clear sign of recovery in the near term for the housing market.
Clearly we are not out of the woods yet because if things do not turn around soon, the Fed will eventually run out of bullets and we will see what many believe has already started and is just being delayed by the Fed actions: the recession.
I am not overly negative though and still pretty 50-50 on the issue. I would rather be ready to ride whatever comes than to try and predict what is coming and miss the target.
Lets look at the weekly chart for the Dow:

The weekly chart helps me get the big picture. We can see the down trend that prevailed starting last October. The way I read the chart, the downtrend ended when ADX turned upwards around the second week of January. Although January was a difficult month, the consolidation phase or sideways phase had started. The ADX has been climbing since but not strong enough to define a direction yet. A strong trend would need the ADX above 30. If the current up movement continues, we could end up crossing through 12800 with a strong ADX which would be an excellent bullish indicator for the market. But overall, the chart is also very telling with regards to market movement and volatility. We see a lot of very long bars going both ways.
Now for the daily chart:

The daily chart show the current consolidation phase. The first push at the end of January was strong but no enough to break out. Now we have been bouncing back and forth and we can clearly see how the ADX shows the lack of trend in the current market.
And finally the 15-minutes chart:

And think the chart says it all. The swing like yesterday’s two long 400 pts bars and today’s big 150 pts drop and quick recovery following the Fed announcement. Anyone trying to predict anything here must be having a field day.
Happy trading!