Saturday, 30 January 2010

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

Weekly Wrap: Another down week? It can’t be---well---it is. Stocks got bashed this week across the board. If you take a glance at the chart for the week, you’ll notice that every rally was sold. The sell-offs were particularly steep which could mean that a real change in character in the market is occurring. Thursday and Friday weren’t pretty in particular. Friday sell-off was not a surprise to people who don’t drink government Kool-Aid. The big news at the end of the week was the GDP number. This number was reported at 5.7%. That means the US government said the economy was expanding at 5.7%, which is actually a wondrous number to report. For an economy the size of the US, 3% growth is considered good. 4% is very good. So the number comes out and it’s 5.7%. That should have given the bulls all the momentum the needed to take stocks higher. The problem is that the number is completely bogus and the market actually sold-off on a supposedly bullish number. Doesn’t inspire a whole lot of confidence when the market plunges on “good news”. You can’t believe anything that comes out of the government statistics and here is why. Last quarter the government reported 3.5% growth in the US which was above economists’ estimates. Then a month later they said, “Well actually it was 2.8%”. Then after that it was revised to 2.2%. So the real GDP growth in the previous quarter was 2.2%. You take out the tax credit for first time home buyers and the cash for clunkers and it was probably negative. Which would mean the US economy would still be in recession. So, it doesn’t do anyone any good to pay attention to anything the government says. The market is much smarter than the government or anyone else. The market has gone down for two weeks straight and it may be giving us a clue to its next potential trend. Let’s talk about Greece and the Eurozone economies. Anyone remember Argentina’s or Russia’s debt problems? You may have the same scenario playing out in Greece. Credit spreads are widening in those developed nations and the endgame isn’t pretty. Greece’s budget deficit is 12.7% of their entire GDP. That means 12.7% of their income is going to pay the creditors. Portugal, Spain, and France are all seeing their creditworthiness get questioned as well. Yeah, this sounds like a global “recovery” to me. I don’t think so. The politicians and central banks don’t get it. You can’t solve a debt crisis with more debt. You will have to pay the bill when it comes. Discharging the debt is just like paying the minimum balance on a credit card. The credit card company keeps charging you more and more each month. Your credit balance keeps growing. They are actually happy that you only pay the minimum because the means they will make more money off of you. The creditors of Greece, Spain, France, and Portugal will cripple the Eurozone economies because those countries debt payments will be so large that all the money collected will go to paying off debt. This is another one of those developing crises. Ben Bernanke was reappointed. Not a surprise. I am not going to say much on that. I think it was a bad choice and it won’t be realized how bad a choice it was until down the road. The Fed also decided to keep rates at 0%. Again, not a surprise. The Federal Reserve does not control interest rates. Everybody just thinks they do. The Federal Reserve follows market rates, and if the bond market is asking for no return in order for safety it should make you wonder how healthy the economy actually is. Boeing hit a new intraday high Friday from the March lows, and Tesla Motors has filed for an IPO. It is the first US car IPO since 1956. Oh yeah, the iPAD came out too! (Not gettin’ it.)

Thursday, 28 January 2010

Market Pulse: Your source for stock, stock market, stock trades, and stocks info

Market Pulse: After last week’s end of the week sell-off, the market has done nothing this week. I heard all types of prognostications that Obama’s cracking down on the banks was going to have significant ramifications on the market on Monday morning. Yawn! The market isn’t really interested in much of anything. The market is clearly trading below the opening range of the month. A sign that is to be noted because we haven’t had a close for the month beneath the low of the opening range since June. So I’ll be watch to see if January turns out to be a significant top. There are only 2 more trading days left in the month, so it’s unlikely that the market will rally and close above. That will make it only the 2nd time since the March lows that the S&P500 finished down for the month. That would make 9 out of 11 months closing up since March. How many more months can the S&P500 close up without a significant correction? If I knew that I wouldn’t be talking to you, I would be out putting positions on. It will be interesting to see. The pundits are all looking at the recent correction and saying that is just a “little pull back”, “nothing to worry about”, “a little correction was overdue”, and other things like that. Nobody thinks it’s strange that the market is up 9 out 11 months, and that a more significant correction might be around the corner. The first 3 days of February might just hold a clue to how February is going to be. This month is done, stick a fork in it. I don’t think anything interesting is going to happen in the next two days. (I could be wrong though. You always have to consider the unexpected when dealing in the markets. You have to be prepared for a crash, pretty much every day, it seems like.) Netflix, NFLX, shot up yesterday (after hours) something like 19%. Damn, I was trying to get in there. Take a look at the charts of Blockbuster (BBI) and Netflix (NFLX) and tell me who you think is winning in that space. Prettty much a no brainer. It was coming down, just how I liked it too. I will have to rethink my entry strategy on that one. Also, I read an article about Panera Bread (PNRA) this morning. Seems like the company is doing really well despite the depression. Got my eyes on them too.

Systems Trading Ideas

Systems Trading Ideas: When it comes to designing a trading system, it is very important to think about entries and figuring out the best time to pounce on an opportunity. BUT… most of your attention should be focused on EXITS. Why? Because that’s what makes you the money. There are many systems out there that focus on getting in, but leave little to be desired when focusing on getting out. They do this because most people think entry (i.e. buying at the right time) is the key to a system being successful and making money. You buy a stock at the right time and then you hold it and watch the stock appreciate. In other words, the buy-and-hold strategy that wall street teaches us. A look at the last decade should be enough to convince anyone that buy and hold does not work. Unless you were born in 1932, 1949, 1974, 1982, or 2003 and were of sound mind and body to even actually buy stocks, then you’re chances of being able to make money from buy-and-hold were slim. 5 times in the last 80 years buy-and-hold would have actually worked very well. Those are miniscule odds. You are better off develop a system that is about making desired profit targets in a 6-24 month time frame, and cut your losses quickly if it doesn’t work out. My advice on developing a system would be to spend as much time on your exits as your entries and you will probably end up being profitable in the long run, and that’s really the name of the game. Making money over time.

Wednesday, 27 January 2010

World News

World News: Seems as though the IPO of UC Rusal did not go as planned. This development shouldn’t be surprising since most IPO collapse in their first year of trading. Also, the possibility of IPOing at the crest of a big wave down in the market is terrible timing. I am still observing the market activity over the past few days, and there are key signs that this decline might be something more. I am hearing chatter that the market declines in the US are linked to the defeat of Martha Coakley by Republican candidate Scott P. Brown. The experts say this is significant because Democrats maintained that position for 46 years. (Quite a long time) Now, the Democrats are scrambling to make sure the keep their remaining seats in the upcoming elections. How will they do this? By going after the bad guys. Who are the bad guys? The Banks. The Banks would could do no wrong (and even if they did, the taxpayer would bail them out) are now getting turned on by President Obama and the Democrats. This seems to be one of the prevailing theories of the market decline. I have got a simple enough answer. The markets are going down because people are selling and there is no one left to buy. Period. The markets worldwide had been overbought for the last 5 months. If anyone took the time to notice, when all the world government started announcing they were coming out of their recessions the market barely rose. Some markets are no better than they were 4-5 months ago. So all the good news comes out but the markets do nothing. Toyota is getting their reputation bashed because of a 2.3 million car recall. I believe they had a 4.3 million car recall just before that. I guess they have a lot of production issues currently. I wouldn’t really worry too much about that. They are the #1 car maker in the world, and sometimes you have setbacks. Ma Zhaoxu, Foreign Ministry spokesman, warned the Obama administration that giving guns, missiles, and helicopters to Taiwan will damage their economic and political ties. I would think so. I have been noticing a lot of squabbling between the US and China of late. That’s what happens when a new superpower emerges. I heard a good quote from a play that I recently attended. Something about the United States flourishing on individualistic capitalism but the new century will be China’s, and that will be predicated on state (or collective) capitalism. You should maybe check out the play for yourself. The play is called the Power of Yes being shown at the National Theatre. So if you are in London sometime soon, check it out. It’s a kind of step by step explanation of the financial crisis.

Monday, 25 January 2010

Learn To Trade

by Niki Arinze

Learn to trade: Continuation patterns – Continuation patterns are patterns that form when price takes a pause (i.e. trades sideways, choppy, or moderately pulls back) in the contrary direction of the major trend. It is also important to try and recognize what the major trend is so that when pause periods occur, you don’t mistake them for actual changes in trend. Take a look at CREE. We can see that CREE was in an uptrend from March. It moved up for three months and then had a gap day 5-27-09. If you were watching this stock, there was no need to rush in. Stocks ALWAYS (and I do mean ALWAYS) provide an opportunity to get on board of a trend. Sometimes you have to wait longer than others. The period from June through the middle of July was that time. You will see the a-b-c zigzag I drew to signify one of the continuation patterns that I think works very well. The time to go in was after the MACD crossed over in mid July. This continuation pattern provides an initial entry point or an additional entry point (if you got in back in March) to add to a position to take advantage of the uptrend.

Saturday, 23 January 2010

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

Weekly Wrap: The market is feeling the heat right now. I know some bears are finally feeling some relief after actually believing they might be crazy. Some of them even believe the party is over. I am skeptical of it until I start to see the market pick up on the down side. It's long overdue and about time that market participants come back to their senses about the prospects of recovery in the economy. Japan Airlines entered bankruptcy earlier in the week. It is Asia's top carrier. It is an example of an organization which tries to sustain itself with massive amounts of debt. First Solar, a alternative energy company, signed a contract to build 22 megawatts of solar power plants in New Mexico. I have got my eye on First Solar (FSLR) because I think they will be the Exxon (XOM) of the future for the alternative energy industry. Bank of America said they lost more money than expected. No surprise there. That bank has real financial troubles that most of the public is not privy to. Also, I think I heard a quote from Bill Miller (fund manager at Legg Mason) that he was in there buying and he would buy more a few weeks ago. No coincidence that Legg Mason got blasted this week. Maybe investors are tired of seeing massive losses from his value investing strategy. No disrespect to you value guys but they are just pieces of paper. Price IS the only thing you can trust, and when it’s going down. There is no need to get in front of that train. Most of the fervor this week is coming from President Obama's proposal on banning proprietary trading. Interesting, we'll see how far that goes. Most of the sell-off to end the week was blamed on Obama's new plan, but in reality the stock market was rising on fumes. Lots of stocks just ran out of steam, and people decided to sell.

Market Pulse: Your source for stock, stock market, stock trades, and stocks info

Market Pulse: The last 3 days have been a phenomenal sell-off in which the S&P 500 has lost 5.1% from the intraday highs on Jan. 19. It took 3 days for the S&P 500 to lose 58+ points. After a relentless rise since the March lows, I would say that there may be a change in character taking place in the market. I have been saying since March that the bear market rally has been getting long in tooth and we were due for a reality check. Maybe this is it. I don’t know. I actually thought it was in late August, then I thought it was in late October, and then after the market rallied again. I didn’t know what to think, but I am not willing to pay high mark up prices for stocks in general. Now, we may be at the biggest juncture in the market since March 2009. Take a look at the chart of the S&P you will see two sets of dotted red lines. These lines signify the intraday high and low of the first 3 days of the month. This is a strategy I developed after reading the book, The Logical Trader, in which he talks about the first 20 minutes of the trading day being the high or low for the day about 17-23% of the time. So I thought why can’t this be applied to a month? I did a little research and found out that a lot of the time the first 3 days of a month can determine the high or low for the MONTH. So, to see which way an individual stock or index will move, just watch the first 3 days of the month and it may give you a GOOD idea. Try it out yourself. Look at the first 3 days of every month since the March lows and see if it marked the high or low for that month. The results might astonish you that it could be that simple. Now, back to the chart. You can see that the low for the month (Jan. 4) has been significantly breached. That is a potential warning sign for a change in trend because prior to the last 3 days the low for the month had been put and the market was moving up, albeit slowly. Now it’s plunged through on high volume, which indicates selling pressure. Market leaders like AAPL, GOOG, ASIA, JOYG have been getting bashed over the last several days. When the market leaders start to crack, it’s another clue that the trend may be changing. Another technical clue is the MACD has turned down, which is more confirmation of a change in momentum. The optimism just 3 days ago was above levels we saw in 2007. With this sharp break in the market, we shall see if it dents all the optimism about a recovery or this is start of the bear market I have been anticipating for the last 5 months.

Thursday, 21 January 2010

Monday, 11 January 2010

Did You Know?

China has now moved in front of the US as the world's largest auto market.