A Perspective on Waves

Marty Schwartz

It may not be a surprise to learn than the market flows in waves.  Whether you are looking at 1 minute charts or 1 month charts.  The waves that show up are very evident.  What I find interesting on a daily chart, is how you can often see that after two weak days showing red across the board as in the last 2 days, there is suddenly a recovery.

Now, can I be absolutely sure about a recovery tomorrow, no I cannot.  No one can because the proverbial happens sometimes.  Whether it be a natural disaster or a horribly tragic event like the recent loss of a plane.  We cannot in the short term tell what will happen next with certainty, as any normal sequence can be interrupted by the chaos of events and there portrayal in the media.  However, most often we can use history to read the tape and know what to expect under normal circumstances.

Therefore, it is still my expectation that after 2 days of selling that we will now be allowed to wave up and approach the 2100 target I have for the S&P 500.  In my humble opinion the bullish nature of this time of year added to the fact that there are no potentially significant negative reports before next week will help push the market to higher prices.

Of course, with all that said, it is just an opinion, and my opinions do not influence my trading plan which is mechanical and non-emotional…unlike me!  So I may continue to think, but I must not act on this experience or intuition, no matter how many times it turns out to be true.

Market News:

U.S. stocks closed down in low volume trade on Tuesday, pressured by weakness abroad and a sharp decline in the utilities sector.

Composite volume held near 2 billion on the New York Stock Exchange, below average levels.

Other analysts did not see any apparent reason for the slide of as much as 2.2 percent in the traditionally high-yielding sector, especially since bond yields were also on the decline.

The Dow Jones Utilities Average also traded lower, off Monday’s closing high.

Concerns about Greece’s failure to elect a new president on Monday continued to weigh on global markets on Tuesday, with Asian and European stocks closing down 1 percent.

The December reading of the Conference Board’s consumer confidence index came in slightly lower-than-expected at 92.6.

Earlier, the Case-Shiller house price index for October showed that U.S. single-family home prices’ rate of increase continued to decelerate in October since the stronger-than-expected rise seen in the previous month.

Wednesday:

7 a.m.: MBA purchase applications

8:30 a.m.: Jobless claims

9:45 a.m.: Chicago PMI

10 a.m.: Pending home-sales index

News Sources:  CNN Money & CNBC


Greece on the Brakes!

Quote 10

It was a rather static day today on the back of weakness in Europe. Greece seems to have been causing concern again in terms of their inability to choose leadership.

However, it’s probably a good thing, no market can go straight up for too long.  We needed the market to take a breather after the miraculous bounce in mid-December.  Therefore, now I will look to see a rally higher this week.  I maintain that we will see the S&P 500 at 2100 before the end of the week.

Market News:

U.S. stocks closed narrowly mixed on Monday, amid fresh lows on oil prices and earlier pressure on European stocks from Greece’s failure to elect a president.

The Dow Jones Industrial Average had the narrowest range of trade for December, and the narrowest range since the day before Thanksgiving, Nov. 26

The Russell 2000 and the Dow Utility Average closed up at new highs, up 4.75 percent and 31.14 percent for the year, respectively. Both indices have led market gains since the S&P 500 closed at a 1.5-month low on Dec. 16.

The S&P 500 posted its 53rd record close for the year, boosted by a 1.11 percent gain in the defensive utilities sector

Low oil prices have hurt the energy-sensitive region of Texas, according to December figures from the Dallas Manufacturing Survey. The general business activity index fell to 4.1 from 10.5, the weakest level since March.

With many traders on vacation between the Christmas and New Year’s holidays, composite volume on the New York Stock Exchange was below 2 billion for most of the day.

Earlier, stocks opened lower, following the lead of U.S. stock index futures, amid some pressure on European stocks from Greece’s failure to elect a president in a third round of elections.

Greek stocks fell as much as 11 percent on the news, paving the way for a snap election on January 25, 2015. The result did not come as a surprise, with many analysts saying prior to the vote that the Greek government needed a “miracle” to avoid a general election.

The Greek politics sent European stocks lower, with losses on the FTSE 100 capped by a slight rally in the basic resources sector.

Source: CNBC


Merry Christmas!

snowglobe3

I would like to take this opportunity to wish everyone that listens to my daily ramblings a very Merry Christmas!  It has been a fantastic year of trading so far and I am so excited to move into 2015 to do even better than this years triple digit returns.

2015 promises to be the best year by a considerable mile at HowDoITradeStocks.com.  As I made some significant breakthroughs in the trading strategy this year that should vastly improve the results next year for everyone involved.

Therefore, mark my words, 2015 promises to be a year that I smash all my previous records!

So, once again, thank you for the opportunity to serve in my own small way and let’s beat the market so bad we leave bruises between now and Santa’s arrival next year!

Merry Christmas to you and your families!

My best,

John


The Fear of Loss in the Market

Van Tharp

As I re-enter the market somewhat late in the game today (as I missed the bullish run of the last few days).  I am reminded that only experience and knowledge allows me to relax every time I enter a trade, even when I am stepping into buying at new all-time highs.

Today I am acutely aware that I have a number of new members entering trades for the first time.  This can be scary, I get it.  But the truth is, no-one can predict with absolute certainty where the market will turn.  I have come across some very good technical analysts in my time, some that even have a high degree of accuracy, but none get it right all of the time.  Not even the greatest of them all, WD Gann, was right all the time.

So where does that leave us?  It leaves us with the element of probability, and only probability counts in the market.  For I cannot tell which trades will be winners, but I know that over time my winners will significantly out-strip the losses by a large margin.  As my system does not try and join in on trends, it anticipates them and enters at the beginning of each new one.

Therefore, in terms of analogies, I am the house, not the guy at the blackjack table.  As the house, I know I will not always make money at the every table, but with enough passage of time and deals of the cards, it is as inevitable as death and taxes that I will win.

So I humbly propose that you feel the emotions that come with trading real live cash, you cannot escape them, but never let them allow you to act out-with a predetermined set of probabilities and rules, as that only leads to failure and internal ridicule.

Market News:

The S&P 500 and the Dow Jones Industrial Average set records in a fifth day of gains as investors cheered data showing the U.S. economy expanded in the third quarter by the most in 11 years.

The Nasdaq, however, fell, snapping a four-session winning streak, as biotechnology names weighed.

After rising as much as 109 points, the Dow Jones Industrial Average closed 64.73 points, or 0.4 percent, higher, at 18,024.17, with Chevron leading blue-gains that extended to 25 of 30 components.

Also rising to an intraday record posting its 51st record finish of the year, the S&P 500 advanced 3.63 points, or 0.2 percent, to 2,082.17, with energy pacing gains and health care the sole laggard among its 10 main sectors.

Erasing initial gains, the Nasdaq slid 16 points, or 0.3 percent, to 4,765.42.

Tuesday’s economic reports had the U.S. economy soaring by 5 percent in the third quarter, the most rapid pace since the same period of 2003, while a separate report had orders for durable goods unexpectedly dropping in November.

Other reports had consumer sentiment at 93.6 in December versus a 93.5 estimate and the sale of new single-family homes falling for a second month in November.

Wednesday

8:30 a.m.: initial claims

1130 am $29 billion 7-year note auction

1:00 p.m.: stock market close

News Sources:  CNN Money & CNBC


Overtrading = Failure

Quote 8Whether you are in a position or in cash, not trading is one of the hardest things to do.  Yet most money is either made or not lost by doing exactly that.  Sitting on your hands and either following a system to the letter or being extremely disciplined in your approach.

Almost all failure in trading comes from either thinking outwith your set strategy or in overtrading.  As I watch the market storm back, knowing that my system wasn’t able to grab further gains, I am relaxed, as I know my opportunity will come.

One thing I must not do is get disheartened that I missed the bottom this time.  So often I am able to grab near the bottom of all major moves.  But this incredible V shaped bottom is simply one that got away.  Fact is, unless you got in yesterday, most of the gains today happened in the futures overnight and buying into a large gap up is often very dangerous.

Capital preservation is critical in such a volatile market.  I will remain humble and wait for my signals.  After all. it’s a marathon, not a sprint.

Market News:

U.S. stocks rallied on Thursday, with the Dow industrials climbing more than 400 points for the first time in three years, as investors applauded the Federal Reserve’s pledge that it would be patient in increasing interest rates.

The CBOE Volatility Index, a measure of investor uncertainty, fell nearly 14 percent to 16.81.

Thursday data had jobless claims falling by 6,000 to 289,000 last week, the lowest since early November.

And, the Conference Board’s index of leading indicators advanced in November for a third consecutive month, signalling the U.S. economy is picking up steam heading into the new year.

American motorists are paying less than $2.50 a gallon at the pump for the first time in more than five years, with retail gasoline prices falling to an average $2.477 a gallon Wednesday night, according to the AAA.

Friday:

Earnings: Blackberry, CarMax, Finish Line

10:00 a.m.: Chicago Fed President Charles Evans

12:30 p.m.: Richmond Fed President Jeffrey Lacker

News Sources:  CNN Money & CNBC


$72M ‘whiz kid’ investor made the whole thing up

Demo Account

Oh dear, 17 year old makes up a story trading in simm mode that he made a massive return, embarrassed his parents and clearly embarrassed the reporter and the editor of the magazine that ran the story.  People love a good rags to riches story, especially when it’s a teenager that did it.  What a silly thing to lie about.  Here are links to the story:

http://www.cnbc.com/id/102271434

http://observer.com/2014/12/exclusive-new-york-mags-boy-genius-investor-made-it-all-up/#ixzz3M37iYHuj

Fact is, anyone can be a genius in simm mode, but add in a good helping of emotion that comes with real money and let’s see how you do.  There is no replacing real trading in my opinion.  I honestly think simm trading is a waste of time.  Back testing is VERY important, as you have to be able to see that a strategy has worked in the past, and even more vitally, be able to trust it going forward.  However, simm mode is not like real trading.

This brings me to the realization that my eldest son just started trading at 9, just as the kid in the false story did.  I wonder if he will be asked to be on CNBC at 17?  He saved his allowance money since he was 5 to have $1000 to open an account.  It was a proud moment going to the bank with him to withdraw it so we could open an account for him.  Anyway, he began in September this year and has a 67% return so far following the system.  But $72m?  Hmm…well anything is possible!

Market News:

U.S. stocks gyrated on Tuesday, as equities tracked the price of oil and pondered the impact of lower energy costs and Russia’s economic troubles on policy decisions by the Federal Reserve.

Wall Street hears from the Fed on Wednesday, with the central bank gathering to consider the timing and size of interest-rate hikes and whether to reiterate its vow to maintain rates low for a considerable period.

After falling to lows not seen since the spring of 2009, crude futures for January delivery on Tuesday fell to a low of $53.60 a barrel, then shoot up $1.24 to a high of $57.15 a barrel, and closed at $55.93, up two cents and halting a four-day loss streak.

New-home construction in the U.S. topped a million on an annualized rate in November, while housing starts fell 1.6 percent and building permits declined 5.2 percent last month.

An industry report on Tuesday had the U.S. manufacturing sector continuing to expand in December but its growth rate at an 11-year low.

Equities around the globe had declined as Russia vowed further action to stabilize its markets after an unexpected interest-rate hike and a measure of factory activity in China dropped to a seven-month low in December.

Wednesday:

Second day FOMC meeting, Greek elections

Earnings: FedEx, General Mills, Joy Global, Oracle, Apogee, Jabil Circuit, Worthington Indusries

7:00 a.m.: Mortgage applications

8:30 a.m.: CPI

8:30 a.m.: Current account

10:30 a.m.: Oil inventories

2:00 p.m.: Fed statement and projections

2:30 p.m.: Fed Chair Janet Yellen press conference

News source: CNBC


Dec 12th 2014 – Trading With The Trend

Scott Ramsey

As the quote today states, the trend is very much our friend, the trick is getting in on the trend as it changes and getting out when it’s done.  Anyone that has studied my method in some of our courses will agree that the system is very good at getting in at the beginning of new trends.  The issue is that sometimes we have choppy markets where no trend is showing and only indecision is in play.

I think that is where the market was until that last few days.  However, now, clearly a downtrend is in play.  It was either going to break up or break down.  It certainly chose to drive downwards this week.  That being said, I doubt we are in for much of a correction here.  As it is still my firm belief that we will see a new high before the end of the year.

The sentiment and seasonality at this time of year is hard to argue with, as it keeps showing up most of the time.  So my bias is that we will see an end to selling and a further push towards a new high in the coming weeks, possibly starting with a recovery on Monday.

Market News:

U.S. stocks declined on Friday, with benchmark indexes posting sizable weekly losses, as crude’s ongoing slide rattled investors.

The Chicago Board Options Exchange Volatility Index, one measure of investor uncertainty, rose 9.5 percent to 21.97, up nearly 86 percent this week.

Oil prices fell further after the International Energy Agency reduced its outlook for global demand.

Equities around the globe dropped on Friday after November Chinese factory production slowed more than forecast.

U.S. wholesale prices declined 0.2 percent drop in the producer price index in November after a 0.2 percent rise the previous month.

Stocks only briefly trimmed losses after a measure of consumer sentiment in December exceeded expectations, rising to an eight-year high.

The Dow Jones Industrial Average declined 315.51 points, or 1.8 percent, to 17,280.83, down 3.8 percent from the week-ago close, its worst weekly loss since November 2011. International Business Machines led blue-chip losses that extended to all 30 components.

Recording its worst weekly hit since May 2012, the S&P 500 shed 32.99 points, or 1.6 percent, to 2,002.34, down 3.5 percent for the week, with materials falling the most among its 10 major industry groups, with all in negative terrain.

The Nasdaq declined 54.57 points, or 1.1 percent, to 4,653.60, off 2.7 percent from last Friday’s close.

News Sources:  CNN Money & CNBC


Dec 11th 2014 – Mind The Gap

mind_the_gap

Today was a good example of why I do not sell into a panic.  I prefer to get out at the open the following day.  Often the best trading concepts are the ones that may not make obvious common sense at first.  The idea being that we can often expect a gap open recovery the next day after a panic.  In my testing, it has shown up over and over and grabs back a little of the losses from the previous day’s fall.  This is exactly what happened this morning.  We have no way of knowing what will happen next, but statistically speaking, over a series of trades, it pays to “mind the gap”!

Additionally, today was a reversal of a reversal of a reversal, then it reversed!!!  What a fickle lot we human beings are.  We had a sell-off on Tuesday only for it to recover strongly and print a bullish reversal hanging man candle. This marginally reliable bullish signal failed and a major selling day happened yesterday followed by a quick recovery today…that was quickly sold into the close.  This is why I don’t like relying or trading on candlestick patterns…they fail all the time!

The current trend is in no man’s land right now, stuck between a high and a low.  But I think we may see further weakness before a new all-time high can be put in.  Today was a wild ride with more volatility ahead I think.  Keeping my powder dry till the path clears.

Market News:

U.S. stocks advanced on Thursday, cutting weekly losses, but euphoria over increased retail sales in November faded as oil fell to another five-year low and renewed worries of a government shutdown.

Stocks finished far off session highs, with Wall Street starting to dial back gains after crude dropped below $60 a barrel, and the pullback escalated amid efforts to block a spending bill in the House, sparking worries of the government closing.

Figures from the Commerce Department had retail sales rising 0.7 percent last month, the largest increase in eight months.

After the stronger-than-expected retail report, the National Retail Federation told CNBC its forecast “is right on track” for a 4.1 percent sales growth this holiday season.

Separately, the Labor Department reported fewer Americans filed unemployment claims last week.

Speaking at a conference in New York on Thursday, Treasury Secretary Jack Lew called lower energy costs an unquestioned positive for the U.S. economy.

On the New York Mercantile Exchange, oil futures for January delivery fell 99 cents, or 1.6 percent, to $59.95 a barrel, it’s lowest since July 2009. Gold futures for February delivery dropped $3.80, or 0.3 percent, to $1,225.60 an ounce.

Friday:

8:30 a.m.: PPI

9:55 a.m.: Consumer sentiment

News Sources:  CNN Money & CNBC


Dec 10th 2014 – The Trend is at the End

Geni

I think the main trend changed to the down side starting on the 5th of December when the high of 2079.47 was put in.  I had expected it to break above 2080 before selling, but I guess it got pretty close.

Therefore, my idea of an imminent new all-time high has been busted.  However, I am hardly crying in my soup, I will be collecting some of the biggest profits I have ever made from the market tomorrow morning.

So after such a huge move up it is time to clear decks and keep the powder dry.  My ideal scenario would be a sharp gap up tomorrow followed by more selling, but the market rarely cooperates with my best wishes…so, we’ll see!

Market News:

U.S. stocks closed sharply lower on Wednesday, furthering the week’s losses, as the price of crude fell to a new five-year low and the Organization of Petroleum Exporting Countries cut its demand outlook for next year.

The Dow Jones Industrial Average fell more than 280 points before recovering some of those losses to trade about 270 points lower.

The Energy sector led declines on the S&P 500, with a fall of more than 3 percent in the hour before the close.

OPEC reduced its estimate for 2015 by roughly 300,000 barrels a day, with the cartel saying the effect of the 40 percent drop in prices on supply and demand is uncertain.

After falling as low as $60.43 a barrel, Crude futures for January delivery closed down $2.88, or 4.5 percent, to $60.94 a barrel, the lowest since July 2009. The February gold contract dropped $2.60, or 0.2 percent, at $1,229.40 an ounce on the New York Mercantile Exchange.

Toll Brothers traded lower after the home builder reported mixed quarterly results; Yum Brands fell after the operator of Taco Bell and other fast-food brands cut is profit outlook for the year for a second time; Costco Wholesale initially climbed after the warehouse-club operator posted a better-than-expected quarterly profit and GlaxoSmithKline declined after Bank of America Merrill Lynch downgraded its stock to underperform from neutral.

Thursday:

Earnings: Lululemon Athletica, Ciena, Adobe Systems, Quiksilver, Esterline Tech

8:30 a.m.: Initial claims

8:30 a.m.: Retail sales

8:30 a.m.: Import prices

10:00 a.m.: Business inventories

1:00 p.m.: $13 billion 30-year bond auction

News Sources:  CNN Money & CNBC


Dec 9th 2014 – Asian Markets Can Be Scary

Crashing market

Holy China!! The Shanghai market crashed a whopping 5.31% overnight causing panics in world markets, that’s equivalent to the Dow Jones going down 900 points…and that was not the worst market hit, Argentina went down 7.5%!

So, despite the best of efforts around technical analysis and forecasting, sometimes panic ensues, as is the nature of man.  I have also seen this kind of volatility in Japan in the recent past, it is nothing short of extraordinary.  I am glad I choose to invest in a market place that isn’t subject to such insane swings on a regular basis.

Despite the panic, I am reminded of the age old investor philosophy:  ‘To keep our heads when all others around us are losing theirs’.  The amazing recovery means I still have no sell orders in place for tomorrow morning.  I am absolutely delighted with my hall from the October lows and I will look forward to taking my profits soon, perhaps after the Santa rally I’m expecting.

It is still my firm belief that this was a counter trend move caused by a short term fear driven overreaction and we will have higher prices again before too long leading up to Christmas.  So bring on more dip buyers; a recovery is almost guaranteed in Asia overnight tonight, possibly helping push on the US market tomorrow.

Additionally, from a candlestick point of view, the market action today has caused a very bullish candle to close, showing the high probability of higher prices again tomorrow.

Market News:

U.S. stocks ended mixed on Tuesday, with the Nasdaq Composite rallying back from stiff losses, as investor concern about the global economy ebbed.

Tuesday’s drop had “not much to do with what is going on in the states, there is no shift in fundamentals,” said Peter Cardillo, chief market economist at Rockwell Global Capital.

Another market analyst said investors more worried about the dearth of data to support the notion that lower gasoline prices are translating into increased consumer spending during the holiday shopping season.

Whole inventories rose 0.4 percent in October versus expectations for a 0.1 percent gain.

Another report Tuesday had small business optimism rising in November to its highest level in almost eight years.

The Shanghai Composite Index tanked more than 5 percent and gold jumped 2.9 percent as investors sought a safe haven.

Moving to propel local governments from using hazy financing instruments to raise funds, China stepped up its efforts at creating a more transparent municipal bond market.

Wednesday:

Earnings: Costco, Hovnanian, Toll Brothers, Lands’ End, Vera Bradley, Men’s Wearhouse

1:00 p.m.: $21 billion 10-year note auction

2:00 p.m.: Federal budget

News Sources:  CNN Money & CNBC