When to re-enter the market?

[AMR]

What sort of correlation is there on a weekly, or even monthly scale? Significantly better than 23 vs 20?

[Crypto Crude]

AMR,
Print the NZX index graph... print DOW index graph... put them side by side and you will see the correlation is high, but not exactly equal to 1....
...
Im sorry, I dont know exactly how to post the graphs like phaedrus does...

.^sc

[duncan macgregor]

What sort of correlation is there on a weekly, or even monthly scale? Significantly better than 23 vs 20?

You are quite right the markets follow each other some more than others. The NZX is greatly influenced by the DOW, as is the ASX. I made a killing last year following Nickel prices in london where almost all nickel companies in Australia followed the trends up and down in unison. To ignore overseas prices, and trends in markets and only concentrate on trends of compamies in NZ is very short sighted.
I would have thought you would have been more switched on to it than that PHAEDRUS. Macdunk

[Phaedrus]

Duncan, I trade stocks in the USA and use an appropriate American index to monitor that market as a whole. I do not need to consider the effects of other major markets, because any influence they may exert is already expressed in the SP500.

I trade stocks in Australia and use the AllOrds Index to monitor the Australian market as a whole. I do not have to worry separately about the effect of other major indices because any effect they have is already reflected in the AllOrds.

Ditto NZ. A New Zealand Index is the best instrument to monitor the NZ market. Because it incorporates all influences (including movement of other major indices) it is all you need.

The market discounts everything.
This is the most basic and the most important tenet of Dow theory. The market (yes, even the NZ market) reflects every possible knowable factor that affects it.
"The sum and tendency of the transactions of the Stock Exchange represent the sum of all Wall Street's knowledge of the past, immediate and remote, applied to the discounting of the future. There is no need to add to the averages, as some statisticians do, elaborate compilations of commodity price index numbers, bank clearings, fluctuations in exchange, volume of domestic and foreign trades or anything else. Wall Street considers all these things." (Hamilton, W. 'The Stock Market Barometer', pp 40-41).

[Bilo]

I think that the worm has turned. Where the index may have once reflected the sum of all the little stock specific trades there is now so much money being dumped onto indicies that the index drives share prices in major overseas markets and Australia. So some pimply faced young kid is deciding that the oil price is down therefore I will dump oilers, the Ni price is down so I will balance my index by dumping Ni producers, we are hot on coal stocks so they will trade at a PE of 50 in a bear market, they do this irrespective of individual company performance, because they obviously can't take in all the coy specific news. So we have good company's with good news getting trashed and coys with bad news being re-rated. We have competing indexes having cyber battles. The banks are using their own stocks to manipulate the day ends, while they dither over which of their stock holdings to selectively add/reduce. Just my observation of the carry-on that this liquidity crisis has accentuated in the ASX.

A major lesson for me has been to never go against the index no matter what the fundamentals may indicate. Something that to Phaedrus is akin to a religious obsession. Opting out of the stocks that the indexes use most to balance their positions is something I am still working on as some of my favourite coy stocks have been hijacked and index activity seems to be multiplying by the month.

NZX may be the exception as our market hasn't been hit by the computerised "bot" trading that plagues the ASX. Long may this remain.

[AMR]

CMC are about to set up an NZX15 cfd futures index, so the dream is over.

Phaedrus,
On a totally different topic, are you able to knock up some technical analysis of housing prices?

[upside_umop]

yeah, i was thinking the same (housing)...would be interesting to see the OBV of housing market at the moment.

[patsy]

The market discounts everything.
This is the most basic and the most important tenet of Dow theory. The market (yes, even the NZ market) reflects every possible knowable factor that affects it.
"The sum and tendency of the transactions of the Stock Exchange represent the sum of all Wall Street's knowledge of the past, immediate and remote, applied to the discounting of the future. There is no need to add to the averages, as some statisticians do, elaborate compilations of commodity price index numbers, bank clearings, fluctuations in exchange, volume of domestic and foreign trades or anything else. Wall Street considers all these things." (Hamilton, W. 'The Stock Market Barometer', pp 40-41).

Phaedrus - this quote from the Dow Theory sounds remarkably close to the Efficient Market Hypothesis in what is called the EFH's Weak Form. The Weak Form of the EFH was established to discredit the use of TA. I'm unsure if you agree entirely with the quote because it seems to me it would fly in the face of your investment outlook.

[duncan macgregor]

Nothing like the proof of the pudding to settle an arguement. I will tell you each morning this week a forecast of the NZX trend for that day only going off what the DOW did.
GOOD day, BADday, or INDIFFERENT day.

1, MONDAY is a good day. The result was
2, TUESDAY
3, WED.
4,THURS,
5,FRID,

I hope we have a rock and roll week to give me a real test. Macdunk

[winner69]

Big call in the Sydney Morning Herald this morning

Share market expected to open higher

http://news.theage.com.au/share-mark...0420-27fo.html