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         Daily Blog - Tiger Software

       >>>    Does Watching The News Really Help
   You Trade Stocks?  Not much.  Watch APPLE's
   Stock. Using Peerless Will Help You A Lot More.
    Do Watch The News as A Citizen.  Just Don't Expect
    It To Help You Much in The Stock Market.

                              July 6, 2007

William Schmidt,     - Tiger Software's Creator
      (C) 2007 William Schmidt, Ph. D.  - All Rights Reserved. 

      No reproductions of this blog or quoting from it
      without explicit written consent by its author is permitted.

      Send any comments or questions
      to william_schmidt@hotmail.com

      Back to Home Page - www.tigersoft.com


           It's hard to make a case that watching the news will help you trade stocks better.  Consider
    the best day and the worst day in stock market history.  Using technical analysis, especially
    Tiger's Accumulation Index and the major Buys and Sells of Peerless will probably help a lot more.

                           Biggest Up-Day in Stock Market History

      It is interesting how bullish it is when the market goes up on bleak news.  Here is what
    the DJI looked like at the market's bottom in July 1932 and re-test of those lows.  The DJI
    had fallen from 380 to 42, between 1929 and 1932.  The largest single day gain ever
    was +15.34% on March 15th. 1933.  See how the high volume breakaway gap would
    have told the attentive technician the trend had changed. (No advance and decline data exists
    for this period, so we can not show normal Peerless automatic Buys and Sells as they now

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          What was the background?   Would reading the newspaper have told you to buy?
    Congress had in February repealed Prohibition. "Demon Rum"   was loose.  Franklin Roosevelt
   was inaugurated on Match 4th and promptly proclaimed a 10-day Bank holiday saying "We have
   nothing to fear but fear itself."  On March 7th, the game of "Monopoly" was invented. 
   The Civilian Conservation Corp began operations with tree conservation at this time..

    Meanwhile, Hitler was establishing a Nazi dictatorship. On January 29th,  Hitler become
   Chancellor of Germany and promised a "parliamentary democracy" and then dissolved
    the German Parliament.  Goring then banned Communist meetings and demonstrations. 
    A few days later, he banned the most important social-democratic newspaper.  The aging
   German President Von Hindenburg limited freedom of the press. Catholic newspapers in
   Prussia were prohibited. The SA/SS-"Police" were formed and quickly killed 50 protestors.
   The Nazis burn the Rechstag and blame the Communists. On March 15th,   Hitler and
    Goring had a German Cabinet meeting in which they discussed how   to complete the process
    of establishing a Nazi dictatorship by getting the Parliament to pass an Enabling Act
    which would give Hitler the power to destroy State government independence as well as
    make all laws and treaties and control the budget without bothering with legislative hearings
    or votes.  On March 23rd, the German Parliament grants Hitler dictatorial powers. In
    April, the first anti-Jewish "laws" go into effect. and the Nazis stage public book burnings. .

        The largest one-day percentage drop since 1914 occurred on October 19, 1987, when the
    DJIA  fell 22.61%.  This was a Monday.   After a very weak Friday, Mondays often are
    dominated by climactic emotional selling.  We were short then.   Our Peerless system had given
    its fourth major S9 signal of the year in early October.  Many Tiger customers made thousands and
    thousands of dollars in this period with put options.

                          Biggest Down Day in Market History

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              What was the background?  Would reading the newspaper have told you to sell before
      the decline and buy on the extreme weakness of this day?   Here was the news background.
      I can see nothing here that could remotely explain the market's extreme negative volatility.

     August 2, 1987 - U.S.S.R. performs nuclear test at Eastern Kazakh/Semipalitinsk U.S.S.R.
     August  7, 1987 -  5 Central American presidents sign peace accord in Guatemala
     August 16, 1987 - Astrological Harmonic Convergence - Dawn of New Age
     August 27, 1987 -  Dow Jones Industrial Avg closes above 2,700 for 1st time (2,700.57)
                                   It peaks on August 25th at 2722,42
     September 1, 1987 - Smoking forbidden in public buildings in Belgium
September 18, 1987 - U.S.S.R. performs nuclear test at Eastern Kazakh/Semipalitinsk U.S.S.R.
     September 24, 1987 - U.S. performs nuclear test at Nevada Test Site

              A better clue of  market vulnerability was the way the Federal Reserve had started to
     tighten money in from February 1987 to September 1987. The Fed Funds' rate rose sharply
     in the Summer of 1987.   

                                                          01/1987, 6.43
                                                          02/1987, 6.10
                                                          03/1987, 6.13
                                                          04/1987, 6.37
                                                          05/1987, 6.85
                                                          06/1987, 6.73
                                                          07/1987, 6.58
                                                          08/1987, 6.73
                                                         09/1987, 7.22  Up 1.12% in 7 months.
                                                         10/1987, 7.29
                                                         11/1987, 6.69
                                                         12/1987, 6.77
     (You can see these statistics at http://www.federalreserve.gov/releases/h15/data/Monthly/H15_FF_O.txt )

                                     The Crash of 1987 Was An Artificial System Failure

        In 1987, the rising tide of short-term interest rates accenuated the move by some big funds to use the
        Futures market and Index options  to hedge their positions.  Many feel the "tail wagged the dog",
        namely that it was the rush to go short the thinner Futures market using computerized trading that caused
        the extreme declines.  Large baskets of stocks were sold this way, owing purely to general market conditions.
        The evidence is strong that it was the breaking of the DJI-30's 200-day moving averaged on Friday,.
        with the DJI still 700 points up off the final bottom, that started this rush to by insurance in the
        form of put options and being short the S%P futures.

        When individuals heard of the massive declines, some rushed to sell.  So many market orders
        came in that the computers could no longer report the last trade.  As a result, many who panicked
        got prices much lower than they expected.   There were no "circuit breakers" to give the computers
        a chance to catch up in their reporting and give everyone a chance to think more cooly.  When,
        finally after the close,  it was revealed how much lower many individual stocks' prices had fallen,
        there was a rush to buy at the next day's opening.  Overnight, the Fed told Big Wall Street traders
        and institutions that they would provide all the liquidity needed to avert a financial collapse. They wanted
        to share prices to quickly rise so that big specialist firms and brokerages would not collapse. The
        Fed guaranteed, in effect, their solvency.   With the backing of the Fed, the market turned back upwards.
        Hence the phrase, "Don't fight the Fed". The world-wide markets were all affected similarly, showing
        the dangers, too, of such linkage and instant communications.

        Want more reading.  Look at   http://www.lope.ca/markets/1987crash/

        Many Key Individual Stocks in 1987 Did Show Bearish Signs Before Crashing

Here is what Apple looked like three weeks before the Crash.  To most observers the stock
     looked great.
  Not to Tiger user; the Tiger Accumulation Index remained negative despite its gaining
     nearly 200h% in the previous year.  Its OBV was also not confirming its run to new highs.  This meant
     informed Big Money Insiders were selling heavily and the public was running out of money to
     buy the stock aggressively.

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             Look at what happened after the beginning of October 1987 with AAPL's stock.  In
     three weeks Apple lost 50% of its value.

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                               What does Apple's Stock Look Like Now?

All the news is good. The stock seems to be starting another run.
          Why would anyone want to sell?   But someone is.  Tiger's
          Accumulation Index is nearly negative.  And aggressive public buyers
          are not boosting the OBV Line to levels that correspond to the new highs
          by the price of the stock.

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> Just as in October 1987, AAPL showed a new high with its
         Accumulation negative or nearly so, despite the new high.
         >   Just as in October 1987, AAPL's OBV Line was not confirming
         the new high.
  Unlike in 1987, AAPL's stock had only doubled, not tripled in the
          past year.
        >   ??? - Sell S9... Now would be a good time to get Peerless Stock Market

              Here are the Comments of a Floor Trader who observed these events"
              Stephen Zarlenga, Director of American Monetary Institute -  http://www.monetary.org
           Here are some excerpts.

                   "At varrious stages of the panic, Partners from the major NYSE member firms
                   came down into the futures trading room, looking like death, to check on their agents.
                   I remarked to X, who represented the largest of them that they’d do better to stay in
                   their offices, rather than display that much evident fear."

                  "During the day on Monday the NYFE pit got thinner and thinner as floor traders
                  either got smashed, scared, or had their trading badges revoked by representatives           
                  of the clearing houses, who came to the floor to pull out traders they had previously
                  guaranteed. All traders without years of experience were summarily removed. Without a
                  clearing house guarantee they had to stop trading."

                 "Others were allowed to continue trading only “for liquidation”; to make trades which
                 would liquidate their existing positions. One “out-trade” (mistaken trade not later confirmed
                 by the opposing trader) could be devastating under such conditions, where the traders were
                 expected to split the loss (or profit) involved in the disputed trade. They were usually losses
                 because if it was profitable, the opposing brokers trade checker was usually sharp enough
                  to accept it as valid, especially if he heard no other trade checker in the trade checking
                  room calling for the trade as one of theirs....

                 "One thing that the 1987 crash made very clear was that there
             was no real liquidity in the markets, when it was needed. Virtually all
             the fund managers tried to do the same thing at the same time: to sell
             short the stock index futures, in a futile attempt to hedge their stock

Soon after the crash, maximum daily trading limits and circuit breakers
            were established by the Stock exchanges; a solution which the agricultural
            and other commodities markets had used successfully for decades. These
            limits were a good idea...

               "This whole experience was very instructive and helpful to me, in accelerating
            my dropping an ideological commitment to “laissez Faire” free markets.
            Life became more complex - I no longer had the simple “one theory fits
            all situations” formula suggested by Ayn Rand’s novels!...

            "After the trading limits were imposed, an article by a free market ideologue
            criticized market participants for compromising the free unrestricted market
            and knuckling under to government in establishing the trading limits!

  Source: )

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