The folks in Washington continuing to try and arrive at some conclusion how the debt ceiling issues should be resolved. Currently the powers to be are scrambling to finalize a debt deal. The futures market will open soon as well as foreign markets. Until this deal is done the uncertainty has and will weigh on the markets. Once a deal is done a relief rally is likely to ensue. Once the deal is done the market will focus more if the economic slowdown continues.If a debt deal gets done and the markets do encounter a relief rally will it be a rally to sell into or a rally to buy for the next intermediate bullish cycle?Many traders, investors and Institutions follow the 50 and 200 day moving averages. The SP500 tested its 200MA Friday, while the DOW and NASDAQ are very near its 200 MA levels.
I use alerts with my charting package and brokers. If it is alerts only you are looking for, you may want to check out this new service I found doing some research with a client recently. It is called Zignals. The link is
The best website charting package in my opinion is www.stockcharts.com
This is a follow up post to …
The Goal of Winning vs the Goal of Not Losing – by Vladimir P
If one cannot embrace or believe in a particular approach they will not trade/invest well consistently over time. If one is not willing to lose and has no tolerance for risk, they will not win.Most traders will begin doubting after 3 losing trades in a row and look for something new and different. Trading is a game of probabilities and money management. Many search for the method that allows them not to lose. Many traders come into this game with unrealistic expectations.Aaron W did have a 19.64% gain from May 4th to June 22nd with a win rate of 62.5%. Most traders would settle for this type of return if it can be duplicated with consistency and over time.Not to take away from Aaron’s trades but this achievement has been duplicated many times in Spike. We have several Spikers and Spike Members that have demonstrated these types of results each and every quarter. We have seen results of 40% gains in weeks. To my knowledge all achieved with various types of technical analysis. We have all the records since SpikeTrade’s inception and keep great records, which happens to be a trait of a successful trader/investor. We see on average 5 – 7 traders doing 20% or better in a 3 month period. The key is having an ability to minimize your losses when you experience the draw-down periods and this is where most lose the game.Dr. Elder talks extensively about the 3 M’s.Regardless of what Method one chooses to use, it is the last M of importance.
- Mind
- Money
- Method
If number 1 or 2 is lacking it will not matter what Method you use. When one begins to experience loss the mind is affected and the mind controls the decisions we make with our money. It is all interconnected and creates action and re-action. No matter how much information we may think we have, we can never have certainty of the reaction the masses may take. It is certainty that many chase, but certainty does not exist, only probabilities.Everyone is looking for a fool proof guaranteed way to make money. It is why Infomercials run on TV, there are folks that will buy a promise that leads to nowhere only for the hope that we can fulfill our greed.Personally, my method of late has not worked so well, yet I am still profitable for the year. Why? Money Management and the Mind to willingly embrace what has worked for me for several years. It is imperative to understand the draw-downs that are inevitable in this game of probabilities and understanding precisely what our risk is. We can then begin to accept and embrace whatever Method that appeals to us. It is why one cannot simply go read a book and duplicate results in hopes to achieve our dreams. The Method is at best 20% of the equation. The other two M’s make up 80%. Risk tolerance (Money) and Mind is vastly different with each person.I have a question….If the BIG Institutions have such an edge and supposedly know so much more than the typical trader/investor, why do so many go Bust?The brightest minds of our world have lost billions, even though they were in the KNOW so the speak. Think about…Even those we honor and put into the Investing Hall of Fame, have lost millions/billions and many bust out. Did they lose their method? Did they lose their ability to Sleuth information?
Banks negatively diverged from the SP500 and did not participate in the recent rally to new highs.They now have formed lower highs. This along with weakness in small and mid caps show why this market has been so thin and market breadth so weak.When we have these type conditions, most long strategies are not following thru. Only a few stocks are working and many of those have been difficult to find good risk reward entries.All the best!Kerry
For many months traders/investors have been trying to understand the markets move to current economic conditions, many have wondered how a market can continue to rally in face of a weak economic rebound. First one must understand that the current DOW move back to 10,000 level is basically not the same representation of the 2008 market. The 2008 move to DOW 10,000, and the current move to DOW 10,000 does not reflect the same stocks that made 2008 highs. If one were to look at the original DOW stocks in 2008, the DOW would NOT be at a new high. The indexes conveniently remove the weakest stocks that drag the indexes down to lower levels and replace them with stronger stocks.The 2008 DOW index is well below the 10,000 level. When the DOW replaced the three weaker DOW components of GM, C, and AIG, with stronger participants, it allowed the indexes to make new highs quicker. As Traders we are taught to “dump the losers” and “ride the winners” this holds true for the Indexes as well. The indexes all rebalance every few years and some more than others. This is one reason why you can see an index improve and march to new highs when the economy is not in sync. Technicals get us in the game early and fundamentals follow breathing life into long lasting trends and mutli year bull markets. We have seen the early technical signs and if we are in a new bull market cycle that is to last for years (3 -5) then we should see improvements in the economy as the market continues its uptrend. If the fundamentals cannot support the move, then the market will begin to discount this information and the probabilities increase we could see weaker prices in the future.
Did anyone notice that the DOW closed at 9605 today? What is significant about this close?
It is not so significant other than on September 10, 2001 the day before the tragic 9/11 attacks occurred. The DOW closed at 9605.
Everyone has a Top Ten….. Here is top ten ways to lose money trading. Add some additional ways if you like.
- No Specific Trade Plan or System, trading impulsively.
- Trading a New System/Strategy without knowing its expectancy. Do not back test or forward test, trading on blind faith.
- Un-realistic expectations, looking for get rich quick systems and searching for the Holy Grail. Looking to trade for the wrong reasons.
- Trading too large a size for the account. (#3 feeds #4)
- Making too many trades for the account size. Trading is boring many times and most people want to be entertained.
- Trading on hope rather than accepting the markets actions. The market will do whatever it is going to do, regardless of your thoughts, hopes, and dreams.
- Un-willingness to accept a small loss. All large losses begin as a small loss.
- Letting winners turn into losers. Only believers in Buy and Hold strategy should never sell. A profit cannot be taken unless you are willing to potentially leave some money on the table.
- Un-willing to scratch a trade when the trade is not working as planned, the trader switches to #6.
- Not reviewing past performance and learn from mistakes. Do not expect different results if you keep doing the same mistakes over and over. Keep doing what you are doing and you will most likely keep getting what you are getting.
The markets have been on a killer run. The earnings are coming in better than expected for many companies. All earnings are not created equal, and we need to ask ourselves – Where are these earnings coming from?The earnings are driven primarily by cost cuts and reductions in workforce. If I look at my own steel business, net earnings were phenomenal in the 1st and 2nd quarters. They were great because of a huge reduction in workforce and massive overhead cuts that we made in 4th quarter of 2008. This is why I can tell you that no way we will meet or beat the earnings we saw in 1st half of the year going forward.
Here is the chart I receive each month from our freight companies, reflecting what is called the Freight Indexes. They measure the demand for Truckload services compared to the number of trucks on the road. The index begins in April 1994. When a reading is above prior years’ level it means there is more freight demand relative to available capacity. When a reading is below prior years’ level, it means there is less freight demand relative to available capacity.As you can see, 2009 (Red Line) is down by a huge margin. Although we saw an uptick in May and June it is nowhere close to average.The private company I am involved in has only recently seen the slightest of upticks in business activity – while selling for minimal or no profit margins. The steel companies have recently worked off old inventory and now they will need to see demand in order to replace that inventory.For now that demand is seen only in a few small areas – it is not broad based. This appears to be a rebound from cost cuts and not demand-driven. Cost cuts have a one-time impact on profits until demand reappears. It should be interesting to see how things will develop now that Q2 earnings come to pass and we must look forward to Q3.
At the beginning of each quarter we allocate to each Spiker $1,000, which has to be traded according to several rules:
- You must bet the entire account on that one trade per week.
- You may trade only US stocks or sector ETF’s representing a basket of US stocks.
- The stocks must have above 100,000 average daily volume.
- You must open and close the trade within one week. You must do it each and every week, missing no more than four weeks per quarter.
- If you end up at the bottom of the group at end of quarter you may be asked to sit the next quarter on the warming bench and may be asked to leave the group.
Trading is difficult enough, but each Spiker must abide by these rules, making their task even harder. They aim not only beat the market but outperform their peers in a friendly competition.When you trade, you probably bet a portion of your account and carry multiple trades in order to reduce risk. You can change your mind and make your pick in the middle of the week.Would you bet an entire account on one trade within a one-week window? I sure hope not. We ask Spikers to step up to the plate each and every week and make one bet that will work or not within a fixed time-frame. They cannot change their pick or the direction of the trade after submitting their pick by Sunday afternoon. They may only change their entry, stop, and target levels. They have an option to scratch the trade and wait to make their next pick until the following week.We are sometimes asked about Spiker performance. One must look beyond simple percentage gains, as Spikers perform under constraints and rules listed above.Spikers get only shot per week, and they perform amazingly well. Anyone can get a single lucky strike, but what about Spikers who perform week after week, and after 52 weeks deliver performance that outshines the SP500 and almost all mutual funds.Look at these Spikers who delivered such performance over the past 52 weeks – during the most difficult trading environment of a lifetime:Henry A 104.78%Dave F 52.48%Jeff P 46.35%Pat L 37.46%Grant C 35.80%Ross P 31.69%These six Spikers have demonstrated a phenomenal level of performance in this environment, under these difficult rules.16 out of the current 18 Spikers outperformed the SP-500 over the past 52 weeks. 10 of them had positive results.Meanwhile, at the top level, our top 6 Spikers have outperformed almost everyone in the financial industry, including the Oracle of Omaha himself , Mr. Warren Buffett.Thanks!Kerry