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I really don't have anything else to add I'm
afraid...........Chas
----- Original Message -----
Sent: Wednesday, June 01, 2005 11:28
AM
Subject: Re: [RT] Parallel moves
Hi Charles,
thanks for your interesting contribution. It
seems to describe a different phenomenon, though. I don't see how it can
explain the fact that stocks and energies are positively correlated. Care to
elaborate?
Best regards,
Michael Suesserott
Charles Meyer
wrote:
> Michael-
>
> How about this
explanation?
> ======================
>
> 5/15/05 -
From Charles Meyer
>
> Take a look at BMNIX in FastTrack.
That fund invests 50% of it's
> portfolio in long positions and 50% of
it's portfolio in short positions
> which translates into pretty much
of a market neutral/non-directional
> posture.
>
>
> The idea is that when the market is strong the stocks in which they
are
> 50% long will rise MORE than the purported weak stocks in which
they are
> 50% short. And when the market is weak; they believe
the stocks in
> which they are 50% short will decline more than the
purported strong
> stocks in which they are 50% long.
>
>
However; look at their performance during April and May. As can be seen
> the fund has been declining in price in spite of the fact 50% of the
> dollars are in short positions? How can this be so? Quite
simply; it's
> the nature of a bear market. While there may be
individual stocks which
> appear attractive to hold and may even be
demonstrating strength
> relative to the overall list; the bulls are
anxious to protect profits
> when those stocks start to fall with the
market. This leads to a domino
> effect where mutual funds--faced
with liquidations--are also forced to
> sell stocks: even the
attractive ones. You will note that BMNIX tends
> to do well when
the general market is fairing poorly. But; there comes
> a point
to where the stocks in which they are long decline more than do
> the
stocks in which they are short. I'm not sure this is a good or even
> an adequate explanation of why this occurs; but the end result is
that
> even perfect hedging market neutral will lose money in a bear
market.
> For related reasons; of course all those hedge funds
will have an
> adverse effect on stocks in a game which can be likened
to musical
> chairs where too much money is attempting to exploit
similar strategies
> and system edges.
>
> Just my 2
cents.
>
> =================
>
> ----- Original
Message -----
>
> *From:* Michael S.
<mailto:MikeSuesserott@xxxxxxxxxxx>
>
*To:* realtraders@xxxxxxxxxxxxxxx
<mailto:realtraders@xxxxxxxxxxxxxxx>
>
*Sent:* Tuesday, May 31, 2005 4:34 PM
>
*Subject:* Re: [RT] Parallel moves
>
> I
am aware of the phenomenon. What I am hoping for is
some
> fundamental insight as to *why* the two
markets behave that way.
> Being an option
trader, measuring correlations is part of my
>
routine. And the said correlation has been unusually strong
lately,
> in several time frames.
>
> Although I never trade on fundamentals alone,
I would still be
> interested in the economical
basis for this occurrence, and would be
>
grateful if someone could come up with a
fundamentally-oriented
> explanation.
>
> Best regards,
>
Michael Suesserott
>
>
> Ron
Cernokus wrote:
> > These two markets
often turn together. Look at March, April and
may.
> >
>
>
> > -----
Original Message -----
>
> *From:* Michael S. <mailto:MikeSuesserott@xxxxxxxxxxx>
>
> *To:* realtraders@xxxxxxxxxxxxxxx
>
<mailto:realtraders@xxxxxxxxxxxxxxx>
>
<mailto:realtraders@xxxxxxxxxxxxxxx>
>
> *Sent:* Tuesday, May 31, 2005 4:13
PM
> >
*Subject:* [RT] Parallel moves
>
>
> > For
some time now, SPY and XLE (Energy Select Spyder)have
been
> > moving
in tandem, even on 5min. charts. Any ideas as to
the
> >
fundamental reason behind this phenomenon? Shouldn't
these
>
markets
> > be
inversely correlated, if at all? I.e., shouldn't stocks
go
> down
>
> when energy becomes more
expensive?
>
>
> > Best
regards,
> >
Michael suesserott
> >
>
>
>
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