Friday, February 26, 2010
Government debt is no longer just a problem for emerging countries. Portugal, Spain, France and Greece (as we have seen in recent weeks) are living in fear of credit default. Consequently, the value of their credit default swaps is skyrocketing.
The following is an excerpt from the February issue of Global Market Perspective.
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High levels of global debt are both financially debilitating and deflationary because they commit scarce cash to servicing interest payments. Up until now, most sovereign credit defaults occurred in emerging-market countries, such as Argentina and Russia. The deflationary tide, however, is starting to lap up against more developed Eurozone economies.
The chart shows the value of credit default swaps -- an instrument similar to an insurance contract that pays holders (if they are lucky) in the event of default -- for Greece, Portugal, Spain and France. In recent weeks these contracts have soared, with credit-default swaps on Greece’s and Portugal’s debt already surpassing the January-March 2009 extremes established in the latter part of Primary degree 1 down.
Obviously, the market is growing more skeptical that Greece can pay its debts, so the cost of protecting against default is rising fast. Greece’s budget deficit is 12.7% of gross domestic product, and Portugal faces a budget shortfall that’s more than twice the European Union’s limit. Traders are now buying default protection on sovereign debt at a rate of more than five times that of specific company bonds. “Greece’s neighbors would ‘step in’ to prevent a debt default to avoid ‘a problem for the whole of Europe,’” a Tokyo-based bondsalesman says. Maybe so, but who will step in to bail out Portugal, Spain, the next sovereign default or the one thereafter?
The world is running out of money to service its mounting debts, and this chart simply depicts the front edge of the next great wave of credit contraction, which will sweep into more established countries throughout Europe and eventually to the United States.
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Thursday, February 25, 2010
Perception, Deception and Debt . . . More Volatility to Come by Van Tharp Institute
In last two week’s discussion on Greek debt, I concluded that uncertainty and hence volatility would remain in the market for some time to come.
As the mainstream press latched onto the situation, the latest revelations have done nothing to change that thinking.
The most interesting report came in a New York Times article over the weekend that revealed—gasp—Wall Street banks have helped create another debt bubble. This one in Greece.
In summary, investment banks (which are now just “plain ol’ banks”), most notably Goldman Sachs, created customized derivatives or swaps to effectively loan large sums of money to Greece (and other countries in the PIIGS mess). All of this was perfectly legal, even if it wasn’t disclosed.
In essence, Greece swapped future revenues from airports, highways and the national lottery (also known as their safest and most reliable future revenue streams) for a chunk of cash then. Since the transaction was classified as a sale and not a loan, the immediate infusion of cash helped Greece meet some European Union financial guidelines in the short term (back in 2000 and 2001) and pass the problem on to future regimes.
Let’s recognize these maneuvers for what they are: an under-the-table use of financial and accounting gamesmanship that allowed a bubble to grow out of control and off the financial radar screen.
Understand, America has developed “passing the problem to future administrations and generations” to an elevated art form, so I won’t cast any stones. Additionally, the European Union debated the very issue of making such swaps more transparent in back in 2000, but decided against any new reporting requirements. Finally in 2002, disclosure requirements for these types of swaps (and the entities formed to facilitate them) began to appear.
The current “second wave” debt crisis is almost certainly deeper and wider than we currently imagine. Additional volatility and uncertainty will continue as the media uncovers more revelations about the situation.
And now for a fun guessing game on perception. Let’s look at the debt of two different governments.
All $ in Millions
Annual GDP Outstanding Debt 2010 Budget Deficit
Government A: Annual GDP $2,000,000, Outstanding Debt $75,000, Budget Deficit $40,000
Government B: Annual GDP $400,000, Outstanding Debt $443,000, Budget Deficit $50,000
Here’s the set-up: Country A has a GDP of $2 trillion, $75 billion in debt and will have a projected budget deficit of $40 billion for this year.
Country B has an economy 1/5 the size of A, has almost 6 times more outstanding debt and will add 20% more debt this year to their bottom line.
Whose bonds would you imagine have the higher priced insurance against default? Which one does the market view as riskier?
Considering the numbers provided, wouldn’t it seem that Government B would have the higher risk for defaulting on its bonds?
Alright, this was a trick question. Government A is actually California. And Government B is Greece.
As strange as it may seem, California had the higher default insurance up until two months ago. California was viewed as a worse credit risk than Greece!
What changed? One thing—perception.
Until December, California had to pay more for bond insurance than Greece did. California’s problems had been in the news for a long time by that point and were very high in the public’s awareness. Since the first of the year, Greece’s debt problems have been in the news more. Now that more people are aware of the issues, the price for insuring against Greek default has risen dramatically.
What a strange game. If one wanted to speculate in government bonds today, it looks to me like buying California bonds and selling Greek ones might be the way to go.
In the end, the two primary Greek creditors (France and Germany) will not allow it to default. For the EU, Greece falls into the same category that the American banks and AIG did last year—“too big to fail.” A default on Greek debt would send the EU into a tailspin that most would consider catastrophic. That could lead to the end of the economic conglomerate and create severe financial hardships for member countries in terms of cost of capital. So the member countries will do everything in their power to keep that from happening.
If Greece is too big to fail, then what about California? It’s five times bigger… Some opine that the California debt insurance is as high as it is because the US federal government has given no indication that it will step in to help. But I think that it is a rather safe bet that the U.S. governmental powers-that-be will not allow a California default under any circumstances short of financial Armageddon.
So in the meantime, someone is enjoying the benefit of writing really high-priced California risk insurance.
Until the EU creates some concrete plans for resolution the PIIGS debt problem, look for the volatility in the equities markets to continue.
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Wednesday, February 24, 2010
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Tuesday, February 23, 2010
Investor expectations are decidely bullish right now, and many people expect an economic turnaround this year. What do the underlying economic conditions suggest? The Chinese mall "The Place" demonstrates the contrast between investor hope and economic reality.
The following is an excerpt from the February issue of Global Market Perspective.
Bullish expectations (shown by the top three panels) may not be quite as extreme as they were in 2007, but adjusted for underlying economic conditions (bottom panels), the current psychology probably ranks right up there with the most complacent outlook in history. The charts of housing, consumer credit and unemployment show the systemically sluggish state of the economy. We know that fundamentals always lag psychological trends, but the lag is generally only a matter of months. It’s been nearly 11 months since the outset of the Primary wave 2 rally; by these critical economic measures the rebound is barely registering.The wide disparity between the hope of investor expectations and the reality of economic strength shows that the great bear market -- already ten years old -- remains in its early stages. As the next legdown matures, hope will turn to despair, and it will become impossible to ignore the persistence of the economic contraction.
The same chasm between fundamental performance and stock market expectations is visible in other parts of the world. In China, for instance, ground reports reveal how out-of-whack financial expectations are with street-level demand. A blog called The Peking Duck described Beijing’s “stunningly dysfunctional, catastrophic mall, The Place. Fifty percent of the eateries in the basement were boarded up. The cheap food court, too, was gone, covered up with ugly blue boarding, making the basement especially grim and dreary. There is simply too much stuff, too many stores and no buyers.” The world’s largest mall in southern China is completely empty. Most investors do not see past the performance of the Shenzhen or Shanghai stock indexes, just as most of the buying and selling of U.S. stock indexes remains detached from the real economy. We see lots of hope but no change in the reality.
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Monday, February 22, 2010
The Market Last Week and Ahead
First, Ben Bernanke raised the discount rate to the banks last week by 25 basis points, but that means nothing with rates as low as they are. Low rates are good news to help the Wallstreet banks survive. It’s no news to help the man and woman on main street survive and decrease the unemployment rate and raise GDP. The banks aren’t lending anyway, and the borrowers are not borrowing also. Those days are over for quite some time going forward. Earnings season is almost over. Even with some good earnings reports, the market still did poorly. Earnings estimates and the actual earnings reports are all laggards to the real market anyway. Unemployment is here to stay for awhile unless you can show me what the government is doing to decrease it, or anything that can help it, and with that, GDP and real estate prices, along with stock prices are still headed south in my opinion. Deflation is now the real situation, declining prices and values of everything, except maybe for food. Cash is king, and it’s a real good trade and investment in times like this, and or short stocks on the upticks now, and hold short long term. I would bet shorting stocks now than buying long at these dead cat bounce prices and current and forward economic conditions.
Global Major Economic Data Reports This Week
Monday: Bank of Japan Meeting Minutes
Tuesday: France Consumer Price Index, Germany IFO Report, UK Housing Loans, USA Case Shiller Home Price Index, USA Consumer Confidence, and Japan Trade Balance.
Wednesday: Reserve Bank of New Zealand 2-Year Inflation Expectation, German Gross Domestic Product, Private Consumption, and Consumer Confidence. USA New Home Sales.
Thursday: Australia Private Capital Expenditures. New Zealand Business Confidence. France Producer Prices. Switzerland & German Unemployment. Euro-Zone Consumer Confidence. USA Durable Goods Orders. New Zealand Trade Balance, Building Permits, Imports and Exports. Japan Consumer Price Index and Retail Trade.
Friday: UK Gross Domestic Product. Euro-Zone Consumer Price Index. UK Consumer Confidence Survey. Australia Private Sector Credit. Canada Current Account. USA Gross Domestic Product, and Personal Consumption.
My Stock Pick This Week
Is a short sell on Goldman Sachs, a major New York and global investment bank that’s been in the middle of the financial crisis since day one. Currently the markets are looking eerily like they did back after the 1929 crash, and subsequent rebound to current prices. Goldman Sachs loan portfolio growth as well as the other banks is slow to dead, and their earnings estimates and stock price are headed in the same direction in my opinion. During the Jan Feb sell off this year, I was seeing sell signals in many global banks, especially in the emerging markets. Possibly a tell tale sign that all is not well around the world right now with the global banks. With the Dubai and Greece debt situations, the big problems are not even begun to be over yet. The worst is yet to come I do believe. Sell and stay short on this very possible intermediate to long term downtrend that started beginning of January. You could actually be a big winner in this disaster if you get it right.
Sell Short Goldman Sachs – Ticker GS
Sell Entry: 166.50 to 154.49
Take Profit Areas: 148.57 to 145.51, 128.77 to 126.11, Hold Short Long Term
Goldman Sachs Company Profile
The Goldman Sachs Group, Inc., together with its subsidiaries, provides various investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide. Its Investment Banking segment offers financial advisory services, including advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense activities, restructurings, and spin-offs; and underwriting services, including equity underwriting and debt underwriting. The companys Trading and Principal Investments segment engages in market making in, trading of, and investing in commodities and commodity derivatives, including power generation and related activities; credit products, such as credit derivatives, investment-grade corporate securities, high-yield securities, bank and secured loans, municipal securities, emerging market and distressed debt, public and private equity securities, and real estate; currencies and currency derivatives; interest rate products consisting of interest rate derivatives and global government securities; money market instruments, including matched book positions; and mortgage-related securities and loan products. This segment also provides equity securities, derivative securities, futures, and options clearing services; market-making and specialist services in equity securities and options; and insurance services, as well as involves in principal investments activities. Its Asset Management and Securities Services segment offers various asset management services comprising investment advisory services, financial planning, and investment products; management of merchant banking funds; and securities services, such as prime brokerage, financing services, and securities lending. The company was founded in 1869 and is headquartered in New York, New York.
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Click the Goldman Sachs Stock Chart for a larger view.
Tuesday, February 16, 2010
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Friday, February 12, 2010
Jean Claude Trichet
We've all heard mainstream market commentators blame the recent DJIA declines on concerns with Greece's sovereign debts. But does that really explain the Dow's weakness?
The truth is, trouble in the countries that share the unfortunate acronym PIGS (Portugal, Italy, Greece, Spain) has been in plain sight for months. As early as December 2009, Elliott Wave International's Global Market Perspective reported the following:
Each of the PIGS economies has problems, but none more so than Greece, [which] has the least-loved bond market in the EU... the lowest bond rating in the union, and the highest debt-to-GDP ratio at over 91%. ... Both the stock and bond markets in Greece suggest economic weakness is dead ahead.
Investors in the Greek bond market demand almost 2% more from Greece than they do from Germany on a 10-year bond. While the levels are still substantially below those hit in late ‘08 and early ‘09, the upturn in both lines indicates that another round of risk aversion is in its early stages.
The EU has stated that it won’t let Greece default, but it’s clear that investors have concerns. Therefore, safety still seems to be the best option for investors while speculators may want to focus on the PIGS, and Greece specifically, for downside opportunities.
Elliott wave patterns saw trouble in Greece two-three months ago. But observe: At the time, the DJIA was happily rising, and few were talking about the "Greek menace." It's only after the DJIA slipped below 10,000 that everyone began to blame Greece.
From an Elliott wave perspective, this makes perfect sense. What drives broad trends in the stock market are not "fundamentals," but investors' interpretation of those conditions. We call it social mood. Two months ago, crowd psychology prompted investors to keep buying the Dow despite Greece's obvious problems; hope reigned. But after social mood pushed the Dow off a cliff (on January 19), fear took over, everyone rushed to find "the reason" for the decline -- and they found it in Greece.
This is only the most recent example of how collective emotions overcome the facts and evidence. And yet most investors continue to believe that news and events drive the markets. As EWI's president Robert Prechter put it in his recent Elliott Wave Theorist, "The exogenous-cause model fools investors exquisitely. One reason is that rationalization follows upon mood change. Mood change comes first, and attempts at reasoning come afterward."
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Wednesday, February 10, 2010
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So many forex traders are trading the currency market in 5, 15, 30, 60 minute, and 4 hour time frames.
Why not trading the forex market with daily price bar time frames just like stocks?
Daily bars help remove all the intraday noise from the situation and show the current real trend that that may or may not be in place. The primary trend has the ability to earn investors and traders the most return with the least amount of risk than any other type of investing trading there is.
Trading daily price bars creates the need to increase stop-loss targets compared to intraday trading, so lesser leverage is very much advised. Over leverage is a very common reason small traders blow out their accounts in short amounts of time, so lighten the leverage and don't be so greedy so fast.
Lesser leverage is good for a number of reasons.
First, lesser leverage allows for intraday volatility to not affect your stop-loss, and or the market going on a stop-loss hunt when there is nothing else happening to move prices.
Second, lesser leverage allows a trader to capitalize on the real current main trend of the market, so big profits can still be realized, but with a longer time period involved, and getting rich from forex trading slowly is better than cooking your account within the first week of trading a newly opened account.
Bigger forex players trade with stop-loss of 200 pips or more with the potential to make hundreds of pips from the main trend, which is very possible over time.
Below is a current daily price bar chart of the EURJPY with the MACD Indicator. As you can see the EURJPY is in a downtrend currently with the MACD Indicator confirming such.
Click the EURJPY Chart for a larger view.
I trade Elliottwave, which is based on market psychology and sentiment, and it's repeating patterns in the markets to provide low-risk high-reward trades and investments.
The 3rd wave of the 5 wave Elliottwave pattern is commonly the longest and strongest of the other five waves.
Based on this, I'm suggesting to short EURJPY and go with the the number 3 wave downtrend with a trade plan and price targets as follows.
EURJPY Current Price: 123.72
EURJPY Entry Price: Your Choice
EURJPY Stop-Loss: 125.50 or Higher
EURJPY Take Profit Price Targets: 116.22 to 115.57, and 106.94 to 106.35
These price targets are very significant amounts of pips of return if proven correct.
Base your stop-loss on the major support and resistant price points, and not just on the previous daily price bar. So your stop-loss could be anywhere from 200 to 500 pips depending on the current situation, and currency pair, so trading with very light leverage in this case is an absolute must.
Try trading with daily price bars. You should be less stressed than staring at your screen all day long trading intraday.
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Tuesday, February 09, 2010
Last Friday (February 5) was yet another interesting day to compare the stock market action with the explanations from mainstream analysts. (This show never gets old, I swear.)
The day before, on February 4, the DJIA saw a jaw-dropping 268-point decline. Trading on Friday morning was cautious; headlines buzzed with explanations:
Stocks Lower as Job Losses Continue (TheStreet)
US Stocks Fluctuate as Sovereign Debt Concern Offsets Jobs (Bloomberg)
Stocks falling on mixed jobs report, debt worries (BusinessWeek)
Around midday on February 5, the Dow was down almost 170 points. Everything pointed to another grim day. But around 2 PM blue chips reversed, erased the losses and closed higher.
Don't look for a good "fundamental" explanation for this turnaround: There was none. Days like that are usually swept under the rug. It makes zero sense that stock market investors -- rational, calculating individuals who know good or bad news when they see it -- would be so fickle.
The one explanation that does make sense relies on the Elliott Wave Principle: An individual investor can be rational, but groups of them are not. They herd, impulsively and irrationally. Bearish bias makes them overlook "lower U.S. unemployment rate" reported on Friday morning and sell. Bullish-minded investors brush aside "mixed jobs report, debt worries" and buy -- just like they did later that day. Note: The news didn't change on Friday, only investors' collective attitudes did.
It turns out that the news makes little or no difference for the broad trend -- something that Elliott wave practitioners have known for decades. Markets are not logical but emotional. EWI's President Robert Prechter has written a dozen books on this subject, and he talks about it in his monthly Elliott Wave Theorist. Collective emotions (a.k.a. social mood) unfold in patterns -- Elliott wave patterns, which makes markets probabilistically predictable. What's more, the higher the volatility, the clearer the patterns!
"Market volatility makes most investors less certain about market trends. Elliott waves, however, become clearer the more intense the market’s behavior. When social mood is changing dramatically, non-mood-related short-term noise has a minimal impact, so even waves of small degree adhere more closely to textbook forms." -- Bob Prechter, May 2009 Elliott Wave Theorist.
We've seen a lot of volatility in the past few days, and if Prechter's forecasts continue to play out, the VIX should only increase. It can be disconcerting, but Elliott wave analysis can help you stay calm.
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Monday, February 08, 2010
This Market Ahead
First, the current stock sell-off is going to continue in my opinion. The big buzzword currently in Washington DC and the markets is jobs and the lack of them. Last Friday I like what Art Cashin of UBS said. “It’s all about the dollar. Yesterday was basically a global margin call,” Cashin told CNBC. I see the dollar continuing higher and all commodities peaked out heading lower with stocks for awhile, possibly for a year or so. Global economies are slowing for a variety of specific country to country reasons, and the bottom line means commodities and stocks cannot sustain their prices right now. We’ll talk about hyperinflation later, but it’s not here yet, so it’s deflation that showing its real self now in my opinion.
Major Global Economic Data Reports This Week
Monday: Switzerland Unemployment and Retail Sales. Canada Housing. UK House Prices and Retail Sales. Australia Business Confidence
Tuesday: Germany Consumer Price Index. UK Gross Domestic Products.
Wednesday: UK Bank of England Quarterly Inflation Report. Australia Unemployment.
Thursday: European Central Bank Publishes Monthly Report. USA Retail Sales.
Friday: France and Euro-Zone Gross Domestic Product. USA U. of Michigan Confidence Survey
My Stock Pick This Week
Is a clothes company with a PE ratio of 40 or so. For the full year, they earned $51.3 million, or 54 cents per share, compared with $127 million, or $1.34 per share, in the year that ended in January 2009. Their EPS is getting hit hard now. If their EPS keep decreasing at this rate, the stock price looks like it could be headed much lower. Its revenue fell 8.4 percent from $4.25 billion last year to $3.89 billion in the year that ended Jan. 2 this year. Look at the stock chart below. The 3rd wave of the downtrend it’s in right now, is normally the biggest trend of the 5 waves in Elliottwave forecasting. I’m betting this 3rd wave is not over yet and is ready to test my trade plan take profit area supports to the 13 area and longer term possibly to 10 or lower. In case it doesn’t, stick to the stop-loss target to get out.
Sell HanesBrands – Ticker HBI
Sell Entry: 22.45 to 20.95
Take Profit Areas: 18.06 to 17.80, 13.83 to 13.63, 10 and Lower
Hanesbrands Company Profile
Hanesbrands Inc., a consumer goods company, engages in the design, manufacture, sourcing, and sale of apparel essentials for men, women, and children in the United States and internationally. Its product portfolio includes t-shirts, bras, panties, mens and kids underwear, socks, hosiery, casualwear, activewear, socks, and hosiery. The company offers its products under the Hanes, Champion, C9 by Champion, Playtex, Bali, Leggs, Just My Size, barely there, Wonderbra, Stedman, Outer Banks, Zorba, Rinbros, and Duofold brand names. Hanesbrands also licenses its Champion brand name for collegiate apparel and footwear. The company sells its products through various distribution channels, including mass merchants, national chains and department stores, direct to consumers, and other retail channels, such as embellishers, specialty retailers, warehouse clubs, and sporting goods stores. As of January 3, 2009, it operated 213 outlet stores. The company is headquartered in Winston-Salem, North Carolina. Hanesbrands Inc. operates independently of Sara Lee Corp. as of September 5, 2006.
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Click the Hanesbrand Stock Chart for a larger view.
Thursday, February 04, 2010
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Wednesday, February 03, 2010
Here's the thing: On January 31, 2010, the Reuters/Jefferies CRB Index of Commodities pulled a lemming: prices dove head first over a cliff to land at their lowest level in four months.
According to the mainstream experts, one main factor spooked the CRB into going south; to wit:
"Commodities retreat as concerns over the outlook for technology companies' earnings overshadowed Commerce Department data showing the US economy grew at a 5.7% annual pace last quarter, the fastest pace in six years." (Bloomberg)
Funny, because one hour BEFORE this particular news item broke, this other headline hit the internet: "US Stock Futures Higher After GDP Data" (Wall Street Journal)
And then again, one day AFTER, this report went viral: "Stocks Climb On Strong Economic Reports... Investors were already becoming more optimistic thanks to news on Friday that the economy grew at the fastest pace in six years." (Business Week)
So, my question is: How does one single fundamental produce three different reactions from the markets in as many days? Answer: It doesn't.
What's Next For The CRB Index? The February 1 Daily Futures Junctures presents in-depth commentary, labeled price charts, and live, video analysis of the near-term trend unfolding in the CRB. Click here to get the complete story.
Here are the facts: the most recent downtrend in the CRB Index didn't get started with "technology companies' earnings" or with "strong economic reports." It got started on January 11. And, in the January 8 Daily Futures Junctures Weekly Wrap-up, long-time editor and EWI's chief commodity analyst Jeffrey Kennedy presented the following close-up of the CRB that showed prices zeroing in on an important peak:
Here, Jeffrey identified a classic double zigzag pattern underway in the CRB index. A single zigzag is a simple, three wave pattern labeled A-B-C, in which the top of wave B is noticeably lower than the start of wave A and wave C travels well beyond the end of wave A. Occasionally, zigzags will occur twice (or at most three times) in succession, producing what is called a double (or triple) zigzag.
Once you recognize a zigzag in action, you can then anticipate when the pattern may end using Elliott's Guideline of Equality: Wave C often travels the same distance as wave A; or, that the first A-B-C sequence travels the same distance as the second one. In the January 8 Weekly Wrap-up, Jeffrey calculated both targets at 501.70 and 528.50. (See bottom of chart)
For its near-term script, the CRB Index peaked at 504.76 before turning down in a powerful selloff to the four-month lows we see today. And, in the just-published February 1 Daily Futures Junctures, our analysts revisit the CRB to determine whether the end of the downtrend is here.
As always, the Wave Principle is about probabilities, not certainties.
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Tuesday, February 02, 2010
Worden Free Investing Trading Classes
Worden is currently touring the country giving FREE stock market and software workshops. These new workshops are extra special as you spend time picking stocks together with our trainers using TeleChart and the new StockFinder 5.0 software. Our trainers have become crowd favorites with their relaxed and entertaining style of teaching.
Phoenix Training Class Feb. 5th or 6th, 2010
Click here for more class dates locations, information, and registration:
You'll learn how to do the following in only 2 hours
Scan for stocks based on visual rules on your chart.
Quickly test the reliability of your rules by running them through BackScanner - included with StockFinder 4.0
Create your own custom index for any watchlist based on price, indicator or rule. Julia will show several indexes which have done a good job recently at timing market swings.
Easily identify chart patterns by painting your price graph based on rules.
Mix rules from different time frames. (i.e. Find stocks above their 200 day moving average and oversold on their 12 minute stochastics.)
These workshops are easy enough for a beginner and exciting enough for the most active trader. The evening is optional, but more than half of the attendees usually end up staying for both ... they are that fun!
FREE BONUSES for Workshop attendees
You’ll take home the StockFinder 5.0 Trading Software including 200+ indicators and 70 candlestick scan rules. You’ll receive exclusive free trial offers for all Worden products so you can try anything without committing a penny of your money. This is not a sales pitch for an expensive seminar, this is the seminar voted “Best” five times by the readers of Stocks & Commodities magazine (including this year). However, keep in mind that these workshops have been updated with brand new material which makes them the “new best”.
"Have you been to a dozen-plus training sessions over the years? This was by far the most informative, educational and well organized I have ever attended. The instructor could not have been better. Knowledgeable with a sense of humor. I don’t relate this lightly. Someone is really doing a great job." – WJ
"I approached today's class with fear and trepidation… I left with enthusiasm and optimism – excited." – AS
"The presentation was excellent. The instructor was incredible. No one threw any question or comment out that she could not handle. She is extremely knowledgeable of the program and presented it with ease." – VP, Van Nuys, CA
Click here for more class dates locations, information, and registration:
Monday, February 01, 2010
The Market Week Ahead
Last Friday’s GDP report gave the US Dollar a boost, and stocks headed higher but then ended down at the end of the day. Short term, the downtrend in equities looks to be continuing. If you’re going to buy stock this week, at least try the value approach. Better yet, would be to buy things that you and other people consume everyday like food, and other commodities. The actual futures should be a better bet than trying to find which company involved in those products gets it right to translate it to their earnings per share. Commodities will provide protection against any inflation coming, and should be the leader on any economic recovery also, so it’s a win-win in any economic event.
Major Global Economic Reports This Week
Monday: Australia House Price Index. UK Mortgage Approvals, Consumer Credit, Net Lending, and Purchasing Managers Index. USA Personal Income, and ISM Manufacturing.
Tuesday: Australia Central Bank Interest Rate Decision. USA Pending Home Sales, and Consumer Confidence
Wednesday: Euro-Zone Retails Sales. USA ADP Unemployment, and ISM Non-Manufacturing. New Zealand Unemployment.
Thursday: UK Central Bank Interest Rate Decision. Australia Central Bank Monetary Statement. European Central Bank Interest Rate Decision. Switzerland Trade Balance. Canada Building Permits, and Purchasing Managers Index. USA Factory Orders, and Chain Store Sales.
Friday: UK House Prices. Japan Leading Index. UK Producer Price Index. Canada Unemployment. USA Non-Farm Payrolls Unemployment Rate, and Consumer Credit.
My Stock Pick This Week
Is a short-sell on a company involved in selling food commodities, with a price to earnings ratio in the mid 30’s, which is pretty high in a market environment as there is right now. In line with my investing trading theme this week, commodities would be the best place to be adding in new buy long positions, especially in the long term, but with this companies valuations far more than the industry and their peer averages, selling it short and buying the raw commodities right now is the better bet than trying to figure out which company involved in commodities can make it work best for their EPS. With a very tight stop-loss, downside is minimal if the stock decides to reverse its most recent downtrend since January 20th.
Sell Short SuperValu Grocery Stores – Ticker SVU
Sell Entry: 15.59 to 14.62
Take Profit Areas: 14.35, 13.45, 12.40. If 12.13 Support Breaks Stay or Go Short Again To 10.00
Supervalu Company Profile
SUPERVALU INC. operates as a grocery retailer in the United States. The company operates combination stores, food stores, and limited assortment food stores under the Acme Markets, Albertsons, Bristol Farms, bigg’s, Cub Foods, Farm Fresh, Hornbacher’s, Jewel-Osco, Lucky, Save-A-Lot, Shaw’s Supermarkets, Shop ’n Save, Shoppers Food & Pharmacy, and Star Markets banners. Its stores offer various grocery products, general merchandise, health and beauty care products, pharmacy products, fuel, and other items and services. As of February 28, 2009, the company operated 2,421 retail stores, including 874 combination stores, 369 food stores, 316 limited assortment food stores, and 862 licensed Save-A-Lot stores. It also provides supply chain services, such as wholesale distribution of products to independent retailers, as well as a suite of logistics services, including warehouse management, transportation, procurement, contract manufacturing, and logistics engineering and management services. The company provides these services to single and multiple grocery store independent operators, regional and national chains, mass merchants, and the military. SUPERVALU INC. was founded in 1871 and is based in Eden Prairie, Minnesota.
Click here to review and trial the Trading Software we used in determining our sell short position on SVU.
Click the SuperValu Stock Chart for a larger view.