The big story could be if the US Dollar increases and stocks did not go down, which is extremely unlikely Friday’s pattern continues.
In simple terms, the low interest rates have encouraged investors, mutual and hedge fund managers to borrow dollars and invest them in riskier assets such as stocks, which can provide higher yields. If the US Dollar strengthens (moves up in price), these investors will be forced to sell stocks and then buy Dollars. Because these are leveraged positions, it wouldn’t take much for an avalanche of selling in stocks to begin.
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The improving trend in the jobs picture that is being established is positive on the short term and this sets up the market to continue to gradually move higher.
The Dow30 was up 150 points in the first hour and proceeded to sell off 200 points in an hour as the US Dollar moved up 1.7% Friday. The US Dollar has been on a downtrend since an important bottom in stocks was established on March 10th dropping from 89 to $74.50 (last week). Any substantial bounce upward in the dollar will have a direct effect and cause the stock market to drop.
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We are at a point in the market where there isn’t a clear high probability entry and exit in many stocks. This phase is where more patience and discipline on your part is required. Build smaller positions than normal and have more cash on the sidelines. Don’t try to make a lot of money in this part of the market right now until we get more obvious high probability ideas with many stocks. We often see more speculation occur after a higher high is made such as we saw in NLST as a bullshort, NABI as another developing one, and ZOOM as an example of moving from $8 to $ 11.25, then back to $8.20 at the close.
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Even though there is strong enthusiasm now after the nice run up this past week, start looking at the idea of reducing your long positions especially if you are overweighted or even leveraged on the long side in relation to your total account size with those stocks.
At the moment, stocks look like they have a ways to go before any pullback but consider reducing your longs as stocks approach the anticipated peak in the indices
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Sorry for not posting here on the blog more often, I’ll try to be more consistent.
We are having an awesome 1 day stock trading seminar in Los Angeles in 2 weeks, Here is more information if you want to check it out.
http://www.tradestocksamerica.com/seminar-offerj.php
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stock trading seminar
It never ceases to amaze me the emotional make-up of the market, financial media, analysts, TV show hosts and a large group of investors who were worried about last week’s sell-off. People were citing various economic data and today’s headline reads “Stocks End up 1.4% Amid Recovery Hopes” when a few days ago the market goes down and the headlines read something like “Stocks Drop on Economic Worries.”
This is what happens when people think like this. Instead of Focus stock today, here is a different type of lesson:
Picture of sheep over cliff
450 Sheep Jump to Their Deaths in Turkey
Friday, July 8, 2005 9:59 PM EDT
The Associated Press
ISTANBUL, Turkey (AP) - First one sheep jumped to its death. Then stunned Turkish shepherds, who had left the herd to graze while they had breakfast, watched as nearly 1,500 others followed, each leaping off the same cliff, Turkish media reported.
In the end, 450 dead animals lay on top of one another in a billowy white pile, the Aksam newspaper said. Those who jumped later were saved as the pile got higher and the fall more cushioned, Aksam reported.
“There’s nothing we can do. They’re all wasted,” Nevzat Bayhan, a member of one of 26 families whose sheep were grazing together in the herd, was quoted as saying by Aksam.
The estimated loss to families in the town of Gevas, located in Van province in eastern Turkey, tops $100,000, a significant amount of money in a country where average GDP per head is around $2,700.
“Every family had an average of 20 sheep,” Aksam quoted another villager, Abdullah Hazar as saying
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The stock market really caught fire today for no apparent reason except that TradeStocksAmerica said that the buy on the dippers should start buying again. Seriously though, some say the market is thinly traded with a bias toward the upside because of the Jewish holidays. A more likely explanation other than the two given above is that there is a lot of money on the sidelines wanting to get in the market after watching stocks move up 56% on the indices since March 10th (or 71% for the Nasdaq Composite).
A lot of people that were left behind want to start making money in stocks after seeing the market move up so much. And the people who have made some money want to start making more.
So eventually the largest part of the investor group piles in with their money at almost the worst time possible.
But this causes problems for most people. Since the less educated investor needs confirmation that the stock market is going up BEFORE they buy themselves and it is such a delayed amount of time before their emotions allow them to get fully invested, the market usually has made most of its move up.
And the same goes with being emotionally “locked up” when stocks are going down. People tend to wait too long until they “just can’t stand the falling prices anymore” and throw in the towel when stock prices are at their lowest. Be cautious because history has proven that most people, as a group, decide to buy toward the end of the bull run and sell when stocks are near their lowest. Learn the strategies in The Wizard Training Course and build the knowledge to invest or trade with the odds on our side, no matter what the herd is doing or how the market is acting.
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REPEAT from Friday’s (SEP-4-09) report: Most stocks are probably not going to rebound to higher highs and we are looking at a few stocks to move to new highs.
It is best to monitor the market closely with your long positions because one of these times, the buy on the dip pattern will stop working and that spike down we had 2 days ago (Tues, Sep 1st) could very well mean an intermediate top is in and a downtrend could be starting but it is a little premature to tell that but that is my hunch at the moment.
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It feels and looks like stocks are going to start riding a momentum wave although trading volume is probably going to be light as summer vacations are wrapping up in the next two weeks.
As mentioned on Thursday night’s report is that the market is ignoring bad news right now and this is something to monitor if and when investors are hyper-focused on good or bad economic news.
The comments in recent weeks of that describe the market looking for “green shoots” (referring to a new plant growing out of the ground) of potential signs of economic recovery has now matured past that point.
Investors seem to be convinced that the worst is behind us after so much brainwashing by government officials, politicians and some early forecasters trying to make a name for themselves by making a famous call.
The important thing to watch is if the market acts like it is believing those talking points and right now it does. Any selling that occurs in coming weeks will probably be the type of correction that investors will buy into and that will give us another excellent swing trade opportunity on the long side.
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