Monday, 31 August 2009

Weekly Wrap: Your source for stock, stock market, and stocks info

Weekly Wrap: Last Week marked another week that the market closed higher, albeit a small one. The S&P 500 hit its highest point (1039.47) in the entire run up from the March lows. You have may have heard the saying “Buy ‘em cheap, sell ‘em dear”. Or may have heard,”Buy the dips, sell the rips.” They are essentially saying the same thing. And it goes for all markets, not just the stock market. That means the housing market, the fish market, the bond market, or even your local grocery market. You have to buy goods (and plenty of them) when they are cheap, and sell them when they are expensive. We all do this when we go to our local supermarket, but why is it that the majority of investors don’t do this when it comes to the stock market. Well, there is a reason. But that’s a side issue and I won’t go into the “Why?” investors do it. I am just going to tell that you should approach the stock market the same way you approach the supermarket. When an item is on sale in the grocery store, we rush to buy more. When an item is on sale in the stock market, investors dump the stock because they fear they are going to lose all their money. You should be doing exactly the opposite. You should be buying a stock that is going “DOWN”. It seems counter-intuitive. But if you want to make money, that’s what you have to do. Generally, you have to act contrary to popular public opinion (“the crowd”) in order to be successful. So, with that said, herein lies the point. The market has now vaulted up from the depths of pessimism in early March to the throws of optimism in late August for six months IN A ROW. To continually go up without a single month closing down is impressive. What is equally impressive is that you would be hard pressed to find a time period in which the market went up six months in row in the last 100 years and it didn’t kick off a new bull market. Especially considering the type of collapse the stock market had in 2008. That’s what makes this time period extremely interesting because if the market is going to collapse (like I think it is), then it is going to happen very soon because eventually the market will run out of steam. It is already running out of steam. The volume has been dying off every month that we go up indicating that the professional money is not interested in higher prices. You should know that 70% (maybe even more now) of trading in the market is done by professionals and it is THEY who truly have the power to move markets up and down. They are the only ones with the kind of capital that can stop a bear market in its track and launch a new bull market. A keen observer would have spotted their participation in late February and early March, when the volume was expanding. That let you know that the professional money was in there buying the market from all the panicking investors who were listening to all the bad news at the time. Right now most of the news is being portrayed as good, yet the professionals are not interested in buying more, which is why you don’t see the volume expanding (it’s shrinking). Meaning that as soon as they start selling, there will be nothing anyone can do about it. And from a technical perspective, I think the market has maybe another 2 months up, which would make it eight months IN A ROW from the March lows. I think that would be absurd in my opinion because I don’t see any of the economic data being released supporting stock prices at the levels. So I am anticipating a correction somewhere in the next two months. It could be September or October. It doesn’t really matter when it happens because there are very few good risk/reward opportunities to the long side. Because of that, it must be time to start looking to the short side (being contrarian). Buy ‘em cheap, sell ‘em dear. In other news last week, Ben Bernanke was nominated for another term by President Obama. Answer me this? Why is it that the American people don’t decide (i.e. vote) on who gets to be in charge of the Federal Reserve if it is a government agency? That’s because it isn’t a government agency. Do some research. The Chairman of the Federal Reserve is decided by a small committee of people who is then given the O.K. by the incumbent president. I don’t thinking the nomination of Bernanke by President Obama was a good thing. President Obama said that it was his “bold action and outside-the box thinking that has helped put the brakes on our economic freefall.” Really, we’ll see about that in 2010, if his “bold-action” and “outside the box thinking” will put the brakes on our free fall. All I am going to say is “One of us is going to be right”. Either President Obama and Bernanke are right and the recession is over, or I am right this time period will be recognized for what it really is, a depression. Meanwhile casualties in Afghanistan climb. 45 U.S. troops were killed in July, making it the deadliest month for U.S. troops since the conflict started 8 YEARS AGO. Can somebody tell me how much is this conflict costing Americans and why are we even there fighting in the first place? Because most of the people I talked to have no idea.

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