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Trend Days (and sitting on hands)

For day traders and swing traders, a trend day can be the difference between extreme profits and being left behind in the dust; having exited a trade too quickly.   Properly identifying a trend day early in the trading session is key to sitting on one's hands and not exiting too soon whether we're trending up and getting out (not fade) if you are short the market.   

Well known commodities and futures trader and President of LBRGroup, Inc. Linda Bradford Raschke points out something I feel of note right off the bat:  that trend days tend to occur after the market consolidates and digests gains; or what we call a few "inside…

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The Free Lunch Trade

Unlike the Dogs of the Dow, which is a strategy buying the 10 Dow stocks with the highest dividend yield at the beginning of the year, then dumping the "dogs" at the end of the year and selecting new ones, the "Free Lunch" trade is a very different strategy executed in mid December and shorter in duration.  It attempts to take advantage of several year end phenomena such as index re-blalancing, tax selling, Santa Claus Rally, January effect, etc. and lasts until February.

According to MrTopStep:

Research has shown that NYSE stocks making new 52-week week lows in mid-December, primarily due to year end tax-loss selling, tend to outperform the NYSE through mid-February. These stocks are selected…

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Sunday Reading

  • What BMW’s China sales say about their economy.  “Xubao” or false reporting; who knew!  Quartz
  • Pay your bills or we take your cat (seriously)  TheMoscowTimes
  • A $1.65 billion buyout, 300 hours of video uploaded every minute,  300 million hours streaming per day, a “farm” of sorts where prominent studios are paying huge sums to acquire companies that bundle together YouTube channels,  an ever-expanding ad platform, a new premium service (Music Key) and a new marketing strategy aimed at turning YouTube starts into, well true stars.  Aand imagine; YouTube is still an experiment.…

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It's Not A Bullish Engulfing Quite Yet

I should have titled this "counting your chickens before they're hatched".  Anyway, a few words on bullish engulfing candles, the term of which is being bandied about a great deal today.  But don't count your chickens.  Just because price took out a high and a low, does NOT a bullish engulfing make.  It's also unwise to call something a engulfing or any other pattern when the trading day is not yet over.  As explained by stockcharts.com

The bullish engulfing pattern consists of two candlesticks, the first black and the second white. The size of the black candlestick is not…

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Lower Oil Spawns Numerous Opportunities

As many Western economies are seemingly slowing down again, with most of them still struggling with stubbornly high unemployment levels, they will only benefit from the current sharp drop in oil prices which will stimulate the global economy. Moreover, countries now have the opportunity to replenish stocks and protect themselves against future price hikes. Stockpiling begs the question: how long will prices remain relatively low compared to recent years? Will they fall further? $60 would certainly kick start substantial economic activity or will supply be rained back?

In the past, we have seen the US and its Western partners put pressure on OPEC, and the world's only swing producer Saudi Arabia, to increase supply so as to lower prices or maintain price stability. Are we about to see them…

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Is It A Correction Or Bear Market?

“Is the S&P in a correction or Bear market Mom?” is the question I received from my daughter last night. She’s been learning the stock market slowly over the last five or so years and I cringe at times with the questions she poses however no question is a bad question. I’d rather she come to me than blindly follow some pundit or supposed guru to $99/month subscription. After all, if he/she is so smart – why do they even need to charge for anything?  Just sit back and enjoy the wealth.

While the big boys and their algorithms have their calculated strategy, this is how I explained it to her in my simple, 'laywomans' terms.  In my mind big money typically buys at major supports during a correction. They sit back and salivate at an opportunity to, not buy the dip, buy buy on the cheap and define their risk.

For me, I consider the monthly 20 SMA as you can see from my prior post on the subject…

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Admin

The State Of Buyback Programs

Stock repurchase programs as well as dividends, are a great way to "return value to the shareholder" and also a way to "prop up" a stock price or keep funds in the game.  Unfortunately, nothing lasts forever and repurchase programs are unsustainable longer term.  At some point the market must heed the fundamentals, earnings growth and if margins contract, the positive effect of buybacks is lessened.   This from one of my favs, Variant Perception

Stock buybacks have been an important feature of the equity rally.  Companies have used low rates and easy credit to borrow money and used it to buy their own shares back.  An identity for a company’s share price is: S = (revenues * margins * P/E) / # of…

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Admin

S&P on Income Inequality, Education, Jobs and Taxes

The topic of income inequality and its effects has been the subject of countless analysis stretching back generations and crossing geopolitical boundaries. Despite the tendency to speak about this issue in moral terms, the central questions are economic ones: Would the U.S. economy be better off with a narrower income gap? And, if an unequal distribution of income hinders growth, which solutions could do more harm than good, and which could make the economic pie bigger for all?

Given the decades--indeed, centuries--of debate on this subject, it comes as no surprise that the answers are complex. A degree of inequality is to be expected in any market economy. It can keep the economy functioning effectively, incentivizing investment and expansion--but too much inequality can undermine growth.

Higher levels of income inequality increase political pressures, discouraging trade, investment, and hiring. Keynes first showed that income inequality can lead affluent households…

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Admin

Given the price action in the market lately, there's been much discussion here on what constitutes a pullback and what constitutes a change in direction or trend. The suggestions have ranged from three weekly or monthly lower closes, a close below a certain moving average, various moving average crosses and more but in all honesty I don't think there's *one* holy grail. One indicator that satisfies all investors across all asset classes and we all have different loss tolerances and for that matter, different viewpoints or perspectives on the world economy and it's ongoing recovery.

This discussion however, brought to mind the following [somewhat lengthy] excerpt from the novel on Jesse Livermore, Reminiscences of a Stock Operator, written in 1923 by Edwin Lefevre [available in PDF…

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