Is it irrational for poor people to have smartphones?  Maybe.  Irrational or not, I can’t see this powerful trend reversing anytime soon.  No wonder there is such a strong backlash at initiatives like SOPA/PIPA/ACTA.  Young people have strong feelings about their online lives and don’t want the government interfering.  Click below to read the whole article.

Think about how technology and connectivity has changed your life.  What is that worth?

When a twentysomething’s budget is tight, her smartphone is far from the first expense to go, suggests a new study from Nielsen.

The survey of 20,000 U.S. mobile customers found that smartphone ownership skews toward the young and the wealthy — exactly as you’d expect.

What is more surprising, however, is this nugget: smartphone penetration among young people in the lowest income bracket is higher than it is among older people in the wealthiest bracket.

Among 18- to 24-year-olds, more than half of respondents who make less than $15,000 each year said they own a smartphone. This might be explained if the parents of many college-age students footing their children’s phone bills. Still, even in the next oldest, post-college age group, the percentage of those in the same income bracket who own a smartphone was a mere 13% lower.

Source: Even on $15,000 a Year, Most Young People Buy Smartphones [STUDY] (Mashable)

H/t: Mark J. Perry

The analysis is of the S&P 500 futures.  Remember, we’re not trying to get every twist and turn correct, but rather we highlight a couple of high probability situations per week.  The data is difficult to read and interpret at first, but once you know what to watch for it’s easy.  The top curve is always the most dominant pattern in the database.  A couple key elements to look for:

• Identify the portions where the two curves are in agreement
• Identify the steepest angles in the curve
• Notice if both curves closed higher or lower or if they’re split (directional agreement is better)
• Observe the general shape of the curve

This deep quantitative analysis mixed with art interpretation.  Look at the following curves through the lens of these four points and spot your trades.

Notice that you couldn’t fade Thursday by those rules — but you could sell the open on Friday.  Would knowing that have kept you out of some trouble this week?

Note: The arrows were added by me to emphasize what I interpreted as high probability times and directions.  They were included with the report emailed to the beta testers.  This wee was not the best week that the software has performed, but I’m showing this week because it was a super hard week to trade.  If you have any questions send me a message through the contact tab.

Monday February 13, 2012

Report:

Actual:

Tuesday February 14, 2012

Commentary:

This is one of those rare occasions where there is literally nothing actionable.  When in doubt, don’t do anything.  You can see the report here and the actual trade here.

Wednesday February 15, 2012

Commentary:

This is another occasion where there is nothing actionable.  When in doubt, don’t do anything.  You can see the report here and the actual trade here.

Thursday February 16, 2012

Report:

Actual:

Friday February 17, 2012

Report:

Actual:

The early warnings signs have arrived, telling us that we’re back to a two-way market, but the true deterioration that often accompanies a top has yet to emerge.  Technology continues to lead with value tech ($HPQ, $DELL) out front.  The energy sector surged and financials finally took a breather.  Transports ($FDX, $NSC, $UNP) were notable under performers as well as bellwether $FCX.  If forced to take a stand I will choose not to fight city hall but we are getting late in the game for this rally.

Remember that this is the market that birthed an Arab debt crisis (Dubai), a European debt crisis, an American AAA downgrade event, and a flash crash that collectively has transferred unfathomable wealth.  There is another surprise right around the corner.  Trust me.  Question is, does is happen after a gentle topping process or a runaway blowoff 30-40 handles higher from here?

Winners: $DVN, $APA, $EMC, $HPQ, $INTC, $DELL, $BMY

Losers: $FCX, $FDX, $NSC, $UNP, $GOOG, $AMZN, $BAC

Unless something changes dramatically in the near term we’re likely to see highs in the months ahead.  I still think we’re in a bull trend and pullbacks are to be bought.  Trust me, I’m no bear.

The market knows exactly when to screw the most longs and when to pound the most shorts.  I do not questions the motives and mysteries.  Interpret, act, and adjust.  Check out the $TRAN index breaking the late January pullback lows.

• He was already an accomplished artist with credibility in both the underground and galleries across the world.
• Made his first stake in Vegas using a progressive betting system.
• Spent several months in Japanese prison for assaulting a security guard.
• Made a fortune taking facebook stock rather than cash payment for commissioned art because he saw something in Sean Parker’s ambition and drive.

What’s the moral of the story?  David is a controversial guy and when it comes to his Vegas exploits and his general view on life I can assure you that there are thousands who take the same path and end up poor, destitute and alone.  David surely had talent and luck on his side.  Regardless of your personal opinion of the man, he’s led an interesting life and dominated in his chosen vocation and exemplified, in the most spectacular way, the old adage that if you do make a big bet, always bet the jockey not the horse.

Watch the whole Howard Stern interview here: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6.  Warning, the subject matter will be seriously offensive to some.  It is a fascinating interview and certainly a life worthy of cinematic treatment, but if you’re not a Howard Stern fan just skip it and wait for the Hollywood version.

There’s a reason millions of people try to solve crossword puzzles each day. Amid the well-ordered combat between a puzzler’s mind and the blank boxes waiting to be filled, there is satisfaction along with frustration. Even when you can’t find the right answer, you know it exists. Puzzles can be solved; they have answers.

But a mystery offers no such comfort. It poses a question that has no definitive answer because the answer is contingent; it depends on a future interaction of many factors, known and unknown. A mystery cannot be answered; it can only be framed, by identifying the critical factors and applying some sense of how they have interacted in the past and might interact in the future. A mystery is an attempt to define ambiguities.

Puzzles may be more satisfying, but the world increasingly offers us mysteries. Treating them as puzzles is like trying to solve the unsolvable—an impossible challenge. But approaching them as mysteries may make us more comfortable with the uncertainties of our age.

Remember that while trading is a puzzle, the market itself is a mystery which will never be solved.

Warning signs are creeping into the market ever so slowly — but a doji candlestick formation is not one of them.  Markets on a run like this don’t just crash, they infuriate everyone with a long and painful topping process.  I expect this doji bar to get will be trampled and sent to the doji graveyard along with hundreds of other invalidated candlestick signals.

There are a lot of people yelling at the top of their lungs that “Everyone is BULLISH.”  While I agree that sentiment is getting stretched, last time I checked sentiment can stay quite bullish during bull markets.  Don’t be bearish just because it’s cool to be a contrarian.  That shit COIF.  If you think people are bullish now, imagine the buying frenzy that would occur if suddenly the S&P was trading at 1275.  Like it or not, the market tone has changed.  It’s okay to be prudent, just know that pullbacks will be bought aggressively.

Some minor warning signs include the bellwether $FCX having a terrible week along with most of the materials sector.  Rails and transports also had a very poor showing in general.  Low quality stocks continue to perform well which is always worrisome.  On the positive side, technology continues to lead the market and move higher via AAPL pulling up the entire XLK up by its hair.  Yes, AMZN and ORCL stumbled this week, but overall tech is still strong.

I will not get too concerned about the transports and the rising tide lifting all the crappy boats until there is something to actually be concerned with.  For example, if the S&P is making highs above 1370 and transports are selling off, or if the MAMO index turns, or if the market starts actually reacting to bad news, then I’ll start shifting gears.  As annoying as it is, the market is objectively trending higher.

Winners: $AAPL, $V, $DIS, $PM, $NKE, $PG, $BAC, $LMT, $UTX

Losers: $MON, $AA, $FCX, $NSC, $UNP, $MS, $GS, BK

Artistic rendering (algo generated in the previous evenings work):

Master market’s actual performance (S&P Futures):

The low of the day timing was a little bit off, but the analog fits rather well.  Don’t worry, more information about this tool is coming.

For more on Josh’s story check out Freedom Chair.

Chart courtesy of SentimenTrader.com.

This study plots the “dumb money confidence,” the “smart money confidence” and the spread between the two.  The theory is that smart money will be a buyer during market bottoms a seller into rallies.  Dumb money, on the other hand, will enter the market after most of the gains have already been realized and become bearish after most of the decline has already occurred.  When the two groups diverge significantly from one another it marks an extreme sentiment reading that should be taken as a contrary indicator.

I’ve highlighted the extreme optimism spread readings since the bull market began in 2009.  As you can see, when the market was momentum-driven in 2010 the extreme optimism reading lasted a considerable length of time.  The extreme optimism readings mostly led to mostly minor corrections (although some of them were monsters).  My point is not to criticize the indicator.  In fact, the indicator nailed the bottom of the markets with great consistency since the beginning of the bull run.  It also nailed most of the tops during the previous bear market.  Obviously the lesson is context.  Yes, we are currently at a sentiment extreme, just within a larger context of a bull market.  The pullbacks are most likely buying opportunities and sentiment will remain optimistic for extended periods.  This is how the market is rolling.  Until it doesn’t.  Sure, caution is warranted but don’t expect Armageddon around the corner.

This is an amazing indicator and I would highly recommend having Jason Goepfert’s research in your trading toolbox.  He’s the man when it comes to quantitative analysis of a notoriously hard-to-quantify subject.  An important note about this indicator is that it is calculated using real-money gauges rather than subjective opinion polls.