The Lawrence Chan Blog

Sometimes things can be quite simple.

I posted about Emini S&P and its funny behaviour around the major moving averages back on July 4, 2013.

Here we are Emini S&P dancing around the moving averages with predictable behaviour again.

Have you figure out the rules yet?

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The 2nd quarter filings from these 2 firms have been delayed (way too much delay but no legal actions from the government as usual). Now we learned that both dumped their gold ETFs.

http://www.bloomberg.com/news/2013-08-14/paulson-cuts-spdr-gold-stake-53-as-soros-sells-out.html

That explained the 2nd leg flush by the end of June.

Very good sign for bulls.

What we need to see another flush to clean out the early birds who picked the bottom and do not have the holding strength necessary for the retest of the low made in June.

Of course, people sometimes get lucky as it is possible for some worldwide crisis to happen in the near future driving gold price higher without a pullback. But that is not the norm and not something we can depend on.

A even better sign for bulls is that Paulson and Soros giving up all their gold holdings, turnaround to short gold and publicly pronounce the death of gold. That will be a good driver for gold going up to $1600 quickly.

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Video from 2010 about the problem of capitalism in its current form.

Notice that as of 2013 August the problem explained in the video is not resolved.

Any moment now, should one large financial institution go under, we will re-live the horror of the financial crisis all over again. Passing the bomb around like the game of music chairs has limitations. As all major economies are now well aware of the tricks necessary to survive in this game, there is no one else to pass the financial problem to. The end is indeed very close.

What the Fed has done so far since 2009 is just delaying the inevitable. Fed effectively acted like a rookie trader by violating all possible trading rules and sound money management principles. Fed has bet everything it has and is running out of pledgeable asset by end of this year. So contrary to popular beliefs, quantitative easing will come to an end one way or the other.

Best that Fed can do is to reduce the current size of QE so that they can stretch the program further out into year 2014. As we all know, QE with lesser amount of money is completely useless as that will not be enough to counter the net outflow of all classes of high quality assets by the top 1%. Even on days when POMO is done, as long as the amount is not significant enough, stock market would sell off. Fed has to really dig deep this time to invent something new to replace QE or significant stock market melt down will become unavoidable.

Being a trader, we have to be extra cautious on what instruments to trade going forward. We also have to be extra careful with our money parked with the brokerages. When the next financial crisis hits us, I suspect many firms will go under. Many small cap stocks and financial markets will simply disappear. ETFs you buy may turn worthless as the organizations managing the funds may go bankrupt and lock up your money.

"Only the paranoid survive" – Andy Groves

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Priceline.com (PCLN) is getting close to the $1000 mark.

The reason I pull out this chart is that it has gone thru the phase where Tesla is going through right now. Thus it will show you what I expect from Tesla from its recent high. What is happening now to Tesla, is what happened to Priceline back in 2012 where it went thru a blow-off top setup against the 600% expansion. A pullback to the 400% level is likely and that was exactly what happened to Priceline back then.

On weekly basis, once Priceline close below the the $910 zone, it will likely fall back down to the year 2012 high quickly. What happens after will depend on how the price arrive at the support zone in the coming months.

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Computer equipment failures often drive us insane. The problems can come from so many possible sources sometimes I have to wonder how slim the chance is my computer actually can start up and do the stuff I want it to everyday. This piece focuses on one specific computer trouble, power surge and outage, where we do have very efficient solutions to protect ourselves.

Power Problems

There are all kinds of power related issues that can damage your computer equipment.

Sometimes you get brownout where the local power level dropped. For sensitive computer equipment that is enough to cause your devices to shut down. Older computer equipment not taking this issue into consideration in their designs would let the lower current to flow through and damage the equipment.

Sometimes you get outright blackout / power outage where the local power just stopped. As long as the power disappear all of a sudden without multiple shocks, it is actually the problem that produces minimal damage to your equipment.

Most of the time, you get power surge / voltage spike that is the most damaging kind of power problem. The spike can come from many sources including lightning, power station level problems, short-circuit of a device within the same loop as your equipment, etc. To deal with this type of problem, however, is quite simple. All you need is a good surge protector, usually in the form of a power bar, to filter out the spikes before they can enter your expensive equipment.

Surge protectors also resolve the problem of brownout and blackout partially by cutting off the power completely. The disadvantage of that, of course, is your equipment are shut down at once. If you need your equipment to be operational as they are performing important tasks, you will need a better solution. You need to use uninterruptable power supply (UPS).

Uninterruptable Power Supply (UPS)

Uninterruptable power supply (UPS) are devices that provide power when your main power source is cut off.

Contrary to popular beliefs, there are many types of UPS. The manufacturers who are new to the UPS market often disguise their ignorance by saying their products are the best but in fact they are not. The technology used within the UPS will determine the level of protection you are going to get from the UPS unit.

The most basic type of UPS are backup power supply. When the power is down, they switch to the battery. These UPS are not designed for computers and other equipment that requires continuous supply of power. The time it takes to switch from your AC supply to the battery power on the UPS is enough to shut down any power sensitive equipment. These UPS are only good for things like emergency lighting, etc. They are also the cheapest as you are essential buying the battery with a simple switching circuit.

The most comprehensive type of UPS are online power supply. They are online because they are always regulating the power from its batteries or power generators. There is no switching at all physically for the power going into your equipment. These UPS are often used by major institutions to protect their computer centres, security systems and very sensitive equipment. These UPS are very expensive and mainly for commercial use.

The in-between type of UPS are hybrid / smart switching power supply. This type of UPS works like the backup power supply in the sense that power is switched from your wall outlet to its battery but the switching is done in a way undetectable by your equipment due to the fact that the UPS is designed to buffer enough electricity all the time so that your equipment will not know a switch has happened in the first place. As you may expect at this point, this type of UPS is the midrange one and the type that is good for most computer equipment.

When you go out to buy UPS, read the descriptions carefully. Somewhere buried in the manual will tell you if you are getting a backup power supply or a hybrid. Latest computer power supplies are designed to take brownout into account, thus a cheap backup power supply may work with your computer but your router and monitor are not. Hence the best bet is to go with the hybrid ones.

What To Protect

You do not just protect your computer like many advertisements made you believe. As a trader you have to protect the complete survival set – your DSL / cable / optical modem, router, computer, external hard drive, monitor, and your VOIP phone if you need to call in for your orders. Without supporting the whole set, your internet connection will be taken out which render protecting just your computer pretty much useless when you are trading online.

You also need to take into consideration that you want to keep your computer running for at least 20 minutes so that you can orderly handle your parked orders, open positions, etc. before you shutdown your computer until power comes back. Of course, if the power disruption is very short term like several minutes, your UPS will save your day.

Usually, the power consumption of the router, modem, monitor and one more minor computer equipment will add up to about the power consumption of a midrange computer. Thus you need to look for a UPS that is good enough to handle at least 2 computers for 20 minutes. If you are using more than one computer, look for UPS with matching power capacity.

Backup Plan

I always have at least one laptop around when I am trading. And the laptop also happens to have the exact order placement software I use installed. Trust me – it is not paranoia.

When I travel my laptop is my main trading computer. When I am not travelling it is my backup plan. If my main computer goes under because of power outage, or that the internet connection is disrupted beyond what UPS can do to maintain it, my laptop with my cellphone internet will allow me to connect to my brokerage quickly to take care of the open positions and orders.

Remember that such preparation is not really time consuming. The unlucky event has to happen just once for the effort to pay off big time.

Battery Replacement

UPS batteries are consumables. Due to the constant charging / discharging cycle the batteries have to go through, the peak performance of these UPS will last about 2 years if they only need to handle occasional power outage. Once the prime time has passed, the battery life will go down hill quickly. My APC Smart-UPS 1500 batteries can support my survivor equipment set for more than an hour when they are new. After 2 years they usually dropped down to about 45 minutes. By the third year these batteries will have a very hard time to last for 30 minutes or so.

If power is really unstable at your location, the UPS battery life will be shorten significantly.

It is not difficult to keep track of the battery life on your UPS. I simply stick a label on the UPS with the replacement date of the batteries. It is one of the rare thing I remember to check yearly. The number of times my UPS have saved my ass has trained me well.

Believe me, if you do not even remember when you last replaced the batteries in your UPS, it is time to replace them. It is bad enough already when power went down. You will feel way worst if you have to watch your computer equipment shutting down just because you have not replaced the battery in your UPS.

One important tip to remember is that there is no such thing as refurbish UPS battery. Do not buy into the myth and get ripped off by stores or people selling these batteries. UPS batteries are like car batteries. If you want your UPS to function properly and really last enough time to give you the protection when you need it most, do not put these so-called refurbish batteries into your UPS.

UPS Replacement

UPS are electronic equipment. I am sorry to tell you that if you are not aware, electronic components do have limited life time. Even with great quality components, a UPS that operating 7/24 for many years, after taking many voltage spikes and other power problems, will have its components worn out. A UPS that works in a very smooth power environment will probably last 15 years or more. A UPS that works in a rough environment with frequent power spikes will probably die in less than 10 years. It is all expected and be ready to replace the UPS when the time comes.

Think of the UPS as an insurance policy that pays for itself the very first day it is installed. This will probably give you a completely different perspective on the device.

End Notes

The picture shown is the APC Smart-UPS 1500 that I use at home. It just took a fatal blow over the weekend and can no longer accept AC input. Even at the worst moment when its input side was fried, this UPS kept my computer and hard drives running smoothly for another 45 minutes to complete my weekly backup before I orderly shutdown everything and removed the UPS. At the time of shut down, it had enough battery to go on for another 45 minutes. The picture was taken after I shut down my computer.

I checked the inside of the UPS and it looks like a few capacitors are fried. I can probably get it repaired if I choose to. But that the UPS has been in use for many years already, hence the other components may be fatigue and fail easily too. Will see what my options are after I get in touch with APC.

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