Investing with the Moon

Posts Tagged ‘Social network’

On broken clocks and social networks

Posted by Danny on May 12, 2014

Even a broken clock is right twice a day. It is a classic saying, but it is only partially true. In my birth region there was a pub with a broken clock that was right four times a day. It just moved backwards! I suppose it was designed as a practical joke, and more importantly, as a way to give the pub’s customers a good excuse to come home late after a few glasses too many.

How is this relevant for investors? Well, markets can be cruel, not so much because they are cruel, but because some investors have a deeply rooted habit of being cruel to themselves. Give some folks a bull market and they will start selling short or bet on put options. Then let a bear market begin, and for some reason they change strategy and start “buying the dips”. This are the backward clocks of the market. They get it right once in a while, but they are drawn to the wrong side of the market like moths to bright light. And these investors can provide as useful a service as the experts who get it right most of the time. If somebody is wrong fairly consistently you can make good money by taking the other side of their market calls. If you can find the worst investor you have found a gold mine.

Of course these investors are not easy to find, but social networks are making it a lot easier than it used to be. Because there are some typical characteristics that set them apart on those networks. They tend to be sarcastic and cynical in their remarks. They continue to repeat the evidence that supports their position while blaming the fact that their forecast hasn’t panned out yet on being a bit too early with their call. And when the market continues to go against them, as it often does, they start blaming it on manipulation by banks, markets being rigged, high frequency trading, the weather, and so on.. If you can find such traders on social networks or blogs, follow them.

Where to look? Besides Twitter, I use Stocktwits, and Scutify, which is a new social platform that is starting to grow nicely. Check them out. Some services are also starting to use social network streams to generate useful sentiment indicators. Downside Hedge is a good example. I think this kind of indicators will become better and better. With a bit of Bayesian logic these indicators will not only reflect what kind of market calls are being made, but also who makes them: a reliable expert or a broken clock.. And that will level the playing field again, because right now banks and brokers already have that kind of information. They can see what positions their clients have and what kind of orders they have in the market. Would you be able to win at a poker table if you can see the cards of some of the players, but they can’t see yours?

Let’s end with our weekly look at the S&P 500 (click for larger image):

S&P 500

The S&P 500 has gone mostly sideways since the start of the current lunar red period. This is completely in line with our main scenario. We have another week of red period to go, and my indicators still display bearish divergences all over the place. But as the market drifts sideways near record levels the odds are rising that the S&P will climb above 1900 before giving way. Sometimes markets take the path of max confusion.

Good luck,




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Posted in Financial Astrology, Market Commentary | Tagged: , , , , | 6 Comments »

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