Author Archives: Dimitri Speck

     

 

 

Is Seasonality in Individual Stocks Based on Sound Evidence?

People often wonder whether it is actually possible to make profitable trades by taking advantage of seasonal trends in individual stocks. Most investors accept the idea that seasonal trends in commodities exist and are also quite open-minded with respect to recurring phenomena such as the year-end rally in stock indexes.

 

S&P 500 Index, 30-year seasonal chart – the year-end rally is highlighted. It has been observed in 24 of the past 30 years and its average gain far exceeded the average loss of the six losing years. Moreover, its average gain represents more than a quarter of the average annual return of the index. The existence of this pattern is widely acknowledged and there are reasonable explanations for it.  Source: Seasonax

 

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Systematic Trading Based on Statistics

Trading methods based on statistics represent an unusual approach for many investors. Evaluation of a security’s fundamental merits is not of concern, even though it can of course be done additionally. Rather, the only important criterion consists of typical price patterns determined by statistical examination of past trends.

 

Fundamental considerations such as the valuation of stocks are not really relevant to the statistics-based trading approach discussed here. This is not to say that they are not important as such – one should certainly be aware of the fundamental backdrop. The point is only that strategies based on e.g. seasonality have a different focus.

 

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A Simple Way

In their efforts to beat the market, many investors are spending a lot of time searching for rare undiscovered gems or sophisticated trading rules.

There is actually a simpler way.

 

Not everything is simple – but some things actually are.

 

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How to Save Money When Buying or Make More When Selling a Home

In your professional capacity and perhaps also in your private life, you may be closely involved with financial and commodity markets. Trading in stocks, bonds or futures is part of your daily routine.  Occasionally you probably have to deal with real estate as well though – if you e.g. want to purchase an apartment or a house, or if own a home you wish to sell.

 

The people who took this photograph probably want to sell… how do we know? Read on…

Photo credit: vantagedesigngroup.com

 

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Chasing Entry Points

Something similar to the following has probably happened to you at some point: you want to buy a stock on a certain day and in order to time your entry, you start watching how it trades. Alas, the price rises and rises, and your patience begins to wear thin. Shouldn’t a correction set in soon and provide you with a more favorable buying opportunity?

 

Apple-Spotting – a five minute intraday chart showing the action in AAPL on February 1, 2017 – an example that illustrated the general principle discussed here quite well. We could of course have picked another stock or an index future, but AAPL was convenient on account of the earnings beat it announced on the preceding evening, which triggered relentless buying pressure over most of the trading day [PT] – click to enlarge.

 

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A Soaring Market

On January 20 2017 Donald Trump will be sworn in as the new president of the United States. On the stock market his victory has triggered a lot of advance cheer already: the Dow Jones Industrial Average rose by a sizable 7.80 percent between the election and the turn of the year.

 

Two big winners: the DJIA and Donald Trump – click to enlarge.

 

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Deutsche Bank Caves In

 

Deutsche Bank trader: “u just said u sold on fix.”

Answer UBS trader: “yeah, we smashed it good.”

 

Deutsche Bank is a defendant in more than 7,000 lawsuits worldwide. In two of them it has recently agreed to settlements and is prepared to pay tens of millions of US dollars in restitution and fines. This includes the settling of lawsuits over gold and silver price manipulation. Associated court proceedings against other financial institutions are still underway.

 

It has been said that precious metal bars make for good door stops due to their high specific gravity. Perhaps, but as DB has just found out, it also means that stubbing one’s toes on them can be painful [PT].

Photo credit: Perth Mint

 

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Long Term Seasonal Price Trends

Prices in financial and commodity markets are exhibiting seasonal trends. This applies to the precious metals gold, silver, platinum and palladium as well.

 

Platinum Crystal, image via shapeways.com

 

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Erroneous Expectations

Many market observers are probably expecting crude oil prices to enter a seasonal uptrend due the beginning heating season. After all, the heating season in the Northern hemisphere means that energy consumption will rise.

 

barrels-of-oil-1200x900Crude oil – is the price of crude actually strengthening during the heating season? This is what most people would surely expect – but it turns out it isn’t true.

 

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Statistical Analysis of the New Gold Fixing

 

Since 20 March 2015 a new gold price fixing organized by the London Bullion Market Association has been in operation. It has replaced the previous price determination process, which was in place for more than a century and became subject to criticism as it was highly vulnerable to manipulation. Has manipulation now ceased?

 

Gold fixing photoGold fixing at N.M. Rothchild and Sons offices in London. The first fixing took place there on 12 September 1919. After more than a century, the process has been fundamentally changed.

Photo credit: N.M. Rothschild

 

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Is it honest or is there fraudulent manipulation?

First fines have been imposed for manipulation of the gold fixing, the silver fixing is even discontinued entirely. But is everything in order with the platinum fixing? Have there been manipulations – and are they part of a larger manipulation campaign?

The precious metals fixings have the purpose of enabling large volume trades. However, they also provide reference prices, which are used by merchants and have an effect on subsequent trades. They are therefore an especially suitable target for price manipulations. There have already been statistical hints as far back as 2002 that systematic manipulation of the gold fixing was taking place; in 2011 similar hints emerged in the silver fixing.

We now want to examine the platinum fixing. It takes place twice daily, at 09:45am (AM fixing) and at 2:00pm (PM fixing) London time, which is equivalent to 4:45am and 9:00am EST. It takes a not precisely predetermined amount of time lasting several minutes until the fixing price is established.

There are reliable methods to trace price manipulations taking place at specific times of the day. Calculation of an average intra-day price trend over many days often provides clear evidence. Similar to gold and silver, this method can also be employed to uncover systematic manipulation in the platinum market. We use one-minute prices of futures contracts from December 1997 to April 2014. From these we calculate the average of intra-day price movements.

Fig.1 is therefore no normal intra-day price chart. It rather shows how the platinum price has behaved in the course of the average trading day over approximately the past 16 years. It shows the typical movements – calculated from millions of prices. The horizontal axis shows the time of the day (EST), the vertical axis the average price level (indexed to 100). Since it is an average over a great many days – 4189 all in all – the size of the moves is relatively small.

 

Chart-1-Platinum intraday averageFig. 1: 16 year average intra-day platinum price – the PM fixing stands out …

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THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
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