Wednesday, 30 December 2009

Learn To Trade: Your source for investment or investments, stock, stock market, and stocks info

Imagine a 15 car train sitting in a train station. Now, take a look at the train operator. Imagine the locomotive gears are jammed and the train operator is frantically working too unlock the gears. He is only able to move the train forward or backward about 10-15 feet in either direction. It’s safe to say that the train isn’t going anywhere until the operator fixes the train or until the situation gets resolved. This example, is the same type of thing that happens to a stock in the stock market. Let’s say that a stock has been going up and down for 3 to 5 months without much upside or downside progress. Sometimes a stock can get “stuck” trading in a range. When a stock starts trading in a range where support and resistance are clearly defined, it’s best to pass on that opportunity and move on to another stock that is moving. A stock that is moving will provide more of an opportunity for good fortune on your investment or trade. If for no reason other than to have your money work rather than idle by because even if you get stopped out rather quickly. You can then move on to another potential winner, rather than be stuck with a position that vacillates back and forth for an extended period of time. There is an opportunity cost to having your money sitting in an investment or trade that isn’t doing anything. The cost is lost potential profits (i.e. opportunity) from stocks that are trending up, while you’re sitting in a stock that isn’t doing anything. Now, imagine a train that is moving top speed across the country.But this train DOES slow down to make intermittent stops. The train allow passengers to get on and off with ease. Try getting off a train going 157 miles per hour. The result isn’t pretty. This example is characteristic of a great stock. A stock in which the trend is clearly up (and picking up steam), but it DOES pullback occasionally (because people are exiting or lightening up on their position and other people are now getting aboard this uptrending stock. And this new group of passengers will take the stock to higher highs. Stick to stocks that are active and stay away from stocks that are not going anywhere.

H.B. Fuller Company 10-Year Chart

Once you have determined that the train is moving (In this case, I would say that it started moving upwards in late 2000, early 2001), you are looking to become a passenger who wants to jump aboard this train. You want to wait for the right time though, because there shouldn't be any rush. Too many people think that when a stock is moving up, it's going to get away from them. That's people's emotion talking for them. No stock will ever get away from you, if you wait patiently for that buying opportunity.

Cree, Inc 10-Year Chart

Here is an example of a stock which languished for 8 years before finally breaking out this year. If you bought this stock in March 2001 for $20, it was still $20 in March 2009. You made no return in those 8 years, and missed out on other potential winning stocks in the market. To top it off, the value of the dollar has gone down which eroded your purchasing power. $20 in 2001 won't buy what $20 in 2009 will buy. So you would have been losing wealth even though the price was the same. Now, the price has increased to $55.28 as of today's close, so you would have made enough to cover inflation and made a pretty decent profit after 8 long years, barely. Why not invest your money somewhere else where the action is during 2001-2009, and then put your money into CREE in 2009?

Monday, 28 December 2009

Closing Out the Year

There are about 3 days left in the trading year. It is safe to say that 2009 was an unprecedented year. I think unprecedented was one of the most used words in 2009. Markets worldwide have moved straight up since March. The S&P 500 has closed up the last 9 out of 10 months. The NASDAQ has closed up 9 out of 10 months. The FTSE finished up 8 out of 10. The Dow 8. The DAX 8. The CAC 8. The SENSEX 7. The Straits 7. The Bovespa 9. The RTSI 9. The Hang Seng 7. And the weakest performer the Nikkei which was up 7. (I left out some, for expediency) Although for the Nikkei, most of that move was made in the last 19 trading days. So you can see that 2009 was definitely a year to be long. So, what's in store for 2010? I, honestly, have no clue because my expectations for 2009 were greatly exceeded. So it begs the question, how can 2010 outdo 2009. The mainstream media wants to talk up the fact that the S&P 500 is up 24.71% as of Thursdays close last week. But really the S&P 500 is up 66.51% from the March 9th close in just 209 trading days. So are we to expect another 66.51% rise straight up for 2010? Well, some inflationists, such as Marc Faber, think that as long as Ben Bernanke keeps printing more (phantom; I will explain the phantom part in later blog posts) money the US stock market can continue to rise unabated. But he thinks the downfall will be the US dollar and Treasury bonds in the long run, which he probably right about anyway. The question is when will it come. Do we need to know or predict what is going to happen next year to make money? The answer is, No. I believe that the future can be predicted in current stock prices by simple technical analysis. So, right now, I believe the trend is up, but my problem is how long can the markets go up without some kind of fundamental backing. I don't need much just more than a little bit. I am sure there are some companies out there making money in the last two years. Are they going to earn enough to lift the world economy? I guess we will see in 2010.

Thursday, 10 December 2009

Rose Colored Glasses

A lot of people (professional & amateur alike) are looking at the past 8 months in the stock market and proclaiming a new bull market. And they may be right, but only in the short term. It helps to take a look at the big picture every once in a while to see where you are. The optimism in every market right now is contagious (i.e. gold, oil, world markets, coal, copper). All these markets have been going up with each other roughly around the beginning of 2009 in the so-called “reflation trade”. This premise is based on the idea that the Fed can create inflation at will, regardless of the dynamics of market activity. So far it seems to be working (or maybe not). I look at the S&P 500 as a general gauge to the US markets. Why don’t I look at the Dow Jones Industrial Average. Because it is only 30 of the largest US companies in market capitalization. It doesn’t represent the US markets as broadly as the S&P does. And if you want an even broader measure, you should take a look at the Wilshire 5000. The S&P 500 is good enough for me, because that’s where big money tends to play, and in the last few months the big money has been reluctant to add to their positions. Even with the declaration that the recession is over, the market has failed to move more than 8% in the last 3 months. Shouldn’t the market go up, now that the recession has been declared dead? You would think so. But markets don’t work like that. You need to be a contrarian at heart to make any money. And right now, there isn’t a whole lot of opportunities to go long because everything is up. And so far, we have been grinding and chopping for the last 20 days or so. It is my belief that markets will probably start heading down fairly soon, but I think it may be a long process before we finally reach the peak. So take a look at the small picture and then at the big picture. Two different perspectives on the same thing, huh? Exactly. For someone, just looking at the last year the market looks like a great investment. But for someone looking at a bit larger time frame, the market looks like a straight line in an almost vertical path. To believe the market is going to continue the same trend up, you must believe that that almost vertical rise since March 2009 will continue, no? So, if the trend does continue, the S&P 500 should be breaking the all-time highs in 2007 by the end of 2010. Likely or not, you tell me?

Small Picture

Big Picture

Back from my hiatus

Hi, I am back after a pretty long hiatus from regular blog posting. To be honest, I got tired of saying the same things over and over again. It is difficult being a realist in time where society is desperate for any kind of optimism. Even bad news is optimistic these days. We have entered a new phase of denial for all who believe the bureaucratic officials who espouse only that the “worst is behind us”. I believe that this statement is very far from the truth of the situation. The majority of people who have little knowledge of economics, finance, banking, law, and politics have been duped into thinking that the current recession we are in is something that we will escape from without a price being paid. Ask yourself, what’s really changed? The truth is when you sit down and think about it, very little. One must have an understanding of the current situation and realizes its importance as a key place in world history. We don’t realize it now, but the times we are living in now will be written and talked about for many years. I am going to keep trying to tell the truth about the situation, no matter how much the “truth hurts” as they say. In my recent blog respite, I learned some things. Some things that I think are quite important that everyone know, in order to stay afloat in our current economic system. And once you grasp the idea of these truths, you will be better able to survive in the next few years. In addition, it might answer some questions you may have had, and make sense of things that occur every day in the world.

Tuesday, 1 December 2009

Market Musings

The S&P 500 finished up 5.74% in November, making that 8 out of 9 months since the March lows that the index has closed up. There aren't many examples in history showing that kind of uninterrupted rise except for "actual bull markets". If the market the market has been continuously going up for 8 out of 9 months and this usually only happens in bull markets; then why don't I feel confident that this party is going to last. Well, its the performance of the market recently. For all the hype, the market is up very significant in the last three months, and it seems to be losing momentum. The trend is still up, but I think it would be dangerous to start buying now if you haven't already.