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Daily Speculations The Web Site of Victor Niederhoffer & Laurel Kenner Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter; a forum for us to use our meager abilities to make the world of specinvestments a better place. |
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11/08/04
Navigating Markets, by James Sogi
After a nice sail this weekend, nothing is better than sailing out in the ocean with the wind, waves and tide at your back surging along powerfully covering miles and miles smoothly without effort. It's the same kind of feeling when long and there is a strong bull rally with prices surging ahead without pullback, kind of like the last few weeks for the bulls. But any sailor knows that to get to his destination, there will be times for upwind work or tacking into the wind, where rather than going straight to the destination, the sailor must sail back and forth often five miles or more along the hypotenuse of the triangle to gain only a few miles upwind and towards your destination. During the process one is fighting the wind, the waves and you are losing distance making leeway and slipping backward through the water due to inefficiency of the sails, the waves, and the boat. The sailor also knows that he must constantly repair 3 breaking things at once, keeping just ahead of disaster. How similar to our market operations this year. We had to tack back and forth 60 points up and down through treacherous and stormy waters to make any head way, and here we find ourselves barely 50 points over 1112 (SP) where we started the year having tacked back and forth through 1112 10 times. In the meantime we have been fighting the slippage, the vig and overhead. The good navigator knows to start the voyage when conditions are favorable and when the wind, waves and current are in the right direction. So the trader should begin operations when the marker conditions are right. Upwind work is unavoidable, but with snappy tacking, a good weather forecast and a tight ship, the sailor can make headway, even in a headwind.