2009 December | The Wall Street Shuffle Blogs

Archive for December, 2009

Are You Getting Ready for Next Year?

The bull market for 2009 has been unusually strong and a trend which has been rather consistent. From a trading or investing point of view, it has been one of the easier price trends in which to participate. Now by no means do I imply that trading is easy. It is never easy. However, the bull trend which began in March has had only minor corrections during the price rise. Bull trends with constant reversals create many opportunities to make a mistake in investing. The bull market of 2009 was one of the most consistent price rises you will witness.

The bearish trend in 2008 was also clearly identified, if you knew what you were looking at in your charts. My question is whether you feel comfortable in looking at a price trend in a stock or commodity chart and developing a trade plan from what you see? If the answer is no, then you need to make that part of your new year’s resolution for 2010. Learn as much as you can about how to read a price chart. If you do, you will be rewarded for many years to come.

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2009.12.23 / no responses / Category: Bulls and Bears, TCC, The Stock Market, Uncategorized
Irrational Exuberance in the gold bull market rally?

Everybody just loved gold. Radio and Television ads continuously pleaded that everyone, even your children, should own gold. And the public rushed in as gold moved above $1,100 and $1,200. Now we will see if they have the staying power to hang on during the first major correction of the bullish trend.

The US dollar is the supposed culprit in this sell off, but I am not so sure. Every market reaches an over reaction point. All trends eventually have a correction, because the last of the eager sellers finally quit selling or the last of the eager buyers finally quit buying. Every bull trend easily reverses as soon as the next buyer steps aside and says “I don’t think so. I’ll wait.” That is what we have now in the gold market.

How far can this decline go? Considering the amount of “new” buyers and investors in the gold frenzy, who knows. Some will come out and sell early, because they have no stomach for the correction and others will try and hold on. It is best to wait until you see a clear sign that prices have stopped their decline. We have not seen a bull market that was built upon such a foundation of hype for some time. It will be interesting to see how this plays out.

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2009.12.17 / 1 response / Category: Bulls and Bears, TCC
The Big Lie in Trading Education

There are lots of trading educators out there. Some spend days and days teaching the new student all about support and resistance or some other simple concept. I hold three books in my hand that teaches the same amount of material for a fraction of the cost of the course.

Other courses or paths to education imply that trading is easy. Just buy software or attend a webinar and within a few days you are looking at a BMW brochure looking for your next car purchased with your dollars earned on a daily basis. Well you and I know that is nonsense, but there are still so many that line up and sign up.

The transition from “working for a living” that earns a certain income for hard work to trading for a living that offers uncertain income that fluctuates widely on a daily basis is incredibly difficult. But I would reduce my sales, if I were to tell the potential student this was the case. Instead, many course vendors imply that trading is not difficult. Just give them a week and they will have you ringing up profits like a cash register. Well, if that is the case, ask them how many of their students are actually trading for a living after one year from graduating the class.

You would be shocked if you knew the answer. Most organizations do not make such a survey. Why? Because if they had hard evidence of how many, it would open them up for potential legal claims in the future. Hard to make a sales pitch on how easy it is to become a trader, if you know by survey that less than 10 percent of your students actually learn to do it.

Let me make this simple. You cannot learn to trade for a living by taking a one week course! Oh there are a few who will catch on to a methodology and turn the corner and change from being a big time loser to having a small degree of success. But I am talking about the vast majority of the students who are new to trading. “But there are testimonials about students finding success.” Let me tell you about the testimonial game.

Ok. I teach 100 students and they go out and begin to trade. Some of the students will have a great winning streak. Even if the students merely sat in an empty room and watched Lady Gaga videos, some of the students who trade will have a streak of winning trades. It is nothing but a fact of probabilities. Now some of these students will be so excited about their winning streak they will write a letter or send an e-mail to the course vendors. “I made $10,000 in my first week of trading! Thanks for the great education.”

Now the course vendor will be able to post that letter on their website. It is factual, but it may represent only 5 percent of their students. As I teach more and more students, I get a few more letters, but they represent only a small fraction of the total experience by all the students. As you can imagine, they don’t print the letters that say “What a crock. A total waste of my time!”

Now I have taught students in the past and it may look like I am trashing my own industry. In fact, I am merely coming out of the closet and telling the truth about our industry. You are not told about how few people who take trading courses, attend webinars, or buy a boatload of books actually succeed in trading to the level of replacing their income from their “real job”. It is an extremely low number. Just know that and realize that, if I am selling you a course, I will most likely tell you about the few successes and not the experience of the majority.

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2009.12.15 / no responses / Category: TCC, Uncategorized
Market Update for the US Dollar, gold, and the stock market

I have mentioned various trends for the past several days on the Wall Street Shuffle and I wanted to spend some time updating these points of view.

Stock Market

In regards to the stock market, Dan and I mention warnings that appear from time to time that may change the longer term landscape in the investing environment next year. The current trend is unquestionably bullish and this trend must be respected. Investors may want to take some profits off the table, if they have any, but there is certainly no sign yet that the bullish trend has ended. Long positions are still paying off better than short positions. Once we see a change in that trend, we will let our listeners know the bullish trend may be ending. That is not what we see today.

US Dollar:

I recently mentioned that the dollar index (DXZ09) was holding above the 76.00 level very well and that traders or investors should be on the alert for the possibility that the index could rise simply because buy stops could be triggered by large quantitative funds getting out of short dollar positions. This buying frenzy is taking place today.

The main reason for my forecast was because the Japanese Yen had risen for three consecutive days and that this kept a small lid on the dollar index rally. Any reversal of the Yen’s rally could help the dollar index blast higher and trigger those nearby buy stops. This event began today as the Yen is down more than 150 points.

GOLD:

Dan loves gold from a longer term perspective and likes to hold physical gold. I prefer the futures market to trade the gold and silver markets. WHY? It is simple. Leverage. For less than $5,000 margin, I can control $112,000 amount of gold. If I am right about my market call, I obviously benefit from the use of the margin. If I am wrong, then I get hurt just as quickly. However, with training you can learn to control that risk and profit over time.

I have recently warned our audience about the price of gold. I saw the potential for a change in the dollar and I also was watching the energy market decline. Now for full disclosure. Did I go short gold futures? No I admit that I did not. However, as an advisor (I am a registered commodity trading advisor (CTA) I recommended clients to sell their gold coins, which were at a considerable premium to the spot gold price. Are they happy? A $100 decline in gold has them with a broad smile – at least at the moment. Clients are fickle beasts.

Trends are based upon perspective – not necessarily fundamentals

There are many times price trends make no “sense”. New traders must understand this. The trend of any market is based upon the current fundamentals of supply and demand and the perception of future supply and demand. The perception of the future is often more important than the current conditions. Keep this in mind as you analyze price trends in the future. If good news cannot drive prices higher, then the perception of the marketplace may be that all the good news is already priced into the market. The reverse is also true.

Sometimes a market can price in such bad news that a low is made simply because the news or perception cannot get any worse. This is what we saw in March of 2009. The market priced in the US economy going over the cliff. A change in that perspective created the bottom. It was not a change in the fundamentals per se that was the critical factor. It was the change in perspective.

The comments I make on the program are generally from a trader point of view. I have been a professional trader for 30 years, so that is my perspective obviously. However, I promise to do my best to teach our audience how they can begin to analyze the marekts themselves and become better investors and traders in 2010.

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2009.12.11 / no responses / Category: TCC, The Stock Market