The U.S. Stock Market finished the day mixed on Thursday, but with an upside bias, as the market managed to rally in the last hour of trading. A look at the daily charts suggests that all of the major averages are re-testing the lows set on October 10th. With this in mind, Friday is going to be an important trading day. If this market is going to put in a bottom, a nice rally on Friday should do the trick. On the other hand, a close below today’s lows can only be construed as bearish.
In other markets today, the yield curve continued to flatten, as the 30 year Treasury Bond enjoyed its biggest one day rally in over 2 weeks. At the same time, the short end of the curve actually sold off. Next week, the Fed meets for a two day meeting, and likely will cut interest rates again.
The Dollar continued to move a bit higher today, but the big currency move of the day was the Japanese Yen. The Yen is trading at its highest level against the Dollar since March, but it is moving upward primarily against the Euro. The Dollar improved against most of the other major currencies.
In the commodity markets, the grain markets enjoyed a modest rally today, the energy markets were mixed with Crude Oil up modestly and Natural Gas down sharply, and Gold continued its sharp slide. Watch for a rally in some commodities if the stock market manages to make gains, and/or if the Dollar pulls back. Many of these markets are extended and due for some consolidation before resuming trends.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Thursday, October 23, 2008
Wednesday, October 22, 2008
Bear Market Growls, Stocks Sink
The U.S. Stock Market plunged on concerns the economy is sinking quickly into a deep recession and will not recover very quickly. Nothing but doom and gloom on Wall Street today. Although a few tech and internet companies have reported good quarterly earnings this week, they have expressed cautious outlooks in their reports.
At this point, if you believe everything you see in the media, you would think that nobody will be shopping at Christmas. Yes, there is definitely a slowdown out there, and we have lost a lot of jobs this year. Furthermore, people have lost a bit of equity in their homes, and a lot of equity in their investment accounts.
But, let’s look at a couple positive developments. Commodity prices have plunged further than stock prices, and the Dollar has rallied dramatically, allowing interest rates to stay at low levels. Now, one could argue that a strong Dollar will result in weak exports for the big multi-national stocks. But, the combination of low inflation with low interest rates and activist governments willing to do what it takes to get things turned around, should ultimately result in an economy that comes back more quickly than most expect.
We also have rampant pessimism in the market at this point, which typically signifies a market bottom. Investor sentiment readings published by Investors Intelligence are at their most bearish levels in 15 to 20 years, and this is usually a good contrary indicator.
Still, for now, the focus must be on the price action, and after a promising start to the week, it looks like will be testing the lows again in short order.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
At this point, if you believe everything you see in the media, you would think that nobody will be shopping at Christmas. Yes, there is definitely a slowdown out there, and we have lost a lot of jobs this year. Furthermore, people have lost a bit of equity in their homes, and a lot of equity in their investment accounts.
But, let’s look at a couple positive developments. Commodity prices have plunged further than stock prices, and the Dollar has rallied dramatically, allowing interest rates to stay at low levels. Now, one could argue that a strong Dollar will result in weak exports for the big multi-national stocks. But, the combination of low inflation with low interest rates and activist governments willing to do what it takes to get things turned around, should ultimately result in an economy that comes back more quickly than most expect.
We also have rampant pessimism in the market at this point, which typically signifies a market bottom. Investor sentiment readings published by Investors Intelligence are at their most bearish levels in 15 to 20 years, and this is usually a good contrary indicator.
Still, for now, the focus must be on the price action, and after a promising start to the week, it looks like will be testing the lows again in short order.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Monday, October 20, 2008
Nice Start to Trading Week for Stock Market
The U.S. Stock Market enjoyed a nice start to the week on Monday, with a 413 point advance in the Dow, and sizable gains in the other major averages. Ben Bernanke and Hank Paulson spoke further about their plans to unfreeze the credit markets. Bernanke also supported government plans for a second stimulus plan for the economy. Also, credit markets had eased overnight, with the 3 month LIBOR dropping nearly 50 basis points. As a result, the markets were already motivated to trade to the upside before the speeches, and this simply gave cause for the markets to rally the rest of the day. Incredibly, with the averages up anywhere from 3.5% to 4.5%, when you look at a daily chart, this is the narrowest trading range in the stock market since October 1st.
Unfortunately, when you combine this with light volume, the trading pattern is a little bit ominous. If we are unable to progress significantly further to the upside on Tuesday, and take out today’s lows, we will likely progress downward for a couple days. For now, however, we will take today’s trading at face value, which was a solid up day, under any market conditions. Furthermore, the last hour of trading was strong, suggesting professional buying into the close.
In the futures markets, Treasury yields narrowed a bit today, with selling in the short end of the curve and buying on the long end. 10 Year Treasury Notes enjoyed their largest rally in two weeks.
In the currencies, the Dollar Index closed at its highest level since June 2007, with a new high for the current move off of the April and July lows of this year. The Dollar was strongest against the Euro and Pound today.
Commodities were essentially mixed today with Crude Oil and Gold showing a modest gain along with Corn and Soybeans. Natural Gas was modestly lower, and Cotton reversed its recent short term uptrend with a major reversal to the downside.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Unfortunately, when you combine this with light volume, the trading pattern is a little bit ominous. If we are unable to progress significantly further to the upside on Tuesday, and take out today’s lows, we will likely progress downward for a couple days. For now, however, we will take today’s trading at face value, which was a solid up day, under any market conditions. Furthermore, the last hour of trading was strong, suggesting professional buying into the close.
In the futures markets, Treasury yields narrowed a bit today, with selling in the short end of the curve and buying on the long end. 10 Year Treasury Notes enjoyed their largest rally in two weeks.
In the currencies, the Dollar Index closed at its highest level since June 2007, with a new high for the current move off of the April and July lows of this year. The Dollar was strongest against the Euro and Pound today.
Commodities were essentially mixed today with Crude Oil and Gold showing a modest gain along with Corn and Soybeans. Natural Gas was modestly lower, and Cotton reversed its recent short term uptrend with a major reversal to the downside.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Wednesday, October 15, 2008
U.S. Stock Market Takes a Nosedive
This was not exactly what we were looking for if a new bull market is to be born from last week’s drop. I was quite certain the stock market would take its time, drifting lower for a few days before either testing last week’s lows, or taking off with a big follow through day to Monday’s huge gains. In the next two trading days, we will have a good idea of what we the market wants to do.
At this point, I get the feeling that the finance ministers of the world feel like they have done quite a bit and are willing to let nature take its course so that the financial system can work through its issues. If they have more weapons to fight this credit crisis, which is still essentially a crisis of confidence, then they are not showing their hand yet.
I was surprised at how weak the market was today. I could understand some weakness was warranted as a result of the weak economic data that was reported today (weak U.S. retail sales for September). However, the stock market has already discounted a steep recession for 2009. Unfortunately, several of the market averages closed below last week’s low closes. Of course, they are still a bit above the intraday lows seen last Friday. But, considering the volatility in the market, it won’t take the market long to test those lows.
So, here are the keys to trading for the rest of the week. If you are on the sidelines, stay there until we get follow through confirmation for this market. If last Friday’s lows are penetrated and the market closes below those lows significantly, look out below! If, however, the market is able to bounce hard after testing these lows, then the final bottom is likely in place. But, I would still wait for a solid confirmation day to put a lot of new money into this market.
There are a lot of people ready to jump into this market if it can successfully test these lows. That smells a bit fishy, except for the fact that a lot of people have been pulling money out of mutual funds and hedge funds in the last week. Last week’s mutual fund redemptions were the highest ever. As such, we are going to have a big battle between the bulls and bears. With all the liquidity being pumped into the market, there is a huge amount of cash waiting to be invested. If we have a successful test, we could see a bigger up day than the 936 points we had on Monday.
However, do not feel like you will be missing the boat by not catching these lows. It will be best to wait until the market settles down. Then, you can sift through the rubble and buy those bargains. But, if we crash through the lows of last week and close lower, another leg down is likely, and the global economy will be in for a world of hurt.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
At this point, I get the feeling that the finance ministers of the world feel like they have done quite a bit and are willing to let nature take its course so that the financial system can work through its issues. If they have more weapons to fight this credit crisis, which is still essentially a crisis of confidence, then they are not showing their hand yet.
I was surprised at how weak the market was today. I could understand some weakness was warranted as a result of the weak economic data that was reported today (weak U.S. retail sales for September). However, the stock market has already discounted a steep recession for 2009. Unfortunately, several of the market averages closed below last week’s low closes. Of course, they are still a bit above the intraday lows seen last Friday. But, considering the volatility in the market, it won’t take the market long to test those lows.
So, here are the keys to trading for the rest of the week. If you are on the sidelines, stay there until we get follow through confirmation for this market. If last Friday’s lows are penetrated and the market closes below those lows significantly, look out below! If, however, the market is able to bounce hard after testing these lows, then the final bottom is likely in place. But, I would still wait for a solid confirmation day to put a lot of new money into this market.
There are a lot of people ready to jump into this market if it can successfully test these lows. That smells a bit fishy, except for the fact that a lot of people have been pulling money out of mutual funds and hedge funds in the last week. Last week’s mutual fund redemptions were the highest ever. As such, we are going to have a big battle between the bulls and bears. With all the liquidity being pumped into the market, there is a huge amount of cash waiting to be invested. If we have a successful test, we could see a bigger up day than the 936 points we had on Monday.
However, do not feel like you will be missing the boat by not catching these lows. It will be best to wait until the market settles down. Then, you can sift through the rubble and buy those bargains. But, if we crash through the lows of last week and close lower, another leg down is likely, and the global economy will be in for a world of hurt.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Tuesday, October 14, 2008
Stocks Pullback after Huge Monday
The U.S. Stock Market finished the day lower across the board today, after a strong open. The most significant weakness was in the Nasdaq averages and Russell 2000 on some tech worries. The market was set to open very strongly, following Monday’s huge gains, and continued strength in overseas markets. However, once Treasury Secretary Paulson and Fed Chief Bernanke presented more information on how the bail-out money will be spent, Stock Index Futures began drifting lower off the highs of the morning, and ultimate the market began selling off early in the session. However, the market finished well off of the lows of the session.
Considering that today followed a historical up day in the market, today’s losses are of no real concern. The market needs time to consolidate and settle itself down. Some traders suggest a test of Friday’s lows will ultimately be required for a new bull market to begin. However, since last week was such an extreme down week, I do not believe a test of those lows is warranted if better days are ahead. There will likely need to be a significant catalyst for the market to trade down to those levels again.
Still, the market needs time to settle down, and likely will drift lower for a few days. Then, the real test will occur, which is a follow through day to the upside. If we see a 400 plus point day in the Dow confirmed by the other averages and on high volume, you can bet that the market will trend higher, at least in the near term.
In other markets today, Treasuries finished the day lower as they begin to price inflation into the mix in 2009. The financial markets are being flooded with liquidity, and this eventually could result in an inflation spike. However, as the stock market sold off today, so did commodities, lead downward by Crude Oil. This activity will keep inflation in check for the time being.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Considering that today followed a historical up day in the market, today’s losses are of no real concern. The market needs time to consolidate and settle itself down. Some traders suggest a test of Friday’s lows will ultimately be required for a new bull market to begin. However, since last week was such an extreme down week, I do not believe a test of those lows is warranted if better days are ahead. There will likely need to be a significant catalyst for the market to trade down to those levels again.
Still, the market needs time to settle down, and likely will drift lower for a few days. Then, the real test will occur, which is a follow through day to the upside. If we see a 400 plus point day in the Dow confirmed by the other averages and on high volume, you can bet that the market will trend higher, at least in the near term.
In other markets today, Treasuries finished the day lower as they begin to price inflation into the mix in 2009. The financial markets are being flooded with liquidity, and this eventually could result in an inflation spike. However, as the stock market sold off today, so did commodities, lead downward by Crude Oil. This activity will keep inflation in check for the time being.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Monday, October 13, 2008
Historic Day for Stock Market
Ok, this was obviously a historic day for the markets, with the Dow Jones Industrial Average up a whopping 936 points on the session, or over 11%. This is the first indication that the market has undergone a change in character, and it is likely we have seen the Bear Market lows.
The ingredients for today’s move were in place over the weekend when the European finance ministers came up with a plan to guarantee new loans issued by struggling financial institutions in order to get the credit markets moving again. This was a part of an overall plan that apparently also being considered by the U.S. Treasury and Federal Reserve.
However, when you step back and take a look at the charts, the major market averages have a long way to go to repair the damage that has occurred over the last month. In fact, the averages are still well below the 13 day moving average that I typically apply to define short term trends.
Now, in order for us to determine that indeed a new bull market has begun, we need to see a follow through day, which we will define as another session where the Dow is up at least 400 points, considering the current volatility in the market. We would like to see this occur in the next 4 to 7 trading days. Bull markets always start in this manner, but of course there are false starts as well.
Not surprisingly, the Dollar pulled back a bit today, but not so much against the Euro, and it actually gained against the Yen. Currency traders are betting that the U.S. economy will eventually rebound ahead of Europe.
Commodity markets were generally higher today, lead by the energy markets. However, most finished well off their session highs. We’ll be looking for short-term trading opportunities to the short side by late this week or early next week.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
The ingredients for today’s move were in place over the weekend when the European finance ministers came up with a plan to guarantee new loans issued by struggling financial institutions in order to get the credit markets moving again. This was a part of an overall plan that apparently also being considered by the U.S. Treasury and Federal Reserve.
However, when you step back and take a look at the charts, the major market averages have a long way to go to repair the damage that has occurred over the last month. In fact, the averages are still well below the 13 day moving average that I typically apply to define short term trends.
Now, in order for us to determine that indeed a new bull market has begun, we need to see a follow through day, which we will define as another session where the Dow is up at least 400 points, considering the current volatility in the market. We would like to see this occur in the next 4 to 7 trading days. Bull markets always start in this manner, but of course there are false starts as well.
Not surprisingly, the Dollar pulled back a bit today, but not so much against the Euro, and it actually gained against the Yen. Currency traders are betting that the U.S. economy will eventually rebound ahead of Europe.
Commodity markets were generally higher today, lead by the energy markets. However, most finished well off their session highs. We’ll be looking for short-term trading opportunities to the short side by late this week or early next week.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Saturday, October 11, 2008
Did Stock Market Bottom?
The U.S. Stock Market had its wildest session ever on Friday, trading down about 800 points in the first 5 minutes, and then within 30 minutes, trading to near unchanged. A couple more wild swings had the Dow down 700 points later in the afternoon, and then the market traded to about plus 200 in the last hour, before selling off in the last 20 minutes. The Nasdaq and some other averages actually posted positive gains for the session. I noted that Apple was positive all day, finishing up over $8 on the session.
So, what does all this mean for the market? Well, it does appear that we saw capitulation selling at the open on Friday. However, it would have been better if the market had continued lower for at least another 30 minutes, with a rally into the close resulting in a positive close for the session. We didn’t get that, so I am not quite convinced that we have seen the bottom. This may be the type of bottom that requires a re-test before the market can move higher.
However, we have a G-7 meeting over the weekend, and if there is an announcement of a joint effort to ease the credit logjam that is plaguing the markets, then this very well could be the bottom. To ease that logjam, the governments need to guarantee some of these overnight loans between the banks so that they can start the process of real business lending. If whatever plan is announced is accepted by the markets, we should see a rally.
As I have been mentioning in previous commentary, a platform is in place to allow the market to rally once we get through this credit crunch. The Dollar has rallied nicely while crude oil and other energy prices have plunged. Other commodity prices, such as agriculture and metals have also dropped significantly. As a result, we do not presently have an inflation problem. We also have very low interest rates in place so that when banks actually start to lend, they will lend at favorable rates. This should help the real estate market gain some footing through re-financing and home purchases at favorable prices.
Once the market begins to look into the future and see that this issue is mainly a crisis in confidence, then investors will look at some very cheap valuations in equities, and a pile of money should flow into the market.
One caveat may be the political landscape. Unless there is a drastic change in the next three weeks, it seems clear that Barack Obama will be our next president, and the Democrats should be in their most powerful position in decades. We will then see what types of economic programs they propose, and whether they can control spending in Congress.
Stay Tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
So, what does all this mean for the market? Well, it does appear that we saw capitulation selling at the open on Friday. However, it would have been better if the market had continued lower for at least another 30 minutes, with a rally into the close resulting in a positive close for the session. We didn’t get that, so I am not quite convinced that we have seen the bottom. This may be the type of bottom that requires a re-test before the market can move higher.
However, we have a G-7 meeting over the weekend, and if there is an announcement of a joint effort to ease the credit logjam that is plaguing the markets, then this very well could be the bottom. To ease that logjam, the governments need to guarantee some of these overnight loans between the banks so that they can start the process of real business lending. If whatever plan is announced is accepted by the markets, we should see a rally.
As I have been mentioning in previous commentary, a platform is in place to allow the market to rally once we get through this credit crunch. The Dollar has rallied nicely while crude oil and other energy prices have plunged. Other commodity prices, such as agriculture and metals have also dropped significantly. As a result, we do not presently have an inflation problem. We also have very low interest rates in place so that when banks actually start to lend, they will lend at favorable rates. This should help the real estate market gain some footing through re-financing and home purchases at favorable prices.
Once the market begins to look into the future and see that this issue is mainly a crisis in confidence, then investors will look at some very cheap valuations in equities, and a pile of money should flow into the market.
One caveat may be the political landscape. Unless there is a drastic change in the next three weeks, it seems clear that Barack Obama will be our next president, and the Democrats should be in their most powerful position in decades. We will then see what types of economic programs they propose, and whether they can control spending in Congress.
Stay Tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Thursday, October 9, 2008
Stock Market Slide Continues
The U.S. Stock Market is now trading like that of a developing country stock market, with another 7% down day in the Dow Jones Industrial Average. There is absolutely no confidence in the markets, and investors are pulling out in droves. Whenever there is a little sign of strength during the day, the selling hits hard. This is mainly due to the amount of redemptions in hedge funds and mutual funds, as investors in these vehicles want to sell out. These trading firms are also being forced to raise cash to cover losses in other markets. The end result is that nearly every stock is just getting hammered without prejudice. Even IBM, which reported good earnings overnight, closed down almost 2% on the day.
If you are invested in this market, this is a time to turn off the TV for six months and maybe have a look at your portfolio statement then. Markets that go up or down this fast tend to reverse and go back in the direction from whence they came just as fast, at least for a bit, until equilibrium is found, and the market can form a new base to work off of in the long run.
If the money you have invested in the market is not needed for at least a couple of years, stand pat. The market will come back eventually. If you have cash on the sidelines once the market has found its bottom, it will be when of the best buying opportunities of your lifetime.
So far this week, the Dow Jones Industrial Average is down over 18%. There have only been two other such occasions in the last 80 years….the week of the 1987 crash and the beginning of the 1929 crash. The difference this time around is that the market peaked a year ago, whereas in 1929, the crash was only 8 weeks removed from its top, and in 1987, the market crash was also only 8 weeks removed from its top.
In 1929, there was a couple more weeks of pain before the market rallied nearly 50% from its lows over the next few months. However, the government was slow to react to the economic issues of the day, and there were clearly valuation excesses in place.
In 1987, the Fed was very quick to react, adding liquidity instantly to the markets, resulting in a bottom for the market, which rallied 30% over the next six months, and within less than two years, was making new all time highs.
I think it is safe to say that governments around the world are not standing still, but are actively adding liquidity to the markets and attempting to solve the other issues troubling the financial markets. With that in mind, I would suggest that a bottom of significance will be in place in the near future.
In other markets, Treasury futures continued to sell-off today as the yield curve continues to steepen with all the liquidity being added to the market. This suggests that Treasury traders are convinced that inflation will be an issue to worry about next year, and is the main concern, rather than economic weakness.
The Dollar also strengthened a bit today, while crude oil futures dropped under $85 in after hours trading, and Gold pulled back $20 by the end of its trading session.
In the near future, Kungfutrader.com will begin a new newsletter that will cover the stock market as well as futures markets with trading ideas for all of these markets discussed in this blog.
Stay Tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
If you are invested in this market, this is a time to turn off the TV for six months and maybe have a look at your portfolio statement then. Markets that go up or down this fast tend to reverse and go back in the direction from whence they came just as fast, at least for a bit, until equilibrium is found, and the market can form a new base to work off of in the long run.
If the money you have invested in the market is not needed for at least a couple of years, stand pat. The market will come back eventually. If you have cash on the sidelines once the market has found its bottom, it will be when of the best buying opportunities of your lifetime.
So far this week, the Dow Jones Industrial Average is down over 18%. There have only been two other such occasions in the last 80 years….the week of the 1987 crash and the beginning of the 1929 crash. The difference this time around is that the market peaked a year ago, whereas in 1929, the crash was only 8 weeks removed from its top, and in 1987, the market crash was also only 8 weeks removed from its top.
In 1929, there was a couple more weeks of pain before the market rallied nearly 50% from its lows over the next few months. However, the government was slow to react to the economic issues of the day, and there were clearly valuation excesses in place.
In 1987, the Fed was very quick to react, adding liquidity instantly to the markets, resulting in a bottom for the market, which rallied 30% over the next six months, and within less than two years, was making new all time highs.
I think it is safe to say that governments around the world are not standing still, but are actively adding liquidity to the markets and attempting to solve the other issues troubling the financial markets. With that in mind, I would suggest that a bottom of significance will be in place in the near future.
In other markets, Treasury futures continued to sell-off today as the yield curve continues to steepen with all the liquidity being added to the market. This suggests that Treasury traders are convinced that inflation will be an issue to worry about next year, and is the main concern, rather than economic weakness.
The Dollar also strengthened a bit today, while crude oil futures dropped under $85 in after hours trading, and Gold pulled back $20 by the end of its trading session.
In the near future, Kungfutrader.com will begin a new newsletter that will cover the stock market as well as futures markets with trading ideas for all of these markets discussed in this blog.
Stay Tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Wednesday, October 8, 2008
Global Interest Rate Cut Boosts Stocks
A coordinated global interest rate cut is boosting U.S. stock index futures ahead of the open this morning. The Fed cut both its Fed Funds rate and Discount rate by 50 basis points in a coordinated move in response to deteriorating stock markets that are threatening a steep recession in coming months. Ahead of the announcement, Asian stock markets were crushed over night, and European markets were selling off hard as well. Dow Jones futures were off as much as 350 points. After the announcement, Dow futures spiked to a positive gain of 150-200 points.
Stay tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Stay tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Tuesday, October 7, 2008
Stock Market Slide Steepens
The U.S. Stock Market closed at session lows, as selling accelerated in the last hour, leaving the Dow Jones Industrial Average with a 500 point loss after trading higher earlier in the session. The market started to head lower shortly after the positive open, and selling began in earnest during and after Fed Chairman Bernanke’s speech. As I write this blog this evening, Asian stocks are plunging further.
There is not much else to add, except that it does appear that the markets are in the capitulation phase. The rate of descent is simply too fast to continue for much longer. However, there is the possibility of a very scary sell-off this week that could finally trigger the final capitulation.
Aggressive traders who are able to follow the markets intraday should pay close attention, because there is an opportunity at hand. When this market decides that enough is enough, the reaction to the upside will be violent. ETF’s may provide a decent vehicle to capitalize on this situation.
An ideal intraday setup will look like a double bottom after a steep drop early in the session. The market will make an intial low, off of which it will bounce a bit. The market will then test this low and bounce violently to the upside, and this is when aggressive traders can put on a position.
Another scenario may just involve a rubber band that is stretched way too far. In this instance, a huge sell-off will run out of steam, and the market will react violently to the upside. This scenario is more difficult to trade. In the case of the S&P 500, if there is a big sell-off early in the morning, and the market then proceeds to rally off of that low by 40 whole points (say from 950 to 990) by noon, then you have quite likely seen the bottom.
If you are a long term investor, and not a risk taker, these scenarios will offer good opportunities to add to long term positions at bargain prices.
Keep in mind that the markets are acting purely on emotion right now. Fundamental analysis has been thrown out the window. It has been quite painful for long term investors to watch their portfolios dwindle, but this should be viewed as one of those few major buying opportunities of a lifetime, similar to the recovery from the 1987 crash, and the end of the 2002 bear market. Still, traders and investors must continue to be careful in this environment.
In regard to any potential Ultimate Stocks, it will likely be at least six months after the low is in place until the candidates we seek will be trading in a manner that will allow us to capitalize on major new uptrends. This is why we should focus our attention on trading indexes, ETF’s and mutual funds to enhance portfolio profits.
Stay calm, stay cool…the opportunity will soon be at hand, and possibly as early as Wednesday!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
There is not much else to add, except that it does appear that the markets are in the capitulation phase. The rate of descent is simply too fast to continue for much longer. However, there is the possibility of a very scary sell-off this week that could finally trigger the final capitulation.
Aggressive traders who are able to follow the markets intraday should pay close attention, because there is an opportunity at hand. When this market decides that enough is enough, the reaction to the upside will be violent. ETF’s may provide a decent vehicle to capitalize on this situation.
An ideal intraday setup will look like a double bottom after a steep drop early in the session. The market will make an intial low, off of which it will bounce a bit. The market will then test this low and bounce violently to the upside, and this is when aggressive traders can put on a position.
Another scenario may just involve a rubber band that is stretched way too far. In this instance, a huge sell-off will run out of steam, and the market will react violently to the upside. This scenario is more difficult to trade. In the case of the S&P 500, if there is a big sell-off early in the morning, and the market then proceeds to rally off of that low by 40 whole points (say from 950 to 990) by noon, then you have quite likely seen the bottom.
If you are a long term investor, and not a risk taker, these scenarios will offer good opportunities to add to long term positions at bargain prices.
Keep in mind that the markets are acting purely on emotion right now. Fundamental analysis has been thrown out the window. It has been quite painful for long term investors to watch their portfolios dwindle, but this should be viewed as one of those few major buying opportunities of a lifetime, similar to the recovery from the 1987 crash, and the end of the 2002 bear market. Still, traders and investors must continue to be careful in this environment.
In regard to any potential Ultimate Stocks, it will likely be at least six months after the low is in place until the candidates we seek will be trading in a manner that will allow us to capitalize on major new uptrends. This is why we should focus our attention on trading indexes, ETF’s and mutual funds to enhance portfolio profits.
Stay calm, stay cool…the opportunity will soon be at hand, and possibly as early as Wednesday!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Sunday, October 5, 2008
Weekly Stock Market Re-Cap
The U.S. Stock market ended the week at its lows, finishing off one of its worst trading weeks on record, even after the House of Representatives passed the financial bail-out bill passed down to it by the Senate. This was entirely expected, but the market had already shifted its focus to the economy. The economy appears to be spiraling downward at an accelerating rate, as evidenced by the employment data released Friday morning, indicating job losses of 159,000.
No matter who is elected president now, he will be faced with an economy in recession. If Obama wins, expect some significant new economic policies and regulation, with a Democratic controlled Congress. I was encouraged by Speaker Pelosi’s speech before the vote on Friday, indicating some focus on balancing the budget. However, in a recessionary environment, this will prove to be impossible. However, it is clear that at the very least, Obama seems to have a vision, whereas McCain has not laid out a coherent economic plan, and that is why he is falling further behind in the polls.
The rhetoric from the campaigns over the next four weeks may determine whether the market can put in a bottom. A market that closes at its lows on Friday is a market that will continue to head lower, at least for another day or two. However, such a large down week indicates that the market is now severely oversold. Lower prices, and then a big reversal may be what this market needs to put in a bottom.
Technically speaking, the market has retraced two-thirds of its gains from the 2002 lows, and current prices are where some followers of Fibonnaci would seek a bottom. The S&P 500 is now 35% below its closing high of 2007. This ranks the current bear market as a worse than average bear market. However, none of this means a thing in reality. The trend is down, and investors and traders need to stay very defensive.
In other markets, the Dollar retained its gains by holding steady on Friday, while Crude Oil finished unchanged, but down for the week. Treasury futures were largely unchanged on Friday, and agricultural commodities had a downward bias, after big losses this week.
In early Asian market trading Sunday evening, the Dollar is rallying further against the Euro, and Asian stock markets are significantly lower.
Stay tuned!
Scott Cole
www.theultimatestocktradingsytem.com
www.kungfutrader.com
No matter who is elected president now, he will be faced with an economy in recession. If Obama wins, expect some significant new economic policies and regulation, with a Democratic controlled Congress. I was encouraged by Speaker Pelosi’s speech before the vote on Friday, indicating some focus on balancing the budget. However, in a recessionary environment, this will prove to be impossible. However, it is clear that at the very least, Obama seems to have a vision, whereas McCain has not laid out a coherent economic plan, and that is why he is falling further behind in the polls.
The rhetoric from the campaigns over the next four weeks may determine whether the market can put in a bottom. A market that closes at its lows on Friday is a market that will continue to head lower, at least for another day or two. However, such a large down week indicates that the market is now severely oversold. Lower prices, and then a big reversal may be what this market needs to put in a bottom.
Technically speaking, the market has retraced two-thirds of its gains from the 2002 lows, and current prices are where some followers of Fibonnaci would seek a bottom. The S&P 500 is now 35% below its closing high of 2007. This ranks the current bear market as a worse than average bear market. However, none of this means a thing in reality. The trend is down, and investors and traders need to stay very defensive.
In other markets, the Dollar retained its gains by holding steady on Friday, while Crude Oil finished unchanged, but down for the week. Treasury futures were largely unchanged on Friday, and agricultural commodities had a downward bias, after big losses this week.
In early Asian market trading Sunday evening, the Dollar is rallying further against the Euro, and Asian stock markets are significantly lower.
Stay tuned!
Scott Cole
www.theultimatestocktradingsytem.com
www.kungfutrader.com
Friday, October 3, 2008
Stock Market Sinks on Economic Worries, Dollar Soars
The U.S. Stock Market shifted its focus to the actual economy today after the Senate passed its version of the financial bail-out plan Wednesday night. Weak employment and housing data over the last couple days has focused the market on actual economic data, which is likely to get worse before it gets better.
Surprisingly, the Dollar has been able to rally very strongly over the last couple of days, particularly against the Euro. Today, this strength spilled over into Gold weakness, as commodities continue to sink across the board. It was notable that many of the stocks that lead the market to its peak in 2007, the agricultural related stocks, coal stocks, and the dry bulk shipping stocks, continue to sink, and many actually made 52 week lows today.
Although the U.S. Government is ready to provide a huge bail-out plan that will include lots of new spending and the printing of more dollars, the markets are suggesting that inflation is not of concern in the foreseeable future. The air in the commodity balloon continues to be let out, and leading economic indicators such as the industrial metals, aluminum, platinum and copper, continue to drop. Oil is now ready to test its mid-September lows while gasoline and heating oil have already gone through those lows.
The bottom line is that these are positive developments, and once we get through this current credit crisis, and normalcy returns to the financial system, the stock market will begin to look forward. With commodity prices falling, the Dollar rising and interest rates remaining low, the platform will be in place for the market to begin a new bull market. UNLESS…the next administration decides to screw things up by raising any kind of taxes. If there are tax increases on business and the top income earners in the country, those that provide the jobs, the recovery will be slowed considerably. The financial bail-out will do nothing if jobs continue to be lost.
Stay tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Surprisingly, the Dollar has been able to rally very strongly over the last couple of days, particularly against the Euro. Today, this strength spilled over into Gold weakness, as commodities continue to sink across the board. It was notable that many of the stocks that lead the market to its peak in 2007, the agricultural related stocks, coal stocks, and the dry bulk shipping stocks, continue to sink, and many actually made 52 week lows today.
Although the U.S. Government is ready to provide a huge bail-out plan that will include lots of new spending and the printing of more dollars, the markets are suggesting that inflation is not of concern in the foreseeable future. The air in the commodity balloon continues to be let out, and leading economic indicators such as the industrial metals, aluminum, platinum and copper, continue to drop. Oil is now ready to test its mid-September lows while gasoline and heating oil have already gone through those lows.
The bottom line is that these are positive developments, and once we get through this current credit crisis, and normalcy returns to the financial system, the stock market will begin to look forward. With commodity prices falling, the Dollar rising and interest rates remaining low, the platform will be in place for the market to begin a new bull market. UNLESS…the next administration decides to screw things up by raising any kind of taxes. If there are tax increases on business and the top income earners in the country, those that provide the jobs, the recovery will be slowed considerably. The financial bail-out will do nothing if jobs continue to be lost.
Stay tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Wednesday, October 1, 2008
Stock Market on Hold Ahead of Senate Vote
The Stock Market was essentially in a holding pattern today after a big rebound on Tuesday as the Senate gets set to vote on a new financial bail-out plan based on the one put forward by Treasury Secretary Paulson. As I write this blog this evening, the Senate actually passed the bill with over 70 votes.
In the near term, this should benefit the stock market. By near term, I mean Thursday. On Friday, we get a new employment report, and the focus will be on that part of the economy. The current problems will still be present, but hopefully passage of this bill will help to unfreeze the credit markets to help the economy get moving.
So far this week, the reaction of the Dollar has been quite positive, and if that continues, that should help things immensely. Also, Crude Oil seems willing to stay below $100 per barrel, and gas futures prices have been dropping even more quickly.
What we want to see going forward is some stability over the next few days and then weeks. If the credit markets can stabilize and lending activity picks up, we may have seen the worst of these market conditions.
Stay tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
In the near term, this should benefit the stock market. By near term, I mean Thursday. On Friday, we get a new employment report, and the focus will be on that part of the economy. The current problems will still be present, but hopefully passage of this bill will help to unfreeze the credit markets to help the economy get moving.
So far this week, the reaction of the Dollar has been quite positive, and if that continues, that should help things immensely. Also, Crude Oil seems willing to stay below $100 per barrel, and gas futures prices have been dropping even more quickly.
What we want to see going forward is some stability over the next few days and then weeks. If the credit markets can stabilize and lending activity picks up, we may have seen the worst of these market conditions.
Stay tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
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