Tuesday, August 28, 2012
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Monday, August 27, 2012
After scanning SP500 stocks, up popped five of the following US banks indicating sell signals on all of them. When the scans we do show more than one stock in the same sector as a buy or sell in this case, it’s very significant and a very strong possibilty of a concerted move in the same direction by the whole sector. In this case it’s the US financial sector . . . the leading sector of the entire US equity market. It’s not a done deal yet, but we suggest getting ready to sell the five US banks listed below short by next week or shortly thereafter unless the market believes in the grind higher quantitative easing program from the US Federal Reserve.
More Federal Reserve Quantitative Easing to Push Up Stock Prices?
It’s almost the end of summer with the US Republican Convention starting this week to nominate Mit Rommey and next Friday US Federal Chief Ben Bernanke will be speaking at Jackson Hole Economic Policy Symposium. Everyone in the market is looking for clues to more quantitative easing from him and the Federal Reserve or not. Even if he did implement more QE will the market buy into it? European Central Bank Chief Mario Draghi will be speaking there on Saturday also. After September 03 Labor Day holiday many traders will be going back to work after taking their usual summer break from the markets. Trading volumes and volatility should pickup quite significantly. Which way do you think the US equity markets, the US Dollar index, gold, silver and oil are going to go? Below is what we think is going to happen.
We Are Not Buying or Selling Stocks This Week
No buy-long low-risk high-reward stock picks this week with the VIX at a Five-Year Low and a SP500 Double Top at the same time currently. We see the high potential for large broad stock market downside in stock prices around the world starting with the USA equities. With the US equity markets looking topped out with more Federal Reserve quantitative easing or not, gold silver starting to breakout to the upside from their downtrends on hints for more global central banks money printing stimulus that hasn't worked very well anyway, the ongoing European debt crisis and already in recession, a continued China and global growth slowdown, a very real upcoming USA $16 trillion fiscal debt cliff, the still oversupply of USA foreclosed real estate for sale with its shadow inventory not on the market yet and still high unemployment rate, a potential bond market bubble, investing guru Marc Faber calling for a global recession now . . . shall I go on?
Risk and Reward
It’s not all doom and gloom out there but for the most part it is and buying stock equity at this point even dividend paying stocks is a high-risk low-reward venture for the time being in our opinion. We are betting that stock earnings reports and profits will disappoint over the next 12 to 18 months. With the relatively low trading volumes in the market currently, don't be surprised to see a continued melt-up of US stocks with the possibility of the US fed doing more quantitative easing, but with more QE or not, US stock prices look weak and tired and ready to very possibly fall off their own fiscal cliff. After the US Labor Day holiday on September 03, major market traders who've been on vacation for the last three months will be back in the market, and what are they going to do you think? We are betting September to October we could see big volume with stock prices very possibly heading significantly lower. Simply put, there's more chance of decreasing stock prices at this point than increasing prices.
Making Money in the Markets this Week
If you want to make money in the markets, we suggest selling selective stocks short, trading the forex markets with its $3 trillion a day in trading liquidity and daily price moving news events, and watching gold silver like a hawk for signs of a continuation on their recent price breakouts. Long-term we are bullish on gold and silver but with the recent upside breakout of gold and silver, it could be fake-out in the short-term and see prices head lower to at least test the breakout area of gold around 1630. For now we could see the current uptrend in gold hit 1690 to 1740 until a correction sets in. The best time to trade gold and silver is when the USA market is starting to open where you might get a pre-market correction to initate a good entry point to the upside or downside. Chance favors the prepared mind, and there's profit opportunity amongst disaster. We also see oil heading lower too. Implement your risk management tools by using stop-loss in case your positions go against you, having a trailing stop-loss to let your winners run, and not over leveraging your account in case you’re trading on margin. See you next week with more market forecasts outlooks next week.
This Week’s Economic Data Reports
A number of significant US economic indicators are scheduled for publication before Bernanke’s speech on Friday possessing the ability to influence his final decisions and tone. For example, the Fed Beige Book will be posted on Wednesday followed by an important Consumer Confidence indicator later in the week. In addition, investors will be seeking more details about the ECB’s new bond-buying program and, in particular, its bond yield targets.
This Week’s List of Potential Low-Risk High-Reward US Bank Short-Sells
Bank of America (BAC)
Bank of New York Mellon (BK)
JPMorgan Chase (JPM)
Morgan Stanley (MS)
PNC Financial Services Group (PNC)
Friday, August 24, 2012
Gold Leaves the Downside in the Dust: Is this Bullish Breakout for Keeps? By Elliott Wave International Metals Specialty Service
Here is a simulated conversation between two gold investors, whom we'll call Hank and Marie, regarding the yellow metal’s recent lift-off to a three-month high.
Gold Trader Hank: I don’t know about you, but the current winning streak in gold has caught me like a deer in the headlights. I never saw it coming.
Gold Trader Marie: Me, too. In fact, I remember reading a slew of bearish-on-bullion news items this exact time just last week. In them, the mainstream experts listed several factors in gold’s fundamental backdrop that would continue to hold prices down, such as:
A Commerce Department report showing the biggest gain in US retail sales since February
A World Gold Council report revealing that global gold demand stood at a two-year low
A 66% decline in hedge funds’ net long positions versus this time a year ago.
Hank: Don’t forget the ace in the hole: the priced-in INACTION by the Federal Reserve. Here, this August 15 news item set the scene:
“Any accelerated gold rally is unlikely to sustain, and gains beyond 1630 seem to be a near impossibility unless QE is announced.” (Economic Times)
Marie: But “gains beyond 1630” is exactly what happened … even though the Fed did not announce a new bond-buying stimulus program on August 22. By early afternoon on August 23, gold prices had even gotten as high as $1670.
Hank: So, why do think gold ignored its fundamental script and left the downside in the dust?
Marie: Your guess is as good as mine.
Here’s a good reason, supplied by EWI's analyst for its Metals Specialty Service: Although gold prices did not follow their fundamental script, they had no problem acting out their Elliott wave script to the very letter.
EWI’s Metals Specialty Service’s Daily gold analysis on August 15 identified an Elliott wave contracting triangle in gold’s price chart. For newbies, contracting triangles are 5-wave, sideways-moving patterns, labeled A through E. Once complete, they are followed by a powerful thrust in the opposite direction.
Metals Specialty Service foresaw gold’s next move befitting this post-triangle thrust and wrote:
“This is likely where we will ‘begin’ to eliminate or at least shift odds on the 3 viable counts…. The bullish contracting triangle would see its wave ‘e’ bottom here and then a thrust.”
Soon after, Metals Specialty Service’s Intraday gold analysis on August 16 at 11:48 a.m. confirmed that the key price action had occurred:
“Bottom line is that with gold rallying above highlighted resistance, I favor a post triangle thrust to AT LEAST 1650.”
Now, Metals Specialty Service’s latest gold analysis reveals whether the precious metal has reclaimed the upside for good.
Click here to review more gold trading resources.
Thursday, August 23, 2012
More and more, we seem to be living in a market of extremes. Market Profile creator Pete Steidlmayer made an interesting observation when I sat with him some time ago in his office inside the Chicago Board of Trade. Pete said that markets are making deeper retracements because of the types of trades being made. Large institutions and hedge funds control more and more money, so the market is now made up of 10 people trading 1,000 lots each instead of 1,000 people trading 10 lots, as it used to be. This leads to markets moving rapidly from extreme to extreme, especially in terms of indicator readings.
This polar market is at it again. Regular (and long-suffering) readers of this column know that the new “risk-on, risk-off” dynamic tends to cause steeper and more rapid swings in both directions. Lately, we’ve been in one of those swings—this time, to the up side.
As always, the meaningful question is, “Where do we most likely go next?” Are we in the middle phase of a bigger push up, or is this trend getting tired? In just the last few days, several interesting things happened that may give us some insight into the state of the current move.
For the First Time in Five Years
Once again, I find myself focusing on one of my favorite short-term indicators: the CBOE Volatility Index ($VIX). People like to call this the “fear index,” and in the last few days, it has hit its lowest level since the times long before the real estate/credit bubble burst. To be precise, the $VIX hit a low at 13.30 on Friday 8/17. The last time it was that low was on June 20, 2007!
Here’s a monthly bar chart that shows the S&P 500 with the $VIX running along the bottom:
Another noteworthy technical occurrence showed up on Tuesday (8/21). In this chart of daily S&P 500 bars, we see a really interesting confluence of technical attributes in yesterday’s candlestick:
We need to bear in mind that technical analysis is just about probabilities. That said, the coincidence of a potential double top at a multi-year high combined with a multi-year low in the $VIX should at least put us on high alert for a trend reversal.
By D.R. Barton, Jr. of Van Tharp International Institute of Trading Mastery
Click Here to Review Dr Van Tharp Trading Workshop Schedule
Wednesday, August 22, 2012
Do You Have What It Takes to Succeed Despite Losing Trades?
Veteran Trader Peter Brandt does -- and shares some of his insights in this FREE report.
How many losing trades can you tolerate each year and still be successful in the markets? How many consecutive losing trades? How many losing weeks, months, or even years would it take to end your trading career?
Peter L. Brandt is a professional trader who openly acknowledges that only about 30 to 35 percent of his trades over an extended period of time will be profitable. He says that most years, he will "incur eight or more losing trades in a row." He also says his trading career has seen "losing weeks, losing months, and even losing years."
So why should you listen to someone who has lost so often?
Recently, an independent accounting audit of Brandt's annual IRS tax statements across 18 years of trading verified an average annual return of +41.6%. This period included the dot-com bubble and the financial crisis of 2007-2009.
When you trade with the Elliott Wave Principle, you must understand that recognizing a chart pattern is only part of the process. According to Peter:
Successful trading is an upstream swim or uphill run against human nature. It is fair to say that consistently profitable market operations require that a trader learn to overcome strong emotional pulls. In fact, most professional traders can relate how many of their most successful trades required action in direct opposition to emotional urges. (Diary of a Professional Commodity Trader, p. 28)
Whether you're a full-time trader or an active investor, the most important elements of your success are education and self-discipline -- in a word, experience.
Learn from Brandt -- a veteran trader and one of a select few contributors to Bob Prechter's Elliott Wave Theorist - in this exclusive FREE report: Foundations of Successful Trading - Insights on Becoming a Consistently Successful Trader from Peter Brandt.
Whether you are an average investor, a novice trader, or an industry professional, you stand to benefit from what Peter Brandt has to say. You can learn more about Brandt and gain insights on his consistently successful approach to market speculation in this free 16-page excerpt from Part I of his book, "Foundations of Successful Trading."
Click here to download your free report Foundations of Successful Trading and learn what leads to a lifetime of trading success.
Click here to review and register for Peter Brandt Traders Boot Camp Seminars Schedule
Tuesday, August 21, 2012
The past 5 – 6 weeks have seen equity prices move considerably higher amid growing concerns regarding the European debt crisis, the instability of the Middle East, and ultimately the potential for a major economic slowdown in the United States.
U.S. equity indexes have continued to climb the proverbial “Wall of Worry” since the first week of June and have put on an incredible run. This past Friday saw the S&P 500 Index (SPX) post the highest weekly close of 2012. The perma-bears have been calling for a top and continue to run scared as light volume and volatility have given the bulls an edge during August.
The next key overhead resistance level for the S&P 500 Index to hurdle is the 1,440 resistance zone lingering slightly overhead. I try to refrain from calling tops or bottoms as I feel its a fool’s game that ultimately humbles most market prognosticators. If calling tops and bottoms was easy, investors and traders alike would be able to produce monster gains all the time with uncanny precision.
Instead of trying to predict where the S&P 500 Index will find resistance or create an intermediate to longer-term top, I will simply posit some technical and macro-economic data that indicates we are likely closing in on a major top.
As stated above, the recent rally we have seen has taken place on relatively light volume and plunging volatility as measured by the Volatility Index (VIX).
Volatility Index (VIX) Weekly Chart
As can be seen above, Friday’s weekly close for the VIX was the lowest in 2012 and ultimately one of the lowest closing price levels in several years. While the VIX is trading at a major intermediate low, there remains a lower support level going back to late 2006 and the early part of 2007 around the 10 price level.
The perma-bulls would argue that we could see those 2006 – 2007 lows tested, but based on September monthly VIX options the option market seemingly is arguing that we are approaching an intermediate low in the Volatility Index. The chart below illustrates the September VIX option chain based on Friday’s closing prices.
Volatility Index (VIX) September Monthly Option Chain
Price action is never wrong, but many times a great deal of information can be acquired by simply reviewing option prices. As can be seen above, the VIX closed on Friday at 13.45, a new 2012 low. However, when we consider the prices in the VIX September option chain shown above I would point out that the VIX September 13 Puts are 0 bid.
What this essentially means is that the VIX options market is saying that the Volatility Index is unlikely to move below 13 in September. For readers unfamiliar with options, selling a naked put or using a put credit spread are two trading structures that are bullish regarding the underlying asset which in this case is the VIX.
The VIX September 13 puts are offered at 0.05 on the ask, but are at 0 on the bid. This means that the VIX market makers are not expecting to see the VIX move below 13. Clearly this is not a guarantee as there is never a sure thing in financial markets. However, this pricing situation for the September 13 VIX Puts is favorable for the equity bears in September.
In layman’s terms, the VIX needs to move higher in the next 3 weeks based on the fact that the September VIX 13 Puts are 0 bid. This is one of several clues that we could be nearing a major top in the S&P 500 Index in the very near future.
When we look at a weekly chart of the S&P 500 Index (SPX) it is obvious that we have a major longer term breakout which occurred this past week. However, there remains additional resistance overhead in the 1,440 – 1,450 price range.
S&P 500 Index (SPX) Weekly Chart
A reversal could play out almost immediately at the current levels or we could move considerably higher before finding major resistance that holds. For now, we do not have enough evidence based on the S&P 500 Index price chart to proclaim that a top has formed or will form in the near future.
Another underlying asset that I monitor closely is copper futures. Generally speaking, if copper futures are rallying economic conditions tend to be strong. The opposite can be said when copper futures are under selling pressure. Recently copper futures prices have been trading in a relatively tight trading range, but the longer-term weekly chart shown below demonstrates that should prices start to selloff, a major selloff could transpire.
Copper Futures Weekly Chart
As shown above, there is a monstrously large head and shoulders pattern (bearish) that goes back to early 2010 that has formed on the weekly chart. Should the neckline of this pattern get taken out on a weekly close the selling pressure that could transpire could be devastating regarding the price of copper.
However, a major selloff in copper would also indicate that economic conditions were weakening globally. If copper triggers this bearish pattern, it would likely not be long before other risk assets followed suit.
In addition to the possibility that major selling pressure could await copper should that pattern trigger, another macroeconomic data point would argue that economic conditions are already starting to contract. The chart shown below, courtesy of Bloomberg, illustrates the amount of waste hauled by railroad cars and the implicit correlation to U.S. gross domestic product (GDP).
Waste Railcar Loads Versus GDP Chart
Recently Zerohedge.com posited an article that featured this chart and a link to that article is found HERE. The article and the accompanying chart demonstrate that as more products are produced, additional waste can be expected. As shown above, the amount of waste being produced and hauled by railcar has fallen off a cliff and should longer-term correlations remain intact a contraction in U.S. GDP is likely not far away.
There are a multitude of other topping triggers that I follow that are all screaming that a major intermediate and possibly even a longer-term top is nearby. However, at the moment the price action in the S&P 500 Index (SPX) is arguing otherwise.
Picking tops and bottoms in advance is extremely difficult and generally foolhardy, however when multiple triggers are going off regarding a possible type I pay close attention to price action. While I will not go as far as to say where specifically a top in the S&P 500 Index will form, I believe that a top is forthcoming and could even occur in the next 2 – 3 weeks.
Price is never wrong, and eventually I suspect that price will tell us what we wish to know. For now, I am going into the next few weeks with caution regarding the upside in risk assets. However, it is important to point out that I am not looking to get short risk assets either.
My research indicates that a major inflection point is coming and it could coincide with the Federal Reserve’s Jackson Hole summit. It could coincide with an event that we are unaware of as well. At the moment risk in either direction seems high and caution regardless of directional bias should be exercised. The next few weeks should tell the ultimate tale.
Click Here to review more Technical Trader market forecasts.
Monday, August 20, 2012
With US summer vacation coming to an end with Labor day coming up on September 03, the bulk of traders will be back in the markets and trading volume along with volatility should be picking up. With the SP500 slowly grinding higher on low-volume we are seeing the potential for the "perfect storm" to generate massive selling in at least the propped up USA markets for a variety of reasons and very possibly taking equity prices down even further than the already down and out other global equity markets.
If you’re a day-trader right now there looks like there’s some money to be made on the slow grind upside but with high-risk and low-reward in our opinion. We are recommending getting ready for selling and or short-selling selective stocks and buying gold silver, and the US Dollar for the time being. If the equities sell-off happens as we forecast it could very possibly be a long and large sell-off going to new lows so be careful if you’re thinking about buying a falling-knife stock sell-off.
This week we have a short-sell on Principal Financial Group which is an asset management company. PFG provides retirement savings, investment, and insurance products and services.
Zacks Investment Research reports that Principal Financial Group reported second quarter 2012 operating earnings of 72 cents per share, lagging the Zacks Consensus Estimate by 2 cents. Earnings improved 1.4% from 71 cents earned in the prior-year quarter. Operating income was $216.3 million in the quarter, down 5.5% from $229 million in the second quarter of 2011.
The year-over-year improvement was primarily due to weak results at Retirement and Investor Services and Principal Global Investors. However, better performances at Principal International and US Insurance Solution were partial offsets.
Including net realized capital losses of $39.2 million or 13 cents per share and an unfavorable after tax adjustment of $4 million or 1 cent per share, net income available to common stockholders was $173.1 million or 58 cents per share, compared with $217.3 million or 67 cents per share a year ago.
The prior-year quarter included net realized capital gain of $23.5 million or 7 cents and other unfavorable after-tax adjustments of $35.2 million or 11 cents.
Operating revenues in the second quarter crawled up 1.8% to $2.14 billion. The rise was primarily due to an increase in premiums and other considerations and fees and other revenues, partially offset by lower net investment income. Revenue failed to meet the Zacks Consensus Estimate of $2.16 billion.
Principal in the second quarter reported a year-over-year increase of 14.3% in premiums and 4.8% increase in fees and other revenues. Net investment income decreased 8.4% year over year.
Total expenses escalated 3.4% year over year to $1.85 billion. Higher benefits, claims and settlement expenses, commissions, compensations primarily contributed to the increase.
Assets under management were $367.1 billion as of June 30, 2012, up 9% year over year.
Book value per share as of June 30, 2012, stood at $28.18, up 4% from $27.08 as of June 30, 2011.
Retirement and Investor Services: Revenues in the quarter increased by 3.5% to $1.08 billion from $1.04 billion in the year-ago quarter.
Operating earnings slid to $141.7 million in the quarter from $154.7 million in the second quarter of 2011.
Principal Global Investors: Revenues in the quarter were $141.1 million, 3.5% higher than the prior-year period.
Operating earnings were $18.2 million in the reported quarter compared with $20.8 million in the year-ago quarter. The decrease was due to higher compensation cost arising from an increase in the number of staff in the distribution and investment wing to support the company’s growth strategies.
Principal International: Revenues were $210.6 million in the quarter, modestly higher than $227.2 million in the prior-year quarter, largely driven by strengthening of the U.S. dollar.
Operating earnings inched up $36.9 million from $36.3 million in the year-ago quarter, mainly due to a growth in assets under management.
US Insurance Solution: Revenues improved to $751.5 million in the quarter from $730.7 million in the year-ago quarter.
Operating earnings increased to $50.2 million in the quarter from $49.2 million in the year-ago quarter.
Corporate: Operating losses narrowed to $30.7 million from a loss of $31.8 million recorded in the year-ago quarter.
Dividend and Share Repurchase
Principal Financial repurchased 5.4 million shares at an average price of $25.52. The year-to-date shares repurchased totaled 7.2 million.
During the quarter, the board also approved buy back of shares worth almost $200 million.
The company also paid a quarterly dividend of 18 cents per common share on June 29, 2012.
We believe that Principal Financial is aligning its business to focus more on the strategic opportunities in the growing asset accumulation and asset management businesses while shedding the line of business, which provides little scope for growth.
The company’s sound capital position and financial liquidity are supportive of its expansion policies in the emerging markets as they offer ample growth opportunities. Also, it scores well with the rating agencies.
Principal Financial remains on track to deploy $800–900 million in 2012 in either returning value to shareholders or in merger and acquisitions. Given sufficient amount in excess capital, we expect it return further value to its shareholders going forward.
However, low interest rate environment continues to remain a drag.
Zacks Recommends Short-Term Sell on PFG
Zacks retains a long term Neutral recommendation on Principal Financial. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates slight downward pressure on the shares over the near term.
Invest2Success Recommends Short-Sell Position on PFG
Sell-Short Principal Financial Group – Ticker PFG
Sell Entry: 26.31 to 28.24
Take Profit Areas: 22.65 to 22.03, 19.99 to 19.39, 16.68 to 16.15
Click here to review different investing trading software that scans analyzes stocks for different technical fundamental criteria, and low-risk high-reward trade pattern setups.
Click the Principal Financial Group Stock Chart Below for a Larger View
Friday, August 17, 2012
Click Here for Dr. Van Tharp Trading Workshop Schedule
There are several methods for growing your trading business, especially when capital isn’t a problem. At first glance, they might seem obvious, but I’ve found that most people still don’t think about them enough, let alone implement them. Here are five key ways to grow your trading business:
1. Develop new, improved trading systems. Each system can help you make more profits, especially if it isn’t correlated with the other systems. Continue to look for new systems that can become new profit centers for your trading research. Some of your systems may stop working in certain market conditions, so it’s always good to have more systems in the pipeline.
2. Find more markets in which to apply each system. Let’s say you develop a great system that works on the S&P 500 index. It gives you five trades a month and has an expectancy of 2R. This means that, on average, it can probably generate 10R each month. But what if the system also works on other major stock market indices with the same results? If you can add 10 more indices, you might be able to make 100R each month.
3. Add traders. Each trader can handle only so much work and so many markets effectively. Let’s say that a good trader can trade $50 million effectively. When the total goes above that level, however, the trader’s effectiveness seems to drop off. On the other hand, ten good traders may be able to handle $500 million effectively.
4. Make your traders more effective at what they’re doing. Let’s say a trading system generates an average return of 40% each year. You can measure the effectiveness of a trader by the number of mistakes he or she makes. For example, a typical trader may make 20% worth of mistakes each year on a 40% system. That kind of trader, at 80% effectiveness, would allow you to generate 32% from the system. But what if you could make the trader more effective? What would happen if you gave your traders effective coaching that could reduce their mistakes to 5% each year? That amounts to a 75% increase in effectiveness per trader per system per year. You can expand a trading business immensely through coaching that allows your traders to become more effective.
5. Optimize your position sizing strategies for your objectives. To do that, you must take each of the following steps:
Clearly determine what the objectives are for your business. Many people and many firms do not do this well, if at all.
Determine the R-multiple distribution generated by each of the systems you use.
Simulate different position sizing algorithms to determine which of the thousands of possible algorithms will meet your objectives most effectively.
Apply that algorithm to your systems.
For example, suppose you want to make 200% on capital allocated to a particular system. You have a system that generates an average of 70R each year. If you risk 1% of your allocated capital per trade, you may find that you can make 70% per year from the system. However, if you increase the position sizing risk to 3%, you may find that you can make the 200%. Of course, increasing the position sizing risk will increase the potential drawdowns. You need to be fully aware of the downside to such changes.
All these factors can be multiplicative. For example, suppose you have three traders, each trading two systems in three markets. Each system makes about 60R per year per market, but the traders are only 75% effective in trading them. This means that they make about 15R in mistakes per system per market per year.
Let’s look at what this generates for the company. If you multiply three traders times two systems times three markets times 45R, you’ll find that the company generates 810R each year. Let’s look at the various changes we could make and see what kind of effect they might have.
What if we added three more traders? We might be able to double the total return to 1,620R.
What if we added three more markets for each system? We might now increase the returns to 3,240R.
What if we added one more system per trader? We might now increase the return to 4,860R.
What would happen if you increased the efficiency of your traders to 90% (which we might have to do for them to handle the extra work)? We’d get an additional 20% profit, which would raise us to 5,832R.
What if we made our position sizing method more effective and increased our profits another 50%?
Of course, no trading business would be able to do all the things I’ve suggested at the same time, but what if you could do a few of them? What would be the impact on your bottom line? If you’re considering some of these changes, concentrate on trader efficiency and on more effective position sizing methods to meet your objectives.
*This article was excerpted from Van's book Super Trader.*
About the Author: Trading coach and author Van K. Tharp, Ph.D. is widely recognized for his best-selling books and outstanding Peak Performance Home Study Program — a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Van Tharp International Institute of Trading Mastery.
Thursday, August 16, 2012
The SST elevates your trading ability by working across multiple trading markets, including Forex, Futures, Stocks and Exchange-Traded Funds (EFT). What’s more, the Seven Summits Trader operates in multiple time frames, such as day trading or swing trading.
Becoming a successful trader is like scaling the Seven Summits. Instead of reaching the peaks of mountains, NetPicks has outlined 7 pillars that we as traders must overcome to reach success:
Multiple Markets, Multiple Timeframes
Dynamic Entries, Targets and Stops
Scale and Trail
Exact Trade Plans
Total Immersion Training
Come see the powerful results of The Seven Summits Trader online day trading system yourself by checking us out at the NetPicks Seven Summits Trader Free Webinar August 16. After this webinar the Seven Summits Trader Software will not be offered again.
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Wednesday, August 15, 2012
In recent updates I have been projecting a series of ABCDE waves to take the Bull market to post March 2009 highs in the 1425-1445 ranges. The recent pullback was expected as what I was calling a “D wave” pullback, with an E wave to come. These final 5th waves or E waves can be extension waves or relatively benign, hence causing difficulty in forecasting the upper ranges.
In the case of the SP 500 index, we have had a strong rally from the 1267 lows in early June to 1409 highs so far (The C wave highs) and recently a pullback into the 1390’s (The D wave). This next leg up should carry the market indices towards the 1440 2008 interim highs which begat the last 5 wave down leg of the Bear cycle that ended at 666 on the SP 500. A case of down the mountain and up the mountain if you will since the 2008 highs to current pricing conditions at 1404.
Once this E wave completes in the 1425-1445 ranges (With an outside shot at an extension blast to 1495) we should expect a fairly significant correction of the entire move from March of 2009. This final rally leg could top anytime between Aug 13th and August 22nd as I last updated, with potential to spill over into early September.
A close over 1409 will confirm the “E wave” has begun in earnest and you may want to buckle up, as it could be the final blast before some rains begin to pour in the fall.
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Tuesday, August 14, 2012
It is an endless debate for investors interested in gold. Should they buy a direct play on the gold price, either gold bullion itself or even so-called paper gold with an ETF such as the SPDR Gold Shares (NYSEArca: GLD)? Or should they invest into gold equities, particularly the larger, higher quality gold mining companies?
Recent history suggests the answer is gold itself. According to Citigroup, physical gold has outperformed global gold equities 120% percent of the time over the past 5 years. Stocks of the bigger gold mining firms seem to react adversely to bad news (which is normal), but the problem is they react with no more than a yawn to good news. These type of stocks are contained in the Market Vectors Gold Miners ETF (NYSEArca: GDX).
Evidence of this trend can been see in the latest news to hit the industry…the slowdown in expansion as recently signaled by the world’s largest gold producer, Barrick Gold (NYSE: ABX). The company’s stock has fallen by more than 30 percent over the last year due to cost overruns at major projects. The latest blowup in costs of up to $3 billion occurred in its estimate for development of its flagship Pascua-Lama project on the border of Chile and Argentina. The project may now cost up to $8 billion.
In addition, Barrick decided to shelve the $6 billion Cerro Casale in Chile and the $6.7 billion Donlin Gold project in Alaska. Barrick is not alone in its thinking among the major gold producers. The CEO of Agnico-Eagle Mines (NYSE: AEM), Sean Boyd, recently said “The era of gold mega-projects may be fading. The industry is moving into an era of cash flow generation, yields and capital discipline.”
Fair enough. But are gold mining companies’ management walking the walk about yields or just talking the talk? Last year, many of the larger miners made major announcements that they would be focusing on boosting their dividends to shareholders in attempt to attract new stockholders away from exchange traded vehicles such as GLD, which have siphoned demand away from gold equities. Barrick, for example, did boost its dividend payout by a quarter from the previous level. Newmont Mining (NYSE: NEM), which has also cut back on expansion plans, has pledged to link its dividend payout to the price of gold bullion.
So in effect, the managements at the bigger gold mining companies (which are having difficulties growing) are trying to move away from attracting growth-only investors to enticing investors that may be interested in high dividend yields. This is a logical move.
But rising costs at mining projects may put a crimp into the plans of gold mining companies’ as they may not have the cash to raise dividends much. And they have done a poor job of raising dividends for their shareholders to date. In 2011 the dividend yields for gold producers globally was less than half the average for the mining sector as a whole at a mere 1.3 percent. Their yields are below that of the base metal mining sector and the energy sector.
It seems like management for these precious metal companies have the similar emotional response shareholders have when they are in a winning position. When the investor’s brain has experienced a winning streak and is happy it automatically goes into preservation/protection mode. What does this mean? It means management is going to tight up their spending to stay cash rich as they do not want to give back the gains during a time of increased uncertainty. Smaller bets/investments are what the investor’s brain is hard wired to do which is not always the right thing to do…
Looks like there is still a lot work to be done by gold mining companies’ to improve returns to their shareholders. But with all that set aside it is important to realize that when physical gold truly starts another major rally. These gold stocks will outperform the price of gold bullion drastically for first few months.
Gold Miner Trading Conclusion:
In short, last weeks special report on gold about how gold has been forming a major launch pad for higher prices over the past year. Gold bullion has held up well while gold miner stocks have given up over 30% of their gains. If/when gold starts another rally I do feel gold miner stocks will be the main play for quick big gains during the first month or two of a breakout. The increased price in gold could and value of the mining companies reserves could be enough to get management to start paying their investors a decent dividend which in turn would fuel gold miner shares higher.
Both gold and silver bullion prices remain in a down trend on the daily chart but are trying to form a base to rally from which may start any day now. Keep your eye on precious metals going into year end.
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Monday, August 13, 2012
The US stock market is at major resistance and critical junctures right now trying to figure out or decide if its heading higher or rolling over to the downside. We think its going lower longer-term, and very possibly significantly lower over time. Our stock pick this week is a short-sell on Applied Materials.
Wall Street Cheat Sheet reports that S&P 500 component Applied Materials will unveil its latest earnings on Wednesday, August 15, 2012. Applied Materials manufacturers and produces capital equipments, and it provides manufacturing equipment, software, and solutions for the global semiconductor, flat panel liquid crystal displays, solar, and related industries.
Wall St. Earnings Expectations: The average estimate of analysts is for profit of 22 cents per share, a decline of 37.1% from the company’s actual earnings for the same quarter a year ago. During the past three months, the average estimate has moved down from 26 cents. Between one and three months ago, the average estimate moved down. It also has dropped from 25 cents during the last month. For the year, analysts are projecting net income of 80 cents per share, a decline of 38.5% from last year.
Past Earnings Performance: The company has beaten estimates the last four quarters and is coming off a quarter where it topped forecasts by 3 cents, reporting profit of 27 cents per share against a mean estimate of net income of 24 cents per share.
Wall St. Revenue Expectations: Analysts predict a decline of 16.8% in revenue from the year-earlier quarter to $2.32 billion.
Stock Price Performance: From July 12, 2012 to August 9, 2012, the stock price rose $1.52 (14.7%), from $10.37 to $11.89. The stock price saw one of its best stretches over the last year between March 6, 2012 and March 19, 2012, when shares rose for 10 straight days, increasing 6.9% (+82 cents) over that span. It saw one of its worst periods between April 27, 2012 and May 18, 2012 when shares fell for 16 straight days, dropping 13.9% (-$1.67) over that span.
Analyst Ratings: There are mostly holds on the stock with 10 of 17 analysts surveyed giving that rating.
Balance Sheet Analysis: The company’s current ratio of assets to liabilities came in at 2.37 last quarter. Having a ratio above 2:1 is usually considered a good indicator of a company’s liquidity and ability to meet creditor demands.
Zacks Investment Research has a #5 rank on Applied Materials which is strong sell signal.
Invest2Success has a short-sell trade plan below on Applied Materials.
Sell Short Applied Materials – Ticker AMAT
Sell Entry: 12.13 to 11.59
Take Profit Areas: 9.94 to 9.65, 9.00 to 8.73, 7.01 to 6.83
Applied Materials Company Profile
Applied Materials, Inc. provides manufacturing equipment, services, and software to the semiconductor, flat panel display, solar photovoltaic (PV), and related industries worldwide. The companys Silicon Systems Group segment offers a range of manufacturing equipment used to fabricate semiconductor chips or integrated circuits. This segment provides systems that perform primary processes used in chip fabrication, including atomic layer deposition, chemical vapor deposition, physical vapor deposition, electrochemical deposition, rapid thermal processing, chemical mechanical planarization, wet cleaning, and wafer metrology and inspection, as well as systems that etch or inspect circuit patterns on masks used in the photolithography process. Its Applied Global Services segment offers products and services designed to enhance the performance and productivity, and reduce the environmental impact of the fab operations of semiconductor, liquid crystal displays (LCDs), and solar PV manufacturers. The companys Display segment provides products for manufacturing thin film transistor LCDs for televisions, personal computers (PCs), tablet PCs, smartphones, and other consumer-oriented electronic applications. Its Energy and Environmental Solutions segment offers manufacturing systems for the generation and conservation of energy, as well as manufacturing solutions for wafer-based crystalline silicon applications. This segment also provides roll-to-roll vacuum Web coating systems for deposition of a range of films on flexible substrates for functional, aesthetic, or optical properties; and roll-to-roll machine for depositing ultra-thin aluminum films for flexible packaging applications. The company serves manufacturers of semiconductor wafers and chips, flat panel LCDs, solar PV cells and modules, and other electronic devices. Applied Materials, Inc. was founded in 1967 and is headquartered in Santa Clara, California.
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Click the Applied Materials Stock Chart Below for a Larger View
Friday, August 10, 2012
The 3-Year Rally: It Doesn't Have to End This Way - Or Does It?
Click Here for New Wave Financial Forecasts
Is it wise to forecast financial markets based on what central bankers say?
Look no further than a chart of long-term stock market prices for the answer: No major trend change ever followed any of those announcements.
Even so, the financial media spends obscene amounts of time analyzing every utterance of central bankers, especially during the past few years of global economic distress.
The positive seasonals at the end of July, beginning of August are now dissipating . . . Equally important, a whole host of inter-market divergences are occurring.
The Fed made their announcement today, the ECB's governing council meets tomorrow and the U.S. unemployment statistics are posted on Friday. These seem to be the main focus of the financial media. On the other hand, our focus is on the markets and in particular, the wave structure. The Financial Forecast Short Term Update, August 1
That issue of the Short Term Update shows charts of the Dow's and S&P 500's wave structure, and it provides insightful commentary about a high-confidence near-term forecast.
The quote above mentions "a whole host of inter-market divergences." The chart below from the Aug. 1 Short Term Update reveals one of them:
The publication adds:
Each successive up leg within the push from early June has occurred with slightly lesser upside momentum . . . This chart, which we published Monday (July 30), shows the percentage of S&P stocks above their 10-day moving average. By this measure, the most recent rise from July 24 has been the weakest so far.
Please note that this analysis makes no mention of comments from Federal Reserve Chairman Ben Bernanke or European Central Bank President Mario Draghi.
The U.S. stock market rally that began in March 2009 is now more than three years old. Yet many experts forecast that the trend will continue higher.
You deserve an independent alternative to the conventional wisdom. See what we see in the Elliott wave pattern to learn where prices are headed from here.
Click here to review new wave financial forecasts.
Thursday, August 09, 2012
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So, I urge you to take your valuable time to go through my website to learn more about what we have to offer and how we can personally help you. Have a great day and I truly look forward to hearing from you soon. Once again, welcome. It’s an honor to have you here.
Yours in trading success,
Todd Mitchell Trading Concepts
Wednesday, August 08, 2012
Candlestick Auto-Recognition Plug-in
Let Track 'n Trade Identify Your Favorite Candlestick Patterns For You
Legendary Japanese Rice Trader, Munehisa Homma, Gained a Huge Fortune, and Popularity Using Candlesticks Analysis, Claiming He Executed Over 100 Consecutive Winning Trades
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Tuesday, August 07, 2012
Since August 2, EUR/USD, the forex pair that makes up the bulk of the $4-trillion-a-day global currency trading turnover, has gained almost 300 points (or pips, in forex lingo).
Analysts say that last Friday's dubious U.S. jobs numbers and the European Central Bank's euro-supportive talk have helped the rally. Sounds logical, but if you actually trade forex, neither of these explanations tells you what EUR/USD may do tomorrow.
You know what can help you get the answer? Elliott wave analysis.
Right now, the Elliott wave message for EUR/USD is: caution! In fact, the editor of our trader-focused Currency Specialty Service, Jim Martens, has posted for subscribers a video update titled "EUR/USD -- Don't Be Fooled by This Rally."
You can watch the video inside the Service online now, but just to give you a glimpse of the evidence -- EUR/USD is showing an almost completed 5-wave rally pattern:
And that's just the half of it.
To really understand where EUR/USD is likely headed next in a big way, you need to see its larger-degree Elliott wave pattern.
Currency Specialty Service shows you the EUR's big picture, too.
EUR/USD is Just 1 of 5 Top Current Forex Opportunities -- See Them Now
In addition to EWI Senior Currency Strategist Jim Martens' new video "EUR/USD -- Don't Be Fooled by This Rally," you get 5 more detailed videos describing the top 5 forex opportunities Jim sees in the markets right now:
Opportunity #1: AUD/USD - 12-minute video
Opportunity #2: EUR/USD - 7 minutes
Opportunity #3: USD/CAD - 9 minutes
Opportunity #4: USD/JPY - 8 minutes
Opportunity #5: GBP/USD - 17 minutes
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Monday, August 06, 2012
This week I'm recommending selling stocks short as I'm not buying into the rumor or fact of more quantitative easing will support or raise equities prices from here. In fact I suggest not to buy stocks long but sell them short, and or trade up and down forex, gold, silver, and oil with their high liquidity and market moving news and events.
With the Knight Trading trading debacle as one of many problem indicators, the US economic fiscal cliff and Presidential election approaching fast, the European debt crisis, the global GDP growth slowdown, and many other financial problems yet to be fixed, the US equity markets are setting up for a big down move and if it happens the way I think, its going to be a big long move down with the ability to wipeout a lot of equity.
If the down move starts to happen don't jump in to buy long too quick if you think stocks are cheap as if this down move happens the way I think, it will be an extended move down you don't want to goes against if you want to save your account. As famous short-seller Jim Chanos said at the recent CNBC Delivering Alpha conference, there's lots of value stocks that are going to get a lot more cheaper. He calls it the "value trap", and I totally agree with him. What looks cheap can get a whole lot cheaper especially in this current economic enviornment.
5 Familiar Stocks to Sell (or Short)! By Zacks Investment Research
Like so many people around the planet, I tuned into some Olympic action over the weekend. Ever since childhood, I have enjoyed watching events that do not usually grace the American sports airwaves and learning about other nations and cultures. For some reason, this time I've been paying attention to the "also-rans." You know, that person out in lane eight that's usually not in the camera, except at the start. What strikes me about it all is that while everyone shakes hands, pats backs and exhibits good sportsmanship, the Olympics, in a competitive sense, is one of the cruelest events on Earth. You either have what it takes or you don't. And winners aren't decided by tippy-toeing around the issue—even in the case of the gymnastics floor exercise. The reality is that you have to be the stone-cold best to win.
Besides the unusual and (as my English friend coined it) "very British" opening ceremony, the big news of the first few days of competition were the failings of a well-known swimmer and a major disappointing performance by a gymnast. It just goes to show you that those who were once considered the best eventually have bad days that could mark the end of their careers. Thinking about the let downs of a few well-known athletes and a Zacks.com customer’s question about stocks to sell gave me an idea. What are the big-name companies that have already peaked or are primed for a fall?
Be Careful with Big Name Stocks
Almost every stock that grows into a large market value began life with a small market value (or at least that's the way it used to be before the mega IPOs). As the corporation brought desired products or services to the marketplace, it became more and more profitable. As profits grew, investors began to notice and purchased the stock. After many years of this cycle of success, the company eventually matured into a big player in the corporate world and its market cap increased as well.
However, as both the Olympics and the stock market illustrate, if you're near the top, sometimes there's no other place to go but down. If the company stagnates and fails to innovate, or becomes susceptible to competition, a mature company will begin to decline. Because some well-known stocks will peak, it's a good idea to identify them before they begin to slip.
Avoid the Downside
Using the Zacks Research Wizard, I researched ways to recognize big-name companies before they underperformed. Since the Research Wizard contains hundreds of pieces of data for each company all at my finger-tips, it took me just a short while to discover a strategy that identified well-known companies that are "sell" or "short" candidates. Below are the results from a 10-year backtest that compares a strategy of those "biggies destined to collapse" alongside the S&P 500.
Here's some ways to find "sell" candidates or stocks to short:
First, the stock has to be a member of the S&P 500. (We want only the largest market cap companies.)
Of the S&P 500 companies, select only those 50 with the largest market value. (We want to focus on the biggest of the big.)
Add another filter by selecting only those stocks with a Zacks Rank greater than or equal to 3. (Any Zacks Rank of 3 or greater is expected to either be at or under market performance.)
Next, pick the 20 stocks with the lowest Sales/Assets Ratio. (Remember we are looking for poor performance and one of the best indicators of this is a low Sales/Assets Ratio.)
Finally, choose the 10 stocks with the highest Price-to-Sales Ratio. (A high Price/Sales is usually a sign the stock is overpriced and ready for a decline to bring the valuation back in line.)
Here are five of the ten stocks that passed the screen this week (8/03/12). Remember these are SELL candidates:
QCOM - QUALCOMM Incorporated
QUALCOMM designs, develops, manufactures, and markets digital telecommunications products and services. This large cap stock has a Zacks Rank of 3, which isn't bad but not great either. Its Sales/Assets is 0.4, which is another fairly mediocre number. But what alarms me the most about this company is the P/S of 5.54. That means for every $1 of actual sales, you need to pay $5.54 for the pleasure of owning this company. Think this company is due for a major correction? I do too.
OXY - Occidental Petroleum Corporation
Occidental Petroleum engages in the exploration and production of oil and gas properties in the United States and internationally. This company has experienced numerous downward revisions in earnings expectations for the next 3-4 quarters. That's never a good sign, and is the reason behind its awful Zacks Rank of a 5. If sales indeed soften up, the stock price of this company will surely follow suit.
KO – The Coca-Cola Company
The Coca-Cola Company engages in the manufacture, marketing and sales of nonalcoholic, sparking and still beverages worldwide. This well-known company has seen its stock price approximately double over the last three years with little change to corporate fundamentals or profitability. When you see a strong, increasing price chart and a flat earnings trend, a little red flag should pop up. Also, this company has a poor Zacks Rank because of decreasing earnings prospects. It's P/S of 3.8 means that if a can of Coke costs $1, an investor could purchase the ownership of that $1 revenue for $3.80. That doesn't sound very refreshing.
AMGN – Amgen Inc
Amgen discovers, develops, manufactures and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses, primarily in the United States, Europe and Canada. This stock, as well as the entire biotech industry, is up over 27% YTD. That kind of run usually brings into question a stock's valuation. And the questions are surfacing regarding Amgen, which has a P/S ratio almost two times the S&P 500's average. Its Sales/Assets ratio isn't that great either by bringing in only 33 cents of revenue for every dollar in assets.
GOOG – Google Inc
Google maintains an index of web sites and other online content for users, advertisers, and Google network members and other content providers. The current stock price of this mega-company is about the same as it was in December 2007 even though a lot of zigzagging has occurred over that time. What's noteworthy is that Google still looks expensive by almost all valuation measures. Its P/S ratio is more than double the S&P 500 and over 1.5 times its industry average. The company has also seen earnings projections revised downward.
Your Ticket to Gold (or at least profitable investing)
Remember back in 1984 when a certain fast-food restaurant chain had a scratch card game that gave away free food depending if an American athlete won a medal for a specific event? Remember also that the Soviet-bloc countries boycotted those same Olympics as payback for the boycott of 1980? That combination resulted in a windfall of almost as much free food as you could eat. Using the Research Wizard to find outperforming strategies is almost as easy as getting a free lunch. Although you can't use it to win a gold medal at the Olympics; you can use the Research Wizard to profit in the stock market. That's the closest competitive arena for most of us anyway.
Want to know the other five stocks the screen identified as large cap stocks to avoid? Or how about discovering stocks that are ideal short candidates with a strategy that's already available in the Zacks Research Wizard?
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Thursday, August 02, 2012
How To Profit In All Market Conditions Even Sideways Markets
This groundbreaking report will tell you about a little-known “methodology” that will instantly turn you into.
You’re about to learn:
What the “60:30:10 Principle” is and how understanding it can DOUBLE your trading accuracy overnight…
Two (2) tested and proven “counter-trend” strategies for profiting during sideways markets that you can use IMMEDIATELY to “legally steal” pips from the market over and over again (while most traders are sitting on the sidelines)…
The only three (3) market conditions that exist, and how to identify them so you can adjust your strategy to profit during each. (HINT: This is a secret only professional traders know about…)
My insanely profitable “Stack the Deck” technique that allows me to use “predictable moments of opportunity” to sky-rocket my accuracy and shatter any doubt when ever I “Pull The Trigger”
BONUS: I will also give you access to 3 private trading videos where you can see the “60:30:10 Principle” in action on some real-world trading scenarios.
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