Tuesday, November 30, 2010
How to Play the Commodities Boom Free Video
The secular bull market in commodities is making traders rich. In the last five months alone, traders made up to 337% on trades WITHOUT even using options or leverage of any kind.
This is where the money is right now. Today, I have a killer video showing you exactly where to find the highest returns
Click Here for the Free Video
It's by John Thomas. He runs one of the hottest hedge funds in the world right now. He's breaking with Wall Street tradition and actually helping main street traders make serious money.
He's published 49 free trade recommendations in the last 5 months. 48 have been winners.
John is not your average trader, either. Wall Street Titans like Paul Tudor Jones and George Soros have hired him to consult with their hedge funds.
He founded Wall Street's first-ever dedicated international hedge-fund.
And right now, today, he's one of the top-performing hedge fund traders in the world,
based on performance.
This video he put together for regular traders is getting amazingly positive feedback. Check it out now:
In it, he reveals:
The 3 hottest stock markets in the world
The specific commodity sectors where you can make the most money
Which little known markets are up 100% in 12 months - with bigger moves still ahead
Hard asset primer for traders
Doomed commodities to avoid like the plague
And a whole lot more
Click Here to Watch it Now
Monday, November 29, 2010
Will Investors Be Able To Trace Their Profits to Ancestry.com? By Investors Business Daily Using the CanSlim Investing Method
First, after looking at the DJIA, S&P500 and Nasdaq index charts, technically I see the markets with some major upside resistance now, and looking to head lower. Now on a fundamental sentiment basis if the good news spin doctors can keep the good times music playing and the crowd dancing to the tunes, possibly the market could head higher here. On the other hand with the dollar gaining some strength lately, maybe stocks are headed lower? Chance favors the prepared mind, so pay attention so you can profit on the upside or downside, and so you don't be a pig and get slaughtered.
Today we're going to look at Ancestry.com (ACOM). You may have seen the firm's advertisements on TV.
The company runs the world's largest online family history resource site. It's digitized a huge number of historical documents over the years and also has other resources to help users research their family tree.
Earlier this year it worked with NBC on the TV show "Who Do You Think You Are?" The show traces the genealogy of various celebrities. And this summer NBC renewed the series for a second year.
Sales growth accelerated during the past four quarters.
Earnings growth also picked up, hitting 167% last quarter.
For the full year, analysts see earnings rising 50% in 2010 and 33% in 2011.
But its earnings have been up and down over the years. The Earnings Stability Factor rating gauges how consistent a company's earnings have been during the past three to five years. It runs from 1 to 99 and the lower the rating the more stable the company's earnings track record. Ancestry.com's Stability Factor Rating is 72, so its earnings have been rather volatile over the years.
Return on equity is a little light at 8%. Historically studies have shown that many winning stocks had ROEs of 17% or higher before they made their big price runs.
The number of mutual funds owning the stock has been climbing, so there is some interest from big investors.
Ancestry Chart Analysis
We can see on this weekly chart it just came public in late 2009, so it's a relatively young stock.
It formed a base between August and September (Point 1). That pattern was part of a larger base-on-base pattern (Point 2).
The stock broke out of that cup-shaped base (Point 3) and hit a series of new highs.
In recent weeks it's pulled back near its 10-week moving average line, where it seems to be finding support and has started to climb (Point 4).
Since Thursday is Thanksgiving, the next Daily Stock Analysis will be posted on Monday, November 29. So be sure to watch for it.
Ancestry.com Stock Checkup
Ancestry.com's 98 Composite Rating is the best among the 34 stocks in its Internet-Content industry group.
Its 94 EPS Rating is the fourth highest in the group.
Its 96 Relative Strength Rating is the group's second highest.
Click here for more information on Investors Business Daily and the Acclaimed Can Slim Investing Method
Friday, November 26, 2010
Auto Invest Trade the Gold Market with Forex Gold Trader Metatrader Expert Advisor
These days with economic uncertainty gold has become the most popular vehicle of investment and trading from George Soros to hedge funds to investment institutions to banks and individual investors traders.
Is Gold A Measurement of Money?
Gold investors traders normally purchase gold as a hedge or safe haven to economic, political, social, or fiat currency crises, including investment market declines, ballooning national debt, currency collapses, inflation, war and social unrest. Gold financial instruments are speculated and traded on just as other commodities are through the use of futures contracts and derivatives. Gold's history as a measure of hard currency, the responsibility of the central bank with its gold reserves, the low correlation of gold with other commodity prices, and its relation fiat currency pricing during the the recent financial crisis suggests that gold possibly has features of being money.
Gold's History as a Standard of Financial Measurement
Through history, gold has been used as money and a standard for global currency measurement. In the 19th century European countries adopted gold standards, and then they were removed during the financial crisis of World War I. Then after World War II, the Bretton Woods act pegged the US Dollar to gold at the rate of $35.00 per troy ounce. The Bretton Woods act existed until 1971 when President Nixon took the USA off the gold standard. The Swiss franc was the last currency to be taken off the gold standard in 2000.
Invest Trade the Gold Market 24 Hours a Day Automatially
Now there is a system to invest and trade in gold using a Forex MetaTrader Trading Account with the Forex Gold Trader attached to it. Now you can automatically invest and trade the gold market 24 hours a day hands free.
What is the Forex Gold Trader?
Forex Gold Trader is a Metatrader expert advisor automated trading robot that automatically places entry, take-profit, and stop-loss gold orders.
Why Trade Gold?
Gold has been the most stable currency for thousand of years. In economic good times, the price of gold remains pretty much unaffected, and in times of economic instability the price of gold seems to soar higher and higher.
What is the trend of Gold now?
See the 10 years gold trend above. The price of gold seems to soar higher and higher. It could possibly hit $1500 or $2000 per troy ounce in the future. The trend is your friend with this highly liquid financial instrument.
Click here for more gold investing trading information and resources.
Thursday, November 25, 2010
Money, Credit and the Federal Reserve Banking System III
Conquer the Crash, Chapter 10 By Robert Prechter
How the Federal Reserve Has Encouraged the Growth of Credit
Congress authorized the Fed not only to create money for the government but also to “smooth out” the economy by manipulating credit (which also happens to be a re-election tool for incumbents). Politics being what they are, this manipulation has been almost exclusively in the direction of making credit easy to obtain. The Fed used to make more credit available to the banking system by monetizing federal debt, that is, by creating money. Under the structure of our “fractional reserve” system, banks were authorized to employ that new money as “reserves” against which they could make new loans. Thus, new money meant new credit.
It meant a lot of new credit because banks were allowed by regulation to lend out 90 percent of their deposits, which meant that banks had to keep 10 percent of deposits on hand (“in reserve”) to cover withdrawals. When the Fed increased a bank’s reserves, that bank could lend 90 percent of those new dollars. Those dollars, in turn, would make their way to other banks as new deposits. Those other banks could lend 90 percent of those deposits, and so on. The expansion of reserves and deposits throughout the banking system this way is called the “multiplier effect.” This process expanded the supply of credit well beyond the supply of money.
Because of competition from money market funds, banks began using fancy financial manipulation to get around reserve requirements. In the early 1990s, the Federal Reserve Board under Chairman Alan Greenspan took a controversial step and removed banks’ reserve requirements almost entirely. To do so, it first lowered to zero the reserve requirement on all accounts other than checking accounts. Then it let banks pretend that they have almost no checking account balances by allowing them to “sweep” those deposits into various savings accounts and money market funds at the end of each business day. Magically, when monitors check the banks’ balances at night, they find the value of checking accounts artificially understated by hundreds of billions of dollars. The net result is that banks today conveniently meet their nominally required reserves (currently about $45b.) with the cash in their vaults that they need to hold for everyday transactions anyway. [1st edition of Prechter's Conquer the Crash was published in 2002 -- Ed.]
By this change in regulation, the Fed essentially removed itself from the businesses of requiring banks to hold reserves and of manipulating the level of those reserves. This move took place during a recession and while S&P earnings per share were undergoing their biggest drop since the 1940s. The temporary cure for that economic contraction was the ultimate in “easy money.”
We still have a fractional reserve system on the books, but we do not have one in actuality. Now banks can lend out virtually all of their deposits. In fact, they can lend out more than all of their deposits, because banks’ parent companies can issue stock, bonds, commercial paper or any financial instrument and lend the proceeds to their subsidiary banks, upon which assets the banks can make new loans. In other words, to a limited degree, banks can arrange to create their own new money for lending purposes.
Today, U.S. banks have extended 25 percent more total credit than they have in total deposits ($5.4 trillion vs. $4.3 trillion). Since all banks do not engage in this practice, others must be quite aggressive at it. For more on this theme, see Chapter 19 [of Conquer the Crash].
Recall that when banks lend money, it gets deposited in other banks, which can lend it out again. Without a reserve requirement, the multiplier effect is no longer restricted to ten times deposits; it is virtually unlimited. Every new dollar deposited can be lent over and over throughout the system: A deposit becomes a loan becomes a deposit becomes a loan, and so on.
As you can see, the fiat money system has encouraged inflation via both money creation and the expansion of credit. This dual growth has been the monetary engine of the historic uptrend of stock prices in wave (V) from 1932. The stupendous growth in bank credit since 1975 (see graphs in Chapter 11) has provided the monetary fuel for its final advance, wave V. The effective elimination of reserve requirements a decade ago extended that trend to one of historic proportion.
The Net Effect of Monetization
Although the Fed has almost wholly withdrawn from the role of holding book-entry reserves for banks, it has not retired its holdings of Treasury bonds. Because the Fed is legally bound to back its notes (greenback currency) with government securities, today almost all of the Fed’s Treasury bond assets are held as reserves against a nearly equal dollar value of Federal Reserve notes in circulation around the world. Thus, the net result of the Fed’s 89 years of money inflating is that the Fed has turned $600 billion worth of U.S. Treasury and foreign obligations into Federal Reserve notes.
Today the Fed’s production of currency is passive, in response to orders from domestic and foreign banks, which in turn respond to demand from the public. Under current policy, banks must pay for that currency with any remaining reserve balances. If they don’t have any, they borrow to cover the cost and pay back that loan as they collect interest on their own loans. Thus, as things stand, the Fed no longer considers itself in the business of “printing money” for the government. Rather, it facilitates the expansion of credit to satisfy the lending policies of government and banks.
If banks and the Treasury were to become strapped for cash in a monetary crisis, policies could change. The unencumbered production of banknotes could become deliberate Fed or government policy, as we have seen happen in other countries throughout history. At this point, there is no indication that the Fed has entertained any such policy. Nevertheless, Chapters 13 and 22 address this possibility.
Do you want to really understand the Fed? Then click here for the free eBook on "Understanding the Fed".
Click here for for more information resources on Robert Precther at Elliott Wave
Wednesday, November 24, 2010
The Intangible Federal Reserve Banking System II
Money, Credit and the Federal Reserve Banking System
From Conquer the Crash, Chapter 10 By Robert Prechter
Let’s attempt to define what gives the dollar objective value. As we will see in the next section, the dollar is “backed” primarily by government bonds, which are promises to pay dollars. So today, the dollar is a promise backed by a promise to pay an identical promise. What is the nature of each promise? If the Treasury will not give you anything tangible for your dollar, then the dollar is a promise to pay nothing. The Treasury should have no trouble keeping this promise.
In Chapter 9 [of Conquer the Crash], I called the dollar “money.” By the definition given there, it is. I used that definition and explanation because it makes the whole picture comprehensible. But the truth is that since the dollar is backed by debt, it is actually a credit, not money. It is a credit against what the government owes, denoted in dollars and backed by nothing. So although we may use the term “money” in referring to dollars, there is no longer any real money in the U.S. financial system; there is nothing but credit and debt.
As you can see, defining the dollar, and therefore the terms money, credit, inflation and deflation, today is a challenge, to say the least. Despite that challenge, we can still use these terms because people’s minds have conferred meaning and value upon these ethereal concepts.
Understanding this fact, we will now proceed with a discussion of how money and credit expand in today’s financial system.
How the Federal Reserve System Manufactures Money
Over the years, the Federal Reserve Bank has transferred purchasing power from all other dollar holders primarily to the U.S. Treasury by a complex series of machinations. The U.S. Treasury borrows money by selling bonds in the open market. The Fed is said to “buy” the Treasury’s bonds from banks and other financial institutions, but in actuality, it is allowed by law simply to fabricate a new checking account for the seller in exchange for the bonds. It holds the Treasury’s bonds as assets against -- as “backing” for -- that new money. Now the seller is whole (he was just a middleman), the Fed has the bonds, and the Treasury has the new money.
This transactional train is a long route to a simple alchemy (called “monetizing” the debt) in which the Fed turns government bonds into money. The net result is as if the government had simply fabricated its own checking account, although it pays the Fed a portion of the bonds’ interest for providing the service surreptitiously. To date (1st edition of Prechter's Conquer the Crash was published in 2002 -- Ed.), the Fed has monetized about $600 billion worth of Treasury obligations. This process expands the supply of money.
In 1980, Congress gave the Fed the legal authority to monetize any agency’s debt. In other words, it can exchange the bonds of a government, bank or other institution for a checking account denominated in dollars. This mechanism gives the President, through the Treasury, a mechanism for “bailing out” debt-troubled governments, banks or other institutions that can no longer get financing anywhere else. Such decisions are made for political reasons, and the Fed can go along or refuse, at least as the relationship currently stands. Today, the Fed has about $36 billion worth of foreign debt on its books. The power to grant or refuse such largesse is unprecedented.
Each new Fed account denominated in dollars is new money, but contrary to common inference, it is not new value. The new account has value, but that value comes from a reduction in the value of all other outstanding accounts denominated in dollars. That reduction takes place as the favored institution spends the newly credited dollars, driving up the dollar-denominated demand for goods and thus their prices. All other dollar holders still hold the same number of dollars, but now there are more dollars in circulation, and each one purchases less in the way of goods and services. The old dollars lose value to the extent that the new account gains value.
The net result is a transfer of value to the receiver’s account from those of all other dollar holders. This fact is not readily obvious because the unit of account throughout the financial system does not change even though its value changes.
It is important to understand exactly what the Fed has the power to do in this context: It has legal permission to transfer wealth from dollar savers to certain debtors without the permission of the savers. The effect on the money supply is exactly the same as if the money had been counterfeited and slipped into circulation.
In the old days, governments would inflate the money supply by diluting their coins with base metal or printing notes directly. Now the same old game is much less obvious. On the other hand, there is also far more to it. This section has described the Fed’s secondary role. The Fed’s main occupation is not creating money but facilitating credit. This crucial difference will eventually bring us to why deflation is possible.
Next: Prechter explains "how the Federal Reserve has encouraged the growth of credit."
Come back later this week for Part III of the series "Robert Prechter Explains The Fed." Or, read more now in the free Club EWI report, "Understanding the Federal Reserve System."
Click Here for Understanding the Federal Reserve System | A FREE eBook the Federal Reserve Bank Doesn't Want You To Read
Click here for for more information resources on Robert Precther at Elliott Wave
Tuesday, November 23, 2010
Money, Credit and the Federal Reserve Banking System
From Conquer the Crash, Chapter 10 By Robert Prechter
An argument for deflation is not to be offered lightly because, given the nature of today’s money, certain aspects of money and credit creation cannot be forecast, only surmised. Before we can discuss these issues, we have to understand how money and credit come into being. This is a difficult chapter, but if you can assimilate what it says, you will have knowledge of the banking system that not one person in 10,000 has.
The Origin of Intangible Money
Originally, money was a tangible good freely chosen by society. For millennia, gold or silver provided this function, although sometimes other tangible goods (such as copper, brass and seashells) did. Originally, credit was the right to access that tangible money, whether by an ownership certificate or by borrowing.
Today, almost all money is intangible. It is not, nor does it even represent, a physical good. How it got that way is a long, complicated, disturbing story, which would take a full book to relate properly. It began about 300 years ago, when an English financier conceived the idea of a national central bank. Governments have often outlawed free-market determinations of what constitutes money and imposed their own versions upon society by law, but earlier schemes usually involved coinage. Under central banking, a government forces its citizens to accept its debt as the only form of legal tender. The Federal Reserve System assumed this monopoly role in the United States in 1913.
What Is a Dollar?
Originally, a dollar was defined as a certain amount of gold. Dollar bills and notes were promises to pay lawful money, which was gold. Anyone could present dollars to a bank and receive gold in exchange, and banks could get gold from the U.S. Treasury for dollar bills.
In 1933, President Roosevelt and Congress outlawed U.S. gold ownership and nullified and prohibited all domestic contracts denoted in gold, making Federal Reserve notes the legal tender of the land. In 1971, President Nixon halted gold payments from the U.S. Treasury to foreigners in exchange for dollars. Today, the Treasury will not give anyone anything tangible in exchange for a dollar. Even though Federal Reserve notes are defined as “obligations of the United States,” they are not obligations to do anything. Although a dollar is labeled a “note,” which means a debt contract, it is not a note for anything.
Congress claims that the dollar is “legally” 1/42.22 of an ounce of gold. Can you buy gold for $42.22 an ounce? No. This definition is bogus, and everyone knows it. If you bring a dollar to the U.S. Treasury, you will not collect any tangible good, much less 1/42.22 of an ounce of gold. You will be sent home.
Some authorities were quietly amazed that when the government progressively removed the tangible backing for the dollar, the currency continued to function. If you bring a dollar to the marketplace, you can still buy goods with it because the government says (by “fiat”) that it is money and because its long history of use has lulled people into accepting it as such. The volume of goods you can buy with it fluctuates according to the total volume of dollars -- in both cash and credit -- and their holders’ level of confidence that those values will remain intact.
Exactly what a dollar is and what backs it are difficult questions to answer because no official entity will provide a satisfying answer. It has no simultaneous actuality and definition. It may be defined as 1/42.22 of an ounce of gold, but it is not actually that. Whatever it actually is (if anything) may not be definable. To the extent that its physical backing, if any, may be officially definable in actuality, no one is talking.
Do you want to really understand the Fed? Then keep reading this free eBook, "Understanding the Fed", as soon as you become a free member of Club EWI.
Click Here for Understanding the Federal Reserve System | A FREE eBook the Federal Reserve Bank Doesn't Want You To Read
Click here for for more information resources on Robert Precther at Elliott Wave
Friday, November 19, 2010
Top Picks, Tips, and Insights for Overseas Investing
As developed countries continue to struggle with heavy debt loads and sluggish growth, the emerging markets burn hotter and hotter, and U.S. government policy stokes trade and currency concerns worldwide, the international picture is becoming increasingly pertinent--and, perhaps, increasingly bewildering--to investors.
This month, Morningstar checks in with our own analysts and strategists, as well as some of our favorite fund managers, to draw a global map for investors. Each day we'll roll out new article and video reports to identify the growth drivers behind the world's economies and the outlook for global investment returns (note: the two don't always correspond), provide insight on the impact of currency, and most importantly, offer practical tips for allocating assets to overseas investments and some specific picks for international investors.
Stay tuned: Each day we'll publish additional reports, so be sure to stop by throughout the week for something new.
Lay of the Land
Morningstar's Christine Benz and fund analyst Karin Anderson kick it off with an international category performance recap to put recent international returns into perspective for investors. Christine also checks in with analyst Kevin McDevitt on recent foreign fund flow trends to see where fund investors are placing their bets today. Plus, Morningstar director of economic analysis Bob Johnson weighs in with the primary international factors behind his current forecasts, and Morningstar U.K. site editor Holly Cooks gets a global economic outlook from Roger Bootle, former HSBC chief economist and adviser to the UK Treasury.
Morningstar Emerging Markets Investment Research
* Foreign Fund Winners, Losers, and Comebacks
* Where Foreign Investors Are Placing Their Bets
* Bootle: Long Haul to Recovery for Developed World
* The Global Gears in the U.S. Economy
* Economic Growth Doesn't Equal Portfolio Growth
* Morningstar Readers Pick Their Stakes Abroad
More Emerging Markets
Matthews Asia Funds' Andrew Foster and T. Rowe Price's Gonzalo Pangaro check in with to offer their take on emerging-markets fundamentals, valuations, and opportunities. Plus, Morningstar fund analysts home in on diversified foreign funds with big appetites for emerging markets, as well as risk-conscious ways that fund investors can make emerging-markets plays. We'll also examine the rise of emerging-markets bonds with PIMCO's Michael Gomez, and take a closer look at the possibility for inflation in emerging markets given recent U.S. monetary policies.
Click for more from the best or Morningstar
Tuesday, November 16, 2010
Get a Week of FREE Elliott Wave Forex Forecasts - Click Here
How Analyzing Forex with Elliott Wave Can Help You Catch Both Rallies and Declines
FreeWeek of Elliott Wave International's Currency Specialty Service is here thru Nov. 18. Move fast . . . chance favors the prepared mind!
On November 1, the EUR/USD -- the euro-dollar exchange rate and the most actively-traded forex pair -- was trading the $1.38 range, near the level it is today.
But if you look at what the EUR/USD did between November 1 and 9, you'll see a huge 400-point (or pip, in forex lingo) rally into the November 4 top -- and an equally huge decline back to the levels we see today.
That's an 800-pip "round trip" in just six trading days -- a huge move which obviously caught a lot of the U.S. dollar bears and bulls by surprise. Could you have seen it coming?
If you know how to analyze currencies with Elliott wave, the answer is probably "yes." Wave analysis helps you identify patterns in market charts and tells you how those patterns -- ideally -- should develop. In other words, Elliott allows you to narrow down multiple possibilities to a handful of probabilities.
A probability is never a certainty. But it's better than a shot in the dark, as this example demonstrates.
On November 1, Elliott Wave International's Currency Specialty Service posted the following end-of-day forecast. (Some Elliott wave labels removed for this article):
[Higher, into a top] The euro is poised to thrust above 1.4160. The question is if the thrust takes place before the FOMC announcement and ends afterward, or starts in response to the announcement. Before or after, the euro should hit new highs.
What gave Currency Specialty Service the confidence to make that forecast? It was the "contracting triangle" pattern you see in the chart above. They often appear in 4th waves, right before the market's final push in wave 5. The EUR fulfilled the forecast with a 400-pip rally into the November 4 top. The following day, our Currency Specialty Service wrote:
The euro is reversing course after a thrust from a triangle. The decline from 1.4283 might not be in five waves, but it has the characteristics of an impulsive wave. A correction of the rally from August should reach the 1.3636-1.3700 area, the 38.2% retracement of the advance...
...which brings us to the price levels where we find the EUR/USD today. And if you're curious to know what Currency Specialty Service has to say now, you have a great opportunity:
FreeWeek is live through noon EST on Thursday, November 18!
You can access all the intraday, daily, weekly and monthly forecasts from EWI's Currency Specialty Service right now through noon Eastern time Thursday, Nov. 18. This service is valued at $494/month, but you can get it free!
Click here to access Currency Specialty Service FreeWeek
Click here for more Elliott Wave information, resources, and trading software.
Monday, November 15, 2010
Will Big Investors Tune In And Push Rovi Higher?
By Investors Business Daily
Rovi's (ROVI) products help people find and connect to TV shows, movies and music. Its technology is used by consumer electronics makers, and it also creates program listings for cable TV firms and other carriers. The company was featured in the IBD New America column in June.
* Rovi's sales growth ranged from 13% to 21% during the past four quarters.
* Earnings growth has been stronger and has accelerated, coming in at 67% in the latest report.
* Going forward, analysts see earnings rising 34% in 2010, then cooling to 19% in 2011.
* The stock's Accumulation/Distribution Rating is an A-. That rating tracks buying and selling of the stock among institutional investors. An A or B Rating tells you big investors are buying the stock.
* Rovi has an Up/Down Volume Ratio of 1.4. Like the Acc/Dist Rating, this ratio tracks buying and selling among large investors. A ratio above 1 indicates demand for the stock.
* Mutual funds and hedge funds own about 72% of shares, and the number of funds owning Rovi rose last quarter, from 701 to 705.
Rovi Chart Analysis - Click the Rovi Stock Chart for a Larger View
* Since late September, the stock has been forming a flat base (Point 1).
* The buy point is calculated by adding 10 cents to the 53.00 peak in the base (Point 2). That gives you a buy point of 53.10.
* The stock tried to break through that buy point on November 1 (Point 3) and again on November 9 (Point 4), but it couldn't gain traction.
* Although it has made two breakout attempts, you can still use 53.10 as the buy point for the base. Watch to see if Rovi can break through that area of resistance on above average volume.
* Remember: While you want to buy as close to the ideal buy point as possible, a stock is considered within buying range up to 5% above the buy point.
Rovi Stock Checkup
* At 97, Rovi's Composite Rating ranks #1 within its 12-member Computer Software — Education/Media industry group.
* Its EPS Rating of 96 also tops the group, as does its Relative Strength Rating of 92.
* Its SMR Rating of A is 5th among its peers.
* The stock's Acc/Dist Rating of A- comes in at #3.
Click here for a free trial of the Investors Business Daily and the Canslim Investing method from founder Bill Oneil
Friday, November 12, 2010
Follow the Fund Flows (Better Yet: Don't)
Consider mutual fund flows, which measure how much money investors are putting into or taking out of different types of funds. Around the turn of the millennium, on a net basis, investors were fleeing safe but ho-hum bond funds for the raging returns of stock funds, which had been driven to record highs by dot-coms and other hot '90s success stories.
The result? Third-degree burns for those who ignored valuation considerations and plunged into stocks in the year 2000.
Fast-forward to today and a situation that's almost the exact opposite. The 2008 onset of the credit crisis prompted a mass flight from stocks of all stripes, at any price. Equity funds stopped hemorrhaging in 2009 and early 2010, but fund flows to stocks remain well below normal.
Fixed-income securities, meanwhile, are all the rage--despite the paltry rates on offer. People think of Treasuries as a risk-free return. Today, however, they're more like a return-free risk. Did the crowd make the right call this time around? I doubt it.
Invest in your investment potential. Try Morningstar StockInvestor today for Free. Click Here
A Strategy Backed by Results
If you want to own stocks--and you should--you want Morningstar StockInvestor. Our strategy works, and we've got the real-world results to prove it.
As editor of Morningstar StockInvestor, I do more than write about investing; I manage two real-money portfolios that put our strategy to the test. Fittingly dubbed the Tortoise and Hare, these portfolios have achieved a combined cumulative total return of 62.7% (as of Aug. 31, 2010) since their June 2001 launch. That's well ahead of the S&P 500's 3.0% return over the same period. It's also better than the returns of 98.9% of large-cap blend mutual funds since inception, while experiencing below average volatility (five-year beta = 0.8).
How do we do it? It's actually quite simple. We buy high-quality businesses, household names with wide economic moats like Berkshire Hathaway BRK.B, Coca-Cola KO, and MasterCard MA. But we buy them only when they're trading at a discount to our estimate of their intrinsic value.
How do we figure that out? We do our homework. Each stock we're considering is put through a rigorous valuation exercise. If it passes, we purchase. If it doesn't, we don't. It's a long-term perspective in a short-term world. And it makes a world of difference.
Put Morningstar StockInvestor to the Test
I'm very proud of the results Morningstar StockInvestor has achieved. I'm equally confident that you'll be proud of the results you achieve.
As an independent investor, you know that information is the key to success. Not hot stock picks or trendy forecasting, but reasoned, researched, truly objective investment insights that focus on the fundamentals. The kind Morningstar StockInvestor delivers.
Every issue is dedicated to helping you understand what the highest-quality companies in the world are really worth. We show you not just what to buy, but when to buy--and when to sell. But don't take our word for it. See for yourself how well our results stack up to those of every other investing newsletter. Try a risk-free Morningstar StockInvestor subscription. If you decide it's not for you, simply cancel within 30 days. We'll cheerfully refund every penny.
It's that easy--and that risk-free.
Click for a free trial and see just how rewarding the Morningstar StockInvestor approach to investing can be.
Click here for more information and resources on Morningstar Investment Resarch
Thursday, November 11, 2010
Dollar Up Gold Down Today?
First, this Thursday morning market opening, we are seeing right now very possible low-risk high-reward trade setups on the US Dollar strength, and Gold Silver weakness. We will see what happens as the day progresses with the G20 meeting in focus.
Forex: Will the G20 Meeting Even Matter?
By FX360.com Kathy Lien, Director of Currency Research
It has been once said that G20 meetings are not worth money that it costs to police them. The meeting which brings together the leaders of the world’s twenty most important industrialized countries has become nothing more than a media blitz used for political posturing. If you want real reform, you need to turn to the meeting of Finance Ministers and Central Bankers – the men and women who do the dirty work. The global recovery is bifurcated with emerging markets enjoying rapid growth while advanced nations underperform. In order to achieve a more balanced pattern of growth, the G20 countries need to stop acting like children by arguing and pointing fingers and start working together. Unfortunately based upon the pre-G20 disputes - the chance of this happening is slim. As a result, we do not expect the final statement to spark fireworks because the G20 will have a tough time agreeing on numerical targets for current account balances and which country(s) should be labeled currency manipulators. Although the fingers have been primarily pointed at China, the Federal Reserve’s recent move prompted some nations to accuse the U.S. of implementing policies that have given other countries no choice but to intervene in their currencies.
What’s on the Agenda?
The easy part of the G20 meeting will be the discussion on regulations. The Basel III rules that will toughen global capital and liquid requirements for banks will be heralded as a major achievement for financial stability. The leaders will agree to make sure there is a living will or plan to unwound “too big to fail” banks to avoid a big impact on the financial markets. They will also applaud themselves for committing to free trade and will pledge to avoid protectionism. However there will be little agreement on currencies and trade imbalances. According to the Wall Street Journal, the discussion on exchange rates between negotiators got extremely heated. Germany and China have previously accused the U.S. of driving down the dollar. The WSJ says that “At one point, a negotiator tried to insert language into the communiqué that could have been interpreted as a condemnation of the Fed's recent move, but it was quickly rejected.” The draft of the final statement said the G20 will “move towards more market-determined exchange-rate systems and enhance exchange-rate flexibility to reflect underlying economic fundamentals,” and will “refrain from competitive devaluation,” which is basically the same language used in the G20 Finance Ministers’ statement.
The U.S. will most likely back off their calls for current account limits after opposition from Germany and Japan. This morning, German Chancellor Angela Merkel said she will not support any quantitative targets. Prior to the G20 Finance Ministers and Central Bankers meeting, Treasury Secretary Geithner made the radical suggestion of asking all G20 nations to bring their current account imbalances to 4 percent of GDP by 2015. At the time, Japan screamed that setting a numerical target is unrealistic and Germany argued that they cannot engineer such a specific outcome. With a current account surplus at 6 percent of GDP, Germany is vehemently against the plan.
Although the lack of progress could leave the foreign exchange market at a standstill, everyone knows what they need to do when they return home. The U.S. needs to engineer growth in a way that does not put the rest of the world at risk. China needs to boost domestic demand, appreciate its currency and narrow their trade gaps with other countries. According to last night’s trade report from China, the U.S. imported $25 billion and exported $7 billion to China. The process will be slow and gradual and will be helped by cooperation and not opposition. Treasury Secretary Geithner, Australian Treasurer Swan and Singapore Finance Minister Shanmugaratnam penned an op-ed piece in the Wall Street Journal today that laid out a new agenda for cooperation between G20 nations to achieve balanced and sustainable growth. They encouraged the emerging economies that are tightening policy to consider the rest of the world whose growth is still not strong enough to handle weaker demand. They also encouraged countries such as China, Brazil and India to reduce imbalances with other countries by shifting their economies away from exports and towards domestic demand. The third of their four points called on emerging economies to allow their exchange rates to reflect their substantial growth and to avoid protectionism. What we found most interesting is that this opinion piece was signed by both the Finance Minister of Singapore and the Treasurer of Australia – two countries whose alliances should be gradually shifting towards China and away from the U.S. given their hypersensitivity to Chinese growth. Perhaps they will have better sway with China than the U.S. who has only let their tensions with the Asian giant become more heated in recent months.
Click here for more forex resources, trading methods, and trading software.
Wednesday, November 10, 2010
"Market Manipulation" Is Not Why Most Traders Lose
A look the requirements for successful trading.
How often have you heard analysts refer to a down day on Wall Street as "traders taking profits"? Sounds great, but the sobering fact is that most traders -- in futures, commodities, or forex -- lose money.
Any book on trading will list for you the many reasons why most traders lose. Yet some traders do win; some even set records. In 1984, Elliott Wave International's founder and president Robert Prechter won the U.S. Trading Championship, setting a new all-time profit record of 444.4% in a monitored real-money options account. Later in his monthly Elliott Wave Theorist, Prechter published a Special Report "What A Trader Really Needs To Be Successful" with 5 important insights for would-be market speculators (including the explanation of why "market manipulation" is not why most traders lose.)
Here's a quick excerpt below -- and click here to read Prechter's Special Report in full, free.
"What A Trader Really Needs To Be Successful" (excerpt) By Robert Prechter
Ever since winning the United States Trading Championship in 1984 (see footnotes, p.4), subscribers have asked for a list of "tips" on trading, or even a play-by-play of the approximately 200 short term trades I made while following hourly market data over a four month period. Neither of these would do anyone any good. What successful trading requires is both more and less than most people think.
In watching the reports of each new Championship over the past three years, it has been a joy to see what a large percentage of the top winners have been Elliott Wave Theorist subscribers and telephone consultation customers. (In fact, in the latest "standings" report from the USTC, of the top three producers in each of four categories, half are EWT subscribers!) However, while good traders may want the input from EWT, not all EWT subscribers are good traders. Obviously the winners know something the losers don't. What is it? What are the guidelines you really need to meet in order to trade the markets successfully?
When I first began trading, I did what many others who start out in the markets do: I developed a list of trading rules. The list was created piecemeal, with each new rule added, usually, following the conclusion of an unsuccessful trade. I continually asked myself, what would I do differently next time to make sure that this mistake would not recur? The resulting list of "do's" and "don'ts" ultimately comprised about 16 statements. Approximately six months following the completion of my carved-in-stone list of trading rules, I balled up the paper and threw it in the trash.
What was the problem with my list, a list typical of so many novices who think they are learning something? After several months of attempting to apply the "rules," it became clear that I made not merely a mistake here and there in the list, but a fundamental error in compiling the list in the first place. The error was in taking aim at the last trade each time, as if the next trading situation would present a similar problem. By the time 16 rules are created, all situations are covered and the trader is back to square one.
Let me give you an example of the ironies that result from the typical method of generating a list of trading rules. One of the most popular trading maxims is, "You can't go broke taking a profit." (The brokers invented that one, of course, which is one reason that new traders always hear of it!) This trading maxim appears to make wonderful sense, but only when viewed in the context of a recent trade with a specific outcome. When you have entered a trade at a good price, watched it go your way for a while, then watched it go against you and turn into a loss, the maxim sounds like a pronouncement of divine wisdom. What you are really saying, however, is that in the context of the last trade "I should have sold when I had a small profit."
Now let's see what happens on the next trade. You enter a trade, and after just a few days of watching it go your way, you sell out, only to stare in amazement as it continues to go in the direction you had expected, racking up paper gains of several hundred percent. You ask a more experienced trader what your error was, and he advises you sagely while peering over his glasses, "Remember this forever: Cut losses short; let profits run." So you reach for your list of trading rules and write this maxim, which means only, of course "I should NOT have sold when I had a small profit."
So trading rules #2 and #14 are in direct conflict. Is this an isolated incident? What about rule #3, which reads, "Stay cool; never let emotions rule your trading," and #8, which reads, "If a trade is obviously going against you, get out of the way before it turns into a disaster." Stripped of their fancy attire, #3 says, "Don't panic during trading" and #8 says, "Go ahead and panic!" Such formulations are, in the final analysis, utterly useless.
What I finally desired to create was a description not of each of the trees, but of the forest. After several years of trading, I came up with -- guess what -- another list! But this is not a list of "trading rules"; it's a list of requirements for successful trading. Most worthwhile truths are simple, and this list contains only five items. ...
Click here to read the rest of Prechter's report now, free! Here's what you'll learn:
* Why a trading method is a "must" for your success
* What part discipline plays in your trading success
* Why "market manipulation" is not why most traders lose
* How to gain trading experience
Click here for more Elliot Wave resources and Trading Software.
Tuesday, November 09, 2010
Why You Should Not Believe Everything You See on TV
By Van K. Tharp, Ph.D. of Van Tharp Institute of Trading Mastery
Click here for Dr Van Tharps Trading Workshops Schedule
For some time now I have had a rather low regard for the financial TV media in the United States. In my opinion, they were puppets of the brokerage and mutual fund industries. Although I don’t get requests for TV interviews often, usually I turn them down because these journalists have no use for someone who encourages real financial education. During my trip to India last month, I granted an interview with a financial channel. That experience prompted me to change my opinion about the financial media—and not for the better. I now believe that many, if not most, of the financial television reporters are worse than puppets. What they cover has nothing to do with brokerages or the mutual fund industry. (I don't feel the same about most of the print media journalist as tend to be open to pursuing the true story and asking pertinent questions.)
I took my first trip to India in September and stayed with the parents of my niece’s best friend. My niece’s friend’s father just happens to be the Director and founder of one of India’s largest brokerage companies. He has read a couple of my books and has been a subscriber to Tharp’s Thoughts for some time. He asked if I could speak to a group of people in Mumbai and perhaps do a television interview. I was happy to do both.
On September 12th, I gave a three hour talk to about 100 Indian investors and traders in Mumbai. The next day, I went to a local television station to tape an interview that was to last about 30-minutes.
The reporter and I sat down to review her planned questions before the actual taping. I don’t remember the exact wording of her questions, but her list looked something like this:
1. Where do you expect the Indian Markets to go from here?
2. What’s your opinion about the U.S. markets?
3. Are there any other Asian/Middle Eastern Regions you like and why?
4. What do you think about oil?
5. There is a trend for hedge fund money right now to be flowing into ________. (I don’t remember exactly where she thought the fund money was going). What’s your opinion of this trend and what are the implications?
I was horrified. These were typical financial channel talking head questions. I wasn’t about to become a talking head if I could help it. Keep in mind that the brokerage company had sent her a thorough brief of my background, the books I have written, and what I do.
My first reaction to these questions was to ask the reporter if she had earned a degree in journalism and she had. I said, “So you’ve had at least six years worth of training to help you do your job well. That’s the way it is with most professions. But anyone, with no training whatsoever, can open up a brokerage account and trade. The only education they might get is listening to people like you ask questions like that. Answers to those kinds of questions will not help anyone trade well or make money in the markets. My job as an investment educator is to turn things around and provide education to investors. Perhaps instead, we can talk about what Indian investors/traders really need to do to be consistently profitable.”
The reporter looked at me and then in interview mode said, “That’s interesting, but what do you expect the Indian markets to do?”
I had actually looked at some charts of the Indian market, so I said, “Well, the market is in an uptrend and there probably isn’t any reason to expect that that uptrend won’t continue—at least until it reaches the old highs. However, saying that won’t help any Indian investors learn how to make intelligent investment decisions. They need to know more important things like understanding reward-to-risk ratios, how to get out of the market, and how to control their emotions.”
Her response was, “Well, that’s very interesting, but what’s a good strategy for Indian investors to use?”
So I tried to explain, “People don’t really trade the markets; they trade their beliefs about the market. Thus, you need a strategy that combines certain principles with your beliefs so that you have something that fits you. There is really no strategy that fits all Indian investors, but there are many good strategies that Indian investors can use that might fit their particular beliefs. That’s what they need to find.”
“But you didn’t answer my question,” she responded, “What sort of strategies can Indians use in these market conditions?”
I replied, “People only trade their beliefs about the markets. Thus, they can only trade a strategy that fits their beliefs. There is no one strategy for Indian investors. Instead, there are probably hundreds of strategies that would work—perhaps as many strategies as there are Indian investors.”
She didn’t seem happy with that, so she went on to ask me about U.S. markets, deviating from her questions a bit.
Perhaps I should have held back my two cents, but I did not. I said,
“The U.S. is in a secular bear market that started in 2000 and could last as long as 20 years. That means valuations, long term, meaning price to earnings ratios, will go down. It doesn’t necessarily mean that prices will go down. And there are lots of things fueling that: the massive implosion of wealth worldwide because of the subprime crisis, the fact that many multiples of the world’s wealth still exist in the form of derivative products, the fact that banks don’t understand risk because they think it has to do with the volatility of the products they sell (so they could package subprime loans as being low risk because they didn’t fluctuate much in price), and the fact that the baby boomers will retire soon and pull massive amounts of cash out of the markets. That being said, the overall trend in the market has nothing to do with whether or not people make money. Educated traders can make a lot of money under these conditions.”
She didn’t seem to like that answer at all and responded something like, “So how can Indian investors profit if you are right?”
I said, “This trend has been going on already for 10 years now. Short-term trading strategies have nothing to do with long-term market trends, so there are plenty of opportunities. You just have to understand things like reward to risk or position sizing strategies.
And do you think she followed up by asking me to clarify what I meant by that? Not at all. Instead, her response was, “What do you think other Asian markets are going to do?”
At this point, I grew a little frustrated, “You are asking the wrong questions.” I told her,
“Making money has nothing to do with predicting what the markets are going to do. It has everything to do with making sure that when you are right you make a lot more money than when you are wrong. Last night at my talk we played a game in which people were only right 20% of the time, but almost everyone made money. Why? Because they made 10 times their risk when they were right and only lost what they risked when they were wrong. And if your total risk per position is small enough to tolerate long losing streaks, you can capitalize on the long term expectancy of the market.”
Of course, she glazed over my comments and went on to her next question, “What do you think oil will do?”
I said, “I have no idea, but I can probably make money in the oil market whether it goes up or down, so I don’t care.”
Undaunted, she continued with her planned list, “Foreign hedge fund managers are putting a lot of money in _________. (I think it was in some sector of the Indian market). What do you think of this move? Is it smart? What do you think Indian investors should do?”
I said, “I don’t have any opinion about that. I wasn’t aware that it was happening.”
She then said, “So what markets do you like?”
I responded, “Well, I assume that question means what markets are going up?” So I said, “The best long-term trend out there is the gold market, and I recently heard that about 40% of the supply for the market right now is people who are melting down their junk gold. That trend will dry up soon, and then gold will go up much more. However, that really doesn’t tell anyone how to make money from the gold market. You need a strategy tied to it or you’d just buy and watch it go up and then watch it go down.”
Again, she didn’t ask a related follow-up question. Instead, she just looked down at her list and asked, “What other Asian markets do you like?”
I said, “You are pretty tied up into your list of questions. Would you like me to write some useful questions that will make our interview more productive?”
She looked horrified and said “No.”
At this point, the two gentlemen from the brokerage company who accompanied me stepped in. One had organized my presentation the day earlier and the other was head of institutional trading at the brokerage. Both had become supporters after learning some “Tharp Think” the day prior and they tried to explain my role as an investment educator. They offered some ideas for better interview material and even pointed out that we could talk about the Trade Your Way to Financial Freedom book that I had brought with me.
She listened and then said, “Perhaps we should get onto the taping?”
I said fine and we went next door into the taping room with the cameras. We sat down and the camera man began recording.
She started, “What do you think about the Indian stock market?”
I think she expected me to be more “cooperative” with the camera going. I wasn’t. I answered her just as I had a few minutes before so the interview went almost the same as the rehearsal. The intended 30 minute interview lasted only about 15 minutes, which was good because I really didn’t want to answer these questions.
While I didn’t think the interview had gone well, I realized something later. If she edited the material down to about 5 minutes, she could have had a nice controversial piece based on my market predictions. If the interview actually aired on Indian TV in Mumbai, I’m sure that’s what she did.
As a result of that whole experience, I feel compelled to make a couple of apologies. First, I apologize to anyone who saw that interview if the reporter touted me as a typical financial news “talking-head guest.” As you know, I am not and I would not have agreed to do the interview if I’d expected anything like I got in the interview. I would like also to apologize to brokerage companies and mutual funds everywhere. For a long time, I thought financial journalists were your puppets. However, you can’t possibly have so much control over journalists to turn them into people like the reporter who interviewed me last month. She was like a wind-up toy.
About the Author: 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 of Trading Mastery.
Monday, November 08, 2010
CANSlIM Investing Method Stock Picks
Perrigo Pharmaceuticals is this weeks stock pick below that comes from the Investors Business Daily. William Oneil is the founder of CANSlIM, and the founder publisher of Investors Business Daily. The IBD is the one of best financial print newspapers available, and now its all online too.
What is CANSLIM?
CANSLIM is the Investors Business Daily acronym for the seven common characteristics all great performing stocks have before they make their biggest gains. You can significantly reduce your risk and increase returns by using the CAN SLIM Investment Research Tool as a fact-based performance checklist to evaluate a stock before you buy.
C = Current Quarterly Earnings Per Share
Look for earnings increases of at least 18% to 20% above the same quarter one-year prior.
A = Annual Earnings Per Share
Look for meaningful, consistent earnings growth over the last five years, with increases each year over the prior year.
N = New Products, New Management, New Highs
The best stocks had new products, services, or new management driving their stock prices. Stocks making new highs tend to go higher.
S = Supply and Demand
Look for a small or reasonable number of shares outstanding that create buying pressure, and watch for above-average volume increases as stock's price increases.
L = Leaders
The best stocks were already leading stocks in leading industries, so avoid laggards and focus on strength and leadership.
I = Institutional Sponsorship
Institutional investors are a major influence on stock prices, so buy stocks with at least some institutional ownership, particularly mutual funds with good performance records.
M = Market
The general market should be positive, since three out of four stocks follow its trend.
This Weeks Stock Pick from Investors Business Daily
Will Drugmaker Perrigo Break Through Resistance and Move Higher?
Perrigo (PRGO), which reported earnings earlier this week, makes generic prescription drugs, as well as a number of over-the-counter products such as cold medicine, skin care goods and nutritional items. The company's products are sold by retailers like Wal-Mart and CVS to sell under those stores' brand names.
On Tuesday, Perrigo posted fiscal first quarter earnings of 87 cents a share, topping analyst estimates. Still, growth has cooled somewhat in recent quarters, going from 56% growth 4 quarters ago to 23% growth in its most recent filing.
Sales rose 21% last quarter but were lower than the Street expected. Sales growth came in between 21% and 22% during the past two quarters.
Analysts expect earnings to increase 22% in the current 2011 fiscal year. On Tuesday, Perrigo said it expects fiscal 2011 earnings to come in higher than that.
Its Accumulation/Distribution Rating is a D+. That rating tracks buying and selling of the stock among institutional investors. The D+ Rating indicates moderate selling among big players, so that's something to keep in mind.
Mutual funds and hedge funds own about 33% of the shares not owned by management. But the number of funds owning the stock slipped a little last quarter, dropping from 197 to 193. Ideally you'd like to see just the opposite.
Perrigo Chart Analysis - Click For Large View
The stock broke out of a base on September 24 as it hit a new high (Point 1).
Since its breakout, Perrigo has had trouble gaining traction, running into resistance around $68 a share.
It's been trading sideways for 6 weeks, long enough to form a flat base (Point 2).
The potential buy point is calculated by adding 10 cents to the peak in the base, which was 67.94 (Point 3). That gives you a buy point of 68.04. The stock briefly moved above that point earlier this week, but quickly pulled back to its 10-week moving average line.
Watch to see if the stock can bounce up from the 10-week line and break though that area of resistance around $68. If the move comes on heavy volume it means institutional investors are buying shares, and that could create a buying opportunity.
Perrigo Stock Checkup
At 87, Perrigo's Composite Rating is the second highest within its 17-member Medical — Generic Drugs industry group.
Its EPS Rating of 96 also ranks first, while its SMR Rating of A comes in at #5.
Its Relative Strength Rating of 79 is 6th among its peers.
The stock's Acc/Dist Rating of D+ comes in at #15
How to Find CANSLIM Stocks
Use Investor's Business Daily and Investors.com in tandem to identify, validate, and track potential winners with quick reviews of key IBD fact-based market assessments.
Step 1: Identify Stocks with CAN SLIM Traits
Scan the List: Investor's Business Daily 100 is IBD's weekly ranking of leading companies. Companies are measured in terms of profit ans sales growth, stock performance, and other factors. Your Weekly Review ( exclusively in the print edition ) identifies industry leaders showing strong earnings growth and price performance.
Discover Promising Companies: The New America features groundbreaking companies that often fly under Wall Street's radar, yet are among the fastest growing enterprises.
Find Stocks with Winning Traits: Check Screen Of The Day ( exclusively on Investors.com ) for a daily look at some of the market's stongest stocks. Each day, this computer-generated list is compiled by Investors.com's editors to help you identify the best stocks.
See where the Market's Headed: Understand today's investment climate with the The Big Picture. This column reviews significant action in the major indexes and examines the condition of leading stocks.
Step 2: Validate & Research CANSLIM Stocks
Check the Stocks Relative Health: IBD Stock Checkup: IBD's "stock doctor" diagnoses the overall health of a stock with fact-based examinations of its techinical and fundamental performance.
Get the Story behind the Stock: IBD Archives let you assess the business history of prospective investments. Research IBD articles dating back to January 1998 by company name, ticker symbols or IBD's industry groups. Simply save or print articles that are of interest.
Watch Key Price and Volume Action: Daily and weekly IBD Charts are color coded to help you identify buying and selling trends. These charts include CAN SLIM-vital data such as moving average lines and Relative Strength lines. These tools are invaluable in gauging the right time to buy or sell.
Buy and Sell Like A Pro: Daily Graphs Online is an interactive, financial information service offering premium stock charts for equities traded on the NYSE, AMEX, and NASDAQ. The service provides technical, fundamental and unique proprietary data for over 10,000 companies that are tracked in the William O'Neil + Co. Database.
Click here for more information and resources on the CANSLIM investing method and the Investors Business Daily
Friday, November 05, 2010
The Fed and "Plunge Protection Team": Are They Manipulating Stocks?
Rumors are, the U.S. government "is propping up the stock market."
Out of thousands of questions recently submitted to us at Elliott Wave International, the most frequent one received is: "Can the Fed manipulate the stock market?" Read our expert's answer on this and other misleading “investment wisdom.” Read more.
You will find many intriguing Q&As at EWI's Message Board. We offer it as a free way for our Club EWI members and subscribers to interact with EWI and the Socionomics Institute's experts. We strive to answer every Message Board reader, and publicly post the best Q&As.
By far, the most frequent question we've been asked recently is:
"What is your take on the persistent internet chatter that the Federal Reserve is holding up the stock market via QE2, POMO, etc.? How can stocks ever decline again if the Fed is in control?"
We have several active Message Board posts that touch on "market manipulation." But here is an eye-opening chart that will help shed more light on this issue.
EWI President Robert Prechter published this chart in his October 2008 Elliott Wave Theorist. Review this chart carefully. For too many investors, the crash of 2007-2009 is becoming a hazy memory. And almost no one in the mainstream financial media talks about the utter panic in the markets in September-October 2008, the worst part of the crash.
If you think back to that time, you may remember that the Federal Reserve and U.S. government took many aggressive steps to help stop the collapse. Every time they would announce a new intervention, the market would cheer. Result? Prechter's chart gives an unequivocal answer:
Click To Enlarge
As you can see, announcements of bailouts, unlimited credit, bans on short sales, etc., were powerless against the biggest stock market collapse in 76 years. The DJIA kept sliding. It didn't stop until March 6, 2009 -- after it had slipped below 6,500.
So: Is the Fed and the "Plunge Protection Team" engaged in market manipulation? You can browse EWI's Message Board for some answers, but one thing is clear: When stocks were crashing two years ago, few dared to suggest that the Fed was in the saddle. Bob Prechter puts it best:
"When markets go up, the Fed seems to be in control; when they go down, it seems out of control. But the control aspect is an illusion."
Click here to get the 33-page Market Myths Exposed eBook for FREE
Learn why you should think independently rather than relying on misleading investment commentary and advice that passes as common wisdom. Just like the myth that government intervention can stop a stock market crash, Market Myths Exposed uncovers other important myths about diversifying your portfolio, the safety of your bank deposits, earnings reports, inflation and deflation, and more! Protect your financial future and change the way you view your investments forever! Learn more, and get your free eBook here.
This article was syndicated by Elliott Wave International and was originally published under the headline The Fed and "Plunge Protection Team": Are They Manipulating Stocks?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
Click there for more Elliott Wave Commentary
Tuesday, November 02, 2010
FPM 2nd Chance Ends Thursday 11/4/10 @ 11:59PM EST!
EUR/USD closed lower on Monday as it consolidates last week's short covering rally. The low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI remain neutral to bearish signalling that sideways to lower prices are possible near-term. Closes below the reaction low crossing are needed to confirm that a short-term top has been posted. If it renews the rally off August's low, the 75% retracement level of the November-June decline crossing is the next upside target.
USD/JPY closed slightly higher on Monday and low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are diverging but turning neutral to bearish hinting that sideways to lower prices are possible near-term. Closes above the 20-day moving average crossing would confirm that a short-term low has been posted. If it extends this year's decline into uncharted territory, downside targets will be hard to project.
GBP/USD closed higher on Monday as it extended last week's rally. The mid-range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are bullish signalling that sideways to higher prices are possible near-term. If it extends this week's rally, this month's high crossing is the next upside target. If it renews this month's decline, the reaction low crossing is the next downside target.
USD/CHF closed higher on Monday and the mid-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are oversold but remain neutral to bullish signalling that sideways to higher prices are possible near-term. If it extends this month's rally, the 38% retracement level of the May-October decline crossing is the next upside target. Closes below the 20-day moving average crossing are needed to confirm that a short-term top has been posted.
Gold closed lower on Monday and the low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are turning neutral to bullish signalling that sideways to higher prices is possible near-term. If it extends today's rally, this month's high crossing is the next upside target. If it renews this month's decline, the 25% retracement level of this year's rally crossing is the next downside target.
Silver closed lower on Monday and the low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are turning bullish signalling that sideways to higher prices are possible near-term. If it extends today's rally, this month's high crossing is the next upside target. If it renews this month's decline, the 25% retracement level of this year's rally, crossing is the next downside target.
Click here for the Forex Profit Multiplier Ending 11/04/10
Click here for more forex resources.