Monday, April 30, 2012
I don't have any buy or sell picks this week. Instead I've got a broader view of the crossroads the markets are at currently.
Recently I have been advising members of my service to be cautious as the market appears to be at a major crossroads. The U.S. Dollar Index is on the verge of a major breakdown. If a breakdown occurs it will be clear that the Federal Reserve will have officially stopped any potential rise in the U.S. Dollar. Over the past few months the Dollar has been producing a series of higher highs and higher lows, however the current cycle may break the pattern as can be seen below.
If the U.S. Dollar pushes down below the recent lows and we get continuation to the downside, we will break the recent bullish pattern. Furthermore, if the Dollar starts to weaken it should benefit equities and other risk assets such as oil. Higher energy prices would not be long term bullish for equity markets so there is concern if the Dollar really starts to extend lower.
However, if the Dollar finds a bottom and rallies it clearly would create a headwind for equities. We should know whether we have a major breakdown on the daily chart in the next few weeks. Until then, the Dollar could go either way and obviously the price action in the Dollar will have a major impact on risk assets and stock market returns in the near future.
From a macroeconomic viewpoint, risk assets such as the S&P 500 Index could be in trouble in the months ahead. U.S. gross domestic product (GDP) came in lower than expected with revisions likely in the near future. Unemployment claims appear to have bottomed and are rising week after week even though the major media fails to report it appropriately as it would appear that the Bureau of Labor Statistics has stumped media pundits with data revisions.
Additionally, there are two other macroeconomic data points which need to be mentioned. The Citigroup Economic Surprise Index has moved below zero and is showing a negative reading. This index is generally a leading indicator regarding equity prices and the recent decline shown below is problematic for the bullish case.
Chart Courtesy of Morgan Stanley
Clearly if industrial production contracts (reduction in Global Manufacturing PMI) the impact on the global economy will be felt across multiple countries’ economies. The chart below illustrates the MSCI World Index compared to global manufacturing PMI. Similarly to the chart above, this chart also tells a significant story about what investors and traders should expect if the PMI numbers come in light against expectations.
Chart Courtesy of Morgan Stanley
As can be seen above, fundamental data is starting to skew towards the downside which is likely a result of the recession that is in the process of developing over in Europe and potentially in China. Time will tell if the index can reverse, but the bulls need to see a major reversal in the near future.
The chart below illustrates the relationship between metal prices and industrial productivity. Demand for metal increases when economies are expanding and prices generally contract when economies retract. The chart below demonstrates global metal demand. The chart speaks for itself.
Chart Courtesy of Morgan Stanley
As quoted from the zerohedge.com article entitled What do Metal Prices Tell us About the Future of the Stock Market, “In other words, for those who still believe in logical, causal relationships (even in a time of ubiquitous central planning) unless something drastically changes to push fundamental demand of metals higher, one could say the the outlook for equities is not good.”
Essentially, the data shown above is certainly not bullish in the intermediate to longer term. However, it generally takes time for macroeconomic data to permeate all the way through to equity markets. For right now, the story regarding global growth is at the very least questionable based on the data illustrated above.
In the short term anything is seemingly possible. The S&P 500 Index closed above the key 1,400 price level on Friday. I would not be shocked to see prices extend up to the recent highs near 1,420. Ultimately I think we are in a long term topping formation that might require another higher high up to around 1,440 before we see a deeper correction.
The past few weeks have produced a very mild correction compared to the monster rally we have seen since October of 2011. This is a bullish signal, but we need to see prices continue higher and climb a serious “wall of worry” that is coming out of a variety of places. The European situation continues to worsen overall and we have lower than expected GDP numbers in the US paired with concerns about growth in China.
The S&P 500 has some negative headlines to deal with, but so far it has been able to shrug off poor economic data and we could see an extension higher that would shake out the shorts and run stops above the recent highs. However a move lower remains possible. The daily chart of the S&P 500 illustrates the recent correction and the 1,420 highs.
I believe that the next few weeks are going to be critical and the S&P 500 may trade in a consolidation zone between recent lows and the 1,420 highs while traders await more economic data. Fundamental data is starting to indicate that a slow down may be beginning. In contrast, the topping pattern that we appear to be carving out may require higher prices to suck in more longs before moving into a deeper correction.
In the short run, the Dollar will likely hold clues regarding the immediate future for risk assets. However, the longer term picture for equities is quite murky based on the economic data points we are seeing paired with additional concerns stemming from the European sovereign debt crisis. Right now I am looking at time decay based strategies in the near term and will likely stay away from directional biased trades. I would urge readers to be cautious regardless of which direction they favor.
Friday, April 27, 2012
Thursday, April 26, 2012
European Central Bank: "Great White Fear" Takes A Bite Out of Recovery
EWI's Global Market Perspective foresaw the shift in European banks from lenders to savers via one remarkable chart.
It's been over two years since the European Central Bank began its open-heart surgery of the eurozone's anemic economy. So far, the procedure has included an unprecedented $3 trillion-plus in bailouts, monetary transfusions, AND toxic debt transplants.
Yet, according to a recent slew of discomforting news reports, the economies across the pond would still flatline in seconds without constant life support. Here, an April 18, 2012, Wall Street Journal writes:
"Europe Hemorrhages through Refinancing Operation Band-Aid" and reveals that Europe's banking sector has wolfed down three years of Long Term Refinancing Operations (LTROs) in under four months.
The question is -- what went wrong?
Well, to answer this, we have to go back to the drawing board to mid-2010. It was then that the European Central Bank and company released the rescue-package Kraken via a $1 trillion bailout of Greece and a full-fledged initiation of its LTRO.
And, as the following May 10, 2010, news items make plain, this credit-reflating beast was set to tear Europe's economic bear to shreds:
"This is shock-and-awe, part II, in 3D, with a much bigger budget and more impressive array of special effects. The EU package eliminates the danger that Greece's debt woes will ricochet through Europe's banks." (USA Today)
"This is a truly overwhelming force and should be more than sufficient to stabilize markets, prevent panic and contain the risk of contagion." (Bloomberg Businessweek)
In the July 2010 Global Market Perspective, however, our analysts foresaw a fatal flaw in the plan. The first part was fine: The European Central Bank (ECB) bought packages of debt and resold them to smaller banks at a historically low interest rate.
BUT the second part didn't work out: Instead of rebundling those loans and passing them on to small businesses to stimulate investment, THOSE banks redeposited the funds with the ECB. Riffing off the famous "Jaws" quote ("We're gonna need a bigger boat"), the July 2010 Global Market Perspective captured the great-white fear circling the lending sector via the following chart of commercial banks' usage of the ECB's Deposit Facility and wrote:
"The chart roughly indicates the degree to which banks fear for the insolvency of one another. Banks receive below-market interest rates on their ECB deposits, so they're generally loathe to hold significant funds there. As anxiety grows, however, so do banks' deposits in the Facility, mainly because their desire for adequate interest gives way to their more essential need to safeguard principal ... Because the [economic downturn] is still young, deposits at the ECB will likely keep rising. Like stocks, the casual approach to banking that existed up until now is in for a massive shift."
Flash two years ahead. The April 2012 Global Market Perspective's updated chart below shows that usage of the ECB's Deposit Facility has indeed risen, nay doubled, since the original forecast.
The question now is not whether monetary policy will save Europe's economy, but whether the one precondition for recovery -- confidence -- will return to lenders.
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Monday, April 23, 2012
I don't have a weekly stock pick this week as the market still looks to want to keep grinding higher with the Dollar heading higher on slower China economic report today. I'm not a buyer of the stock market at this point, but I'm not a selling either yet. May will be here next week, and will the cliche "sell in May and go away" be true this year or not? I'd rather wait till then to be taking any new positions in stocks either long or short.
Forget theory - you can put this to the test today with a 60-day trial account
This is bold.
Dr. Adrian Manz just released a new video detailing his Daily Income Trading method offering to help you make $357 an hour trading (click the link above to watch it now).
If you followed the approach he publishes in his Daily Income Trading Plan precisely for the last several years, starting with a $30K account, then you potentially could’ve…
Made an 85.88% return in 2008 without leverage, or 171.76% using 2-to-1 leverage…
Made a 53.49% return in 2009 without leverage, or 106.98% using 2-to-1 leverage…
Made a 37.79% return in 2010 without leverage, or 75.58% using 2-to-1 leverage…
Made a 53.22% return in 2011 without leverage, or 106.44% using 2-to-1 leverage…
In fact, for the past SIX YEARS, this approach has averaged a 58% annual return without leverage,
if followed precisely. Obviously, that’s before commissions and fees, which vary platform to platform, but you get the idea.
On the other hand, the S&P 500 averaged a whopping 2.48% over those same six years[i].
I don’t know about you, but I’d rather follow an approach that at least has the potential to pay
$58 for every $2.48 you could make in the S&P 500.
Get this: Even if, for some reason, you failed to follow Adrian’s plan exactly and only caught HALF
of those gains, you’d still generate over TEN TIMES MORE money per year than the S&P handed you before you even thought about using leverage.
Making $357 an hour… or more.
When you watch that presentation, make a special note when Adrian shows you how to automate his
Daily Income strategy so you only have to spend 10 minutes a day to follow it.
If you made just $15,000 this year by trading his Daily Income method, then that would be the equivalent of a part-time job paying you $357 an hour.
With an average of about 250 trading days x 10 minutes a day, you’ll only spend 42 hours of trading this method in an entire year.
$15,000 from 42 hours of trading works out to about $357.14 an hour.
If you’re starting with a bigger account—one capable of delivering, say, $50,000 in profits in
the next year using this approach—then it’s more like getting a $1,190 an hour from a part-time job.
So the question is:
Is there any REAL chance you, personally, could make $15K a year from this?
Honestly, only you can figure out that.
It depends on several factors: First, how much money you have to trade. You’d need around $25-$30K to make $15K, based on a 58% average annual income.
More importantly: No one can predict the future. Who knows what the market is going to do next?
Yes, Adrian’s method generated over 85% in the crash of 2008, but would it do that again? Any answer I gave would be theoretical and, frankly, the world needs less theory and more proof.
Adrian agrees, so at the end of today’s presentation, he’s actually letting you register to get his Daily Income Trader service for 60 days on a trial account.
That way, you can try it out for yourself and see if it works… see if you like it… and see if it makes you money BEFORE committing to investing in a membership.
That’s a great opportunity. Click here to see what Adrian’s letting you have.
Hurry, because ONLY the FIRST 250 traders are allowed to get that trial account. After that, the trial account goes away.
Adrian is making it so easy to test his method out—without any risk—that no sane trader is going to refuse this opportunity. The risk/reward is just too good.
Yes, there’s a catch: You have to qualify to use the service. These are S.E.C. rules, not Adrian’s. He explains them in the video.
Either way, Adrian’s trading information is world-class. You’ll come away from this presentation a smarter trader, no matter whether you qualify for the service or not Click the link above to watch it now.
Wednesday, April 18, 2012
Click Here to Review and Register for the TradeVantage Forex Trading Software Training Online Webinars April 18, 19 & 20
I am strongly recommending, that you register for the “Making Money with TradeVantage” webinar, which starts today and has timeslots available for now through Friday. Spaces are limited though, so grab yours now.
Dustin Pass will be sharing with you everything he knows about being a smart, savvy trader and how to multiply your income using TradeVantage.
Here are five great reasons why you should register ASAP:
1. This guy really cares about helping traders, as you’ll see, so he is holding
an open Q&A session at the end so you can ask anything you want. This is a RARE
opportunity to learn directly from a master trader at no cost.
2. Dustin is going to give a great lesson on risk management and trade management,
and that is his specialty. Most traders are terrible at this, so you’ll find
this part extremely valuable!
3. He will be revealing a way for you to get a years’ worth of TradeVantage access,
at no cost - sweet!
4. You will learn exactly how to use TradeVantage, all of its features will be
5. You don’t want someone else to get your copy since availability is limited
and they are going fast.
Demand has been truly astounding so far. I think it's because of the simplicity
of the software. If you understand how to obey a traffic light, then you will
understand TradeVantage, but managing your account is the key, and that is what
Dustin is going to show you on the webinar.
If you always wondered about lot size and setting stops properly, and that type
of thing, then this webinar is exactly what you need.
If you don’t attend, it’s pretty much assured that you will not be able to get
a copy of TradeVantage, and the evaluation version of the software is going to
stop working in just a couple of days, so it’s now or never.
Tuesday, April 17, 2012
If you’re sick and tired of losing more money than you make trading, then you need to click this link, watch the presentation and sign up for this 60-day demo account.
Watch that presentation and you’ll see why it could be the perfect trading approach for you. Especially if you want to…
Make a bigger monthly income: If your portfolio is $25K or more, then it should be easy for this method to add a potential $1,500…$3,000… even $10,000 or more a month in income to your personal bottom-line.
Be a more consistent trader: Adrian’s Daily Income Trading Method has gone SIX YEARS without posting a single losing month. Those are NOT backtested, curve-fit results, either!
Have a full-time job? No problem! In your 60-day trial membership, you’ll see how you can automate 99% of this process and trade in less than 10 minutes a day.
Cash in during crashes: Make more income AND profit during crashes? Yes!
In 2008, Adrian’s method posted an 85.88% annual return, before commissions and fees.
In the spring slide of 2010 - remember the “Flash Crash”? - the S&P lost about 10% in two months, but you could’ve been UP 4.93% without leverage … or up 9.86% with 2-to-1 leverage using Adrian’s method, before commissions and fees.
In the volatile summer of 2011, the S&P 500 lost 16% in about three weeks and stayed choppy. Once again, the Daily Income approach did great:
It grossed $4.75 per share traded in July 2010, Grossed $2.67 per share traded in August 2010, And grossed $2.64 per share traded in September of 2010.
Obviously, your commissions and fees would vary and affect your final returns, but that’s a phenomenal record.
Clearly, this is a system worth trying risk-free for 60 days just to see how it performs in your account. Click the link above to find out about the 60-day trial.
Compare your current trading results with Adrian’s Daily Income Strategy.
If you started with a $30K account, followed Adrian’s strategy precisely and rolled your profits back in, then you potentially could’ve… Made an 85.88% return in 2008 without leverage, or 171.76% using 2-to-1 leverage.
Made a 53.49% return in 2009 without leverage, or 106.98% using 2-to-1 leverage.
Made a 37.79% return in 2010 without leverage, or 75.58% using 2-to-1 leverage.
Made a 53.22% return in 2011 without leverage, or 106.44% using 2-to-1 leverage.
In fact, for the past SIX YEARS, this approach has averaged a 58% annual return without leverage, if followed precisely. That’s before commissions and fees, which vary platform to platform, but you get the idea.
You don’t have to take these numbers on faith. You can click here to get a 60-day test-drive and prove it for yourself in your own trading account — either a live or demo account, whichever you’re more comfortable with.
Look at all of the things you get during your risk-free, 60-day trial of Daily Income Trader.
Start a 60-day trial membership today, and Adrian will give you loads of membership benefits for two months at his own risk (click the link above to get all the details), including:
His Daily Income Trading Plan for two months. You can test it live, in a demo account or even on paper to see how it works for you…
His Daily Income Trader automated software to test for two months.
Ongoing coaching, training and mentoring for two entire months before you have to make a final decision on whether this service is right for you. During that time…
You and Adrian will trade the whales — the institutional investors — together.
Together, you’ll identify which days are “payday” trading days with good volatility and spot the “money-losing” days with horrible volatility. That way, you’re always playing exclusively in the best market conditions to make money.
Together, you’ll track and identify what phase the market is in. This skill alone could transform your trading results for the rest of your life.
Together, you’ll adjust your setups to match the current phase of the market that’s being caused by institutional investors.
Click the link above to get all the details.
During those two months, Adrian will also answer every single question you have about the markets, our strategies, building trading plans — everything related to trading that will help improve your returns. He won’t hold anything back.
PLUS, Adrian will give you his proprietary trading software that automates your trading down to less than 10 minutes.
It lets you increase your monthly income while holding down your regular job… or while you go to the beach.
You won’t have to sit in front of the screen all day if you don’t want to.
You’ll get to see firsthand how this software and trading plan removes probably 90% of the stress from your trading by letting you avoid all the emotional decisions that ruin your results.
Adrian priced this service to be accessible, and it’s not as expensive as you think it is!
Normally, a service like Daily Income Trader would be at least a $2,000 service. In the past, a lot of traders happily invested that much in the service—but you won’t have to pay that!
Check out the video with all the details. You’ll be pleasantly surprised by the price.
Hurry, because this special “low-ball” membership is ONLY available to the first 250 traders.
After those spots fill up, you’ll be locked out of the low-investment membership fee.
Monday, April 16, 2012
This week I have a low-risk high-reward buy long stock pick on AutoNation. The stock market has just had its worst two weeks this year so far. Is it headed lower or is the sell-off over with for now? With earnings season here now maybe earnings reports will show more direction. I'm betting this week equities keep grinding higher with the Feds quantitative easing program, and potential positive earnings reports? In case the market goes against your positions use the best tool available to you called stop-loss to live trade and invest another day.
On April 05, 2012 Zacks Investment Research reported that AutoNation posted a 15% increase in new vehicle sales to 25,489 units in March 2012 compared with the same month in the previous year. The company recorded improvement in sales in all of its segments.
Sales in the Domestic segment hiked 26% to 7,991 vehicles; Imports increased 10% to 13,403 vehicles and the Premium Luxury segment rose 10% to 4,095 vehicles during the month.
Last month, light vehicle sales in the U.S. grew 10% to seasonally adjusted annual rate of 14.4 million units from 13.1 million units in the same month of 2011. The increase was driven by higher demand for fuel-efficient small cars and compacts due to rising gas prices. Mild weather and increasing age of vehicles on road stimulated sales during the month.
Large vehicles also performed well during the month. The improvement was driven by attractive promotions on trucks, along with expanding opportunities in the job market and higher consumer confidence.
AutoNation offers a range of automotive products and services, including new vehicles, used vehicles, vehicle maintenance and repair services, vehicle parts, extended service contracts, vehicle protection products, and other aftermarket products.
The key brand of vehicles that the company offers for sale are manufactured by Ford Motor Co., Toyota Motor Corp., Nissan Motor Co., General Motors Company, Honda Motor Co., Daimler AG’s Mercedes-Benz, BMW, and Chrysler.
AutoNation holds a Zacks #2 Rank (Buy) on its shares. The company earned $71 million or 51 cents per share in fourth quarter of 2011 compared with $68 million or 45 cents per share in the same quarter last year. With this, the profit surpassed the Zacks Consensus Estimate by 3 cents per share.
Revenues in the quarter augmented by 13% to $3.7 billion from $3.2 billion in the same quarter last year. This growth was mainly fueled by strong sales volume in retail, new and used vehicles. Revenues were also higher than the Zacks Consensus Estimate of $3.5 billion.
Buy Long AutoNation - Ticker AN
Buy Entry: 32.25 to 33.23
Take Profit Areas: 37.83 to 38.44, 39.01 to 39.69, 41.96 to 42.69, 47.89 to 48.76
Click the AutoNation Stock Chart for a Larger View
Friday, April 13, 2012
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Thursday, April 12, 2012
The 2012 Socionomics Summit
New Initiatives in Social Mood Research and Application
April 14th 2012, Georgia Tech Hotel and Conference Center
What new initiatives will you “get your head around” by attending our 2012 summit?
The kind which build on the momentous, 26-year history of groundbreaking initiatives and successes that define socionomics today.
Robert Prechter’s pioneering essay — “Popular Culture and the Stock Market” — was the September 1985 cover story in Barron’s magazine. It was the first time a national audience learned that social mood drives cultural trends.
The essay became a theory, and the theory produced years of research. A new understanding of human social behavior began to emerge; other academics and practitioners began to study and apply social mood. The New Science of Socionomics published to rave reviews in 1999; the Socionomics Institute opened in 2005; Prechter & Parker’s landmark socionomics-related research published in The Journal of Behavioral Finance in 2007.
In April 2011, the first annual Socionomics Summit was a sold-out event. The atmosphere was so electric that attendees and speakers talked together for hours afterwards. The spirited pace and shifts of focus invigorated everyone who attended.
Even so — with all the above in mind, can The 2012 Socionomics Summit actually deliver on its promise of “New Initiatives in Research and Application”?
In a word, Yes. Here’s a flavor of how our lineup of scholars, business people, and financial professionals research and apply socionomics right now:
Consulting firms use socionomics to educate clients about social mood and integrate that knowledge into their business models;
Politicians and policy makers are opening their door to socionomic research, considering plans that anticipate the public mood, and shaping policy choices that are proactive instead of reactive;
Academics and research professionals are regularly publishing research that advances the premises and understanding of socionomics, via broad data analysis that quantifies shifts in mood on social media platforms like Twitter;
Hedge funds and other money managers apply text analytics to develop social mood indexes, and in turn incorporate their findings into trading strategies and models;
A board-certified psychiatrist with financial market experience now offers training in emotion management, behavioral finance, and market sentiment.
Here are just a few attendee comments from last year’s sold-out Summit.
“This has been the best meeting I have attended in years!!!” - Jeff P., Atlanta, GA
“The Socionomics Summit is a great place to get a bigger and deeper picture of what really drives people to do what they do.” - David L., Boston, MA
“The Summit exceeded my expectations which were high to begin with.” - Shawn I., Corpus Christi, TX
Here’s the point: This emerging field is moving fast. If socionomics intrigues you, don’t miss this event. Reserve your seat now>>
Socionomics is the study of how society’s changes in mood motivate social actions in realms that include the economy, political preferences, financial markets, actions of peace and war, and the fads and fashions of popular culture. Robert Prechter began formulating socionomic theory in 1976. He introduced the idea to the public in an article in Barron’s in 1985 and wrote his first book on the subject – The Wave Principle of Human Social Behavior – in 1999. He has since made presentations about socionomics to The University of Cambridge, Georgia Tech, The London School of Economics, MIT, Oxford University, SUNY, Trinity College Dublin, and academic conferences.
The Socionomics Institute, based in Gainesville, Ga., studies social mood and its role in driving cultural, economic and political trends. The Institute’s analysis is published in the monthly research review, The Socionomist. Work by the Socionomics Institute and other socionomists has been cited by The Atlantic, Barron’s, Esquire Magazine, The Futurist Magazine, MarketWatch, Mother Jones, Nature, New Scientist, Science, USA Today and others.
Tuesday, April 10, 2012
Click here For Your Free Download Evaluation Copy of Dustin Pass TradeVantage Forex Smart Trading Software
I haven’t seen anything this good in a long time, so make sure you hit that link above immediately as this isn’t an open-ended offer, it will expire quickly because he is only allowing these complimentary downloads for a limited time.
This is the software that caught my eye because it uses some seriously advanced artificial intelligence to make trade predictions with up to 87% accuracy, which means outstanding PIP totals which will grow your trading account balance.
Imaging having more than eight winning trades for every one losing trade, then imagine each of those winning trades being three to four times the size of the losing trades! That is the track record of the best of the best professional traders, and that is what that TradeVantage can do for you. I’ve seen it with my own eyes, this is documented and proven over a long period.
This could be taken down as soon as tomorrow, so register for the software. He mentioned he is posting another video showing you what it’s capable of as far as results, but you have to get the software today.
I will post the video link here once I have it.
Here’s what I like best about his offer - you can easily make enough money with this no-cost evaluation version to pay for the full version several times over when it eventually gets released, so start trading with it TODAY to earn as much “easy money” as possible - it’s REALLY simple to use as you’ll see in a minute!
Monday, April 09, 2012
This week I don't have a Weekly stock pick as I usually do every Monday. Instead I've got something more important for you. It's about having the mindset to be a successful trader and investor in the long-term instead of having your trades blow-out your trading investing account.
Tired of hesitating to pull the trigger and missing big profitable trades?
Tired of that big blow-out trade that strips you of all the profit you've built for the day, the week or even the month?
Norman Hallett and his team down at The Disciplined Trader have really done it this time.
They are the world leaders in helping traders get disciplined with their trading, and they continue to lead their field because they are CONSTANTLY IMPROVING what
Their popular "The Disciplined Trader Mastery Kit" plus 2 Fantastic Bonuses they can offer only to limited number of buyers.
You see, one of the bonuses involves one-on-one coaching, so they need to keep this offer under control.
"The Disciplined Trader Mastery Kit" is your "priced-to-sell" answer to your trading hesitations and emotional mishaps that cause trading struggle and strangle you trading success.
Any experienced, successful trader knows that controlling your mental and emotional trading aspects comprise 90+% of what makes a trader successful.
If you're ready to BE The Disciplined Trader, click the link above to review the answer.
This Take-Home version of their former online program, contains all the material of the online program at HALF the price!
You can train on your own time in the comfort of your home or office.
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You'll actually experience yourself moving from UN-Disciplined to Disciplined in a matter of Weeks not months or years!
If you're ready to make the transition from trading struggle to trading success, then click the link above and invest in yourself.
Thursday, April 05, 2012
Is it safe to start buying Gold Stocks yet? By Dave Banister of Active Trading Partners
Click Here for Free Weekly Trade Ideas and a Stock Trading Manual
One of the most common questions I field from my forecast and trading subscribers is can we buy Gold stocks yet? We have seen Gold consolidating and correcting following a 34 fibonacci month rally that I discussed last fall was going to top out around 1900 per ounce. This type of rally went from October of 2008 to August of 2011 and we saw Gold rally from $680 to $1900 per ounce during that time.
In order to work off the bullish sentiment that was at parabolic extremes, Gold is required to spend a reasonable amount of time in relation to the prior 34 month move to wash out the sentiment and create a strong pivot bottom. While this continues, the Gold stock index has taken it on the chin as money rotates out and into other hot areas like Technology and the Internet 2.0 social media boom. To wit, the GDX ETF peaked out last fall around 67 and current trades under 47 as of this writing.
However, there may be a silver lining developing in those dark mining stock clouds very soon. It does appear that we are in the 5th and final wave of this pessimistic decline in Gold stocks per my GDX ETF chart below. A typical bottoming pattern ends after 5 clear waves have taken place, and in this case I have targets between $43-$47 per GDX share for a likely pivot low in Gold stocks. Contrarian investors may do well to begin picking the better names in the sector and “scaling in” over the next short period of time.
Gold itself has recently corrected from 1793 per ounce to 1620 in the last several weeks. This has spooked the crowd out of Gold and put further pressure on the Gold mining stocks as well. Should Gold hold the $1620’s area and rebound past $1691 you will see the Gold stocks take off just ahead of that and from these 43-46 levels on the GDX ETF provide very strong returns to investors with the iron stomachs.
The best way to make money long term in the market and to grow your capital is to develop a method where you can define your risk levels within reason near the apex of a downside move, and then scale into that final apex and catch the rally on the upside. This is difficult to do but at my ATP service we have developed a strong methodology that takes advantage of “herd behavioral characteristics” and takes advantage of typical panic selling and panic buying to do just the opposite. We have not yet bought into the Gold Stock sector but I assume fairly soon we will be dipping our toes in the water while others have all rushed out of the sector right near the apex lows.
David Talks Live About MRM Method
You can also download the mp3 audio file for this interview on your computer by clicking the link above.
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Wednesday, April 04, 2012
What All Major Depressions Have in Common
Click Here to Download Your Free 90-Page Deflation Survival Guide eBook.
Signs of deflation are visible but the public will be fooled
Deflation requires a precondition: a major societal buildup in the extension of credit (and its flip side, the assumption of debt). -- Conquer the Crash, 2nd edition (p. 88)
Has the United States met that precondition?
Well, consider that total credit market debt as a percent of U.S. gross domestic product was
280 percent in 1929 at the start of the Great Depression
380 percent in 2008
The current build-up of credit goes far beyond major -- it's unprecedented.
It's been rising steadily for 60 years. The slope literally looks like the side of a steep mountain.
Bank credit and Elliott wave expert Hamilton Bolton studied every major depression in the U.S. In 1957, he made this observation:
All were set off by a deflation of excess credit. This was the one factor in common . . . the signs were visible many months, and in some cases years, in advance. None was ever quite like the last, so that the public was always fooled thereby.
Let's read again from the second edition of Conquer the Crash (p.92):
A deflationary crash is characterized in part by a persistent, sustained, deep, general decline in people's desire and ability to lend and borrow . . .
The U.S. has experienced two major deflationary depressions, which lasted from 1835 to 1842 and from 1929 to 1932 respectively. Each one followed a period of substantial credit expansion. Credit expansion schemes have always ended in bust. The credit expansion scheme fostered by worldwide central banking . . . is the greatest ever . . . If my outlook is correct, the deflationary crash that lies ahead will be even bigger than the two largest such episodes of the past 200 years.
Is there evidence now that a deflationary trend is underway? Dear reader, the evidence is abundant and growing by the day.
To begin with, just a casual observation of our national economic life reveals a deep general decline in people's desire and ability to lend and borrow.
But there are many specific signs pointing to bankruptcy, default and a deflationary spiral.
Yet they're not grabbing the headlines. The "good" economic reports and levitating stock market are. The public will likely be fooled again. But make no mistake, the signs are there.
Learn Why Deflation Is the Biggest Threat to Your Money Right Now
Discover Robert Prechter's views on the unfolding deflationary trend by reading the 90-page report, The Guide to Understanding Deflation. This guide will help you survive a major deflationary trend, and even equip you to prosper.
Plan and prepare for your financial future.
Click the Link Above to Download Your Free 90-Page Deflation Survival Guide eBook
Tuesday, April 03, 2012
Norman Hallett is the Internet's top authority on trading discipline has done it again!
In fact, he's done TWO THINGS again!
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He's recorded 3 short audios (3 minutes each) tackling the most important 3 issues reported by traders . . .
- Stopping the "Blowout Trade"
- Having the Strength to Pull The Trigger
- Taking Your Losses without Hesitation
and TWO . . . he's just GIVING these audios to you - complimentary - available for a few days.
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More specifically, when the 1772 traders were polled, the 3 most common "discipline issues" that were expressed, read . . .
"I did it again! I had all this profit and just gave it all back AND MORE in one UN-disciplined trade. How do I stop these debilitating 'Blowout' trades?"
"I'm hesitating to Pull the Trigger when my trading plan signals me to. How can I become more consistent in following my trading plan?
"I'm having trouble taking my losses. Can you tell me how to stop this destructive practice?"
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Monday, April 02, 2012
By Paul Larson, Chief Equities Strategist and Editor, Morningstar StockInvestor and Rick Summer, CFA, CPA, Equity and Credit Analyst
Click Here for a Free Morningstar Investment Research Trial
While Groupon has quickly made a name for itself, its recent IPO appears ripe for selling. The company does not appear to have an economic moat, and even after falling after the IPO, the stock still looks richly valued. Caveat emptor!
IPO Coverage: Groupon (GRPN)
Heavy spending and rapid expansion have helped Groupon establish a market for "daily deals" and e-mail promotions for local businesses. With a database of more than 115 million e-mail subscribers, Groupon has built a large audience to market deep discounts (called "Groupons") offered by local merchants. We do not believe the company has an economic moat, however. In our view, the lack of an economic moat, coupled with an unproven business model, create an inappropriate and elevated risk profile for public investors.
Groupon's business presents investors with three critical challenges: 1) The business does not scale well. 2) Short-term advantages are neither durable nor profitable, and 3) The business model is unproven, leading to a wide range of potential outcomes for the company's overall valuation.
Exhibiting Weak Economies of Scale
The company is the largest provider of daily deals, and its growth in customers, merchants, subscribers, and revenue has been nothing short of stratospheric. However, the company has not been able to achieve profitability, as expense growth continues to outpace revenue gains. For our purposes, we are increasingly concerned about the firm's sales, general, and administrative (SG&A) expenses, which represent a disproportionate percentage of overall costs to the firm. In 2011, for example, SG&A expenses still represented 50% of full-year revenue, despite the significant ramp-up in top-line growth.
While this reported expense may seem astronomical as compared with other companies, we don't expect substantial improvement in this metric, going forward. Each deal sold by a salesperson has to be negotiated, closed, and managed. Additionally, Groupon manages an editorial staff (400-strong) that writes up a creative description of the offer to help drive consumer interest in the daily deal. Essentially, every deal requires a minimum number of allocated resources (people), whether it generates $10,000 or $3,000.
Groupon's Business Can Easily be Replicated
We believe that Groupon is primarily a local e-mail marketing company that is hoping to transform into a local advertising powerhouse. This potential opportunity is not lost on the market, as companies including LivingSocial, Travelzoo (TZOO), Amazon.com (AMZN), OpenTable (OPEN), and Google (GOOG) have launched daily deal services as well. Although Groupon has incredible brand recognition, it's not clear to us why merchants would avoid using the competition, particularly if they receive other services or better terms.
Thoughts on the Economic Moat
In our view, Groupon has not carved out an economic moat. We cannot attribute any of our five defined sources of an economic moat to Groupon's business at this point in time:
Customers and merchants have no switching costs. Consumers typically subscribe to multiple e-mail lists, and we believe that the value of the deal and the quality of the merchant drives the transaction, not the company that e-mails the offer.
The firm also does not have a cost advantage. The company has built an e-mail subscriber list and runs a call center to call local businesses to run "Groupons." Unless the company can develop a low-cost way for "self-service" advertising by local merchants that is superior to the competition, we cannot envision any cost advantage that Groupon could construct. Furthermore, we think that competitors who sell other ad products to the same merchants may put Groupon at a competitive disadvantage.
The firm has no meaningful intangible assets, and it doesn't enjoy network effects. Groupon is essentially a sales agent and intermediary between local merchants and consumers. Consumers are free to use competitors such as LivingSocial, Amazon Local, or Travelzoo's Local Deals and gain little to no benefit from using Groupon repeatedly. Moreover, LivingSocial has shown no signs of slowing growth although it has a smaller base of merchants and customers.
Using our DCF valuation model, our preliminary enterprise value for Groupon is $5.0 billion (about $8 per share), representing approximately 2.7 times 2011 revenue. We do not expect the company to generate an operating profit until 2013.
We expect little operating improvement with respect to SG&A and cost of sales. Ultimately, we believe these line items are driven by transaction volume and merchant inventory.
The firm generates cash flow by collecting from customers well in advance of paying local merchants. Significant changes in this cash conversion cycle would decrease our valuation by as much as 30%, even if the accounting profitability of the overall business remains the same. In addition, higher payout ratios to local merchants could be detrimental to the business. If merchants require a 70% payout ratio, we do not believe that Groupon could be profitable without a change in its business model.
Our preliminary model assumes roughly 500% top-line growth in 2011, followed by 53% growth in 2012 and 25% growth in 2013. Our estimates depend on continued profitability of existing locations, geographical expansion, and new product categories. Given the elevated uncertainty associated with this model, we can envision a wide range of outcomes for Groupon's business. Our forecast calls for profitability beginning in 2013, with long-term operating margins stabilizing just above 6%.
There are considerable risks to the company. Competitors like Google and Facebook have deep pockets and more compelling assets to leverage daily deals. Their marketing presence and connections to users (through Internet search and social networks, respectively) may place Groupon at a relative disadvantage. Furthermore, consumers may experience deal fatigue; increasing e-mail offers may desensitize consumers to daily deals, ultimately lowering the conversion of e-mail subscribers to end customers.
There are some ways Groupon could dig a moat. First, it could create a self-service platform. If it did, the firm may finally be able to gain operating leverage from the platform and drive profitability higher. Second, personalization represents an opportunity. The rollout of the firm's smart deals engine could increase the conversion rate and customer stickiness, while a true real-time marketplace (achieved through scale and data collection/analysis) can drive incremental volume to merchants (improved yield) as well as Groupon. Analyst: Rick Summer, CFA, CPA
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