Monday, May 31, 2010
Bull Bear May 2010 Boxing Match
Happy Memorial Day to Our Veterans!
First, Happy Memorial Day USA and our Veterans. I thank and honor all our our War Veterans for your sacrifice to the call of duty, and making life for me, my family, and he rest of the world more free. God Bless You all.
No Stock Pick This Week
I don't have a weekly stock pick to buy or sell this Monday. The market looks too confused to me this week to provide some good low-risk high-reward short or long opportunities right now. Whats better is that I have some analysis on the S&P500.
May Was A Sellout
May sure did turn out to be “sell in May and go away” as the saying says. The bulls got their butt kicked. In fact the worst May since 1962 for the USA market. You think the bulls still have what it takes to come back?
See my S&P500 chart where we are at right now and where I think we are going from here near term. At least near term, I bet the bear wins this round.
S&P500 Near Term Forecast
I see current near-term S&P500 resistance between 1091.60 and 1123.04 with a continuation down to 1015.77 after that or more before finding a decent bottom for the bulls to start coming back in big. From there, we will watch and see if the bulls can take the market higher or it consolidates for a time, then the bear market spring winds up again, and we're headed for another small to big sell-off. I'm still betting for the sell-off of any kind after a dead cat bounce this summer.
Click the S&P500 Chart for a Larger View
Real Recovery or Double-Dip?
What's the market forecast? I'm all ears. Real recovery, not hype or double-dip? The charts are telling the real story right now while the recovery spin doctors are doing their best to hold the markets up. What reality right now is going to keep the markets moving higher right now? I don't see it . . . yet.
Past Earnings Reports and Economic News
Are past earnings enough for you to buy long with big bad news bear economic reports are not so rosy? Global central banks are printing money like there's no tomorrow, but saying everything is fine. Real economics is starting to hit main street with sustained high unemployment and lower gross domestic product growth.
Some are saying this is a normal pullback in a bull market. Others are saying its double-dip time. I would suggest that buying long right now has more risk than selling short.
The current pullback is the same that happened back in January of this year. One or two months from now equities will be back to their April highs. The US consumer is coming back. American companies are sitting on tons of cash, and their profit margins are the best they've ever been. The USA markets looks more healthy than the rest of the world.
I would suggest it doesn't matter if you believe the above or not. What is the price chart telling you? What is the current trend? Up down, or reversal coming? How's the real fundamental forward looking economic news and reports?
Bill Gates Market Forecast
Bill Gates, not that he's a market prophet, is saying that the European crisis could be "headwinds" to a USA recovery. He's got a good idea of global growth potential with his past success at selling software worldwide. I'd say he's right on that one, and that Europe's problems can become the rest of the worlds problems, and vice versa. It's called globalization. We're all in the same big financial boat together now, and no one country is an island unto itself anymore. I suggest having something to float on in case the boat goes down would be a good idea now.
History Repeats Over and Over
History has shown us in the past that global stock markets follow each other. Some think that there is de-coupling of markets sometimes or it’s different this time theory. I’m even one who has thought this in the past from time to time because I was wishing and hoping for something. In retrospect, I have yet to actually see it happen in my 20 plus years in the markets. From what limited knowledge I have of the financial markets past, global markets have tracked each other most of the time leading and lagging the way.
Trade What You See - Not What You Believe You Think
From what I hear, what I want to believe, and what I actually see happen, I’ll put more weight on what I actually see happen. As an investor and trader, I suggest to invest and trade what you see, not what you think about the future. What I mean is don’t put a lot of analyzing weight on hyped out information either on the positive or negative side. I suggest investing trading the markets on rules based investing trading systems, history price averages, and the psychology of traders, speculators, and investors, whether they are professionals or amateurs. I call it the social mood of the market, or the fear and greed of it. The price chart, the VIX, and a number of other real market indicators have a lot to say about that. Where you can get involved in trades and investments that have more reward than risk if taken.
Bear Market Bottom June 2016
I’m suggesting we are in a bear market until about June 2016 now, at least for the Europe and USA markets. Asia and the rest of the world can easily follow too, and so far it looks like they are. How did I come up with that date 2016? From my work with long-term financial market cycles. In any bull or bear market, there are reversals in the primary trend for a time called the counter trend, and most of the time they are tradable, but to take long term positions against the primary trend is potentially financial suicide, which is where the markets are at right now. But then again, this could be a normal correction as some say. I don't really care, because stop-loss and reversal is a part of my everyday trading plan, and if I get stopped out, I can reverse if it looks like a real reversal.
In any event and with any stock whether they are the biggest leading company in their industry and sector to all the other junk equities out there, I suggest selling any stock if your long position loss is 8% or more regardless of the quality or brand name of the company. Of course you dividend investors out there disregard what I'm saying here. Your buy and hold, and I do hope it works out for you in the end. It’s about having a mathematical system to survive and thrive in the markets long-term, not an emotional one. Money has no emotion, but people do, and lately it’s been misery for many people with long positions.
Low-Risk High-Reward Investing Trading
You need to figure out a system that you can work with and the amount of stop-loss you’re willing to accept, which is based on what the market can potentially give you in profits in the long term. Something like this: A system where if you lose three times, and win once, you’re at breakeven money. If you can’t win once out of four trades in the markets, I suggest you go back to stock market school before doing anything further.
Short-Selling and the $3 Trillion a Day Market
If you don't like short selling stocks for whatever bull reason, I suggest trading forex. Forex is twenty four hour a day, five days a week trading, buy long sell short, and it’s the most liquid market in the financial universe at about $3 trillion a day now. Lately the swings in the currency market have been huge, thanks to the same in the equities.
Use A System - Professionals Do
If you do trade forex, I suggest not to over leverage yourself and your account. I suggest 1:100 leverage or less, although the brokers might encourage you to use 1:500 leverage so if you do lose, you’ll lose it faster. I also suggest proper position sizing which is combined with the amount of leverage you use. It’s called risk money management. Analyze currency pair trends and counter trends starting with monthly, then weekly, then daily price charts. Lower time frames for intraday trading. For people with day jobs or business’s to run, I suggest swing-trading the forex market. Day-trading is a full-time profession. Swing-trading can be done by any part-time investor trader. Properly done, profiting from forex can be very easy and profitable. Not done properly, losing all your money in one week with forex is easy too.
Click here for ZuluTrade and trade your account with the best forex traders in the world for free.
Friday, May 28, 2010
Autotrade Forex Signals by Specialists
What is ZuluTrade?
ZuluTrade bridged the gap between valuable information in money markets and trade execution, by converting the advice of professional and talented traders globally to an executed trade rapidly and automatically in your account (from supported brokers)
There was a time when trading was a headache. Not anymore! You don't have to study or monitor the market to make a good pick, because hundreds of industry well-known experts from all over the world are doing it for you. All you have to do is pick the experts you like, and ZuluTrade will quickly convert their advice into live trades in your trading account directly with the broker. And the best of all, it's completely FREE!
ZuluTrade receives rebates from the brokers, for the trades generated and splits them with the experts that provide the advice. Check the performance results recommended by our experts here
Who is placing the trades on my account? Do the experts know about my account?
None of the experts that recommend trades will ever know your account's existence. ZuluTrade receives their recommendations, and checks the experts you have subscribed with in your account profile, and decides whether or not to autotrade their advice in your live account using a secure direct connection with the broker's backend. ZuluTrade's patented engine places trades automatically with no human intervention. ZuluTrade service is server based, in other words you don't even need to have your computer on.
How do I get started?
All you have to do is provide ZuluTrade with the name and account number of the brokerage firm you're trading with. Sign and fax the LOD required by your broker, to authorize ZuluTrade to bridge the experts advice with your broker account.
If it is the first time that you will trade online or you never had an on-line trading account with one of the brokers we support, then the first step is to open a new account. Click here to open one now in just 5 minutes.
Are the results hypothetical? There are a lot of websites that claim all kinds of results.
Every signal received by ZuluTrade is executed on at least one live / demo broker account. The results contain final spread, swap rates, and profit or loss from current open positions, hence all possible costs by the broker. The spread is the standard spread advertised by the broker you're trading with. Hence our performance always reflects real market conditions. Due to the volatility of the markets, sometimes results may vary between accounts.All signals and trades executed on a demo account are considered to be hypothetical.
I already have an account with one of the dealing brokers you support. What is the next step?
When your broker notifies you that the change has been made, you will receive an email from us that you are ready to start using ZuluTrade. This process will take a maximum of 2 days.
I already have an account with one of the dealing brokers you support. Why is ZuluTrade telling me that I cannot use this account? Signing the RB form doesn't work. Do I need to open a new account? What’s wrong?
This is because when you opened this account, there was a party that acted as a Referring Broker (RB). Your dealing broker cannot remove that Referring Broker from your account and replace it with ZuluTrade as the new one (legal issues). You need to open a new account and set ZuluTrade as your Referring Broker. Click here to open a new account already setup for ZuluTrade.
I do not want to open a new account, and I don’t want to sign any forms, even though there is not any cost involved with it. I prefer to use my existing account with the broker I’m trading with, without any changes. Is this possible?
No. By signing the RB form, you enable ZuluTrade to receive rebates from the broker or dealer you have an account with, and most importantly for ZuluTrade to pay the signal providers that are generating the trades being executed in your account. So if you do not wish to sign the RB form with the existing account, the alternative is to open a new account with your broker by signing the same RB form for that new account.
Why do I need to type my username for the broker platform I’m trading with? Is there any danger for anybody to steal it?
No, there is no danger. We will never ask you for your password. But even If your password was stolen, it is not possible for anyone (including ZuluTrade) to withdraw funds from your account. This is because your broker, who always wires funds to the beneficiary of the account ONLY, is the one who had opened the account
To link your existing broker account with our revolutionary trading platform.
Please click here to fill in the signup form. We will then automatically send you your login details to begin autotrading with our platform. Accounts are usually activated within 3-5 days.
What is a pip?
A pip is the minimum movement of a currency upwards or downwards. To calculate each pip for every currency, divide 1/ (currency pair exchange rate) Ex: 1/224.92 (GBP/JPY) = 0.00444 GBP. If you’re trading a 100:1 leverage account, then multiply this with 100. Ex 0.00444 x 1000 = 4.44 GBP. To transform this to USD just convert it. Ex: GBP/USD = 1.9377 x 4.444 = 8.6 USD / pip.
Another example is to calculate a pip for GBP/USD. 1/1.9377 = 0.516 GBP. For a 100:1 standard account, multiply that with 10. Ex: 0.516 x 10 = 5.16. To convert in USD multiply with 1.9377. Ex: 5.16 x 1.9377 = 9.98 USD / pip.
Without proper risk management, this high degree of leverage can lead to large losses as well as gains.
How long does it take to open a new account with my existing broker?
It only takes 1 day. Most brokers – if you already had an account with them, do not require duplicate proof of records, and will provide you with a new account number. Don’t forget to tell them that your Referring Broker is ZuluTrade. Click here to open a broker account already setup with ZuluTrade.
What is the minimum deposit to open a new account?
It depends on the broker, but we recommend that the amount for a standard account is $15,000 USD and for a mini account is $500 USD.
I don’t have a trading account with the brokers you support. Is that a problem?
No. You can open a new account already set up with ZuluTrade now.
I tried to open an account, but I’m confused. Should I open a standard account, or a mini one?
If you are trading more than $10,000 USD we recommend to open a standard account, otherwise a mini account.
Can I open my account in different base currency than USD?
Yes. You can choose between USD, JPY, EUR, GBP and AUD.
I logged into my account. How many providers should I trade with?
On the account settings page in the member's login area, there is a wizard that corresponds to the lots traded by every provider and your equity. This wizard will display how many providers you should choose without having the risk of a margin call. Simply follow the wizard. Of course you can choose the signal providers manually if you wish.
What is a lot?
A standard lot is a buy or sell size. If you buy 1 lot of EUR/USD, trading at 100:1 leverage then you buy 100,000 EUR/USD. But since you’re trading with 100:1, the leveraged value is 1,000 EUR/USD or 1 standard lot. If you trade a mini lot, then you buy 10,000 EUR/USD and the leveraged value is 10,000 EUR/USD or 1 mini lot.
Without proper risk management, this high degree of leverage can lead to large losses as well as gains.
Can I trade manually? Or will it conflict with the automatic trades?
Yes. Manual trades will not affect automatic trades.
I have opened a new account with my broker. How do I know everything is ok?
Your broker will send you an email confirming that we are the Referring Broker, and that your account is ready. Then, you log in to ZuluTrade and configure your trades.
Who are these signal providers? How did you pick them?
We do not pick them. Any individual can become a ZuluTrade signal provider. It is not possible on ZuluTrade to misrepresent the performance of the signals generated. If ZuluTrade shows a profit or loss, it is accurate, because details are confirmed by the dealing broker’s statements. For each pip stated in the performance section, there is a trade registered in the broker’s backoffice.
What is ‘spread’ and why do all my trades start off with negative pips?
The spread in the FX currency trading market, refers to the difference between the ‘bid’ price for the currency and the ‘ask’ price.
Each traded currency pair opens with the spread. So if the spread is 5, then your trade will open at –5pips.
How do I control the number of lots, and the number of trades a signal provider trades with on my account?
When logged into your account at ZuluTrade, go to your account settings page. From there select the ‘max open lots’ drop down menu’, this allows you the set the number of total lots you wish a provider to have open at any one time, before he can open any more lots. Also, next to each provider's name you have selected, there is a drop down selection called ‘lots’. This pertains to the number of lots to be traded on each individual trade. For example: if you wish each provider to trade with 2 lots per trade, but wish there to be no more than 2 trades open at a time. Then you would set max open lots to 4, and number of lots next to your providers name to 2.
How do you sign up to be a signal provider?
To sign up to become a signal provider, on our homepage under our current list of top providers there is a selection that says ‘join ZuluTrade as a signal provider’, please click on this and fill in the requested information.
What do signal providers do? And how do they receive commission?
A signal provider places trades on his or her account, and all clients that have selected this provider in their account settings page receive these trades on their accounts, unless they do not have enough usable margin, or have their max open lots set to low. Signal providers provide signals for all clients who select them in their accounts settings page.
Signal providers get 0.5 pips for each traded lot of his or her own signals ONLY. So provider signs up, sends signals, and passively waits for clients to use their signals, trying to have good performance to attract them.
Do you offer institutional accounts?
Yes, we also offer various institutional account types based on trading volume. Please contact us for more details.
Click here to review more information about ZuluTrade and open a free account.
Thursday, May 27, 2010
Traders and Mistakes by Van K. Tharp of Van Tharp Institute
Click here for Dr Van Tharp's 2010 Trading Workshop Schedule
I’ve always said that trading is mostly psychological and that traders should spend a lot of time working on their core issues. In fact, most of my Super Traders spend at least a year working on psychological issues before they get to work on their business plan or trading systems. One area where psychological issues can appear in trading is in mistakes.
So let’s look at the psychology of trading from the angle of mistakes. When you don’t follow your rules, you make a mistake. It’s that simple. And making the same mistake repeatedly is called self-sabotage. Self sabotage is another area of psychology rich with the opportunity for understanding yourself to improve your trading results. Here, however, we’ll focus on mistakes relating to some broad categories of traders.
First, let me introduce one way to measure mistakes' impact on your trading. Trader efficiency is a measure of how effective a trader is in making mistake free trades. So a person who makes five mistakes in 100 trades is 95% efficient. In the last five years I’ve requested that my Super Traders document their mistakes so that we can look at their efficiency levels. I have found that 95% is actually a very good trading efficiency level; many traders can’t even trade at 75% efficiency—which is terrible. That’s one mistake in about every four trades. This is most important for one category of traders: rule-based discretionary traders. In my opinion, when rule based discretionary traders become efficient, they are by far the best type of trader.
There are two other groups of traders I’d like to talk about: 1) mechanical traders and 2) no-rule discretionary traders.
First, we’ll look at mechanical traders. Mechanical traders believe that they can eliminate psychologically related trading problems by becoming mechanical. Many people aspire to be mechanical traders, letting a computer make all the decisions for them, because they believe it factors out many human-based errors.
In fact, one of my best trader friends said to me once that psychology didn’t enter into his trading because his operation was totally automated. My response was “You could decide not to take a trade.” About 18 years after I made that statement, his CTA business closed down. His partner decided against taking one trade—the trade that would have made their entire year had they taken it.
I’ve always said that people can only trade their beliefs about the market, so let’s look at some of the most important beliefs that a pure mechanical trader might have:
* With mechanical trading, I can be objective and not make mistakes (except the psychological mistake of overriding my system).
* Mechanical trading is objective. My system testing will allow me to determine my future results.
* Mechanical trading is accurate.
* If a system’s underlying logic cannot be turned into a mechanical trading system, it probably isn’t worth trading.
* Human judgment is too prone to errors. I can eliminate those through mechanical trading.
So then, is mechanical trading truly objective? I tend to think not because there are all sorts of errors that can creep into an automated trading system: data errors, errors in the software platform, errors in your own programming, and many more. (Interestingly, one of the main categories of errors that my Super Traders come up with consistently is programming errors.)
Let’s consider data errors. Is your data accurate or does it have bad ticks and other issues with it? Mechanical traders are always dealing with data errors of some sort. For example, price errors can show up in streaming data quite regularly. Sometimes those are resolved within seconds and the error “disappears” but, by that point, the bad data may have triggered a trade already. Additionally, historical stock data may or may not have dividend and split adjustments. And what happens when a company goes bankrupt? What if it goes private or is bought out by another company? Those companies’ data may simply disappear from your data set.
I once wanted to research an efficient stock trading system. We looked for efficient stocks (moving up without much noise) and bought them with a 25% trailing stop. We had an S&P 500 data set going back 40 years that was supposed to be clean and adjusted for splits and dividends. I was very pleased with the results because my system made a small fortune. I didn’t realize this at the time, however, but the system traded on “inside information.” Because of the data set, I was able to buy stocks at the IPO that would later become part of the S&P 500. Thus, my system, in back test, bought Microsoft, EBay, Intel, and many other companies before anyone knew they would become part of the S&P 500. Why? Because, as I said, my data set was today’s S&P 500 going back 40 years.
And what about Thursday May 6th, 2010? The Dow Jones dropped 1,000 points in the space of about 20 minutes. Blue chip stocks like Procter & Gamble dropped over 20 points, and Accenture even went to a penny per share briefly. While there may not have been one root cause for that mini-crash, it had a major effect on mechanical trading systems. Things like that happen in the markets; such are the challenges (error/mistakes) for mechanical systems. (That afternoon’s swing affected lots of regular traders, too. One client said he used 25% trailing stops on all of his positions and got stopped out of every single stock.)
Meanwhile, one of our instructors, Ken Long, trades rule-based discretionary systems and made 100R in that same week. As always, he was very conservative in his trading and very careful to make sure that he fully managed his risk.
There is another class of error that is made by mechanical trading systems: the error of omission. Because the criteria by which trade setups and entries are so precisely defined, mechanical systems miss many good (or great) trades that a discretionary trader would spot easily.
For example, suppose your systems screens for five consecutive lower closes. After you get five consecutive lower closes you then look for an inside day. Now you have your full setup. Your entry is a few cents above yesterday’s high.
So let’s look at some examples of other entry signals you might miss by being so precise. You could have four down days that were extreme—perhaps the price is down 30%. Or you could have less than four down days that where the price is 30% lower or more. However, neither of those example would be an adequate down move according to your strict mechanical criteria.
Let’s say you found something that had five days of new lower lows but the fifth down day might open on a new low and then close on a new high. That’s usually an extremely bullish signal, but you’d miss it by your precise definition. Or, you could have five days of lower closes and the sixth day opens on a new low but closes on a new high. Thus, the precise entry definition would miss a trade opportunity with even more weakness followed by an extreme bullish signal.
There are a lot more variations of this entry that a mechanical system would miss, but you get the point. As soon as you state your rules so precisely that a computer can execute the trades, you open yourself to errors of omission—good or outstanding trades that your automated system cannot take because of its precision. Those missed opportunities don’t qualify as mistakes but they severely limit the potential results of the underlying logic behind the system. The mechanical system results will look rather weak next to the results of a trader who used that same system and was allowed some discretion to take the all of those other trades that didn’t quite fit the precise mechanical system rules.
Now lets look at mistakes and another type of trader: the no-rule discretionary traders.
In my experience, when most people say “I am a discretionary trader,” it basically means that they are free to do whatever they want. They can take a newsletter recommendation, trade a high probability setup based on what some guru said in a workshop last year, or perhaps just buy something on a whim. They might feel they have 20 different systems with none of them rigid.
In reality, they have no systems at all. What they really have is a little bit of nothing and a lot of “into-wishing” (as opposed to intuition). As a result of having no system and no rules, they have no way of effectively managing their trading. How well do you think a company would operate with no plans, no business systems and no rules? Because they have no rules to follow, everything no-rules discretionary traders do is a mistake.
Now in fairness, some of discretionary traders have rules for at least a portion of their trading. There’s hope for these people because they have a starting point. Those who are totally no-rules discretionary traders, however, have no hope and should either stop trading or totally revamp their trading business.
Are you a discretionary trader? How would you be able to tell?
Here is a quiz that will help you decide. Answer Yes or No to the following questions.
1. Do you sometimes buy newsletter recommendations without having a real plan for how you’ll get out of the trade?
2. Do you occasionally (or often) take trades based upon some interesting indicator that you learned in a workshop (i.e., when you see that indicator go, you usually get into a trade, but again you have no real plan about how you’ll get out of the trade)?
3. Do you trade three or more different systems in the same account?
4. Do you trade more than ten different systems?
5. Do you sometimes enter a trade and later not remember why?
6. Are you unsure of how many systems you have?
7. Do most of your systems lack a complete set of rules to guide your behavior?
8. Are your systems equivalent to the setups used to get into the trades and nothing more?
9. Are you unable to list the rules for the last trade you made?
10. Are you able to list the rules for any of the last five trades you made?
If you answered Yes to as many as two of the questions above, you have some elements of a no-rules discretionary trader. However, if you answered Yes to 6 or more questions above, you definitely are a no-rules discretionary trader.
Chances are you seldom make money in the market because you are not playing a winning game. You probably make many mistakes. In fact, since you don’t have rules, I would consider everything you do to be a mistake until you have a set of rules in place. How can you effectively learn from any of your trading experiences if you do not know which ones are mistakes?
If it is any consolation, most traders fall into the no-rules discretionary category. The best among this group might be dedicated to following the trades of a single newsletter. If that applies to you, do you even know the rules of the newsletter? Does the newsletter writer have rules to guide his trading? Chances are, if he must come out with a specific recommendation once every month on a specific date, he doesn’t have such rules. And chances are also good that you don’t follow the recommendations of the newsletter writer exactly: you don’t take some trades, you may miss some others, you buy at a price other than that recommended, and you probably don’t sell when you are told to. Again, these are all signs of a no-rules discretionary trader.
About Van Tharp: Trading coach, and author, Dr. Van K. Tharp is widely recognized for his best-selling books and his outstanding Peak Performance Home Study program a highly regarded classic that is suitable for all levels of traders and investors.
Click here to learn more about Van Tharp at the Van Tharp Institute
Wednesday, May 26, 2010
The Very Long Bear Market Forecast and Losing $2 Billion "Hard Day" for Pension Fund Officer
Imagine what $2 billion would buy. How many college tuitions would that pay for? How many gas tanks would that fill? Not to mention things like clothes and groceries.
Between 9:30 a.m. and 4 p.m. Eastern on Thursday, May 20, two billion dollars vanished from a pension fund.
After the Dow closed down 376 points on that day, the chief investment officer of a major state pension fund talked with CNBC. After, the interviewer noted the fund had assets of $204 billion, the manager replied, "You said 204 in the intro . . . It's 202 now, so $2 billion in a day. It's a hard day. It's a hard day." He went on to mention, "We're just under 2% cash . . . we're overweight still a little bit in global equity and fixed income."
"Under 2% cash" is not that uncommon these days. In a new report mutual funds are showing an average of 3.5% cash. This figure matches the all-time low, which occurred in July 2007, the month when the Dow Industrials plus the transports combination made its all-time high.
The 2007-2009 stock market crash was bad enough for pension funds; then, making matters worse, some "doubled-down" in risky assets only to see the market crater. Of course, it failed, which is partly why public pensions are in such tough shape now. The effort to grab for yield yet again, especially after such spectacular losses just over a year ago, suggests an even worse result this time.
A May 19, PRNewswire report provides a sobering glimpse of the overall picture for pension funds: " . . . several state pension funds will not last the decade, a situation that will place tremendous pressure on the federal government to bail out financially insolvent states at a price tag likely to match or exceed the recent bailout of the U.S. financial system. An April report from the American Enterprise Institute adds that, "State pension funds are underfunded by $3 trillion."
Translation: Retirement dreams of Hawaiian beaches, Paris cafes, or "RVing" across long stretches of beautiful landscapes could be in jeopardy in the years ahead for millions.
This is not a risk-free world. Whether you entrust your retirement to a fund, the government, or try and take control of it yourself, good results are not guaranteed. Yet an independent perspective on the markets has already proved invaluable for many future retirees.
Robert Prechter on Yahoo! Finance: "On Schedule for a Very, Very Long Bear Market"
Robert Prechter discussed the recent global sell-off that has sent all major
U.S. averages 10% below their 2010 highs with Yahoo! Finance Tech Ticker host
Aaron Task on May 20, 2010. Prechter says that the current climate shows that "we're
in a wave of recognition" where the fundamentals are catching up to the
technicals and that it's time to prepare for a "long way down."
Don't believe current recovery hype. Check the hard facts, and your own independent analysis before you go buying into this market right now.
Watch the video below and you'll learn why the worst is NOT over and what you can do to safeguard your financial future.
Click here for the free report that can safeguard your financial future.
Tuesday, May 25, 2010
Free Elite WaveTrader Webinar Tuesday May 25th at 9:00 pm EST
Stock Trading Has Never Been Simpler And More Powerful
What if I told you that with 3 points of analysis that took less than a minute each that I am consistently able to identify “Power Stocks” that have the potential to produce multi-hundred percent gains in the following few months?
Would I have your attention? I bet I would.
My long-term study of the stock market’s biggest winners showed me the consistent patterns that occur as a stock transitions through what I call a “super-cycle”.
Knowing where a stock is in a super-cycle may at first glance appear challenging but within just a few hours of study you’ll quickly understand how to read these important clues and trade stocks accordingly.
In fact many of the stock markets biggest movers of the past several years have flashed these powerful clues before breaking into mega-cycles and were trades generated by the Elite Wavetrader system.
Some of these include:
* FSLR 159% gain in 3 months
* KUN 265% gain in 4 days
* BIDU 250% gain in 6 months
* ZNH 300% gain in 5 months
* CEA 400% gain in 5 months
* ISRG 217% gain in 9 months
* DRYS 333% gain in 6 months
* RIMM 333% gain in 14 months
* BCSI 400% gain in one year
And many of these stocks were optionable producing stratospheric gains on the option. Can you see how having this information might be beneficial?
Remember, the core components of the Elite Wavetrader system were designed to make the stock market game easy to play and easy to win.
Sure, I’ve compiled a lot of information into the training program based on my study of mega-stocks but the critical stock selection aspects are easily gleaned in the first few hours of study.
Let’s Take A Little Peek Inside My Unique “Stock Trading On Steroids” Trading System:
* Stocks move in cycles-and learning to interpret where a stock is in a cycle can lead to an uncanny ability to capture significant gains
* Along with stocks, the market itself moves in cycles; knowing which bias to use when (short or long) can hyper-charge your trading results.
* Premier stocks can provide significant clues to their long-term potential-knowing what those clues are is as simple as following a few basic rules
* Finding these premier “hi-scoring” stocks is made much simpler when you understand that patterns tend to repeat themselves.
* Realizing that a certain breed of stocks produce these repetitive patterns, stock scans can be built to target the next batch of prospects.
* Finding and analyzing these stocks for buy signals can be the most productive thing you do financially for the small amount of effort invested
* This system excels at keeping your money working hard - the annual ROI (return-on-investment) on the right momentum stocks can be phenomenal
In fact, the top traders of all time are momentum traders including one who turned a $10,000 account into $42 million in 2 years a few years back (try to do that with Forex ;).
You will understand why the old way of investing in the markets is a thing of the past…getting wrapped up in “noise” can cost you a lot of money in missed opportunities.
I’ll show you why conventional swing trading is like surfing in the ripples between mega-waves, sure you can make some money but wouldn’t you rather focus the bulk of your trading capital on the right stocks at the right time?
Here’s A Fact You Should Get Straight In Your Head Right Now – You Have No Business Throwing Your Money Away On 90% Of The Stocks In The Market
This is a fact that many traders fail to consider when trading. At least 90% of the stocks in the market are no place for your precious investing or trading funds.
They just are not performing. Either they’re just sitting there, or meandering back and forth randomly, or even going down in value.
Why on God’s green earth would you have investment or trading capital tied up in stocks going nowhere – or losing value?
Does that make sense to you? It didn’t to me either. And that’s why I’ve been studying the stock market’s biggest movers over the past fifteen years.
To me (and hopefully, to you by now), it makes sense to place your stock market bets only on the true “thoroughbreds” of the market – like Microsoft, Cisco Systems and Dell Computer of the 1990’s, or like Taser, First Solar, Apple Computer, Research in Motion, and Hansen in the 2000’s…
These are the kind of stocks that can quickly super-charge your stock market returns and ones that my stock scoring system is uniquely able to target.
Hot stocks, ETF’s and hot sectors can occur in about any market condition. Momentum trading systems like my Elite Wavetrader system are uniquely able to identify these oftentimes very subtle turning points based on the key criteria gleaned from my study of this breed of mega-movers.
Being highly selective and targeting only “the top potential stock-waves in the market” is exactly the core philosophy behind my Elite Wavetrader system.
This is how to super-charge your stock market returns.
Big League Stock Trading Analysis
There is no better trading system for trading momentum stocks-the stock timing strategies alone are designed to catch the meat-of-the-move and avoid unproductive “do-nothing” consolidation zones.
And I make this easy for you by giving you detailed strategies for how to analyze price action. This will enable you to cull the herd and hone in on the top trading prospects-and become your own stock trading guru.
Many traders know that trend line placement is one of the most challenging aspects to trading and I show you how to properly apply trend lines based on where a stock is in a super-cycle (this is one of the most powerful aspects of the system).
Knowing where to place the trend line in one area of a stocks “launch pad” the PBC Zone (hint: stock mega-movers MOS and POT-generated 700% and 500% gains respectively with this strategy) is the key to maximizing gains and minimizing risk.
Once you get into the training I’ll teach you how to analyze the ongoing price action for signs of weakness and possible sell signals. You’ll also learn the importance of analyzing a stock’s price range for tell-tale signs of an imminent reversal.
You’ll receive a “quick-start” roadmap and powerful stock scanning formulas for identifying price squeezes and honing in on stocks with explosive short-term potential as well as stock timing strategies to target exact dates in the future for trade entries and exits (this is sometimes months ahead of time).
This is a system that is ideal for those wanting superior returns in the market without having to be bogged down in “another job”.
Click here to review the Elite WaveTrader system.
Click here for the Free Elite WaveTrader Webinar Tuesday May 25th at 9:00 pm EST
Monday, May 24, 2010
Global Stock Markets and the Euro
The last two weeks have been nothing but down in the global stock markets, and the Euro looks might it might be headed for 1 to 1 against the US Dollar longer term. I do expect some kind of a rebound in the Euro, dead cat bounce, retracement, whatever you want to call it, but longer term the euro looks like it’s going to 1.20 and lower unless the ECB can create some major magic and fast, which I doubt.
Stock Equity Buying Opportunities?
I would suggest there may be some buying opportunities out there in the stock equities, at least for a bounce, but long term I'm not so sure. If you do buy long, I suggest being very selective, use stop-loss to keep your risk reward ratio low-risk high-reward as possible. I would suggest only buying non-cyclical stocks right now if you buy anything. Food and healthcare stocks for example might hold their value if the stock markets keep tanking.
Short Selling Opportunities?
If you like to short sell, well this is the best low-risk high-reward opportunity to invest and trade on the sell side that I’ve seen in the last year. There’s no problem sticking to cash either. Cash is a good trade and investment in times like this. With very possible deflation now and broken global stock markets, being financially prudent is ever so critical to survive and thrive into the future. So buy if you like, sell short some if you like even better I see, hold some cash too, maybe add a little gold and silver to your portfolio, and be nimble and ready for anything with big surprises to adjust your holdings at a moments notice.
Currency Swing-Trade Dance
The last two weeks have seen some of the biggest moves in the currencies, and if you were on the right side there, you made a ton of money. It looks like maybe the stock market downturn has everyone re-positioning their entire investment portfolios. I see the Euro rebounding a little this week with the EURGBP as the best bet for heading higher, and the NZDUSD, and USDCHF heading lower as low-risk high-reward forex swing-trade opportunities right now.
My Stock Pick This Week is a Short Sell on Take-Two Interactive Software
Take-Two Interactive Software makes video games for the PlayStation, Xbox, Nintendo Wii, and PC system platforms with famous video games like Grand Theft Auto, and their newest game Red Dead Redemption. If you’ve got kids of any age and computers at home, you know how crazy kids are about playing video games. Being a father and kid at heart myself, I enjoy playing the video games just as much as the kids when I have the time, but when it comes to making money, I have to call them as I see them. I’ve got a short sell call on Take-Two Interactive this week. It’s based on weekly price bars. Their current fundamentals and forecasts are terrible, and their price chart doesn’t look any better either.
Video Game Sales Decreasing Big-Time
According to NPD Group, video game sales in April 2010 dropped a huge 26%, and overall video game hardware software and accessories dropped about the same. So far it’s been one of the video game industries worst year over year sales declines ever. With the economy the way it is, new non-essential goods purchases like video games may be put aside for awhile. Also, buyers may be waiting for new devices and systems to come out before purchasing, especially in the mobile market where sales prices and profit margins for the gaming companies are much lower. Most of the time April is a slow month anyway for the game makers as March is the end of their ending fiscal year and they are launching new products for the new fiscal year. Take-Two just launched its newest game Red Dead Redemption. We will have to wait and see how the sales will affect the next quarter’s bottom line, but I don’t think one game will pull Take-Two out of the sales slump they and the rest of the industry are in just yet. Even with these somewhat positive considerations, with the bigger picture in mind, I still see Take-Two’s stock price heading lower. Look at the chart below. Starting 11/29/09 Take-Two opened at 11.29 and closed a week later at 7.74. The chart is suggesting to me there is a retest of the 7 to 8 price area coming soon if not later, and if things get worse for the industry, even lower stock prices from there. This is a low-risk high-reward short sell trade setup if the short squeeze doesn’t come first. In case it does, implement a trailing stop-loss to lock in profits.
Sell Short Take-Two Interactive Software – Base on Weekly Price Bars
Sell Entry: 11.88 to 10.76
Take Profit Areas: 7.23 to 6.69, 6.14 to 5.69
Take-Two Interactive Software Company Profile
Take-Two Interactive Software, Inc. publishes, develops, and distributes interactive entertainment software, hardware, and accessories worldwide. The company develops and publishes software titles for various gaming and entertainment hardware platforms, including PlayStation3 and PlayStation2 computer entertainment systems, PlayStation Portable system, Xbox 360 video game and entertainment system, and Wii and DS systems, as well as for the personal computer and games for Windows. It offers products through its wholly owned labels Rockstar Games and 2K, which publishes titles under 2K Games, 2K Sports, and 2K Play. The company, through its subsidiary, Jack of All Games, also distributes software, hardware, and accessories in North America. Its proprietary brand franchises include Grand Theft Auto; Sid Meier's Civilization; Max Payne; Midnight Club; Manhunt; Red Dead Revolver; Bully; BioShock; Sid Meier's Railroads!; Sid Meier's Pirates!; Carnival Games; and Top Spin, as well as licensed brands comprise the sports games Major League Baseball 2K; NBA 2K; and NHL 2K. The company sells its software titles to retail outlets through direct relationships with large retail customers and third party distributors. Its customers include mass merchandisers, specialty retailers, video stores, electronics stores, toy stores, national and regional drug stores, and supermarket and discount store chains. The company was founded in 1993 and is headquartered in New York, New York.
Click here to review different investing trading software that scans analyzes stocks for different technical criteria, and trade pattern setups.
Click the Take-Two Interactive Software stock chart for a larger view.
Friday, May 21, 2010
Deflation and the Stock Market
The following market analysis is courtesy of Bob Prechter's Elliott Wave International. Elliott Wave International is currently offering Bob's recent Elliott Wave Theorist, free.
Continuing—and Looming—Deflationary Forces
The Fed and the government quite effectively advertise their efforts to inflate the supply of money and credit. But deflationary forces, to most eyes, are invisible. I thought I would point some of them out.
1. Banks Are about 95 Percent Invested in Mortgages
Figure 4, courtesy of Bianco Research, shows that U.S. banks used to be fairly conservative, holding 40 percent of their assets in Treasury securities. This large investment in federal government debt, the basis of our “monetary” “system”, served as a stop-gap against deflation. In 1950, even if mortgages had been wiped out by a factor of 80 percent, banks still would have been 50% solvent and 40% liquid. Today, banks hold federal agency securities (backed mostly by mortgages), mortgage-backed securities (meaning complicated packages of mortgages), plain old mortgages that they financed themselves, and a few business loan contracts. If these mortgages become wiped out by a factor of 80 percent, which in turn would cause many of the business loans to go into default, the banks will be only about 22% solvent and 1% liquid. I believe the coming wipeout will be bigger than that, but let’s be conservative for now. The point is that, unlike Treasuries, IOUs with homes as collateral can fall in dollar value, and such IOUs are pretty much the only paper backing U.S. bank deposits. The potential for deflation here is tremendous.
2. More Mortgages Are Going Under
It has been well publicized recently that commercial real estate has been plunging in value as business tenants walk away from their leases, leaving properties empty. Zisler Capital Partners reports, “Returns were negative for the past five quarters, the longest streak since 1992. Property prices have fallen by 30 percent to 50 percent from their peaks. Much of the debt is likely worth about 50 percent of par, or less.” (Bloomberg, 11/11) Needless to say, the fact that commercial mortgages are plunging in value is stressing banks even further, which in turn restricts their lending. This trend is deflationary.
3. People Are Walking away from Their Homes and Mortgages
Great numbers of people are ceasing to pay their mortgages, even if they have the money to pay them. When people walk away from their mortgages, they are reneging on a promise to pay the interest on the loan. … Refusal to pay interest is deflationary. When banks can’t collect fully on their loan principal, as is the case by law in the above-named states, it is deflationary. Even in states where banks can go after other assets held by borrowers, default is still deflationary if the borrowers are broke. The reason is that, in all these cases, the value of the loan contract falls to the marketable value of the collateral, and a contraction in the value of debt is deflation.
Some people who walk away from their mortgages purposely damage the homes when they leave. New businesses have sprung up to take on the job of cleaning up the houses that former occupants trashed as they left. Angry defaulters are stripping coils out of stoves, pulling electrical wiring out of walls, ripping fixtures out of bathrooms, yanking seats off of toilets, punching holes in walls and leaving rotting food in the fridge. (AP, 8/9) Such actions, and the threat of more such actions, lower the value of the collateral behind mortgage debts, thereby lowering the value of mortgages, which is deflationary.
4. Bank Lending Standards Have Stayed Restrictive
As people default on mortgages, banks are tightening lending standards. Figure 7 shows that banks loosened credit standards from late 2003 through the summer of 2007. By the end of that time, you could borrow money if you were breathing and could operate a ball-point pen. Banks have been tightening credit standards ever since. The rate of tightening peaked in October 2008, but the graph shows that over the past year various banks have either left their new, tighter standards in place or continued to tighten their standards further. Across the board, it is harder to get a loan, and it’s staying that way. Lending restrictions reduce the credit supply. This condition is deflationary.
5. Banks Are Cashing Out of the Credit-Card Business
Articles have revealed that banks are doing everything they can to get credit-card debtors to pay off their cards. They are raising penalties and rates, lowering ceilings and otherwise bugging their clients to pay up, one way or another: Transfer your debt to another bank’s card; default; pay us off; we don’t care which. And it’s working. Through September, consumers have paid down credit card balances for 12 months in a row. Figure 8 shows the new trend. The credit-card business was another formerly humming engine of credit that is sputtering. You might call the new program “cash from clunkers,” and it is deflationary.
Click Here To Safeguard Your Financial Future With Bob Prechter's 10-Page Market Letter, it's FREE!
What Becomes of a Broken Stock Market?
There are two possible Elliott wave paths for stocks from here, but only one likely outcome.
You know what a mystery the Dow's 1,000-point drop on May 6 has been.
Wall Street is looking for a smoking gun -- a trader's mistake, a computer glitch -- but nothing definite has been found yet.
If you're familiar with Elliott wave analysis, last week's shocking decline gets less mysterious. The chart you see below is from Robert Prechter's latest, May Elliott Wave Theorist. Notice the price area where the drop occurred.
The April-May Theorist series entitled "Deadly Bearish Big Picture" reveals a lucid picture for 2010-2016. It's the flipside of Robert Prechter's February 2009 Forecast for a 'Sharp and Scary' Rally. Click here for a free copy.
As you see from Prechter's chart, the Dow reversed after the rally off the March 2009 low had retraced about 61.8% of the 2007-2009 crash. To be exact, "The Dow met the .618 retracement level when it reached 11,258 at 11:15 a.m. EST on April 26. Then it reversed, as shown in Figure 9," writes Bob in the May Theorist.
Why is that important? Because in Elliott wave analysis, .618 is a common Fibonacci reversal area for market corrections.
Based on the Dow's 300-year-long Elliott wave pattern, Prechter sees a huge difference now compared to the last two significant tops in 2000 and 2007. In fact, "This massive stock market top is preparation for something big," writes Bob.
The May 8 Theorist shows you two Elliott wave paths that stocks will likely take from here -- and both point in the same direction.
There is more -- you also discover the likely final outcome if this decline indeed develops into "something big": Prechter gives you his ultimate DJIA's price targets several years from now.
Click Here To Safeguard Your Financial Future With Bob Prechter's 10-Page Market Letter, it's FREE!
Click here for more Elliottwave commentary, resources, tools, and trading software.
Thursday, May 20, 2010
What is Market Analyst? Free Trial
In simplest terms, Market Analyst is a Technical Analysis Package suitable for traders who are trading stocks, futures, currencies - in fact any security from any exchange in the world.
Market Analyst was designed for those not born with a silver Microsoft mouse grafted in their right hand - as such it is one of the easiest software programs that you will ever use.
Market Analyst will provide you with many features that have been designed to make your analysis easier and to save you time. For instance the 'Layers Panel', which allows you to put different technical indicators on different layers on your chart - helping you to organize your technical analysis. Another feature is 'Transparency' which can be applied to all charts and technical analysis. Often a stock chart can become cluttered with the analysis that is applied to it. Market Analyst allows you to adjust the transparency of your analysis so that it "fades"- keeping the underlying chart uncluttered.
What is Technical Analysis?
Technical Analysis is a method of analyzing the historical data of a security. The analysis itself is usually some sort of mathematic formula that is calculated for every day in the history, this then creates a plot on the chart. The technical analyst interprets this information to make their trading decision.
At one level, Technical Analysis is all about probabilities. For example, if when analyzing the historical data of a security, you find that 90% of the time a certain technical indicator changed direction just prior to a change in trend of that security, there is a high probability that a change in trend will follow, if you now see that the technical indicator has just turned again, you have a statistical basis for predicting the next change in trend.
A software program like Market Analyst is often referred to as a Technical Analysis Package. We prefer to call it a "Trader's Toolbox". The reason we call it a Toolbox is that Market Analyst contains many different Technical Analysis techniques that will allow you to apply the right technique to the right market - just like using a hammer (instead of a saw) on a nail!
The accomplished technical analyst knows how to apply the techniques, and more importantly, knows how to interpret the analysis to make educated trading decisions. An important word of caution though - just as inexperience with tools in a toolbox can cause a lot of harm (remember the first time you used a hammer?), so using technical indicators without a thorough understanding of how to use them can cause you a lot of financial harm. This is why we recommend that our clients seek educators and/or education that can teach them how to trade with technical analysis.
Where do I get Market Data from?
Market Analyst can read data in a variety of data formats including the most common Metastock format and CSI format. Our own Market Analyst Data is the fastest data downloader in the world (why spend 15 minutes downloading your data when you can get it in under a minute). Market Analyst Data also saves the data in the native Market Analyst format which makes Market Analyst run fast and seamless.
Scanning the Market
Market Analyst includes a Scanning Manager that allows you to define exactly what condition you are searching for. Based on those criteria, it will scan the market to see if any securities match the criteria and rank them in order for you. This will save you hours of laborious manual scanning and allow you to trade many more markets.
The Scanning Manager is also the ideal tool for back testing your trading strategy. Using the Scanning Manager, select any past time period and find stocks that passed your criteria in the specified time range. Market Analyst can then be used to open those companies at that date. Using the Market Analyst training mode feature you can then add a series of bars onto the chart to determine profitability of your trading plan.
What Type of Technical Analysis is Included?
Market Analyst includes many of the common Technical Analysis techniques such as moving averages, oscillators, and momentum indicators such as RSI's. Market Analyst also includes many unique techniques like Market Price Analysis, which is a Market Profiling tool.
Time Price Labels which allow you to do extensive Time and Price analysis, and finally the Gann methods which can add a whole new dimension to your trading, are also included within Market Analyst.
Who is Gann?
W.D. Gann was a famous technical analyst that utilized techniques for accurately predicting when stocks and futures would turn. In an era where a family could survive a month on $100, Gann is reported to have made $50M (that's M for million) in his trading!
Market Analyst Professional includes many of Gann's techniques - from the Gann Fan to the Time by Solar Degrees tool. If you are a Gann enthusiast, or are just curious, Market Analyst Professional has all you need to begin your quest for trading 'Gann style'.
If you have mastered the Gann techniques in Market Analyst Professional, we also have our specialist Gann program called Gann Analyst. Gann Analyst introduces some of Gann's most powerful analysis, from that ancient calculator - the Square of 9, to the squaring of the all time top of a market. As you apply these techniques, and see how they call changes in market trend, you will receive a chill down your spine. For the avid Gann disciple, Gann Analyst also introduces some of Gann's final works on Cosmic Analysis and the interaction between the created universe and our markets.
How Can I Try the Software?
You can download a free 14 day trial of Market Analyst right now. Click on the link below to start your download. We will contact you shortly by email to make sure that you have everything you need to get the most of your trial.
Wednesday, May 19, 2010
Analysis of Paralysis Free Report
Analysis paralysis is a phrase that describes a situation where the opportunity cost of decision analysis exceeds the benefits that could be gained by enacting some decision, or an informal or non-deterministic situation where the sheer quantity of analysis overwhelms the decision making process itself, thus preventing a decision. The phrase applies to any situation where analysis may be applied to help make a decision and may be a dysfunctional element of organizational behavior. This is often phrased as paralysis by analysis, in contrast to extinct by instinct. Wikipedia
Analysis of Paralysis Report
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Monday, May 17, 2010
Analyzing The Market This Week
First the Greek debt crisis and the Euro. I see a near term upside bounce in the EURUSD after its recent total thrashing since early December 2009 1.50 price. The EURUSD could possibly bounce back up to 1.29, 1.34, 1.37, 1.40, and 1.44 which are all Fibonacci retracement price levels. The 1.37 price area is the 50% retracement of the 1.50 December 2009 sell off to the current low of about 1.2350.
Sure the Europe debt problem is very bad, but everybody knows it and is on that side of the trade. At some point short covering might set in as it usually does and the price would head higher. Longer term, the Euro still looks in bad shape with more sovereign debt problems coming in Spain and Portugal in which the Euro would be greatly devalued again by helping to bail out those European countries in financial trouble.
I’m a dollar bull for the rest of the year, but only for the idea that it’s the lesser evil of all the currency evils out there. Currency evil, meaning money printing machines. In the long-term, I see USA defaulting the last after Europe. What a thing to think, and even worse to say. Not, it’s a very possible reality, and my money doesn’t have any emotion. What if that happens? Something to think about and try to prepare for because it’s very possible now. Cash is king, hold a little gold and silver, if buying buy quality companies, short selling rewards being favored, and good old fashion hard work in a job or a business of your own to help increase the gross domestic product of the country your living in is a good idea now to bring struggling economies out of recession which I would call a depression if not now very soon.
Monday Morning Financial Headlines from Bloomberg
Euro Swaps Corner Trichet in Currency Tumble Showing No Signs of Slowing. Prudential Plc Starts Rights Offer to Raise $21 Billion for AIA Purchase. Euro Tumbles to Four-Year Low as Budget Cuts Threaten to Undermine Growth. Universal Health Agrees to Purchase Psychiatric Solutions for $3.1 Billion. Hedge Fund Rules to Get European Union Review Over U.K., U.S. Opposition. Buying Europe on Euro Collapse Makes Darst Join Herro as Valuations Tumble. Recovery Rewards U.S. Investors With Unemployed Denying Historical Rebound. Thailand Demands Protesters End Attacks Before Peace Talks After 36 Killed. Amsterdam, Edinburgh Airports Closed on Volcanic Ash; London Faces Curbs.
My Stock Pick This Week is a Short Sell on a New York Investment Bank
It’s Greenhills Investment Bank in New York that specializes in mergers. A smaller investment bank compared to JP Morgan and Goldman Sachs and as of recently, one of the best managed investment banks in the industry. Greenhills looks like it’s going to fall out of bed here looking at the chart below. When all the good news is out on a company, and everyone is invested in it, the fundamental valuations are at the highest, and there’s less and less money to push the price higher, short selling the stock now becomes a low-risk high-reward venture. This is one of those situations I believe.
Review the Greenhills stock chart below. See the recent prices and the “1 – 2 – 3” on the chart? These are price waves of a normal total of 5. The 3rd wave is always the biggest and strongest of the 5 price waves in terms of price movement. It suggests there’s much further room for the Greenhills price to fall. See my trade plan below for sell entry, stop-loss, and take profit price targets. Wave 4 is a counter trend move to the primary trend of Wave 1 & 3, and wave 5 is the last of the primary trend move, until consolidation, a reversal or a continuation of the main trend happens.
I invest and trade the 3rd waves a lot because the momentum is already built into the trade by the time the 3rd wave is clearly identified. It’s the trend is your friend theory. I call it low-risk high-reward trading. I jump on board the 3rd wave on Monday, and swing-trade until Thursday or Friday or longer depending. Finding the end of the 2nd wave, which is the beginning of the 3rd wave is the optimal entry point, but that is hard to determine in advance many times, because the 2nd wave can extend past your projected entry point, and stop you out of your position many times. I just wait for the 3rd wave to identify itself, and go with that trend to key support resistance levels until it looks like the price move is expiring, and close my position. I don't the entire 3rd wave move but a get enough to to low-risk high-reward satisfied.
3rd wave swing-trading with daily price bars in the equity and forex markets has by far been the most profitable trading method for me, especially lately with the markets moving big. I’ve got better things to do than day-trade all day, and I don’t have or manage huge amounts of money that for example Warren Buffet has to hold long-term. I wouldn’t hold long term anyway in this current economic environment going forward. I would consider holding long-term starting in June 2016 when I see a bear market bottom in the equity markets. More on that in future posts here. Until then we still have to make money, so I’ll buy them and sell them, use stop-loss, and whatever it takes to survive and much better profit.
“Greenhill Shares Set to Fall” – Barron’s - Sunday May 16, 2010
A rare earnings shortfall at Greenhill & Co, could begin to break the spell that the financial-advisory firm has cast over the investment community.
Barron’s: Greenhill Ticker GHL, which advises big corporations globally on mergers and acquisitions, arguably has been Wall Street's best-managed firm in recent years, and has been rewarded with the sector's highest price/earnings ratio. At a recent 77 a share, the company is trading at an outsized 30 times projected 2010 profit of $2.54 a share, and for 10 times book value. This valuation is appreciably above that of financial boutiques such as Evercore Partners (EVR) and Lazard.
Reuters: High-priced shares of merger-advisory firm Greenhill & Co (GHL) could tumble unless there is a boom in corporate mergers, Barron's reported in its May 17th edition.
The company has one of the highest valuations of any Wall Street firm, trading at 30 times earnings per share estimates for this year. Rivals, such as Lazard (LAZ) and Evercore Partners (EVR), trade at around 16 to 26 times projected 2010 earnings per share.
Barron's noted that Greenhill insiders recently sold 3 million shares, indicating they think the stock is fully priced.
However Greenhill supporters point to a looming merger boom as justification for the firm's high valuation, Barron's said.
Sell Short Greenhills Investment Bank – Ticker GHL
Sell Entry: 80.53 to 74.85
Take Profit Areas: 66.96 to 66.31, 55.78 to 55.10
Greenhills Investment Bank Company Profile
Greenhill & Co., Inc. operates as an independent investment bank. The company focuses on providing financial advice on mergers, acquisitions, restructurings, fund placement, financings, and capital raisings to corporations, partnerships, institutions, and governments. It acts for clients located worldwide from its offices in New York, London, Frankfurt, Tokyo, Toronto, Chicago, Dallas, Houston, Los Angeles, and San Francisco. The company was founded in 1996.
Click here to review different investing trading software that scans analyzes stocks for different technical criteria, and trade pattern setups.
Click the Greenhills Investment Bank stock chart for a larger view.
Friday, May 14, 2010
The S&P 500 Went South and We Cashed In Our Chips Video
Have you been riding's the big wave moves in the stock, futures, forex market lately? Big wave surfing can be like a casino and the stock market sometimes, you win some and you lose some. These last two weeks have been a wild and fun ride for some, and a total wipeout for others. Hows your investing trading waves been lately? If not so good, read on.
Last week the market tanked big-time, then last Monday stocks opened gap up. Back up just under levels that were support before and now are what looks like major resistance. Mostly a short covering rally I suspect. If the market is going to continue higher, it'll have to really prove itself and grind through the head and shoulders resistance now. If you do buy stock, buy the leaders not the laggards, and maybe you'll survive if there's another massive sell down, and or bear market trend forming.
If your in the bear camp, then more short selling time is possibly coming very soon now again it looks like. The sovereign debt crisis is not over, it's just starting, and it’s going to continue for many years. This either may or may not affect the global markets. Watch, see, and and optimize your portfolio. The ECB seems to be printing more money than the US Fed now. I see the dollar higher by the end of the year for sure. Its the lesser evil of all he evils right now, winner by default you might say.
Bull or bear, its even more important these days to be on the market to at least survive, and better, profit. Chance favors the prepared mind for maximum success.
This Free Market Convergence Report Can Help
The S&P index could easily be 1,050 or 1,000 by year-end, and the Dow could be 5000 or below by 2011. The weekly charts looks very negative for the markets. I wouldn't be surprised if oil gold and silver come down a bit also short term.
Click Here to Review S&P500 Long Term Video Analysis
Stock Market Surfing and Probabilistically Predictable
The financial markets are very similar to nature, and especially human nature which is what drives the markets. For example, when the ocean makes waves, its wave patterns are patterns that repeat over and over again. These patterns have predictability. If you surf, you know what I'm talking about, if you don't well your missing out. Go get a board and paddle out brudda.
The stock market is probabilistically predictable. This statement flies in the face of random walk theory and efficient market hypothesis, the two mainstream theories of market behavior that got thoroughly trased in the 2007-2009 crash. Today random walk is discredited and EMH is on the run.
What's behind market price swings, in the first place? I believe it's the collective feelings of market participants. They change constantly, but not randomly. Its Socionomic . . . social mood.
Human emotions . . . are rhythmical. They move in waves of definite number and direction. A completed move consists of five waves." R.N. Elliott, The Wave Principle Published 1938.
"Although Elliott came to his conclusions fifty years before the new science of fractals blossomed, the very idea that financial markets comprise specific forms . . . remains a revolutionary observation to this day, it has eluded other financial market researchers and chaos scientists." Bob Prechter, The Wave Principle of Human Social Behavior.
You see the "rhythm" of human emotion in this chart.
The astounding similarity between the two sets of the DJIA's price movements, one from 1921-1929, the other from 1974-2000, is not a coincidence.
"...markets are impulsive and patterned, not rational . . . they go through similar expressions of the same cycle of psychology over and over. The extent and duration vary, but the essence is always the same." Bob Prechter, The Elliott Wave Theorist, June 2006.
You can see the same patterns in nature itself:
Trees, for example, are branching robust fractals, as are animals circulatory systems, bronchial systems and nervous systems. The stock market record belongs in the category of life forms since it is a product of human social interaction.
R.N. Elliott discovered in the 1930s that this "human social interaction", as reflected by the stock market, is predictable because it forms similar patterns over and over again.
This order is not altered by the news. For example, as you may have read May 6 1000-point intraday drop in the Dow wasn't caused by the trouble in Greece or whatever, it occurred where the Elliott wave structure suggested it should have occurred.
What does the wave structure suggest about probable market action in the weeks ahead? Brace yourself, it may be a bumpy ride. Discover the revealing details today for free. Click here.
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