Trader’s Narrative

For most, the constant flood of real time news can be overwhelming. There are already many sites which aggregate news, categorizing and organizing them into more manageable streams. For the past week I’ve been using an invitation only financial news service called SkyGrid that does this and much more.

Behind the constantly updating headlines delivered by SkyGrid is a sophisticated set of algorithms that not only check for reputation and relevance of the source but also measure the sentiment expressed in the article. SkyGrid then categorizes the news as either red (negative), green (positive) or grey (neutral). So with a glance you can tell what the prevalent news is for a company or sector. Here’s a recent screenshot:

The user interface, with its clear and intuitive layout, is reminiscent of a Bloomberg terminal. You can filter the stream of real time news to blogs, mainstream news sources, EDGAR, etc. You can also add specific sectors as well as do a search for any public company by typing in its name or symbol.

SkyGrid was founded by Kevin Pomplun in 2005 and later attracted VC funding from Draper Fisher Jurvetson, RRE Ventures, BlackRock, and Esther Dyson. Pomplun says that he started Skygrid because “If you looked at the information landscape prior to the Internet, it was manageable. But with the explosion of content you had a fire hose of data that is hard to digest, and people needed a way to filter it.”

Until recently, SkyGrid cost $6000/year (or $500/monthly subscription). Their business model has changed to an advertising supported model, so they are now offering the same product for free. But they are limiting accounts to invitations exclusively. You can request one at their site but who knows how long it will take for them to respond and send you access.

As a gift to my readers, I’ve finagled a limited number of SkyGrid invitations. I would like to ask that as a courtesy, you only take the invitations if you intend to use the service and provide feedback to the SkyGrid team. This is a free service so earn some good karma by sending them an email after you take their baby for a spin (there is a huge feedback button on the top right of the screen once you login).

If this isn’t something you’re interested in, then take a pass or pass it on to someone who is because if the other invitation offers on other blogs is an indication, these will go fast. Click here for the SkyGrid invites (all gone!).

Here’s a video of SkyGrid:

Well, it is the end of another year. And if you are a trader, your thoughts turn invariably to the January effect and more specifically, how you can use this phenomenal annual pattern to generate alpha.

There are a few ways to take advantage of the January effect. My personal favourite is on closed-end funds (CEFs). I’ve outlined the whole trading plan here: My Year-End Strategy.

With the turmoil in the bond market this year, a lot of bond funds and other “yield” vehicles have gotten beaten to a pulp. Which means there are a lot of unhappy longs who are selling for tax-loss year end reasons.

I feel like a kid in a candy store this year.

I’ll just feature one example: BlackRock Municipal Bond Fund (BBK), but for a vowel, my namesake. Almost everyone who bought this this year is facing losses:

Notice the upsurge in volume - a telltale sign. And the way it has fallen to technical support at $14.

Hope you had a great year, and see you in 2008

I’ve mentioned several times that I prefer to look at Nasdaq numbers when it comes to breadth (in a non-cumulative way) because NYSE breadth numbers are “polluted” with non-common stock securities.

These are usually interest rate sensitive. They are municipal bond funds, bonds (yes actual bonds trade on the NYSE), CEF’s, and other weird and woolly financial concoctions.

The result is that these securities move like a great galloping herd. But they don’t move to the rhythms of the stock market. Rather, they take their cue from the bond market. So when you people get spooked about rates (thinking that we won’t see a rate cut or maybe even have a rate increase) these non-common stocks get clobbered.

And that effects the NYSE breadth numbers. Let me show you with one example. Here is the chart for BlackRock Municipal Bond Trust (BBK). Last week it sliced through its 200 day moving average (blue line):

Now look at the effect of moves like that one, multiplied by hundreds and hundreds of similar bond-like securities:

That is one really oversold market? Isn’t it? We are at the same extremes that we saw at the Feb-March 2007 market bottom. But are we really? Take a look at the Nasdaq advance decline numbers:

Oversold? What oversold? We are in neutral territory. And that is how the siren call of the NYSE breadth numbers can throw you off course.

If you’re interested to know how I trade these munis, take a look at My Year End Strategy.