Another tool to help figure out whats going on- money and markets

Defense related and not covered in the other categories? Then it goes here.
expat42451
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Posts: 36
Joined: Fri Nov 10, 2017 4:11 am

Sat Nov 11, 2017 5:07 am

This post is a result of another post of mine on another thread (NK) about watching money flows. RiffRaff asked if I would post here with some explanation as well as some links to information to share another tool for being forewarned. Considering that I have lurked here for a year, am probably one of the newest guys on the block , have gained over the time I have lurked - a lot of great information and perspective, I am happy to share what little I know. I have over the years since day trading started (for me 1993) traded stocks, futures and the international currency market as a very very small retail investor. What I have gained from this time around the markets i.e. in front of a computer with chart programs running, is a vague idea of how money flows work surrounding crisis and uncertainty. And its not as complicated as it may seem.

Large institutional investors and small guys hate uncertainty. A tool to use to begin to try to spot how "close" a conflagration is- or to try to verify a piece of sensationally bad news.....is money flow specifically market activity. Large institutions (you know the household names of the big investment houses and banks) are able to "buy" timely information and many-most times will react to a crisis before the major news outlets report it. From my observations over a long period of time, through things like elections, Brexit, FBI letters to the Justice Department in the US concerning investigations weeks before elections, and various other events, I have seen the extreme volatility that heralded these events appear anywhere from a half hour to 2 hours BEFORE any media reports. Hard and fast rule ? No. But watching markets is another tool in an arsenal we can use particularly given the situation in the ME and NK. Major investment houses will have as good information as most nation states have. Reason being interlocking directorates, interlocking "tentacles of interest", and your senator or congressman has a couple of mil invested with Gold in the Sack --- dont think there isnt going to be a phone call made as a balloon goes up saying "Get the money out of Asia." And that is only one possible avenue in how the institutions have better, quicker information than I do......Those of you here who are retired military and still have connections "inside" also have great info but maybe of a more localized nature depending on what your MOS was. Since I mention military here I want to state that I did not serve in the military and because of this my knowledge is very limited.

So how do we use this and what do we look for. Its pretty simple, we look at the major world indices. Like the DOW, Nasdaq and S&P 500 in the US, in Asia Nikkei 225, Hang Seng, Shanghai, Sensex and Singapore. We also look at futures if our local markets i.e US.... are closed. The first site I would recommend is here

https://www.marketwatch.com/

Marketwatch has a LOT of tools but a couple of simple things to know to get started.... MarketWatch is going to be pretty much in step with other news outlets in reporting what is going but the markets themselves will provide an advanced clue. Following the link I gave you look in the upper left hand corner of the page. Below the blue "sections" button are listed the following headings--US Europe Asia FX Rates Futures. Click on US and you see listed DOW S&P 500 Nasdaq Global Dow Gold Oil. The first column to the right is the value in either points or $ or some other denomination, the value fo the index or item. Second column to the right is the one we are interested in and it indicates the amount of change in the index or price (in the first column) since the open of the market that day. The 3rd column to the right indicates the change as well but as a percentage of the total. The numbers are red with a minus in front when the market is down. All of the sections work this way. Click on Europe at the top and you see FTSE100, DAX, CAC 40, FTSE MIB &c&c. Click on Asia and you have the Asia DOW, Nikkei 225, Hang Seng &c&c, For the sake of brevity I am not going to break out what all of the different markets are but will be more than happy to help with another post should any of you so desire. After Asia is FX which is the world currency market and shows major currencies. The Rates Column shows various sovereign debt bonds and their interest rates...... Finally the Futures column is important particularly when it is after hours for the US markets. Futures are derivatives and somewhat more complicated to explain but they trade 23 1/2 hours a day starting Sunday night and closing on Friday evening. The futures market closes for a half hour each day in the evening, then is open all night and the following day. Everyone in the world has access to it. The US futures will reflect the sentiment of traders worldwide. The Futures column has DJIA F (the DOW), S&P F ( the S&P 500 futures contract) , NASDAQ F (for the Nasdaq) Gold futures, for Gold, Silver and Crude Oil.

So you go Holy Crap how do we wade through this....... lets take the situation we had the other night when another forum member captured information from a source he was having trouble verifying, that commercial flight restrictions had been instituted over North Korea. When I read this the first thing I did was to look at Asian indexes. If you see for example, the Nikkei 225 down 500 points along with the other Asian indexes, and look at Gold futures and see that up $20...and look at US futures and see the S&P F down over say 30 points DOW F down 500 points then something is going on because it has shaken up the institutional investors and they have enough shares in their portfolios --where if they start dumping them it moves the price. 100 S&P contracts wont move the market. 100,000 will, and institutions will trade in large blocks when trying to escape danger. Had the FAA or the ICAO prohibited flight in the Korea's I believe we would have seen definite market movement on the downside.

Couple of things to bear in mind. As I stated before, investors hate uncertainty. N Korea launches a missile or another nuc test, the situation in the ME comes unglued i.e. Israeli or SA jets downed by Syria or Russia these types of things are going to move the markets. Investment houses typically rotate out of stocks, meaning the indexes we see here go lower because of selling pressure, Gold is going to go up because it is a safe haven, ditto silver. Oil is probably going to spike more if its ME rather than NK . US futures are going to be sharply lower if something bad happens. Sharply may be 300-500 points on the DJIA F, 30-50 points or more on the S&P F and maybe 50-100 on the NASDAQ Futures. During the day, when the normal markets are open, the futures will more or less move in lockstep with the indices.

Another place you can look is the US $ index since during a crisis many investment houses move into the US $ from either stocks, futures or other currencies. You can find the chart for this here

https://www.barchart.com/stocks/quotes/ ... tive-chart

If the US $ is sharply up in conjunction with other indices and or futures being sharply lower and Gold up sharply then something is up. Big down moves mean the investment houses know something has either happened or is going to happen and they are moving money to try to protect their assets.

You do not have to be a chartist or trader or know very much other than big down moves may signify panic. See a report from a source you dont know about commercial airspace being closed in an area of unrest or someone lost a fighter or a ship to hostile activity then look at Marketwatch. The big houses may decide to dump , say, airline portfolios since the major airlines cant fly there any longer until the airspace is reopened and their profits are going to be hurt. Also things have ripple effects. Big Down moves are generally a sign of bad things happening.

This may sound complicated and some of it is. However one simple thing you can do when you have unverified news is to look at the marketwatch page I linked to and see what the markets are doing. I use this daily as well as DEFCON in following what is happening and I hope for those of you so interested, that this will prove of use.

I hope this will help. Money flows reflect the world situation. Sharp moves may indicate a crisis coming to a head. Slower moves, say out of Asia and into the $ or Gold and over a period of weeks or longer, may indicate unease with a geopolitical situation.

Any way I can better explain what I have attempted here, please ask.

Again, many thanks to everyone here for an excellent forum.

Regards

eth32
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Posts: 81
Joined: Sun Sep 25, 2016 12:17 am

Sat Nov 11, 2017 5:44 am

Really insightful, helpful stuff. Thanks for educating me and no doubt many others! :)

expat42451
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Posts: 36
Joined: Fri Nov 10, 2017 4:11 am

Sat Nov 11, 2017 6:24 am

Hi eth32

You are most welcome. Thanks for the kind reply.

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RiffRaff
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Sat Nov 11, 2017 6:46 pm

Moved from General Discussion to here and pinned for future reference.

Thank you, expat, for the very detailed insight from your experience. It will be interesting to see how this pans out over the next several months.
"It's in your nature to destroy yourselves." - Terminator 2: Judgment Day

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TheChrome
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Wed Jan 24, 2018 6:09 am

I am not sure the average person will understand what you are talking about, but I would caution against following the herd mentality of the markets. When the markets go haywire you can bet something might be going on at that moment, but you probably should not base any investment strategy on it.

Everyone should base your investments on earnings and nothing else (Unless you are savvy enough to be a trader) . In the year 2000 tech stocks had no earnings, and the oil stocks did. We know that tech busted, and oil skyrocketed. The lesson is buy stocks with earnings and growth potential, not stocks that have already exceeded their potential.

In addition to the comments of the original poster, I suggest tracking the Baltic Dry Index: https://www.bloomberg.com/quote/BDIY:IND
The Baltic Dry Index tracks shipping around the world. When shipping orders decline, so does the overall economy. If you look at a 5 year chart, the index was high in 2014 when oil was at it’s peak. Then it declined because there was less demand for shipping heavy equipment. Now there has been an upswing, signaling increased shipping.

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RiffRaff
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Fri Feb 09, 2018 1:13 am

RiffRaff wrote:
Sat Nov 11, 2017 6:46 pm
Moved from General Discussion to here and pinned for future reference.

Thank you, expat, for the very detailed insight from your experience. It will be interesting to see how this pans out over the next several months.
So I am curious as to your analysis of current global market instability. Is it truly a "correction" as some analysts have been touting? Or is there a deeper unease about the various flashpoint areas we are monitoring?
"It's in your nature to destroy yourselves." - Terminator 2: Judgment Day

expat42451
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Posts: 36
Joined: Fri Nov 10, 2017 4:11 am

Sat Mar 17, 2018 8:29 pm

Hi RiffRaff

Just got back to the forum and found this a month late so my apologies on that. First I would like to say that I totally concur with The Chrome's comments. I posted the original not to give any investment advice to anyone at all but as a means of analyzing various international occurrences. Incidents cause money to flow depending on their severity. This is all I was posting about. Actively trading is a completely different skill set, and while I have done it for a number of years I am not going to even start to go into it here other than to say it requires a lot of hours and a lot of discipline.

Given that this is over a month after your post RiffRaff (and my apologies again) calling what has caused and is causing the current market volatility is pretty tough. Markets have a tendency to revert to mean values. Healthy markets and by healthy I mean non manipulated markets have occasional pullbacks, sometimes as much as 20%. Sometimes more. If you look at the longer term charts since 2008 we have not had a pullback of any consequence for a long time. Another thing I see as worrisome is interest rates on longer term US debt and the effect that may have on particularly the US . There are a lot of different theories surrounding what we have seen over the past few months and I dont have any good idea of what one factor may be causing the uncertainty. Jobs reports from the US labor markets are pretty good, the GDP wasnt that great, wage growth in real terms for US workers hasnt been that great either. If you look at Shadowstats.com their figures tell a different story from the government figures on a number of metrics. There is worry around about all of the flashpoints in the world now, worry about China's national debt as a percentage of their GDP affecting business in the US. These are concerns I am hearing, some of them new, many are not. So I cant really point to any one cause in the short or medium term to say why things in the markets are the way they are. Another thing is..... most traders trade what the market is doing rather than what they think it should be doing. See the trend, trade it and figure out what caused it after the close. Otherwise you end up loosing money.
I doubt this helps much but many times in market movements up or down, there are a number of inter related causes that arent apparent until afterwards.

Regards.

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