Schaeffer's Trading Floor Blog
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Sharlee says - "Take a look at a weekly chart of AMZN. Don't you just know they have done "swimmingly" this past quarter? We will find out tonight."

My response - Amazon.com (AMZN) heads into their earnings announcement with the shares near their annual low and an equity scorecard reading of four. The chart that caught my eye is the Internet HOLDRS (HHH)...

Created with SuperCharts by Omega Research

The daily chart of the HHH shows the recent decline with the 50-day moving average. The weekly chart highlights the support near 50. Since he mentioned it I thought I should show the weekly chart of Amazon - which is not encouraging, and the chart of eBay for further perspective (and because I need to fill out my table).


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We emerge from lunchtime with the SPX tagging new lows for the session...


Chart Courtesy of Thomson/ILX

I don't see much in the way of major headlines and most of the "reasons" I am seeing for the decline look more like after the fact rationalizations than catalysts. In other words, it seems more like random volatility than a reaction to one particular event...


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Index Check

by 4/26/2005 1:08 PM
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Here is where the market stands as we glide through lunch...

Here we see a much more mixed picture from what we saw at the open...Oil is still down as are internet stocks...As I noted earlier, semis took off with the surge in NYSE net ticks but have pulled back from their highs of the day...Bonds opened higher but have reversed...Biotech opened higher and is still one of the leaders...


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Swans...

by 4/26/2005 12:17 PM
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The buying spikes settled down shortly after the indices pushed into positive territory and I have been using the lull to work on my weekly column for the homepage...

The focus of the column will be Massey Energy (MEE) which is a stock I first profiled back in February. The shares recently pulled back and bounced off the prior resistance zone near 36. While the equity scorecard is neutral there are a couple of points that might still make the stock interesting.

However, the reason for this post is not about that stock. It has to do with the topic of risk. Last week I noted I was reading through the trading psychology chapter from our "Mastering Advanced Options Strategies" and listed some key points for traders. One of the other things that caught my eye was concept of the "black swan" from Fooled by Randomness, by Nassim Nicholas Taleb. This topic came up on the trading floor this morning so I thought I would use it in my column. But I also thought you might be interested to see it also. The excerpt below explains this concept...

    "In his Treatise on Human Nature, the Scots philosopher David Hume posed the issue in the following way (as rephrased in the now famous black swan problem by John Stuart Mill): No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion."

The study course then goes to note this conclusion from Taleb:

    "I can use data to disprove a proposition, never to prove one. I can use history to refute a conjecture, never to affirm it. For instance, the statement "The market never goes down 20% in a given 3-month period" can be tested, but it is completely meaningless if verified. I can quantitatively reject the proposition by finding counterexamples, but it is impossible for me to accept it simply because in past data the market never went down 20% in any 3-month period."


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In response to my cynical post on IBM, Dave says - "RE:IBM the only thing they forgot was the stock split..."

My response - The cynical response would be that they need to keep some "powder dry" in case today's gains don't stick...

Luckily, I am not that cynical...Am I?

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