Top down, bottom up approach to Investors Sentiment tracking by Proactive Structural Simulation, Forecast of   Rate cuts, Housing, Credit, Financial Crisis, Recession , Bail Out, Stimulus Impact on Dow Jones, S&P 500 , NASDAQ Indices Pricing Mechanism ,Arbitrage,  Day Trading, Momentum Trading Volume relationships  and Component stock Pricing Simulation Forecasts TW master hands controlling Global economic recession, financial crisis Optimal Long/Short ETF and Indices,  S & P 500  E-MINI Futures risks hedging Strategy  Maximize  Risks Adjusted Return 
Tracking Monetary Economic, Fiscal  Policy,  Dollar currency Speculation , Housing market, US Credit crisis, unemployment   S&P price and Trading volume impact on  component stocks performance  ( full day workshop  )   S & P 500 index futures OSA forecasts and   full day strategic long/short ETF  forecast workshop

Dr. Warren Huang, Founder, OSA, USA  wh3928@yahoo.com    www.osawh.com 

                                                                                                                                                           Abstract

  This paper demonstrated  Huang’30 years  pioneering  proactive structural behavior arbitrage assets ( equities, bond, commodities, housing ) pricing mechanism  research,  teaching,  consulting  for China , Taiwan, US 15 cities 30 million   high net worth individual and institutional investors, fund managers  through integrating last 30 years macro, financial , industrial economic and investors daily  trading volume ( confidence ) data into  real time   stock indices and its component portfolios earning performance, stock prices and commodities , housing price mechanism Operations Simulations Analysis (OSA).
 
These asset prices simulators have been used for tracking   global  central banks  monetary, economic, fiscal  policy ,   financial  systemic  stability risks , Basel II Risk, corporate scandals applications . It  quantify and compensate financial system and specific noise ( uncertainties),  identify the real time global  financial, housing, commodities market  asset prices bubbles   deferential due to  speculation resulted  mispricing ( over and underpricing in interest rate,  currency, inflation, housing, equities price bubbles and earning announcement  ) in last 20 years global mortgage,  credit,  financial crisis, economic recession systemic risks , corporate  scandals  cycle months, years ahead of the emerging boom and bust, bull, bear  market trend to maximize  risks adjusted strategic indexing ETF arbitrage return for global asset allocation . These  Proactive APT  simulator  compensate current APT and CAPM  systemic noise due to betting on the wrong side of  monetary policy, interest rate impact on assets  price.

Huang  extended  proactive structural OSA arbitrage asset pricing to  macro,  financial, industrial econometrics integration into real time investors speculation behaviors tracking misprcing (over and underprice) through Exponential GARCH estimation and Granger causes, consequences co-integration . It  simulate  US Fed monetary, economic, fiscal  policy rate cuts, bail out, credit , financial crisis recession impact on dollar currency, unemployment, inflation, interest rate on  housing price, mortgage default , financial crisis, consumer, business demand impact on  economic recession, oil, commodities, metal asset price mechanism  and  Dow Jones, NASDAQ, S&P 500  index, its banking, finance, high tech, retail energy, biotech component stocks earning, performances., 
   He  warned on 2007 Peking university International financial engineering risk management June 2007  and on Wall Street Journal   Market beat blog since Sept. 2007 and March  5, 2008 on China Fund World 2008, Shanghai Conference  that US housing price slump , credit crisis continue into  first half 2009 ,lead to consumer, business spending plunge 3.5 %, ISM and consumer confidence drop to 36, jobless rate soared to 7- 8 % repeating 1980 style  double dip recession, with banking, finance, housing  investment banks  loss trillion dollars MBS, CDO, hedge fund writedown, banking, finance, mortgage stock down   70- 90  %, drag US and global stock   50-70  % bear markets correction, S&P and Dow Jones, NASDAQ plunge 50 % , Dow entering 6500- 7000  NASDAQ entering 1200- 1500, SP 500 entering 700- 800 recession trading range starting Dec 2008 through March  2009 ( Taiwan, Hong Kong, India stock indices down 70 %) in recession bear market correction  and the overpricing of US high flier Google, Apple, Goldman Sach, China PetroChina, Sinopec,  and Bear Stearn 29 billion hedge fund failure ,  rescue Fannie Mae, Freddie Mac , Lehman, AIG  , Citigroup mortgage , credit crisis,  with average error below 1.5 %, correlation  over 0.98. 
 
Our Proactive structural macro, financial housing bubble simulation forecast predicted last year that QE2 will only help boost commodity , stock prices by 30 %, CPI triple, and hurt real economy GDP. will not help lift housing market and GDP   to avoid double dip,  GDP only up 0.3 % in 1Q, 1.3% in 2 Q and will plunge below 1 % ,June  ISM plunged from 55 to 50.5 recession level , June consumer spending drop 0.2 % unemployment will be rebound above 9.2 %. Global Exit strategy rate hikes and Housing, debt  bubble burst crisis  lead US economy to slow in the second half 2011, below 1%,  facing double dip risks, follow Euro debt crisis, and China, US, China, Asian slowdown, Dow Jones to test 9900- 11000, SP test 1100- 1200, Nasdaq test 2500- 2600
This work also extend proactive arbitrage pricing into  financial market behavior , tracking forecast  by introducing  stock indices and stocks trading  volume ( investor confidence) relationship into price, return forecast with correlation constant greater 0.98 , average error below 2 %
S & P 500 E-mini future hedging strategy   http://www.optionsxpress.com/welcome/tour/trade/futures/sp500.aspx?SessionID= 
Keyword:   emerging market   behavior finance   arbitrage assets prices bubble,   financial crisis    US mortgage default    corporate   scandals     ETF indexing arbitrage   , systemic noise risks   global stock indices   trade volume/price relations

Comment by Warren Huang Wall Street Journal Real Time Economics- Blog June 5, 12.37 PM,2009,

• • Comment by Dr. Warren Huang, to Wall Street Journal Real Time Economic Blog. May. 27, 2009 Warren Huang wrote:
  Despite rate cuts, even to -5 %, Housing bottom and   credit crisis ends only after the end of recession, the jobless rate peaking out. With 11 month of unsold housing inventory and recession drag us into next year, after economy is out of recession. There is no incentive for hoe buyer in falling housing prices and can not afford the low monthly income with interest rate only small part of it), rate cut to - 5 % can not, will not help push loan demand up. Despite some distressed housing are ( with price down over 30 %) like northern  California, Florida housing sales pick due to bargain hunting , most of countries, like New York, Seattle, Boston continue to slide into 20- 30 % decline, drag national price plunge 32 % from 2006 peak to 30- 40 % decline early next year. details on http://www.osawh.com/mortdefa.htm http://www.osawh.com/SP500.htm http://www.osawh.com/macro.html
  • Comment by Dr. Warren Huang to Wall Street Journal Market Beat and Real Time Economic Blog
    • 12:03 pm May 18, 2009   Warren Huang wrote:
    According my two master hands controlling global macro-financial GDP,stock index ( right hand) and industrial sectors supply demand, pricing, corporate performance, stock prices (left hand) Today  market rebound just bargain hunting those beaten finance, banks, retail shares. Up to this moment, stimulus only work on and stay on right master hand ,the macro, banking, finance systems, while the rest of the economy, the industrial sector (left hands0 s are still in deep recession , The bull market come only when these two master hands felt the impact of stimulus impact The problem of credit, financial crisis, recession remain, not follow few day stock correction to go away. continue  soaring foreclosure ( Calif soared to 13 %, some area to 24 %, NY and others up to 8 %), due to falling housing prices ( down 26 %), despite local housing sale rebound., falling retail sales, despite tax rebate, soaring jobless at 8.9 % some are over 12 %)will continue into summer, falling capacity utilization at record 67 % , due to weakening demand and prices PPI down 3.7%), with only money supply double from 5 to 11 %, stocks price up 37 %.,global recession from GDP contraction , despite ISM supply chain index improvement. Japan 12 % to EURO 4 %) poor corporate earning just hoping stimulus will help pulling out recession We are only half way to this crisis and recession, while stock market speculators are celebrating bull markets. details on http://www.osawh.com/SP500.htm http://www.osawh.com/mortdefa.htm http://www.osawh.com/industfine.htm

Dr. Warren Huang (黃華南博士) Pioneer, proactive structural dynamic global inflation, macro economy, daily financial markets interest rates, currency, stock, bond, derivatives, housing, commodities, oil asset pricing and risks valuation markets fundamentals price mechanism, accurately warned on Wall Street Journal Market beat Blog Sept.19, 2007 and Mar 5, 2008 masterclass  workshop China fund world 2008, Pudong, China  to Goldman Sach managing directors JPM, UBS and 150 China QDII/QFII fund managers that  US Fed aggressive rate cuts drag dollar to 1.53-1.65 EURO, 95- 108 Yen, economic stimulus boost consumer spending on gasoline and jet fuel summer, demand, driving gasoline , heating oil to 415, oil price to 121-145, commodity price double, will peak out as US dollar rebound follow Fed ending rate cuts cycle , can not stop sub-prime crisis spreading, regional  housing price slump 30-50 %  and credit crisis, crunch crisis continue through  2009 drag economy into 2009 repeating 1980  double dip  inflationary recession resulted trillion housing and stock market loss and US, global stock indices  and oil, commodities , metals price bubble burst bear market  50-70  % , Dow Jones test 6000- 7000  NASDAQ PLUNGE testing  1100-1250-  and high fliers (GOOG, PTR, AAPL) , IT, retail stocks facing  50-- 70 % correction,    with banking, finance, housing share price plunge 70- 90   %, dollar making to new low 85- 90 Yen,   commodity prices doubled,  and bubble burst plunge 50-70 % % in recession widening bond , CDS spread and failure in MBS/CDO, Bear Stearn 30 billion dollar MBS hedge fund and government steps rescue, Lehman bankruptcy,  Fannie Mae, Freddie Mac AIG, bail out,  despite Fed rate cuts . , oil price plunge from 147 to 40, copper plunged from 350 to 115, corn from 600 to 350,  He also warned top global QFII management on Peking  Univ June 2007 International Financial Engineering Conference that China overheated housing, stock market wealth gain resulted inflation over 8.7 % will lead to China Peoples Bank credit tightening to remove excessive liquidity, China  Banking housing, stock markets follow US housing price slump, recession, bear market correction, drag China GDP plunged to 6.8 % 4Q 2008,will test 6 % first half 2009  and stay above 8 % second half 2009 due to and China 568 billion infrastructure and 10 industrial sector stimulus  program maintain 2009 GDP at  7.5 % and stabilize stock markets, Shanghai traded 1500- 2100 through  09     until economy softlanding
China is suffering from housing market overheating, with 300 % gain in housing prices still  up 0.5 % , FIXED investment , consumer spending still up 22 %, first 9 month GDP still up 9.9 %, CPI drop to 1.2% in Dec 2008 % after   China peoples Bank cut 2 % rate after  6  rate hikes, 16 bank deposit rat hike to 17.5 %. China  raise  its M2 money supply growth   to 12 % 17.5 Dec. 2008

Dr. Huang will be the keynote speaker for EUROMONEYs China derivatives market conference March 24-25, Shanghai 2009 to speak on 2009 China/US economic/Capital market, oil, commodity market  outlook and Challenges, opportunities in China/global onshore, offshore derivative markets  

• 　
  • Comment by Dr. Warren Huang, to Wall Street Journal Real Time Economic Blog. May. 27, 2009 Warren Huang wrote:
  Despite rate cuts, even to -5 %, Housing bottom and   credit crisis ends only after the end of recession, the jobless rate peaking out. With 11 month of unsold housing inventory and recession drag us into next year, after economy is out of recession. There is no incentive for hoe buyer in falling housing prices and can not afford the low monthly income with interest rate only small part of it), rate cut to - 5 % can not, will not help push loan demand up. Despite some distressed housing are ( with price down over 30 %) like northern  California, Florida housing sales pick due to bargain hunting , most of countries, like New York, Seattle, Boston continue to slide into 20- 30 % decline, drag national price plunge 32 % from 2006 peak to 30- 40 % decline early next year. details on http://www.osawh.com/mortdefa.htm http://www.osawh.com/SP500.htm http://www.osawh.com/macro.html

  Comment by Warren Huang, Wall Street Journal Market Beat Blog 3:02 pm May 1, 2009

  The bull forgot that we are in unprecedented global financial, crisis crisis and deep recession in a decade. The economic recession and housing, banking crisis , recession and capital market will not be easily recover, it will follow U shape recovery  and stock market V share rebound.. The market will be changed from U recovery to W recovery due current premature bull speculation. We will soon facing correction, as bulls find rocky housing, banking, financial economic recovery and disappointing corporate performance. details on http://www.osawh.com/macro.html http://www.osawh.com/mortdefa.htm http://www.osawh.com/SP500.htm

Comment by Warren Huang Wall Street Journal Market Beat- Blog  January 23, 2009 at 2:23 pm
We have been through Phase I monetary, economic, fiscal policy impact on Global Housing, Equities, Commodities, Bond, Derivatives Asset Prices Bubble Burst Mechanism and Sub-prime on Daily Prices Dynamics , Subprime, mortgage, Credit crisis, Financial , Systemic Risks impact on Recession which causes housing price down 19 %,trillions dolllar fiancial market loss, bankruptcy of Lehman, AIG Fannie Mae Freddie, Merrill Lynch and Citigroup with deep recession -6.1 % GDP and 8.9% unemployment and now
we are entering Phase II Global recession impact on banking, credit, financial crisis and industrial sectors demand, prices slump and operating loss with jobless rate at 8.9 % and business, consumer spending over 5 %,
will drag stock price for 20 % more correction resulted widening mortgage, credit card, business loan loss will drag Bank of America 16 billion dollar loss even JP Morgan and more banking, financials into widening loss   details on http://www.osawh.com/mortdefa.htm http://www.osawh.com/recession.html  http://www.osawh.com/macro.html http://www.osawh.com/SP500.ht

Comment by Warren Huang , Wall Street Journal MarketBeat  Blog- - January 16, 2009 at 4:04 pm Bank of America 4Q 16 billion loss is inherited from merger of Merrill Lynch, with total 136 billion bailout out does not solve Bank of American nor US banking, credit, financial crisis, as we are still only haff way to housing market price slump, with currently down 19 % will continue plunge 30 % through second half this year. which will lead to more continued loan, credit loss, will lead to write down, oerating loss for the best bank like JP Morgan, and additional loss out of Bank of American’s Merrill Lynch bad assets. US investrors speculators the market bottom at 7900 will be drop into bear trap in the month ahead with Dow Jones plunge to below 7000 and SP below 700 and NASDAQ to 1250. details on http://www.osawh.com/mortdefa.htm http://www.osawh.com/SP500.htm

Comment by Warren Huang -Wall Street Journal Market Beat Blog December 30, 2008 at 3:08 pm
From my tracking of last 30 years global super housing bubble burst resulted deep recession impact on stock market receovery, We are not even through the worst of housing slump, the recession yet, It is premature to talk about market bottom and recovery.
Stock market must have another 25 % plunge to reflect the depth of housing slump and recession due to plunging consumer, business spending, continued housing slump, soaring jobless rate ,which will be around next April.Dow Jones will be around 6000, SP around 600, NASDAQ be 1100.
we will see market bottoming out from there, until more concrete result from OBAMA’s job creation to stop economy, housing market decline.
the stock will be creeping up from bottom 40 % to 8500 for Dow, 800 for SP500.
There will be no V-shape recovery for housing, nor, economy, nor atock markets. details on www.osawh.com/SP500.htm
www.osawh.com/mortdefa.htm www.osawh.com/macro.html

 

Comment by Warren Huang - November 5, 2008 at 7:43pm
 I kept warning on this blog that market speculators ignoring plunging housing prices, consumer , business spending and confidence, ISM index and soaring job cuts, drag economy deeper into recession still using US stock are cheap to making election and yearend rally will give up all their gain return to 8000- 9000 for consolidation, back and filling.
 Despite global rate cuts, trillion dollar bail out, global stocks will be drag by recession into further bear market correction.
 details on www.osawh.com/mortdefa.htm www.osawh.com/SP500.htm www.osawh.com/recession.html
Comment by Warren Huang , Wall Street Journal Real Time Economics Blog- October 17, 2008 at 10:05 pm

US Sept. consumer confidence plunge to 38, ISM manufacturing purchaser index plunge to 43 and jobless rate to 6.1 % and Dow Jones plunged 40  % third quarter GDP contract 0.3 %core inflation up 2.9 %, warned, predict by me Sept. 2007 on this blog that US  housing slump continue , will entering double dip inflationary recession 3Q 2008 despite rate cuts, stimulus, bail out plan and extends into deeper recession contracting by 2 % in $Q 2008 and 1Q 2009,  resulted by  full impact o business, consumer spending decline due to 6.5 % jobless and 20 % housing slump, 40 % stocks market loss
  The real causes of current mortgage, credit, financial crisis and recession are due to poor financial, monetary policy decision modeling in asset pricing and  risks valuation mechanism, MBS, CDO , the burst of super housing, commodities asset price bubbles caused by 7 year longest expansive excessive money supply, easy credit policy .
Global central banks, financial markets financial decision still rely on 30 year old probabilistic, statistical Capital Market Asset Pricing (CAPM) and macroeconomic modeling, ignoring asset price impact on inflation and financial, housing , MBS, CDO prices.
Predicted by Dr. Warren Huang, pioneer of Proactive Global Asset Pricing Mechanism , June 2007 , Beijing, Wall Street Journal Economic, Market Beat
 Blog Aug.2007   and March 5, 2008 Pudong, China Fund World 2008 to 200 global top investment banking, fund managers that Global Housing price bubble burst, prices plunge 30 % into 2009, drag  global economy into recession and stocks bond, oil,  commodities, metals ,Derivative Asset Prices Bubbles Burst with 50 % Price Correction Cause Credit, Financial Crisis and Economic Recession, ( As Dow Jones, SP 500, NASDAQ drag global stock indices plunged more than 50 % into 2002 recession low ,( Dow Jones  after current consolidate in 8000- 9000 will test 7000, NASDAQ test 1250, S&P test 700 low, oil price plunged 55 % from 147 to 64，Gas oil from1300 to 600 , corn  from 800 to 350, cotton from 80 to 43 , gold from 1050 to 650 as global economy  enter deep recession by year  end, despite US 700 billion  and ECB 2.3 trillion bail out to stabilize credit crisis

details on www.osawh.com/Fedcrisab.htm  www.osawh.com/mortdefa.htm www.osawh.com/commody.html www.osawh.com/centmaf.html

 Dr. Warren Huang (黃華南博士) Pioneer, proactive structural dynamic global inflation, macro economy, daily financial markets interest rates, currency, stock, bond, derivatives, housing, commodities, oil asset pricing and risks valuation markets fundamentals price mechanism, accurately warned on Wall Street Journal Market beat Blog Sept.19, 2007 and Mar 5, 2008 masterclass  workshop China fund world 2008, Pudong, China  to Goldman Sach managing directors JPM, UBS and 150 China QDII/QFII fund managers that  US Fed aggressive rate cuts drag dollar to 1.53-1.65 EURO, 95- 108 Yen, economic stimulus boost consumer spending on gasoline and jet fuel summer, demand, driving gasoline , heating oil to 415, oil price to 121-145, commodity price double, will peak out as US dollar rebound follow Fed ending rate cuts cycle , can not stop sub-prime crisis spreading, regional  housing price slump 30-50 %  and credit crisis, crunch crisis continue through  2009 drag economy into 2009 double dip  inflationary recession resulted trillion housing and stock market loss and US, global stock indices bear market  50 % , Dow Jones test  7000- 8000  NASDAQ PLUNGE testing  1250- 1500 and high fliers (GOOG, PTR, AAPL) , IT, retail stocks facing  correction,    with banking, finance, housing share price plunge 70- 90   %, dollar making to new low 90 Yen,   commodity prices doubled,  and bubble burst plunge 50 % in recession widening bond , CDS spread and failure in MBS/CDO, Bear Stearn 30 billion dollar MBS hedge fund and government steps rescue Fannie Mae, Freddie Mac bail out,  despite Fed rate cuts . He also warned top global QFII management on Peking  Univ June 2007 International Financial Engineering Conference that China overheated housing, stock market wealth gain resulted inflation over 8.7 % will lead to China Peoples Bank credit tightening to remove excessive liquidity, Banking housing, stock markets follow US housing price slump, recession, bear market correction, with Shanghai A testing  1800  through  early 2009  until economy softlanding
China is suffering from housing market overheating, with 300 % gain in housing prices still  up 3.5 % , FIXED investment , export growth and consumer spending still up 26 %, first 9 month GDP still up 9.9 %, CPI up 7 % despite  China peoples Bank 6  rate hikes, 16 bank deposit rat hike to 17.5 %. China need to further cut its M2 money supply growth  from 15 % to 12 % next year to achieve housing price cut of 30 %, CPI to 4 %, GDP to 8 % to achieve soft landing and start of bull market stock rally.