Traders' Library

Monthly Market Outlook Webinar with John Person

What: Free Exclusive Webinar

When: Wednesday, August 4, 2010 | 8:30 PM EST

Where: Click here to register!

John Person will be having his monthly market outlook - some of you already know how John’s Techniques have helped many traders identify large market moves and profit handsomely! This time will be no different John promises not to pull any punches. John will:

· Cover some of the market sectors that best perform in different economic phases.

· Cover stocks and commodities picks that perform best during specific times of the year from a seasonal perspective.

· Show you how to use ONE of his powerful price indicators available to determine whether you should be BUYING dips or SELLING rallies.

· AND as if all of these factors weren’t enough, John will introduce you to another factor and force of trading – Norman Hallett of The DISCIPLINE OF TRADING.

As part of John’s efforts to complete a session with SOLID information and training, John has asked Norman to participate on giving our subscribers some of his powerful views on this subject to help our clients put better emphasis on the way they trade.

Well… when you have a Master on Trading and a Master of Mental training the forces are with YOU!

Register now!

Interview with Mark Larson

Sinclair Noe on KFNN 1510 Financial Radio interviewed Mark Larson, author of 12 Simple Technical Indicators That Really Work.

Take a listen!

How to Take Money from the Markets

Steve Palmquist, one of our great blog contributors, has a new book coming out next month.  Here is a sneak peek from How to Take Money from the Markets: Creating Profitable Strategies Plus Six Ready-to-Use Systems.

 

Chapter 7: Market Adaptive Trading

 

Trading is about being positioned to make profits if a stock, or the market, does the usual thing in a given situation. If we find that a specific price or volume pattern is most often followed by price increases in bullish markets, then we focus on taking long positions when we see the pattern form during a bullish environment. If we find that another pattern is most often followed by price declines during a bearish environment, then we focus on taking short positions when we identify the pattern in bearish market conditions. There is no way to predict the future and know what the outcome of any particular trade will be. We can, however, discover what the most likely outcome of a trading pattern is over hundreds of trades in similar market conditions, and thus have a reasonable expectation that over a number of trades, in similar conditions, profits may be realized.

 

The market has three basic modes: bullish, bearish, and trading range. It really can not do anything else. There is no way of knowing what the market will do next year, or over the next five years, and it is odd that so many people gamble their life savings based on some stranger’s prediction of future market direction. Listening to market forecasters is basically “hold and hope.”

 

Hope is not a trading strategy.

Click here to continue reading...

 

Download to read the rest of Chapter 7 and take a look at the Table of Contents and Index.

Brand New Jea Yu DVD -- Sneak Peek

We are cranking out all the DVDs from our Legends of Trading Forum in April.  The first one is Jea Yu's DVD, Short-Term Profit Hunter: Stochastics, Moving Averages and the Mindset to Make You a Winning Trader.

You can Pre-Order now!

Here is a clip from the session!

Yesterday's late sellers were today's early buyers

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June 15th, 2010

 

Join us for a FREE webinar hosted by PFG Best on July 29th at 3:30 pm Central to discuss "Futures Market Slang" : http://pfgbest.com/webinar/eventSummary.asp?skey=337713234

 

Monday's horrendous close had the bulls nervous and the bears salivating, but despite a lack of positive news or obvious catalyst Tuesday belonged to the bulls. 

 

I recently read an internet blog that shared the same pessimistic reality that I have spoken about in this newsletter from time to time.  It stated that based on the open interest of calls and puts in the SPY (the ETFy version of the S&P 500 index) the S&P would need to be a little above 1100 at expiration to cause the most pain to the most speculators and this is what the blogger expects to happen.

 

Unfortunately, I agree; I believe the markets have a tendency to cause the most amount of pain to the most people.  Don't forget that beating the market is a tough game...greedy investors chased Madoff and his 12 to 13% annual track record straight into prison, so expecting "easy" money is unrealistic.  I am not saying that profitable and lucrative trading isn't possible, but it is my job to point out that as a trader it is important to be able to accept the good with the bad.  That said, although our conclusions were made via different analysis relative to this blogger, the outcome is the same. 

 

We have been looking for the S&P to trade into the 1120's and maybe as high as 1130.  Today's test of the 200-day moving average (near 1108) puts us well on our way.  However, President Obama will be addressing the country tonight and he has been called by some un-named CME floor traders "Mr. Sell Signal".  Therefore, if you have caught this up-move don't get greedy holding out for 1130...look to tighten stops and take some risk off of the table.  Assuming we break 1108, the next resistance will be 1117 and then again near 1127.  There are likely many buy stops above and this should translate into an extension of the rally but he bulls shouldn't get comfortable.

 

If you are trading the NASDAQ, resistance lies near 1905 and again near 1930. 

Resistance in the Russell continues to be 661 but we think that 675 will be seen sooner rather than later.

 

3 Ways To Play Sovereign Debt Crisis

3 Ways To Play Sovereign Debt Crisis

As the sovereign debt crisis continues to take its toll on Europe and fails to linger away, currencies continue to deteriorate, government bond yields continue to rise and stock markets remain volatile.  Depsite the fear that this crisis has brought on, there are four ways one can play it.

Japan

Many believe that the next country to be hit by the crisis is Japan.  Traditionally, the Japanese Yen and Japanese bonds have been a safe haven in times of uncertainty; however, this is no longer the case.   According to a study conducted by Moody’s, Japanese government debt is estimated to be more than 200 percent of the nation’s gross domestic product (GDP), which puts limitations on the government’s ability to spend and implement additional fiscal stimulus plans to stimulate a much battered economy. 

In regards to interest rates, the Bank of Japan needs to keep interest rates at or close to zero and continue its asset-purchase program to curb the effects of deflation and worsen the overall health of its economy.  To make things even more challenging in the Asian nation, Japan’s demographics are highly unfavorable.  The Japanese population is aging and shrinking, which eventually will result in the labor force retiring and cashing in on government bonds, which is likely to result in the Japanese government borrowing more at higher yields from more prospering countries.  

With the future looking relatively gloomy for Japan, some possible plays include the ProShares UltraShort MSCI Japan (EWV), which aims to seek twice the inverse daily performance of the MSCI Japan index.  A second play includes the ProShares UltraShort Yen (YCS), which allows one to bet against the Japanese Yen.  EWV closed at $47.29 on Tuesday and YCS closed at $20.65 on Tuesday.

Corporate Bonds: A New Safe Haven

By Kevin Grewal, Editor at www.SmartStops.net

As companies continue to outperform Wall Street’s expectations, bonds issued by non-financial companies are the most expensive they have been since the start of credit debacle and investors are starting to shun away from Treasuries turning to corporate debt.

According to Bank of America Merrill Lynch Index data, Chevron Corp.(CVX) and Johnson & Johnson (JNJ) led a drop in U.S. industrial company debt yields to 130 basis points more than similar-maturity Treasuries.   Additionally, the overall U.S. corporate bond market is up 1.3% this month and is expected to post its fourth straight month of gains.  In comparison, U.S. Treasuries have returned a mere 0.4 percent for the month, after witnessing a decline of nearly 0.85 percent the month before. 

Another indicator that corporate bonds are gaining appeal is overall corporate credit risk appears to be declining.  The Markit CDX North America Investment Grade Index Series 14 continues to increase as it gained 1.2 basis points, reaching a level of 89.4 yesterday.  The index is known to be used as hedge against losses on corporate debt or a way to bet on corporate creditworthiness.  Increases in the index generally indicate deterioration in investor confidence and decreases in the index indicates improving investor confidence.  Overall, the consensus behind corporate debt is that it is likely to outperform credit-default swaps. 

Four Reasons Google Is Attractive

By Kevin Grewal, Editor at ww.SmartStops.net

Despite the continued hype behind its competitor’s innovative products, and its withdrawal from China, Google (GOOG) may be worthy and for good reason.

The search engine giant’s emergence into the mobile device world through its Nexus One and Android software stack which includes an operating system has been a hit.  Recently, Google announced that 60,000 cell phones equipped with Android are shipping on a daily basis.  Additionally, advertising on the Android continues to increase.  According to advertising firm AdMob, U.S. ad impressions on Android devices have increased from 27% in November to 42% in February and worldwide ad impressions have increased by 2%.  What makes Google even more appealing on this front, is that it appears to be taking advertising share from Apple’s iPhone, which has seen declines of ad impressions from 55% to 44% during the same time frame.  Furthermore, Google’s mobile phone can be found on Verizon (VZ), Sprint (S), AT&T (T) and T-Mobile’s platforms.  

A second factor that is likely to support Google’s strength is its upgrade to its online package of word processing and spreadsheet programs, Google Docs.  The changes, which were introduced on Monday, include several editing tools for word processing and quicker ways to fill cells in spreadsheets, which will enable it to directly compete with Microsoft (MSFT) Office.  The beauty behind Google Docs is that all of its applications are hosted over the Internet, whereas Microsoft’s software is typically installed on individual’s computers or workspaces.

Another factor likely to bolster Google’s attractiveness is the recent talks about developing a tablet device based on its Android operating system software.  The New York Times recently reported that Google has been working with numerous hardware makers to construct the perfect tablet device to compete against Apple’s iPad and the Amazon (AMZN) kindle. 

The new homeowner ATM and Greece aiding rally

 

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April 12th, 2010

Upcoming webinar with DeCarley Trading and SFO Magazine, "An Alternative Look at the Trading Plan", register for free at https://www2.gotomeeting.com/register/872525859

Stocks gapped up on the open of electronic trade on Sunday afternoon on word of a detailed backstop for the potential Greek debt default.  However, the markets have spent the previous weeks pricing in a less than catastrophic outcome to the Greece drama. 

With much of the uncertainty across the pond sorted out, but by no means completely resolved, traders are looking forward to the upcoming earnings season.  Alcoa is set to kick off the season after the bell but the bulk of the reports won't start rolling out until later in the week.  As we have mentioned in the past, the markets seem to have accounted for a great earnings season and this sets the bar high in terms of market expectations.  Even numbers that beat analyst projections might not be enough to keep the bulls in control. 

News, data and markets are all the same in that they go through cycles of positive and negative.  We have just experienced a relentless string of optimistic news but the laws of expansion and contraction suggest that the tides could soon be turning. 

Also, stock market bulls are pointing toward improvements in retail sales as a sign that the economic recovery is robust.  However, I have run across several studies that suggest that many strategic mortgage defaults are spending their mortgage money frivolously (tanning, nails, clothes).  Assuming mortgages ranging from $1,000 to $2,000 or more it is easy to see how consumer spending could look much better in light of this phenomenon.  However, the velocity of money isn't being increased it is just being reallocated from paying debt to "discretionary spending".  Some are calling this the new homeowner ATM. 

Our resistance areas coming in were 1165, 1995 and 707 in the S&P, NASDAQ and Russell respectively.  For the most part, they managed to hold (give or take a few points) but there is substantial event risk looming and the near-term direction is just as unpredictable as this rally.  The next resistance will be 1203, 2007 and 707.  Let's see what tomorrow brings!

 

Crude Oil Likely To Gain Ground

By Kevin Grewal, Editor at www.SmartStops.net

Bigger than forecasted inventory gains caused crude oil to drop two days in a row, however, there are plenty of reasons to suggest that the highly sought after commodity is likely to appreciate and potentially hit the century mark.

Over the past six months, black gold has been oscillating back and forth in the $70-$85 range and according to an analyst at Lind-Waldock, the commodity is at the uppermost point of its range.  To take it a step further, crude’s pattern suggests that it will break away from its high point and could potentially add an additional $15 per barrel.

On the supply side, the recent increases in crude stockpiles will likely dissipate in the coming months.  The driving force behind this is relatively flat production.  When the global financial meltdown put a damper on demand for crude, OPEC cut production levels to reach an economic equilibrium point.  Now that both developing and developed nations have emerged from the Great Recession and expected growth in global GDP is set to reach 4.5%, the demand for crude will likely be bolstered, resulting in a supply and demand imbalance which will slowly eat away at excess inventories. 

ETFs For Currency Debasement

By Kevin Grewal, Editor at www.SmartStops.net

As developing nations around the world have turned to government funded stimulus packages to ignite their economies, a nation’s debt and currency debasement should be of much concern. 

Most recently, a study indicated that the U.S. national debt has ballooned nearly 12 fold over the last 30 years.  Additionally, over this same time span the ratio of debt to GDP has gone from nearly one-third to 85%.  During this time of exploded debt, GDP has only expanded 5.3 times, indicating that debt is growing at twice as fast as the U.S. economy.  Similar trends have been seen in Europe, in particularly Greece, Spain and Portugal.

Some concerns of this exponential growth in debt include hyperinflation, as a result of printing more currency, a decline in the value of a nation’s currency, better known as currency debasement, and increased costs of borrowing, which make it difficult to chip away at deficits.

Some experts suggest that this trend in the developing world, in particularly the United States, is likely to continue as nations have become accustomed to borrowing extraordinary amounts of money and printing extra currency to stay afloat.  If this is the case, than inflation will be inevitable and currency values will diminish. 

Some possible ways to protect against currency debasement and increases in inflation include the following: 

Japan Could Pose An Opportunity

By Kevin Grewal, Editor at www.SmartStops.net

The world’s second largest economy has been struggling to get back on its feet and emerge from its worst recession since World War II. However, recent data suggests that Japan’s economic recovery efforts are finally starting to reach households and its economy could finally be starting to stabilize paving the road to opportunity. 

According to Japan’s Ministry of Economy, Trade and Industry, consumer demand and spending has been on the rise.  Higher demand for automobiles, energy and machinery has pushed retail sales up in February, marking the second straight month of increases, and nearly 4.2%. 

In fact, despite negative publicity and suspension of U.S. production for five days, the world’s largest automaker, Toyota Motor Corporation (TYM), boasted an increase in production in nearly all of its regions.  In fact, Toyota boosted output 83% from a year earlier and February was the seventh straight month the automaker has witnessed jumps in production.

This trend has further trickled down to automakers Honda Motor Company (HMC) and Nissan Motors.  Honda is boasting production increases of nearly 49% from a year earlier and Nissan’s production is up nearly 72%. 

Pharma ETFs Likely Winner Of Health Law

By Kevin Grewal, Editor at www.SmartStops.net

Now that the historic Health Care Bill has been signed into law by President Obama, drug makers are likely to reap all the benefits and for good reason.

The overhaul of the healthcare system will likely add to the revenues of Big Pharma companies.  From a mere quantity perspective, the reform is expected to provide insurance coverage to more individuals, hence giving more people the ability to pay for prescription medication and pushing sales volumes up significantly. 

From a competition perspective, it appears that the pharmaceutical sector has won nearly a decade of protection against generic-like competition for biotech drugs.  Additionally, the law does not contain any measure which bars the sector from paying generic drug makers to delay the launch of less-expensive alternatives; in essence, cash heavy pharmaceutical firms have the ability to pay off more cost effective competitors who manufacture “knock-off” alternatives and control the prescription drug market.

Gold Likely To Regain Footing

By Kevin Grewal, Editor at www.SmartStops.net

Over the past week, gold prices have been teetering in positive and negative territory and somewhat uncertain; however, there is much confidence that the price of bullion will increase this year.

One factor that is likely to support the price of the precious metal is the fact that central banks around the world have been hoarding onto the commodity and reluctant to sell it.  In fact, some bullion analysts expect the Central bank of China, Russia and India to continue to gobble up gold as they move away from sovereign bonds and seek safer investments. 

A second factor likely to support the price of the yellow metal is the expected increase in global demand for base metals.  There is an indirect correlation between the two types of metals, and in general as the prices of base metals increase so do those of gold.  Thirdly, investor appetite for safe-haven tools is expected to continue to rise as sovereign debt issues in Europe, in particularly Greece, continue to make headlines and remains of concern.   

Tech ETFs Likely To See Boom

By Kevin Grewal, Editor at www.SmartStops.net

As the economy starts to show signs of prosperity and tries to mend the wounds caused by the recession, the technology sector is likely to boom.

For starters, the sector appears to have strong fundamentals and is relatively cheap as compared to other sectors.  In fact, as a whole, the sector boasts a projected five year PEG ratio of 1.1, which indicates that value on the expected growth of the sector is prevalent.  In general, a lower PEG translates to higher value because an investor would pay less for each unit of earnings growth.

Additionally, big technology companies are known to hoard cash, which makes it that much easier to expand into new businesses and hold onto competitive advantages.  With excess cash, these companies are able to take on risk without being at the mercy of a tight credit market. 

According to a recent study by the Wall Street Journal, tech giants Apple Inc (AAPL), Oracle Corp. (ORCL), Google (GOOG) and Microsoft (MSFT) along with six other companies have accumulated a whopping $68.5 billion in new cash over the past two years and are putting it to use.

ETFs To Play The Jobs Bill

By Kevin Grewal, Editor at www.SmartStops.net

In an attempt to ignite the labor markets, Congress passed a $17.6 billion measure and sent it over to President Obama to sign into law, paving the path of opportunity in some sectors.

With unemployment lingering around 9.7%, spring break right around the corner and Congressional elections looming at the end of the year, the clock was ticking and policymakers decided to agree on the Job Bill. This Job Bill is expected to exempt businesses from paying the 6.2% payroll tax on newly hired employees who have been jobless for at least 60 days and offers a $1,000 tax credit to businesses who keep the newly hired workers employed for at least a full year. 

In addition, the bill provides an extra $19.5 billion, through subsidized state and local construction bonds, to shore up road and bridge construction and extend the federal highway program through the end of the year.  This extra funding could potentially lead to an increase in domestic demand for raw materials, such as steel, industrials and transportation services related to getting these materials to desired destinations.

Financials Could Feel The Heat

By Kevin Grewal, Editor at www.SmartStops.net

Although the future of reform legislation remains unclear, a recent bill proposed by Senator Christopher Dodd could potentially hinder the financial sector and its exchange traded funds (ETFs).

This new proposed reform, which is expected to be forced onto the Senate Finance Committee as early as next week, aims to give the Federal Reserve extraordinary control and power over large financial institutions.   More specifically, it would give the Fed the power to break up any large financial institution which could potentially jeopardize the stability of the financial system. 

Additionally, the bill will give the Fed authority and control over the nation’s largest bank-holding companies, those with assets of $50 billion or more, and be the focal point of oversight and regulation over mortgage-related businesses and non-bank financial firms like insurance companies.  The bill specifically aims to regulate risky financial instruments, like mortgage-backed securities. 

Another caveat of the bill includes Federal Deposit Insurance Corporation (FDIC) oversight over state-chartered banks with less than $50 billion in assets.

ETFs, Breakouts, and Swing Trading

A Second SPY Triangle Forms March 12 (Afraid to Trade)

Cup/Handles Everywhere (BigTrends)

That VXX Again (Daily Options Report)

Are Brick Charts Favoring or Condemning BRIC ETFs? (Greenfaucet)

Innovation, Schminnovation – Welcome to the Boring Age (Infectious Greed)

The Economy Abides(Planet Yelnick)

Testing Common Knowledge About Volume on an SPX Breakout (Quantifiable Edges)

Today in Commodities: Spring Break?   (Seeking Alpha)

Why Do Traders Lose Money in Slow Markets? (TraderFeed)

Swing Trader (Wall St.Warrior)

ETFs To Play Smartphone Growth

By Kevin Grewal, Editor at www.SmartStops.net

As consumers start to loosen the grip on their wallets and search for a solution to fuel their appetite for innovation, the technology sector is likely to reap the benefits.

The technology sector as a whole is relatively broad based.  Of all the sub-sectors included in the sector, those which are involved, either directly or indirectly, with smartphones will likely benefit the most.  According to a research study, the surge in global demand for phones like the Apple (AAPL) iPhone and the Google (GOOG) Nexus One will soon push sales of smartphones past those of personal computers.  In fact, sales of smartphones as a whole are expected to triple over the next two years, heading towards the billion-unit category.

Some suggest that this surge in demand for these mobile devices is primarily driven by the fact that they offer many of the same benefits and functions of personal computers from the palm of one’s hand.   In fact, most of these phones, such as the iPhone, enable users to download applications, or “apps”, directly to their devices which enable them to do everything from read the latest news published on the New York Times (NYT) to utilize social media by posting new comments on their Facebook pages.  

Playing the Amplified Energy Markets

By Kevin Grewal, Editor at www.SmartStops.net

As the global population continues to expand and purchasing power in developing nations increases, the world’s appetite for energy is likely to amplify painting an opportunity for investors.

According to the Energy Information Administration (EIA), average consumption of crude oil is expected to increase to 1.5 million barrels per day, up nearly 300,000 barrels per day from its previous forecast of 1.2 million barrels per day.  This uptick in demand is primarily being driven by expected economic growth in the Asia-Pacific regions and the Middle East as well as a more optimistic domestic economic outlook.

Additionally, the EIA has stated that it expects the average price of a barrel of crude oil to average a price well north of $80/barrel, which is being supported by an increase in demand and the decision by OPEC to curtail any increases in production.  These price pressures has further lead the EIA to forecast the average price of a gallon of gasoline in the U.S. to hover around $2.35/gallon for 2010, an increase of nearly 21% from a year earlier.