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Topic: Harami

The Harami (meaning " pregnant" in Japanese) Candlestick Pattern is a reversal pattern. The pattern consists of two Candlesticks:

• Larger Bullish or Bearish Candle (Day 1)
• Smaller Bullish or Bearish Candle (Day 2)

The Harami Pattern is considered either bullish or bearish based on the criteria below:

Bearish Harami: A bearish Harami occurs when there is a large bullish green candle on Day 1 followed by a smaller bearish or bullish candle on Day 2. The most important aspect of the bearish Harami is that prices gapped down on Day 2 and were unable to move higher back to the close of Day 1. This is a sign that uncertainty is entering the market.

Bullish Harami: A bullish Harami occurs when there is a large bearish red candle on Day 1 followed by a smaller bearish or bullish candle on Day 2. Again, the most important aspect of the bullish Harami is that prices gapped up on Day 2 and price was held up and unable to move lower back to the bearish close of Day 1.

TA revisit and revise continue ... ..

Shooting Star

The Shooting Star candlestick formation is a significant bearish reversal candlestick pattern that mainly occurs at the top of uptrends.

The Shooting formation is created when the open, low, and close are roughly the same price. Also, there is a long upper shadow, generally defined as at least twice the length of the real body.

When the low and the close are the same, a bearish Shooting Star candlestick is formed and it is considered a stronger formation because the bears were able to reject the bulls completely plus the bears were able to push prices even more by closing below the opening price.

The Shooting Star formation is considered less bearish, but nevertheless bearish when the open and low are roughly the same. The bears were able to counteract the bulls, but were not able to bring the price back to the price at the open.

The long upper shadow of the Shooting Star implies that the market tested to find where resistance and supply was located. When the market found the area of resistance, the highs of the day, bears began to push prices lower, ending the day near the opening price. Thus, the bullish advance upward was rejected by the bears.

Jonathan Swift

It is clear to anyone who has studied the financial crisis of 2008 that the private sector?s drive for short-term profit was behind it. More than 84 percent of the sub-prime mortgages in 2006 were issued by private lending. These private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year. Out of the top 25 subprime lenders in 2006, only one was subject to the usual mortgage laws and regulations. The nonbank underwriters made more than 12 million subprime mortgages with a value of nearly $2 trillion. The lenders who made these were exempt from federal regulations.

How then could the Mayor of New York, Michael Bloomberg say the following at a business breakfast in mid-town Manhattan on November 1, 2011?

It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp. Now, I?m not saying I?m sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn?t have gotten them without that. But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody. And now we want to go vilify the banks because it?s one target, it?s easy to blame them and Congress certainly isn?t going to blame themselves.?

Barry Ritholtz in the Washington Post calls the notion that the US Congress was behind the financial crisis of 2008 ?the Big Lie?. As we have seen in other contexts, if a lie is big enough, people begin to believe it.

Even this morning, November 22, 2011, a seemingly smart guy like Joe Kernan was saying on CNBC?s Squawkbox, ?When the losses at Fannie and Freddie reach $200 billion? how can the ?deniers? say that Fannie and Freddie were enablers for a lot of the housing crisis. When it gets up to that levels, how can they say that they were only into sub-prime late, and they were only in it a little bit??

The reason that people can say that is because it is true. The $200 billion was a mere drop in the ocean of derivatives which in 2007 amounted to three times the size of the entire global economy.

When the country?s leaders start promulgating obvious nonsense as the truth, and the Big Lie starts to go viral, then we know that we are laying the groundwork for yet another, even-bigger financial crisis.

The story of the 2008 financial crisis

• In 1998, banks got the green light to gamble: The Glass-Steagall legislation, which separated regular banks and investment banks was repealed in 1998. This allowed banks, whose deposits were guaranteed by the FDIC, i.e. the government, to engage in highly risky business.

• Low interest rates fueled an apparent boom: Following the dot-com bust in 2000, the Federal Reserve dropped rates to 1 percent and kept them there for an extended period. This caused a spiral in anything priced in dollars (i.e., oil, gold) or credit (i.e., housing) or liquidity driven (i.e., stocks).
• Asset managers sought new ways to make money:   Low rates meant asset managers could no longer get decent yields from municipal bonds or Treasurys. Instead, they turned to high-yield mortgage-backed securities.
• The credit rating agencies gave their blessing: The credit ratings agencies ? Moody?s, S& P and Fitch had placed an AAA rating on these junk securities, claiming they were as safe as U.S. Treasurys.
• Fund managers didn?t do their homework: Fund managers relied on the ratings of the credit rating agencies and failed to do adequate due diligence before buying them and did not understand these instruments or the risk involved.
• Derivatives were unregulated: Derivatives had become a uniquely unregulated financial instrument. They are exempt from all oversight, counter-party disclosure, exchange listing requirements, state insurance supervision and, most important, reserve requirements. This allowed AIG to write $3 trillion in derivatives while reserving precisely zero dollars against future claims.
• The SEC loosened capital requirements: In 2004, the Securities and Exchange Commission changed the leverage rules for just five Wall Street banks. This exemption replaced the 1977 net capitalization rule?s 12-to-1 leverage limit. This allowed unlimited leverage for Goldman Sachs [GS], Morgan Stanley, Merrill Lynch (now part of Bank of America [BAC]), Lehman Brothers (now defunct) and Bear Stearns (now part of JPMorganChase?[JPM]). These banks ramped leverage to 20-, 30-, even 40-to-1. Extreme leverage left little room for error.   By 2008, only two of the five banks had survived, and those two did so with the help of the bailout.
• The federal government overrode anti-predatory state laws. In 2004, the Office of the Comptroller of the Currency federally preempted state laws regulating mortgage credit and national banks, including anti-predatory lending laws on their books (along with lower defaults and foreclosure rates). Following this change, national lenders sold increasingly risky loan products in those states. Shortly after, their default and foreclosure rates increased markedly.
• Compensation schemes encouraged gambling: Wall Street?s compensation system was?and still is?based on short-term performance, all upside and no downside. This creates incentives to take excessive risks. The bonuses are extraordinarily large and they continue?$135 billion in 2010 for the 25 largest institutions and that is after the meltdown.
• Wall Street became ?creative?: The demand for higher-yielding paper led Wall Street to begin bundling mortgages. The highest yielding were subprime mortgages. This market was dominated by non-bank originators exempt from most regulations.
• Private sector lenders fed the demand: These mortgage originators? lend-to-sell-to-securitizers model had them holding mortgages for a very short period. This allowed them to relax underwriting standards, abdicating traditional lending metrics such as income, credit rating, debt-service history and loan-to-value.
• Financial gadgets milked the market: ?Innovative? mortgage products were developed to reach more subprime borrowers. These include 2/28 adjustable-rate mortgages, interest-only loans, piggy-bank mortgages (simultaneous underlying mortgage and home-equity lines) and the notorious negative amortization loans (borrower?s indebtedness goes up each month). These mortgages defaulted in vastly disproportionate numbers to traditional 30-year fixed mortgages.
• Commercial banks jumped in: To keep up with these newfangled originators, traditional banks jumped into the game. Employees were compensated on the basis loan volume, not quality.
• Derivatives exploded uncontrollably: CDOs provided the first ?infinite market? at height of crash, derivatives accounted for 3 times global economy.
• The boom and bust went global. Proponents of the Big Lie ignore the worldwide nature of the housing boom and bust. A McKinsey Global Institute report noted ?from 2000 through 2007, a remarkable run-up in global home prices occurred.?

• Fannie and Freddie jumped in the game late to protect their profits: Nonbank mortgage underwriting exploded from 2001 to 2007, along with the private label securitization market, which eclipsed Fannie and Freddie during the boom. The vast majority of subprime mortgages ? the loans at the heart of the global crisis ? were underwritten by unregulated private firms. These were lenders who sold the bulk of their mortgages to Wall Street, not to Fannie or Freddie. Indeed, these firms had no deposits, so they were not under the jurisdiction of the Federal Deposit Insurance Corp or the Office of Thrift Supervision.
• Fannie Mae and Freddie Mac market share declined. The relative market share of Fannie Mae and Freddie Mac dropped from a high of 57 percent of all new mortgage originations in 2003, down to 37 percent as the bubble was developing in 2005-06. More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions. The government-sponsored enterprises were concerned with the loss of market share to these private lenders ? Fannie and Freddie were chasing profits, not trying to meet low-income lending goals.
• It was primarily private lenders who relaxed standards: Private lenders not subject to congressional regulations collapsed lending standards. the GSEs. Conforming mortgages had rules that were less profitable than the newfangled loans. Private securitizers ? competitors of Fannie and Freddie ? grew from 10 percent of the market in 2002 to nearly 40 percent in 2006. As a percentage of all mortgage-backed securities, private securitization grew from 23 percent in 2003 to 56 percent in 2006.

The driving force behind the crisis was the private sector

Why didn?t anyone say anything?

Why didn?t anyone listen?

1) Those suffering from Cognitive Dissonance ? the intellectual crisis that occurs when a failed belief system or philosophy is confronted with proof of its implausibility.

2) The Innumerates, the people who truly disrespect a legitimate process of looking at the data and making intelligent assessments. They are mathematical illiterates who embarrassingly revel in their own ignorance.

3) The Political Manipulators, who cynically know what they peddle is nonsense, but nonetheless push the stuff because it is effective. These folks are more committed to their ideology and bonuses than the good of the nation.

He is too polite to mention:

4) The Paid Hacks, who are being paid to hold a certain view. As Upton Sinclair has noted, ?It is difficult to get a man to understand something, when his salary depends upon his not understanding it.?

Barry Ritholtz   concludes: ?The denying of reality has been an issue, from Galileo to Columbus to modern times. Reality always triumphs eventually, but there are very real costs to it occurring later versus sooner .?

The social utility of the financial sector

Wall Street, which was originally designed to finance ?creative destruction? (the creation of new industries and products to replace old ones), fell into the habit in the last decade of financing too much ?destructive creation? (inventing leveraged financial products with no more societal value than betting on whether Lindy?s sold more cheesecake than strudel). When those products blew up, they almost took the whole economy with them.

Do we want another financial crisis?

Asia stocks flat as traders await next Fed step

(AP:BANGKOK) Asian stock markets were little changed Monday as traders weighed the consequences of an anticipated phasing out of the U.S. central bank's unprecedented stimulus program.

The Federal Reserve has been aggressively buying government bonds to push down interest rates and return employment to normal levels after millions lost jobs in the recession that followed the 2008 financial crisis.

The Fed says the program has helped stimulate the economy by making it easier to buy homes and invest in businesses. The Fed has also said the program is not indefinite and will be phased out when the economy improves.

Recent economic data and public statements by Fed policymakers have led investors to conclude that the Fed will begin winding down its $85 billion a month in bond purchases starting as early as September. Falling bond yields in the U.S is one sign that traders believe the Fed's move is imminent.

But analysts said a sharp increase in the cost of credit could stifle growth, which will make the transition tricky and could make stock markets shaky.

" If it looks like the removal of funding is having too much of an adverse effect on the local economy it (the Fed) will have to step back in or the more likely scenario, it will extend the timeframe for the complete removal of monetary stimulus," said Evan Lucas of IG in Melbourne, Australia.

Japan's Nikkei 225 index rose 0.4 percent to 13,706.36. South Korea's Kospi fell 0.3 percent to 1,914.92. Hong Kong's Hang Seng declined 0.2 percent to 22,474.39. Australia's S& P/ASX 200 fell 0.1 percent to 5,107.90.

Trading was suspended in the Philippines due to severe flooding. Mainland Chinese shares were mixed. Taiwan and Indonesia fell.

Among individual stocks, Australian steel maker BlueScope Steel plunged nearly 16 percent after reporting a net loss of $84 million Australian dollars for the 2012-13 financial year. Internet-related companies in Hong Kong posted gains. NetDragon rose 5.2 percent, while Tencent Holdings advanced 1.5 percent.

On Friday, the Dow Jones industrial average closed out its worst week of the year. The Dow was dragged lower by a weak performance from retailers and companies sensitive to higher interest rates. The Dow fell 0.2 percent to 15,081.47. The Standard & Poor's 500 dropped 0.3 percent to 1,655.83. The Nasdaq composite fell 0.1 percent to 3,602.78.

Benchmark oil for September delivery was up 15 cents to $107.60 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 13 cents to $107.46 on the Nymex on Friday.

In currencies, the euro rose to $1.3323 from $1.3319 late Friday. The dollar rose to 97.59 yen from 97.53 yen.

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Follow Pamela Sampson on Twitter at http://twitter.com/pamelasampson

tapering    present participle of ta·per (Verb)

• The FOMC Minutes: On Wednesday, we get the minutes from the July 30-31 Federal Open Market Committee meeting. " At the time of the July Fed meeting we suggested the minutes could be more important than the actual meeting statement, because the former would shed greater insight regarding the breadth and degree of comfort among Committee members toward a September QE taper," said LaVorgna. " Recent public comments from various policymakers suggest that even notable doves, such as Bullard, Lockhart and Evans, are comfortable with?but not yet committed to?the taper commencing at the September meeting. The lack of conviction for September largely stems from lingering uncertainty over the underlying health of the labor market and the broader economy."
• What To Look For In The Minutes: " Tempering any bearish discussion of tapering in the minutes would be any signals that the Committee is prepared to push out its forward guidance for rate hikes," said Credit Suisse's Neal Soss. " For example, there may have been discussion in late July about possibly lowering the Committee?s 6.5% threshold for the unemployment rate at some point in the future.
  
  " In analyzing the minutes, we will be paying particular attention to the distinction between the 19 FOMC ?participants? and the Committee?s 12 voting ?members.? Also, the choice of quasi-numerical modifiers such as ?few?, ?several?, ?many?, etc. will be an important focus."

• Existing Home Sales (Wednesday): Economists estimate a existing home sales in July climbed to a pace of 5.13 million on an annualized basis. " Existing home sales are likely to increase a modest 0.4% mom in July to 5.1 million saar," said Bank of America Merrill Lynch. " Housing data tends to be noisy, so we like to look at the 3-month moving average growth rate, which is trending at 1.7%. Coupling this with the fact that existing home sales dropped 1.2% mom last month, we should see growth in closed contracts this month. Also, inventory has been expanding since the beginning of the year ? months supply was 5.2 in June, up from 4.3 in January ? which is supportive of greater sales given that it has been noted as a constraint in recent history."
• Federal Open Market Committee Minutes (Wednesday): The minutes will be released at 2:00 p.m. ET.
• Initial Jobless Claims (Thursday): Economists estimate weekly claims climbed to 329,000. " Last week we learned that initial jobless claims for the first full week of August fell to 320k?thereby pulling the four-week moving average 4k lower to 332k," said LaVorgna. " Both initial claims and the 4-week average are now at pre-recession levels, and are therefore consistent with a faster pace of payroll gains than what we have seen over the past three months (+175k). Since 1990, 320k on claims has been consistent with approximately +230k on payrolls, the level of the 4-week is consistent with +200k."
• Markit U.S. PMI Flash (Thursday): Economists estimate the preliminary U.S. manufacturing PMI ticked up to 53.5 from 53.2 in July.
• Kansas City Fed Survey (Thursday): Economists estimate the regional Fed activity index fell to 5 in August from 6 in July. Any number above 0 signals expansion.
• New Home Sales (Friday): Economists estimate new home sales in July fell to an annualized pace of 487,000, down from 497,000 in June. " This would follow three months of consecutive gains," said BAML. " Mortgage purchase applications fell over the month, indicating a decline in signed contracts. Homebuilder reports have been mixed ? the NAHB homebuilder sentiment index has been positive but reports from individual builders have been more mixed. While we expect a dip in July, we think the trend over the rest of the year for new home sales will be higher, albeit in a choppy fashion."