The biggest banks/institutions and hedge funds look for every edge they can get in the stock market. They have billions of Dollars to spend and hundreds of billions to make if they create the fastest computer and the most intelligent trading programs. These high frequency computers continue to advance more and more and it is making it harder for the average investor to profit.
Have you noticed how more and more the market or stocks sell off on good news or rally on bad news? Have you noticed how when you go to bed the futures are up or down but then reverse by the next morning? This is called the contrarian play and it works almost every time. These computer programs are classic emotional analysts. They take the sentiment of the market (how many average investors are buying/selling). When they have enough of the little investor in on the trade (long or short) they slam the market in the opposite direction. The small investor panics and exits the position, giving their money to the massive banks as pure profit. This happens over and over again as these computer programs rinse and repeat.
How do you avoid this fate? How do you avoid giving profits to the institutions and going broke? Simply follow the charts. Always think opposite. When the markets are at highs or surging, think about shorting. When the markets are collapsing, think about buying. Use common sense and learn technical analysis (PPT Strategies). If something is overbought, never chase, if something is oversold, never short. Use strict discipline and it will keep you from being the sucker who is filling Wall Streets pockets with gold. Stop getting bullied by Wall Street. Learn the tricks and start profiting for life.
Gareth Soloway [more]
Traders and investors are always looking for the next hot stock. It is safe to say that the sexy stocks like Apple Inc (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG), or Twitter Inc (NASDAQ:TWTR) always seem to get all of the media attention. This is usually because these stocks are perceived to have the best growth opportunities, but when the overall market indexes are exceptionally volatile and choppy it is usually better to look at the less sexy or boring stocks. [more]
At 2PM ET, the Federal Reserve will give their statement on interest rate policy. While interest rates will not change, the big questions is, does the Federal Reserve cut more money from their quantitative easing? In December 2013, they cut $10 billion, going from $85 billion to $75 billion. It is widely expected that they will taper another $10 billion today.
Economic news in China is poor, currency problems are popping up from Argentina to Turkey and even economic and earnings news in the United States is mediocre of late. The markets are scared. The markets are fearful that a cut in stimulus will put the world into a tailspin. The markets are addicted to QE (quantitative easing) and do not want it cut.
This brings Wall Street into 2PM ET. This announcement is huge. If the Federal Reserve cuts more money from the stimulus, look for major selling across the globe to continue. Please note that the markets are lower today, expecting some sort of cut. On the other hand, if the Federal Reserve does not taper, expect a major reversal and a snap back rally to begin. While it is doubtful we will see new all time highs, it is likely a bounce to 1,820 will occur on the S&P 500.
Once again, this announcement will either kick-start major selling, easily another 500 points down on the Dow Jones Industrial Average, or a strong rally in the markets. It is a big one, stay tuned...
I have made it my life's work to tell every Wall Street secret and unveil every shady practice by the big institutions and hedge funds that screw the little investor out of money. Honestly, the stock market is built to transfer wealth from the uneducated smaller investors to the educated Wall Street elite. I strive to alert every investor who will listen so they can learn the tricks and be on the right side of the market, up or down. I truly believe it is time to even the playing field and I will continue to help smaller investors learn how to take their money back from Wall Street.
Just think about the general Wall Street rules. It is almost a joke amongst the institutions. "When the small investors pile into any stock or market, the top is in". That is honestly the truth and as soon as the small investor puts their hard earned money in the markets, they fall. Just look at the recent data that shows margin is at all time highs. What is margin? It is the amount of money being borrowed by the average investor to buy stocks. That is right folks, investors are borrowing more money than ever to be long stocks. What just happened in the last week? A big market drop. When was the last time margin was at all time highs? The year was 2007, just before the mega financial crisis. Never be part of the group. Always go in the markets when the average person is scared to go in.
There is so much data that shows the little investor always buys the tops and who always wins? Wall Street banks, hedge funds and the wealthy that get the best advice. The funny thing is, even in the rare instance Wall Street loses, like in 2007-2009, they are bailed out by the Federal Reserve. Who bailed out the small investors? Who bailed out the retirees that lost so much money they had to return to work or postpone retirement? No one...
I will dedicate every last breath I have to helping the small investors, the mom and pops profit and take back their money from Wall Street. I am Robin Hood and it is time to transfer that wealth right back.
Tip of the day: It is so simple, but as an investor you must NEVER let emotion take control of your decisions. Analysts on Wall Street will upgrade stocks when they are at their all time highs, the media will pump them, you must never chase them. Never buy a stock that is up significantly on the charts. A good example was Apple (AAPL) in 2012 when it was at $700 per share. Wall Street was pumping it non-stop with upgrades to $1,000 price targets and the media never went 10 minutes without talking about it. This creates an emotional response in an average investors mind, thinking they need to jump on board. Institutions are just waiting to sell into these buyers. Unloading and smiling all the way to their billion-Dollar profits per quarter.
Treat buying stocks like shopping at the mall or the supermarket. Only buy stocks on sale. When you go to the mall, you look for that nice, good quality pair of jeans that is on sale, marked down 25%. This is the mentality you need to use. However, most investors in the market look for stocks that are shooting up and they buy at the highs. Would you ever buy a pair of jeans that was marked up 300%? Hell no! You would go shopping for a different one. Use this same mentality and you will already be on the right road to profiting for life.
It is still amazing to see how the public will become so bullish when a stock is at an all time high. Just think about how bullish people are on the financial news networks when markets are rallying up by 2.0 percent in a single trading session, these people behave like cheerleaders at the Super Bowl. On the flip side, the same people become so fearful when a sell off occurs and the stock market indexes decline by 2.0, or 3.0 percent. If you have watched any of the financial media channels when a sharp decline occurs they act and speak as if they were at a funeral. Rarely, will the media say hey there is a great opportunity here for a short term bounce. No, you won't hear the financial media tell you where the opportunities are in the stock market when there is volatility or fear taking place.
Believe it or not, some of the best markets to trade are the markets that are filled with volatility and fear. This is why you want and need to learn the technical pattern setups that occur on the charts each and every day. Just look at today's decline in Apple Inc (AAPL) to see what I’m saying. Most people at home were panicking as the stock declined lower by more than $40.00 a share at the open, yet the I managed to buy the stock at $502.54 and traded it for quick $6.00 gain in just minutes. You see, volatility equals opportunity if you know what you are doing.
Right now, corporate earnings are being released in droves every day. These earnings releases are creating numerous intra-day, and daily chart trading opportunities. Traders and investors must learn how to take advantage of these opportunities rather than being fearful, and scared. Learn to read the charts and you will soon understand that volatility equals opportunity.
One of the best performing industry groups in 2013 has been the airline stocks. The consolidation in the sector has certainly helped the airline stocks rally throughout last year. Recently, the airline stocks have begun to decline from their high levels made last week. Now traders and investors should be patient and wait for the proper support areas before buying into the leading airline stocks.
United Continental Holdings, Inc. (UAL) is a leading airline in the United States. Traders should watch for solid daily chart support around the $38.00 level. This is an area where traders can look for a daily chart bounce.
American Airlines Group Inc. (AAL) has benefited greatly since emerging from bankruptcy. The recent merger with U.S. Airways has just added to the consolidation in the entire sector, this will help increase the pricing power in the entire industry group. Traders can watch for solid daily chart support around the $25.50 level.
Delta Air Lines Inc. (DAL) has been arguably the strongest stock in the entire airline sector. Traders should watch the $27.00 level for near term support. This is an area where traders can look for a short term bounce.
I have traded for well over a decade. That means in the trenches, often over twenty trades every single day, seeing every tick up or down on the stock market and individual stocks. I have witnessed buy programs, manipulation and other shady practices along with the major tops in 2000, 2007 and today. Seeing it all for well over a decade made it very easy to spot key signals which is what I spotted recently. I literally warned everyone who I could, over the past few weeks. I talked about it on the radio every day for the last two weeks, as well as writing countless articles, while putting out short trade calls on stocks and the market for my members. All those that listened are enjoying the rewards.
1. The major signal that caught my attention was the 1,850 S&P 500 level. This was the high on December 31st, 2013. On January 15th, 2014, the market popped briefly above that level intra-day but COULD NOT close above that level. Just this past Tuesday, January 21st, 2014 the S&P opened sharply higher, into that same 1,850 level and fell dramatically. It was clear this was a major pivot point on the market. A blind man could even see it. As long as the markets remained below on a CLOSING BASIS, investors should be very bearish. This was contrary to the overall media hype on the major bullish side.
2. The fact that the market was smoked down every time we kissed the 1,850 level spelled out classic distribution. Distribution is where the institutions are selling while the little investor is buying. This has been going on for some time now and could be seen clearly since the start of the year.
3. Margin is being maxed out (all time highs). Margin is the amount of money being borrowed by retail investors (smaller investors) to buy stocks. The last time this hit an all time high like these days was in 2007. The time before that? The year 2000. Scary stat! In addition, mutual fund money flow has reached epic levels again (shows small investors buying). In other words, the small investors are back in this market in a major way and institutions are selling. Which way do you think this market is going?
Ultimately, the struggle at the 1,850 level was how I pinpointed the sell off within these first few weeks of the new year. I told my members the market was going to make a big move this week. With the Dow Jones Industrial Average down over 200 points today, I would call that a big move.
As scary as it may be to hear, the markets are entering a new cycle...one where downside becomes more prevalent. Expect bounces along the way, but the downside will continue.
Gareth Soloway [more]
The stock markets have been soaring higher since March 2009 when the S&P 500 Index traded as low as 666.78. Today, the S&P 500 Index trades above 1800.00 and continues to rally higher nearly every day. How could the stock markets go up so much in less than five years yet the economy is still so sluggish? The answer is open to debate, but most will agree that global central bank intervention has been the primary catalyst for higher equity prices. Below are three things that Wall Street doesn’t want you to know:
1. The banking system around the world is still very fragile. The derivatives market that nearly destroyed our financial system in 2008 has grown even larger. It is estimated that the over the counter (OTC) derivatives market is now around $700 trillion. In 2008, the derivatives market was estimated to be around $500 trillion. The big banks are the primary traders in the derivatives market and these banks have grown exponentially larger since the 2008 financial crisis. So there are fewer players in the game now, it remains to be seen if that is a good thing or a bad thing. Countries such as China have been facing liquidity problems over the past year. This is not a healthy sign, especially since China is now the second largest economy in the world. Either way, banks around the world are still very fragile and that is why central banks around the world such as the Federal Reserve, Bank of Japan, Bank of England, and others continue to keep the easy money policies intact. They simply have to pad these large banks with liquidity. Why do you think the accounting standards were changed from mark-to-market to mark-to-model. Mark-to-Model accounting refers to the practice of pricing a position or portfolio at prices determined by financial models, in contrast to allowing the actual market determine the price.
2. Financial reports can easily say anything when magic accounting is involved. Just think about how many companies beat their earnings estimates by a penny every quarter. How is that possible? It is possible because the accounting standards allow certain charges, item exemptions, and other accounting tricks. This has been going on for years. It is still amazing how a company can beat its earnings estimate by a penny, but miss on revenue. We see this every earnings season. This is one of the reasons why traders and investors should use charts and technical analysis instead of news. Price action in the stock does not lie, while the earnings report can be full of misleading statements.
3. Beware of upgrades and downgrades at extreme highs and lows. Please understand, large financial institutions move stocks, not individuals with a 401k or an online account. In September 2012, I cannot tell you how many people in the public were buying Apple Inc (AAPL) stock between $600 and $700 a share. The stock was being upgraded by financial institutions every day. Some firms were upgrading the stock to $2000.00 a share. Obviously you all know that AAPL stock topped out around $705.00 a share in September 2012. While the public was jumping into AAPL stock the institutional money was selling the stock to the unfortunate public. As a rule, when everyone loves something you should start to look the other way and perhaps begin to hate it. The same thing happens with almost everything in life, when everyone owns the popular toy, clothing item, car, or anything it is usually the time that particular item has run its course. The stock market is really no different, but you won't hear this from Wall Street.
Almost every day we hear about how great all of the mobile providers are in commercials that run continually on Television and other media outlets. For a while now leading mobile telecom provider Verizon Communications Inc. (VZ) has been the king of the hill. The other leading mobile telecom companies have been AT&T, Inc. (T), and Sprint Corporation (S).
A year ago nobody would even mention T-Mobile US Inc (TMUS) as a market leading mobile provider, but today the stock chart of T-Mobile (TMUS) stock is painting a different picture. The stock is now a takeover candidate if you look at the sideways base it is making on the daily chart. The weekly chart could be setting up for a breakout move in the next few weeks. Usually, the stock charts don't lie and this stock looks attractive.
Recently, T-Mobile (TMUS) has made a push to get new subscribers by covering the early termination fee from consumers other mobile providers. Recently T-Mobile merged with Metro PCS. Since that time the product has become much better. T-Mobile is even moving into the banking sector cashing checks without charging excessive fees. Personally, I could care less about the story, but the daily and weekly stock chart of TMUS stock makes me think this is a company that traders and investors must keep on the radar.
This morning, many of the leading retail stocks are coming under some selling pressure at the start of the trading session. Leading retail stocks such as Kohl's Corp. (KSS), Bed Bath & Beyond Inc. (BBBY), Costco Wholesale Corporation (COST), and Wal-Mart Stores Inc. (WMT) are just a few of the names declining today. As you may know, the key to trading is to find where the stock will find enough institutional support to have a bounce. Day traders should watch the $49.90 area as decent support for KSS stock. This is an area on the chart which should give the stock an intra-day bounce.
Dear Governor Chris Christie,
As a pro trader and investor, I pride myself on avoiding catastrophic events that can put me out of the game. I have spent years learning rules that have ultimately turned me into a great trader and investor in any market, up or down. These rules are universal and can be used to help in any situation. Even better, they can be used to avoid ugly scandals or in your situation, catastrophic events in the political arena. I offer my help in future political situations. I am a fan of yours and think you have a chance to rise like a phoenix. I will help you navigate around these bogies and ultimately get into the White House.
1. Treat situations that grind your gears like pro investors treat stocks. Never get emotionally attached. When you get attached, you make rash decisions that will ultimately cost you a lot of (in your case) political capital. This was the toughest lesson I had to learn as an investor and trader. When a stock went against me years ago, I would get so emotionally involved it would actually hurt me ten-times more. I would stick with it and refuse to take a small loss. The loss would grow. Political small losses are easy to come back from just like small losses on a stock. It is the epic losses that put us all out of the game. A great example of this would be Bruno Iksil, nicknamed the London Whale who went too heavily in a position and could not cut his loss and get out. He stuck with it until it became catastrophic. Billions were lost. Where is he now? Out of the game! Small losses on small positions cause no emotion and are the key to success.
2. Analyze risk versus reward of any action. When trading, before I make an investment I look at my potential gain versus my loss. This again is done with no emotion. If the loss could be five-times the gain, what is the point of taking that trade. I simply walk away and avoid it. Anytime you make a decision (or your staff makes a decision), like closing off lanes of traffic, you have to look at it in terms of risk vs. reward. What was the reward of that situation? To punish someone who did not vote your way, who annoyed you? Seems like a minor gain. However, look at the loss potential on that trade. It was huge. You know eventually something like this could come out and the destruction to your political future could be epic. Step back, take out emotion and make the RIGHT decision. The one with the most reward.
3. Treat the people of New Jersey like the Dollars in your trading/investing account. In other words, protect them at all costs and grow them. They are what allow you to prosper in your political career like they are what helps me live well in my condo on the beach, while helping those in need. My goal is to nurture and grow my investing/trading account. We must always do what is best. When you close lanes and hurt the people of New Jersey, it is the same as me purposely losing money or putting it into a trade I know is going to go against me. I just cannot and would not do that. Take only the highest percentage trades/investments and see how your political career profits for life.
We all lose occasionally. Any investor or trader who says they do not take a loss is lying. I assume this is true in the political arena as well. Every politician has taken a small set back at some point and most likely will in the future. Do not get vindictive. Just cut it small and move on.
These are just some of the lessons I have learned the hard way when it comes to investing and trading. But I learned them. I am here to help you and your staff always view things in the right light. I am here to help you build your political capital to where you take over as the President of the United States.
Gareth Soloway [more]
Institutions and hedge funds are selling stocks. Consider yourself warned. How do I know this? Let me explain simply. There is classic distribution going on and this can be seen clearly in the charts.
1. December 31st, 2013 the S&P 500 hit a new all time high of 1,848.36. The next trading day (January 2nd, 2014) stocks were sold hard. This tells us that as soon as the new year came, money managers sold stocks, taking profits. Remember, window dressing was over as of the 31st of 2013 and taxes on these new sales do not have to be paid until April 2015. Notice how eager they were to sell at the start of the year. That tells us they do not think there is much upside to this market.
2. Last Wednesday, January 15th, 2014, the markets moved higher, making a new all time high of 1,850.84. However, this was just an intra-day all time high as heavy selling came in, pushing the S&P back below the December 31st, 2013 high. One must ask, why was there such selling pressure as soon as the markets broke that high last Wednesday? The institutions are eager to use any excuse to sell. They would not even allow the market to close at a new all time high.
3. Today, the markets opened higher and hit 1,849.31 on the S&P 500. This was shy of a new all time high intra-day by 1.53 points. Please note that the markets this time, could not even take out the high from Wednesday as sellers started selling quickly. The markets have since gone to the negative side.
Notice the trend of distribution is getting stronger. First you had a strong close at all time highs on December 31st, 2013. Then you had a weaker move as the markets broke that high but quickly pulled back below by the end of the day on January 15th, 2014. Then today, the markets opened just underneath those all time highs and sold immediately. Strong, weak and weaker. That is the trend on the S&P 500 as institutions start selling more aggressively.
In addition, please note that margin usage is at all time highs. This is the amount that the retail investor is borrowing to buy stocks. The last time margin usage was at an all time high was in 2007 (before the financial collapse) and in 2000 (when the tech bubble burst). In addition, note that mutual fund money flow (retail investors) has surged dramatically in the last year. The same thing happened in 2007 as well as 1999-2000. Scary stuff.
The bottom line remains...the institutions and hedge funds are unloading their long positions and retail investors should be very scared. Watch the F&%k out!
Gareth Soloway [more]
This past Sunday, the Denver Broncos beat the New England Patriots to win the AFC title. The Seattle Seahawks defeated the San Francisco 49ers to capture the NFC title. Now the Denver Broncos and the Seattle Seahawks will face each other in the Super Bowl on February 2nd, 2014. Both football teams will help to bring in tons of revenue dollars for the economy and their respective cities. This coming Super Bowl is expected to be the most highly watched Super Bowl game ever. It features one of the best offensive teams in the NFL going against one of the best defensive teams in recent history. It has been estimated that a 30-second television commercial will go for about $4 million during this year's Super Bowl.
At the start of 2014, two states began selling marijuana legally, Colorado and Washington. Since the two football teams that will be playing in the Super Bowl are coming from these two states it is safe to say that marijuana stores will likely do very well on Super Bowl Sunday. We can only expect marijuana sales to be up leading into such a major sporting event. After all, alcohol sales always increase during the week of the Super Bowl, so we should expect the same type of reaction from marijuana sales.
Here are three marijuana related stocks that could benefit from the upcoming Super Bowl game. Please note, all of these companies mentioned below trade on the OTC-BB so they are equities that carry much higher risk. These stocks have also had big gains since the new year began. Traders and investors must make sure that they understand the risks involved before trading these stocks.
1. Cannabis Sativa (OTC-BB: CBDS)
2. Medbox Inc (OTC-BB: MDBX)
3. Terra Tech Corp (OTC-BB: TRTC)
Would it shock you to know that options are a total scam when you hold them into expiration? Would it surprise you to know that the institutions manipulate stock prices into expiration to maximize their profit? If you are like me and have traded and invested for years, you are not surprised. All others, let me explain the game. [more]
The markets surged higher today for the second day in a row. The S&P 500 hit a new all time high before noon. Many investors are wondering if it is time to buy the markets again, prior to another leg higher. The pros are watching one thing and one thing only. The closing price on the S&P 500.
Does the S&P 500 close at a new all time high or does it close below the former all time high? This is all that matters and exactly what the pro traders on Wall Street are following. If it closes above 1,849.44 (the former all time high from December 31st, 2013), a bullish case can be made for a move higher in the markets. If it closes below that high, caution should still be used as the markets could decline in the near future. This and only this is what institutional traders and pro investors are watching.
Stocks are rebounding today after an ugly decline yesterday. The S&P 500 has gotten back about two-thirds of the losses in total, by the early afternoon. This is the classic mentality of buy the dip and has become common place in the last few days. After-all, average investors have been programed to buy every minor dip, no matter what...or risk missing the next up move.
While many believe 2014 will be another year of double digit gains in the stock market, I for one do not. I believe this market is setting up for an epic collapse of 30% between 2014 and 2015. Why? The three main reasons are listed below.
1. The Federal Reserve has started to make it clear that they do not believe QE (printing money) is helping the recovery anymore. Essentially they look at it like it may be hurting the economy in the long run (inflation issues). There is a mega disconnect between investors and these comments. The market still believes the Federal Reserve will not let the economy or the stock market take any sort hit. QE has been the main culprit for the epic run in the stock market over the last few years. Removal of this, leaves a drug addict without its precious drug.
2. Earnings growth has been small and mainly due to stock buybacks. In simple terms, companies have been buying back shares which increases earnings per share without actual profit growth. This can be seen as revenue numbers have remained unchanged or dropping in the last year. In recent days, constant warnings from retailers like Lululemon Athletica inc. (NASDAQ:LULU) and Sears Holdings Corp (NASDAQ:SHLD). In an economy that is supposed to be growing, this raises major concerns.
3. The cycles are aligning. First, compare the time period between the 1993-4 to the epic Dot.com collapse. Then take that same time frame and note the collapse that started in 2007. Then take that same time frame and add it to 2007 and look at what you get. You get 2014-15. This is scary as the cycle is telling us something big is on the verge. As if that was not enough, take a look at the chart of the Dow Jones Industrial Average and compare it to the Dow chart from 1928-30. They are almost identical. In 1930 the stock market took a 30%+ hit.
The bottom line is obvious and must be expressed. This market has major risks and it is wise to be on the careful side.
Leading retailer Bed Bath & Beyond Inc (BBBY) is declining again today by 1.61 percent. This stock has plunged by more than $12.00 since January 8th, 2014 when the stock traded as high as $80.22 a share. Swing traders should watch the $64.50 level for near term support and a potential short term bounce. This stock is severely oversold at this time and that is an area where the institutional money may come in and support the stock.
The highly debated Keystone XL Pipeline has never been closer to being approved by the U.S. government. Recently, there were two terrible train wrecks in Canada, and the United States have shifted the momentum toward a future approval of the project. The pipeline would run from Canada throughout the United States into Mexico.
The idea of the project is to make North America energy independent. Many people are still not in favor of the pipeline. Potential greenhouse gases and possible oil leaks into the Great Lakes have been two reasons why the project has not been approved by the current administration. Either way, a pipeline seems more cost effective and sensible to transport oil and gas from Canada to the United States and Mexico then by railroad.
Should the project get approved in the future here are five stocks that would likely benefit from the venture:
1. TransCanada Corp (TRP)
2. Phillips 66 (PSX)
3. Suncor Energy Inc
4. Enbridge Inc.
5. Exxon Mobil Corp.
The average investor always seems to be caught with their pants down. They buy when stocks are high and they panic and sell when stocks are low. Ultimately, the institutions have the average investor just where they want them, so the transfer of wealth can continue. Does it surprise anyone that the big institutions have entire quarters where they do not lose money trading on one single day? Most of us would say, "It must be a rigged game!" You would be right. There are ways to combat it though. First, education, you must know the tricks so you can make them work for you. If you can unmask the games played, you can profit for life.
1. Never let emotion come into play. This is the most common way the institutions take your money. When stocks are shooting higher, the media pumps them and analysts upgrade them. Institutions know that 9 out of 10 average investors will chase and buy these stocks at the highs. Institutions are just waiting to pass the stock off to you prior to it falling. Investors are always the bag holders.
2. Risk vs. Reward assessment is the next key. Without emotion, truly look at the stock chart and decipher where it currently sits. All you need to do is see if the stock price is high or low over the last 52 weeks. Ask yourself if it is on-sale compared to where it was a week ago, a month ago, a year ago. Treat the stock market like a shopping mall and stocks like hats, jeans, shirts..ect. Buy solid companies when they are on sale. This mentality will make you thousands if not millions.
These are two of the most common problems small investors face every day. These are also two of the main ways large institutions transfer your wealth to themselves. Start abiding by these two rules land you can truly profit for life.
Let's face it, in 2013 almost every dip in the major stock indexes turned out to be a buying opportunity. Every time the stock market seemed to be starting a correction or meaningful pullback the central bankers came running out on TV proclaiming that low interest rates would remain intact for years to come. Just think about it, there has not been a single 10.0 percent correction in over two years. The last time the stock market even came close to a real correction in 2013 was in May when Ben Bernanke told the world that he would start to taper QE-3. As we all know, he quickly rescinded his statements and kept QE-3 going until 2014.
Recently, the economic data that has been released has been better than expected. The GDP numbers in the United States (gross domestic product) have improved, the job picture has picked up a bit, the housing markets have been rallying, and the stock markets have been soaring to new all time highs. So according to this data the Federal Reserve should start to taper its $85 billion a month quantitative easing program (QE-3).
In 2003, the Federal Funds rate (overnight lending rate to the large commercial banks) was at 1.0 percent. That year was one of the most bullish years for the stock markets in history. In June 2004, the Federal Reserve started to raise the Fed Funds rate by a just a quarter point and the major stock indexes came under some turbulence throughout most of the year. So this tells us that while tapering isn’t tightening it is a cut in the easy money that the stock markets have become accustomed to for the past five years. Traders should brace themselves in 2014 for much more volatility.
The Federal Reserve claims that there is very little inflation in the economic system. For all I know they might be correct, but deflation seems to be their real fear or they would not be taking this easy money policy stance for so long. So, will the buy the dip mentality work in 2014? Sure the buy the dip mentality will work in 2014 as long as you buy a low enough dip. The only way that traders and investors will know when to get back in will be to follow the charts. I remember in 2008 and early 2009 how people started to flock toward technical analysis for guidance, now people just buy anything and wait for the central banks to pledge more easy money. If the easy money policies are now really coming to an end those days of just buying the SPDR Dow Jones Industrial Average (DIA), SPDR S&P 500 (SPY), or some other ETF are over. The game is going to be a lot tougher this year, especially for those who thought it was easy.
J.C. Penney Company, Inc. (NYSE:JCP) is currently trading at $7.57, -0.62 (-7.63%). It is a screaming buy in my opinion because of one main reason. This morning, the company affirmed previous guidance. The stock has sold off on that news. Why? Great question! Most likely because the street was hoping for them to raise guidance. This has created one of the best buying opportunities in a stock in the new year. Below is the main, key reason.
1. They affirmed guidance which in essence means they have stopped the bleeding. It means they have turned the corner. Granted they have a long way to go but so did Best Buy Co., Inc. (NYSE:BBY), Hewlett-Packard Company (NYSE:HPQ) in late 2012 when those stocks were around $12.00 a share. Don't we all wish we bought those then?
This alone tells me the stock is worth at least $10.00 per share and means there is 30% upside in 2014 this year.
How often do you hear a trader, investor or the media talk about volume? I would wager that you hear about this topic pretty often. As you may know, volume is the number of shares or contracts traded in an equity during a specific period of time. While that definition might seem helpful, it really doesn’t tell us what we need to know about volume, or how to use it properly. In this article, I will detail three helpful tips on how you can use volume to your advantage each and every trading day, regardless of the time period that you are trading.
1. When stocks move higher or lower with heavier than normal volume, it is a signal that the institutional money is involved in the equity. Why would this be important? It is important because the institutional money moves stocks and equities, it is not the individual investor at home trading a 100 shares of stock that move markets. Anytime you see a surge in volume it means the big money crowd is involved, and that could mean further upside or downside is very likely in the near term.
2. Traders should always watch for high volume moves from the past. The reason why traders and investors want to watch for high volume moves from the past is because that is generally an area where the institutional money (big money crowd) will support a stock should it decline into that area on lighter volume. See the chart below for an example of this.
3. Volume is a leading indicator. These days, there are so many traders that rely on oscillators and algorithms for trading and investing. Almost every oscillators and algorithm that I have seen is lagging the current price of an equity. Have you ever wondered why a stock or commodity didn't move the way you expected it to move when a MACD or stochastic crossover has taken place? It is because these are lagging instruments, not leading. Volume happens in real time and it always tells us what's happening as it is moving.
Understand volume and how to use it like the Pros. In doing so you will give yourself an advantage over the masses who do not know how to read/utilize volume properly. The three tips above should help you get started.
Yesterday, Janet Yellen was confirmed by the Senate to be the next Federal Reserve Chairman. History will judge her to be the one holding the markets...
Yesterday, Janet Yellen was confirmed by the Senate to be the next Federal Reserve Chairman. History will judge her to be the one holding the markets reins as the next mega stock market bubble collapses. It is somewhat unfair she will be blamed almost entirely, as a majority of the damage will have been inflicted by her predecessor Ben Bernanke. However, she has always been as dovish, if not more than him, never dissenting.
The bed for the United States and world has already been made. At this stage it is just degrees of bad that Janet Yellen can control. How much more money is printed? How much higher does the stock market go as the bubble inflates? How much more debt will the U.S government take on and how much higher will the balance sheet of the Federal Reserve go?
Top 3 Reasons This Market Will Collapse In 2014-15
1. The Federal Reserve Balance sheet has risen to over $4 trillion. The Federal Reserve is still planning on printing $75 billion every single month going forward. As the economy continues to improve, inflation is going to jump (this always happens with a better economy, even ignoring the massive printing of money that has been done). History has shown us that when inflation starts, it is very hard to control. A good example is China in recent history. In addition, never in history has this much money been printed.
2. Rates are going much higher and soon. We have already seen the 10 yr yield surge above 3%, up about 100% from its recent lows. As much as the Federal Reserve wishes it could control rates, there will be a breaking point where the flood gates open (it likely started already). Rising rates will put a major halt to economic growth as the borrowing of money becomes too expensive for most. Housing will take another hit as well. This means higher unemployment and lower economic growth...just as the economy was starting to do better.
3. The stock market will crash. The stock market has risen 150% off the 2009 lows (without any major corrections) partly because the world is not ending but mostly because the Federal Reserve has been there to backstop any negatives with more printing of money. That money has artificially deflated rates causing money to flow into the stock market. The bottom line is that the market is on a drug called QE. There is no fear of anything because the market feels the Federal Reserve will always be there to bail it out. As the Federal Reserve lowers the amount printed, the market will stall in these upper levels (starting to see that now). As rates rise and economic activity start to stall out later in 2014, the market will hope for more intervention from the Federal Reserve, however quickly realize the Federal Reserve's former tactics will not work. This is where the major freakout will happen. Imagine drug withdrawal.
As Janet Yellen takes control of the Federal Reserve, the markets expect more of the same. While the bed has already been made, she will likely make it worse by continuing to feed the drug of QE into the market and economy. There is only disaster waiting at the end of this ride. There is no way you can print over $4 trillion dollars and not have some negative overdose down the line. The markets are priced to perfection and the dark clouds can be seen on the horizon. The Federal Reserve portrays itself as having the ability to always control the outcome. However, we clearly know from history this is not the case. Beware the bubble collapse cycle which hits in mid 2014-15.
Warren Buffett is considered by most people to be the best investor in the world. After all, he is one of the richest men on the planet. Mr. Buffett is a disciple of the legendary Benjamin Graham. Ben Graham's philosophy was to always have a margin of safety when investing and Warren Buffet has certainly mastered that. Mr. Buffett was the son of a U.S. Congressman, so he so he was able to see how things worked in Washington D.C. and the political world.
Over the past six years Mr. Buffett has been adamantly promoting that people should own stocks. In 2008, he invested money in Goldman Sachs when many in the public thought that the firm was destined to collapse. After all, financial giant Lehman Brothers was allowed to collapse. Other giant financial firms such as Bear Stearns, Merrill Lynch, Washington Mutual, Countrywide Financial, Wachovia, and many others were all taken over for pennies on the dollar. How did Warren Buffett know to invest in Goldman Sachs Group above the other financial firms? At the time when he got involved with Goldman Sachs the common stock was trading around $125.00 a share. Of course, Mr. Buffett bought preferred shares. During the time that Mr. Buffett was invested in the company the common stock of Goldman Sachs declined to $44.47 a share before finally bottoming out in November 2008. Many investors in the public followed Mr. Buffett into Goldman Sachs stock at $125.00 a share but were shaken out when the company looked like it was on the verge of collapse. After all, who can hold a stock when it drops by more than 62 percent from their entry? Only Warren Buffett can have that kind of staying power.
In August 2011, Mr. Buffett invested $5 billion in Bank of America (BAC). At that time, Bank of America common stock was trading around $7.00 a share. Of course, Mr. Buffett did not buy the common shares he bought $5 billion of preferred stock that paid a 6 percent annual dividend, he also received warrants for 700 million shares that he can exercise over the next 10 years. Bank of America has the option to buy back the preferred shares at any time for a 5 percent premium. It should be noted that over the next couple of months from the initial investment in Bank of America, the common stock declined to $4.92 a share before bottoming out on December 19. 2011. Once again, the average investor on main street that might have followed Mr. Buffett and bought the common stock shares of BAC stock would have a very difficult time holding a losing stock that declines by more than 30.0 percent against them; but once again, Warren Buffett has that staying power. How does the Oracle of Omaha know these stocks are going to make that comeback?
Over the past few years the United States has been undergoing an energy boom. North Dakota has been producing oil that needs to be transported around United States. Once again, Mr. Buffett became a major investor in the railroad stocks. In 2009, Warren Buffett bought Burlington Northern Santa Fe Corp for $34 billion. The purchase would be the biggest acquisition ever for Berkshire Hathaway Inc. which is the investment firm that Warren Buffett owns. Since the time of the acquisition, the railroad stocks have been some of the biggest winners in the stock market. This acquisition in the railroad stocks also came at a time when the Keystone XL pipeline in Canada was ready to break ground and start operations. Many people would think that a major pipeline out of Canada throughout the United States into Mexico would be a much safer way to transport energy products than by rail road. Since the Warren Buffett investment in the rail road stocks President Obama has sternly opposed the Keystone XL pipeline citing greenhouse gas emissions as the reason for not approving the project. At a time when the United States could use the jobs, President Obama refuses to budge on the Keystone XL pipeline. Does Warren Buffett have any influence over President Obama? Recently, there have been several major rail road crashes carrying energy products. One major railroad accident happened in Canada last year and another accident just occurred in North Dakota last week.
Recently, it has been reported that Warren Buffett is starting to invest in oil refinery companies such as Phillips 66 (PSX). Many of the leading oil refinery companies develop polymers that allow energy products to flow freely in a pipeline. What does the Oracle of Omaha know that we don't know about a potential pipeline being built from Canada now? Either way, we can only guess that he knows a lot more than the rest of us. Sometimes when you have as much money and political influence as Warren Buffett you can make the rules as you go along. It is well known that Mr. Buffett is a major financial contributor and financial advisor to President Obama. Remember, Warren Buffett knows how Washington D.C. Works, he has been taught this since his father was a U.S. Congressman in 1942. So when it is all said and done Mr. Buffett is the greatest investor of all time, but he might also be the greatest insider of all time as well.
I am going to keep it extremely simple. The last day of 2013 saw the S&P 500 hit a new all time high of 1,849.44. The first day the stock market was open in 2014 saw the markets sell, with the S&P 500 hitting a low of 1,827.74. That range became key to the markets and the future direction. Any close on the S&P 500 below 1,827.74 would be viewed as bearish near term, while any close above 1,849.44 would be looked at as bullish near term.
Today, the S&P 500 is currently sitting below that key pivot low at 1,825.32. Watch the closing print today. Should it close below, look for more selling in the next week. The first major support on the S&P 500 is 1,775.00.
Every bull and bear market has leadership by individual stocks and sectors. Therefore, it is important for independent traders and investors to always watch the leading stocks and sectors for clues. Certain chart patterns will indicate when the major institutional money is going to start taking profits, or even begin to accumulate a particular stock or industry group. This is why it is critical to learn and understand how to read the charts.
At this moment, some of the leading stocks in the NASDAQ Composite are Google Inc (GOOG), Facebook Inc (FB), Apple Inc. (AAPL), Amazon.com Inc. (AMZN), and Twitter, Inc. (TWTR). By following these market leading stocks we can get a sense of how the overall market will perform. As long as money flow continues to lift these equities, the rest of the NASDAQ Composite Index should hold up well. Other leading equities can generally be bought on pullbacks into technical support levels, as long as these leading stocks remain in solid up-trends. Should a trader or investor see a technical reversal signal in one of these leading equities, then it could be a warning sign that the institutional money is beginning to come out of the leading stocks. When this occurs, it will often have and adverse effect on the major stock indexes.
Remember, it is the institutional money that moves markets, it is not the individual at home with an online account buying 100 shares of a stock. The institutional money is very leveraged and has unlimited buying power, therefore, the institutions are who you must learn to follow.
Gold has been one of the most hated commodities in the world since it peaked in September 2011 at $1923.70 an ounce. At that time, the precious metal was upgraded by J.P. Morgan Chase to $2500 an ounce. As many of you already know, when a major firm upgrades a stock or commodity at an extreme high it is usually a top in that market. Today, the price of gold is trading around $1222.00 an ounce. Last week, gold traded as low as $1181.40 an ounce which was a fresh new two year low. Many so called professional traders and investors now believe gold is going to decline further because the economy is improving and the Federal Reserve is going to start to taper its $85 billion a month QE-3 program. But, here are three reasons why gold might be bottoming right now.
1. The sentiment for gold is as bearish as it has been for years. If you watch CNBC you hear almost every guest talk about how bearish they are for the precious metal. They will list all of the reasons why gold should go lower. Even the famous hedge fund manager John Paulson seems to have thrown in the towel on gold after taking big losses over the past two years. When this happens it is often the sign of a bottom. When the crowd and a stock market whale leans so strongly in one direction I want to start looking the other way.
2. Gold is real money. Over the past five thousand years the world has viewed gold as money, however since President Nixon took the United States off of the gold standard in the 1970's it has been viewed as a useless relic. Why then do central banks around the world own gold? Remember, gold cannot be printed. Gold is not magnetic, and it is also the greatest conductor of electricity. So believe me, it is not a useless relic, it has many uses. If gold was a useless relic why do you think President Franklin Roosevelt confiscated it from the U.S. citizens in the 1930's? Central bankers around the world continue to print paper money (fiat) at an alarming rate. This is happening in the United States, China, Japan, England, Europe, and of course Zimbabwe.
3. The current pattern on the charts is suggesting a potential bottoming pattern is forming in gold. The commercial money is only slightly bearish at this time. Last year, the commercial money was heavily bearish on gold. Remember, the commercial money is always early to the party and could be accumulating at this time.