Traders and investors in the equity markets have been enjoying watching as prices have been breaking to all-time highs.
Of course the big question in everyone’s mind is where will this bull run end and is there anything I can do to protect my capital when it does? While no one can predict exactly where this price movement will reverse since there is no supply level above to signal this, there are some tools that traders can use to identify when the bullish pressure has subsided and therefore marked the time for profit taking in your portfolio.
Source: Sharekhan - TradeTiger
One of the most common methods is to use a moving average on your chart. The average summarizes the past trend and momentum and when prices start breaking down...
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Articles
What Is an Index Fund?
An index fund is a type of mutual fund or exchange-traded fund (ETF) that holds all (or a representative sample) of the securities in a specific index, with the goal of matching the performance of that benchmark as closely as possible. The S&P 500 is perhaps the most well-known index, but there are indexes—and index funds—for nearly every market and investment strategy you can think of. You can buy index funds through your brokerage account or directly from an index-fund provider, such as BlackRock or Vanguard.
When you buy an index fund, you get a diversified selection of securities in one easy, low-cost investment. Some index funds provide exposure to thousands of securities in a single fund, which helps lower...
The most important financial center in the world? A fabled place of silver spoons and golden parachutes? A hub of cut-throat capitalism? Or all of the above. Wall Street is many things to many people, and the perception of what it really is depends on who you ask. Although people’s views of Wall Street may differ widely, what is beyond dispute is its enduring impact not just on the American economy, but on the global one.
What Is Wall Street Anyway?
Wall Street physically takes up only a few blocks that amount to less than a mile in the borough of Manhattan in New York City; however, its clout extends worldwide. The term “Wall Street” was initially used to refer to the select group of large independent brokerage firms that dominated...
Successful investors and traders alike usually have a rule-based strategy that provides them with a financial advantage or edge. A combination of institutional supply and demand, fundamental and technical analysis are typical components. Another analysis we can add to the recipe is investor mood, commonly called sentiment. In other words, do market participants feel bullish, bearish or neutral about the future?
While each region and country has a unique economy, given the volume of international trade, those individual economies are part of a larger global economy. The U.S. economy is the largest in the world but, more importantly for this analysis, it is also the last market traded on the daily clock. This allows U.S. investors a...
The latest bullish meme floating around Wall Street is that President Donald Trump is going to unleash a new era of big fiscal spending. As a result, lackluster U.S. economic growth is going to finally accelerate to the upside. Inflation is going to pick up. In a nutshell, this is the narrative which has triggered a huge rip higher in the U.S. stock market.
Be careful accepting that bullish narrative as gospel.
Take a look at history – it offers investors some interesting perspective. In particular, the post-election market between 1980 and 1982. On November 4, 1980, Ronald Reagan was elected president. The country appeared to be riding high.
What happened?
The stock market rallied – big. In fact, the S&P 500 jumped 7% from the...
In November of 2016 Americans will choose a new president. A detailed study of history can give us some interesting clues on how the USstock market might behave regardless of who wins.
Many market analysts have noted a general tendency for the stock market to experience a meaningful price bottom roughly every four years. Of course, the exact timing from low to low does not always correspond to an exact four year cycle. Still, there does appear to be some correlation between the action of the stock market and the four year period that extends from one presidential election to the next. This is most commonly referred to as the “Election Cycle.”
The Election Cycle
The “Election Cycle” as generally defined, consists of the...
So, an analyst at Citigroup reckons that the FTSE 100 should double in value over the next 10 years. Actually, were that to happen (but see below) it would be no big deal as the FTSE has doubled in value no less than 4 times since its launch in April 1984 and, each time, it has taken far less than 10 years to do it –
April 1984 @ 1150 - doubled to 2300 by May 1987 = 3 years
Oct 1987 @ 1580 - doubled to 3160 by Sept 1993 = 6 years
June 1994 @ 2900 - doubled to 5800 by Feb 1998 = 3.75 years
March 2003 @ 3500 - doubled to 7000 by Oct 2007 = 4.5 years
So, on the face of it, the idea that it might double over the next 10 years is no great shakes; history of the FTSE shows that it could do it in the next 3 to 5 years, tops! But - and...
Over the coming week, the legion of earnings announcements will hit the market and will continue over the next few weeks. Being in the seasonally most volatile period of the year and hand in hand with some very interesting technical developments recently, we look to this period to bring in precious volatility and exciting price action.
The big event over the last several days in the financial markets is a fresh, multi-year breakout in Gold to new, All Time High. In our June 28th Newsletter as well as some recent discussions in the Evolution Trading Studio, we pointed out some Bullish price behavior and that the Gold market was beginning to "heat-up." It is gratifying to see the price follow through on our expectations, and the time has...
First, it was Citigroup disappointing with their earnings shortfall, and this, along with less-than-stellar retail sales numbers for December, sent stocks roiling on Tuesday. The Dow and S&P finished the day lower by more than 2%. To add insult to injury, Intel's lackluster earnings release after hours pummeled those shares, setting in motion a plunge in the stock index futures. Translation - the market's in for more selling (at least in the early part of the year).
Can things possibly get any worse? Yes, they can. People seem to possess very short memories. After all, it's only been 4 years since we suffered through one of the worst Bear markets (caused by the technology-led recession) in history. How bad did things get then? From the...
Most commodity futures markets will tip their hand when it's time to reverse direction. Knowing how to read its language is the challenge. It's not easy. This is important information, since this is all you really need to know! Volatility is a clue as well as price synchronization. Read on about these unique observations. This information can be applied to most any freely traded market of any time frame.
Observation Trading Notes:
Keep watching the five minute futures chart with the horizontal line tool to see price support and resistance. Then confirm this action on the one-minute charts.
We have all seen the stair step action of a trending commodity futures market. Sometimes you can keep buying those corrective spike dips into the...
With the Dow making new highs last week, we are now well and truly into unchartered territory. So how should you define the new targets?
The action over the last week satisfies an expectation we have had for the year 2006: a fresh all-time high. The move into new-high territory was not an easy breakout. In May, the DOW crept to within 90 points of an all-time high and thereafter sold-off to lose 8% of its value throughout the next couple of months - this was one of the strongest pullbacks the market had since the major low in 2002. In July, the market found its footing and once again made a second run for its all-time high. It has been all-up ever since and into today. Here's a toast to the Bulls for a well earned victory! Now it's...
In my view, we are still in a secular bear market and currently at a point of extremely high risk. We have now passed the period of seasonal strength for the year - a time when spirits are high and the market performs better than at any other time on a historic basis. A study in the December 2002 issue of the American Economic Review reported that the average stock market returns from Halloween through May Day (the so-called "winter months") were significantly higher than equity returns from May Day through Halloween (the "summer months"). The findings were that the summer months' returns have averaged so much less than those of the winter months that almost all of the stock market's long-term returns have been produced during the...
Since my last Special Alert which was written at the start of May with the theme of SELL IN MAY AND GO AWAY, I have had a lot of calls and e-mails asking if I had written another since. I had not because I saw no reason to veer from the message in the prior Alert. The early May Alert was probably the most technical Alert I have written and I concentrated on the monthly charts. That is not something I usually do. Typically, I only refer to a monthly chart when I think that "bigger picture" viewpoint is seriously worthwhile. My focus was almost exclusively on the monthly charts because I believe the April 26th high was the orthodox top for the recent "reprieve rally" that began with the March 2009 low. When I went over my monthly charts...
In my view, we are still in a secular bear market and at a point of high risk. However, we are now in the seasonally strong time for the year - a time when spirits are high and the market performs better than at any other time on a historic basis. A study in the December 2002 issue of the American Economic Review reported that the average stock market returns from Halloween through May Day (the so-called "winter" months) were significantly higher than equity returns from May Day through Halloween (the "summer months"). The findings were that the summer months' returns have averaged so much less than those of the winter months that almost all of the stock market's long-term returns have been produced during the winter months. The obvious...
For daytraders and scalpers looking for a quick trades or even a bit longer hold from 5 minutes to 1 hour, it's not easy to do. When day trading stocks, not knowing which way the market will go or the sentiment of the next few minutes is the fastest way to go broke. So watching the breadth such as the composites such as NASDAQ, DOW, or S&P 500 is a fundamental tool used to day trade effectively. Getting an idea what the immediate sentiment is crucial is seeing when and where the buyers or sellers are coming. Believe it or not, stocks are not islands and are not random. Participants move in and out for reasons others prices of stocks. There is always a correlation to some type of data, be it news or other related stocks. So finding a...
The danger signal has been on my Alerts since August 6th and some people have asked for me to explain why since the market has been going up since that time. First of all, my objective in writing these is not to be a short term trading service, it is to provide you with a big picture look of where we are in the overall cycle and what that is likely to imply. That is why I frequently refer to "the sequence of events in the cycle". Let's go over that for a moment. If I was talking about seasons and began advising my readers to prepare for a hot summer, everyone would wonder whether I had lost my mind because we are in November and the proper comments would have to do with winter, not summer. Everyone knows "the sequence of events" in the...
I began putting the DANGER signal on my Special Alerts to "alert" everyone to Danger (duh). I know this stage of the market well as I have seen it time and time again in many different markets. As I said over and over, "the job of this rally is to draw in as many players as possible" (and then give them a thorough drubbing for being so foolish). There were two "turning points" to potential tops (August 7 and mid September). Both were tops, but only temporarily (very temporarily).
MARKET TOP - (The title of this article), I can't get much more "up front" than that it means that everything I was looking for to produce a market top had occurred and that anything beyond that would send me back to the drawing board. I now think the odds are...
Before Putting Your Money on the Line - You Should Know the Basics
If you are like most people, you work hard for your money and the last thing you want to do is see it evaporate in your trading account. Throughout my journey in the markets, I have yet to find a fool proof way to guarantee profitable trading, but what I am certain of is that you owe it to yourself to fully understand the products and markets that you intend to trade before risking a single dollar. What you will learn from this article is merely a stepping stone but without fully understanding the basics you may never lay the foundation necessary to become a successful trader.
When most people think of commodities they imagine fields of grain or bars of gold...
To get a computerized system edge, you need to figure out the basic human trading weaknesses and include them in your software. Anyone can buy a trading system these days, but it will have little value unless it is unique and different from the crowd. Here's some easy-to-understand ideas I use that add in the human fears!
These days it's very easy to put together a computerized commodity trading system. The average software program will literally write and optimize itself. You can buy a "black box" that will give you wonderful claimed performance. But what does that tell you? If anyone can do it, then it's of little value and uniqueness in the market and will become a loser over time. To get an edge, you need to figure out the human...
Fibonacci Retracements - A Precision Trading Strategy
Deciding on a topic for this article, I reviewed the top ranked articles in T2W and found some fantastic material. I did not however find inspiration for a new article idea that readers may like. Perhaps strangely, I then looked at the lowest rated articles. I noticed that two of them discussed Fibonacci which both surprised and intrigued me. It was not necessarily that people did not like Fib, just that perhaps it had not been explained well enough for their liking. I am a huge Fibonacci fan and it plays a big part in my trading so the following will explain how I use it to trade successfully.
While this strategy can be applied to almost any market, I will focus on the Dow Jones...
Parallel channels are one of the most commonly seen patterns in charts. They give many opportunities to profit whether or not the market is trending. Horizontal channels are better known as trading ranges when the market is not trending; rising channels occur when market is trending up and falling channels appear when the market is trending down. Regardless of the market conditions seen, parallel channels can be found in all shapes and sizes.
Trade Recap
During the weeks in mid-June to early July, 2007, S&P 400 MidCap E-mini future has been moving up steadily inside a rising channel, as seen on the 60-minute chart below. Although the MidCap has been moving near the all time high, it has been trading in a large trading range. This...
"We begin with a clean slate"
There is something refreshing about the first day of a New Year - for a brief period of time, it feels like a clean slate where we have the opportunity to begin anew and possibly right the wrongs of the year that just ended. Let's all hold that thought and see if we can "will" some good things for 2007. It would appear that the machine that runs our country can use all the help it can get.
As bad as the news was on occasion last year, the market put in a good showing. The following performance for the major indices is worth viewing:
The stock market did well in 2006. It was robust into the spring; had a sharp decline into the summer and then came on strong the rest of the year. The blue chips were the...
Is there a correlation between Crude Oil Futures and the Dow? And can this correlation be quantified?
In my August 30, 2006 market summary, I wrote how "we would be foolish not to avail ourselves of the inverse pricing relationship between crude-oil and the Dow Jones Industrial Average." Since then, the price of crude has fallen $6.35 and the Dow is 227 points to the upside.
But, now that the distance between these two indicators appears to be excessive, will this wide discrepancy begin to shrink?
In August, energy prices were approaching $80 a barrel, the major equity indices were flat, but as the continuous NYMEX light sweet crude-oil futures contract (CL #F) was sputtering, the markets began spurting upwards. If you compare the...
The emerging market meltdown that occurred between May 12 and June 13, 2006, had an impact on currencies, the carry trade and incredible growth in derivatives over the last decade, as described in Part 1.
In summary, here are the issues we will be examining in part 2.
An index that has been uncannily accurate in providing advance warning of emerging market trouble and what it is saying now.
What the yield curve inversion for the third time in the last six months means. How accurate has it been in the past in warning of a pending slow down?
Based on the importance that real estate and related construction activities play in economies around the globe, what impact will a real estate correction have?
Real wage growth, a principal...
In this article we look at the current market correction with an eye on price and volume and observe how this has marked changes in market sentiment in the past.
The financial papers do not have a problem creating plausible stories that attempt to explain the recent market downturn. Although many fundamental factors have contributed to this recent blowout, as technicians, we take a completely different perspective. Besides looking for clues that might give us insight into the causes of this correction, we are looking for symptoms of a reliable recovery as well.
In the past 37 trading days, the cues (NASDAQ-100: QQQQ) went from an intraday trading high of $40 to a $36.62 close on 7/25/06. Most technicians will automatically inspect...
What effect does conflict and war have on the stockmarket? In this article we look at past wars/conflicts and examine what the future might be with the current conflict in the Middle East.
Maybe I should stop taking my two-week Nantucket trip each summer. Last year during our stay we were glued to the news over the London terrorist bombing, and this year it was Hezbollah's kidnapping of two Israeli soldiers, prompting the current fighting in the Middle East.
There's a thought on Wall Street that investors should be
"buying when the cannons sound and selling when the trumpets sound."
When thinking about this view I harkened back to mid-March of 2003, when on the eve of the current Iraq war, Schwab's Investment Strategy Council (which I...
A look at what is happening in the markets at the moment and if this is just a correction or the start of a longer term down-trend.
As I was about to write my alert, I happened to see the above quote and figured it was just too good not to put in the letter. In many ways, it explains the serious problems we are currently facing. Our illustrious leaders in the U.S. government (and I direct this squarely at both parties) have failed us in the biggest way. They have depreciated our currency; created incredible debt; run up mind boggling deficits; created a derivatives time bomb; got us into two wars that we can't possibly win (but they cost us dearly in money we can't afford to pay and precious lives); succeeded in making us the world's...
In the first part of this article Return of the Bear - Part One we looked at secular patterns the stock markets move in and the current state of the Bull Market.
The Monetary Background
I've always believed that the "rate-of-change" (ROC) of interest rates is more important than the actual level of interest rates. If levels are so important, how can one explain the extreme economic weakness in the 1930s when rates were in the basement compared to relative prosperity in the 1970s and 1980s when rates were in the stratosphere?
caption: Chart 8. Vertical lines show when ROC crosses above +30, stocks become more risky.
To prove this point, Chart 8 compares the annual change in the level of the Discount Rate to the S&P Composite. The...
A look a the current market correction - the 'canary correction' and what may have caused it.
When the Morgan Stanley Emerging Markets Index Exchange Traded Fund (EEM) hit an all-time high of $111.10 on May 9, 2006, it marked a meteoric rise from its humble launch price of $33.37 a little more than three years before. Volume had also grown exponentially from a mere 36,300 shares on April 11, 2003, to an average daily exchange of more than 3.5 million shares by early May 2006.
caption: Figure 1 - The Morgan Stanley MSCI Emerging Market ETF (EEM) dropped sharply between May 9 and June 13, 2006. May registered the biggest monthly decline in the history of the index, and the drop was only half over.
Chart provided by www.Genesisft.com...
Introduction -
There are occurrences in the business cycle when the consensus of my proprietary primary trend indicators find themselves within the confines of the bearish camp. Unfortunately, now seems to be one of those occasions. The last time the technical, economic, and monetary indicators aligned themselves in such a negative way was the turn of the millennium. Then, as now, for the benefit of my subscribers, and their valued clients and investments, I feel duty-bound to publish a Special Report setting out the arguments for the impending scene about to unfold.
In early 2000 it like the market was at, or close to, a secular or very long-term peak (albeit if not in absolute price terms, certainly in inflation-adjusted ones)...