Beware The “Top Of The Market” Gurus.
It has been one of the most profitable years in the history of the stock markets. Anything, well almost anything you bought a year ago is probably making a lot of money for you right now. I am quite please that so many people have written to me thanking me for “Profit From The Panic” because its release was so timely that they took the book’s advice and happen to buy the bottom of the March low, six weeks after the book’s release. But even without that book, a lot of money would have been made anyway because everything went up in the last year and this happened all over the world …
And now, as has happened in the past, the “Gurus” emerge. Claims of success in the market and proof of profits shout out from the newspapers everyday as more and more new faces come forth. There can be little doubt that such riches were indeed made and there can be no doubt that these claims are real. What doesn’t meet the eye is a very reliable chart pattern that tells us that this could be the market top …
As the market ran to the top of 1999/2000, there were several very prominent foreign gurus in Singapore and Malaysia. They faded as the market faded between 2001 and 2003. Only one stuck around at the bottom of 2003 (A) and was joined by two other locals as the market recovered (A to B). At the top of the recovery a year later, the market was flooded with all sorts of gurus promising wealth and easy money. I should know … I signed up for several of them with no results.
By the middle of 2004, I was wiped out while even more gurus came to the fore. By 2005, the market was no longer going up and some of these gurus faded away. I began my comeback by trading this volatile and sideways market (B to C) and managed to make considerable progress between the middle of 2004 till 2006. I started teaching at AKLTG at the end of 2006 (C). At that time, there were only a handful of gurus and a couple of them were already suffering from bad press thus leaving only three really credible ones including the foreigner from 2003.
By the time the market hit 13,500, there were approximately 4 gurus (less the two who suffered the bad press and not including myself because I am not a guru). A few months later as DOW hit 14,000 (D), there was a flood of newcomer-gurus claiming massive profits and more get-rich-quick programs here in Singapore, in K.L and very obviously in Jakarta.
The market tanked … and so did the newcomers’ numbers through 2008.
At the bottom of 2009 (E), I counted only 4 regular workshops not including my tutorial. At that time, “Profit From The Panic” was flying off the shelves to become the #1 Bestseller (FYI, proceeds from the profits of that book went to charity). The market then went into that most profitable one-year rally in recent history (E to F).
Today, if you open the newspapers, you can count no less than 12 different competitive gurus every week (not including me) teaching easy money strategies, get-rich-quick systems and claiming obscene profits from the market.
For the record, I have never made such claims because I know the market is a killer of dreams and dreamers. You only need to attend my Preview to know this to be true.
So when the new gurus emerge and my class gets difficult to fill, it only means that the easy money is about to end.
So will we go sideways in a volatile fashion like B to C or will it be another tanker like D to E?
Whatever the outcome, one thing is for sure … at the end of that period, there will only be a few gurus in the market and that will be the market bottom again.
And since I am not a guru, I guess I will still be around to write another market bottom book!
Happy Hunting!
Post your comments here: Beware The “Top Of The Market” Gurus.
Why Traders Fail – Lesson 3
This lesson looks at the most popular reason why most Traders get wiped out – The Hype
Through the years, trading has always been a pipe dream for most who wanted to get filthy rich. With the advancements in technology over the last decade, this pipe dream has been brought closer to home than ever before. Today, it is a very accessible dream to anyone and everyone. All you need is a computer and an internet connection.
And of course, you need the right kind of market.
This is where the hype starts. We have been over-exposed to all sorts of advertising and promotional rah-rah that makes us believe that it is actually possible to make that fortune a reality. We see ads with winners making really fantastic profits from a single trade and we hear of friends who make a living from trading and living the good life. We see the rich and famous on TV that have made fortunes in the market. We read about people making fortunes from the comfort of their homes.
We believe we can be one of them. Worse, we believe it is really that easy.
What we don’t see in most cases is the real ugly truth. We don’t get to see losers, we never see the many hundreds or thousands that get wiped out and we definitely never hear what happens to the few winners when the market turns.
We never get to see how difficult it is for those successful few to make that living. We don’t see how much studying, hard work and endless hours of practice it takes to achieve that “easy” life. We definitely don’t hear about how much losses were accrued before the wealth accumulation started.
When the market is rallying at full steam, you always get to see new gurus hyping up their courses, authors of all sorts publishing their version of making a fortune from the market and everyone rushing to brokerages to get an account open. Workshops of all kinds will be touting their software that makes profits without the trader having to put in much effort. Some gurus will adapt their classes to ride the trend of the market – if Options is the way to go, you’ll get Options teachers by the dozens … if Forex is the flavor of the trend, then that’s what you’ll get lots of.
The market in itself is a hype. When everything is running up the charts, it is so easy to make money from the market. Everyone seems to be getting in on the action when a bull run is in full steam. The hype worsens as these bull-run winners put more money into the market to help the rally climb even higher. Pretty much like what is happening in our property market today. The aunties and uncles at the coffee shop also seem to have the best tips and everyone in the neighborhood is an expert at stock picking.
Scandals also abound when the market is in full hype. Hedge funds and pillion-trading are two of the many ways these scandals begin. In some recent cases, the owner of the fund or hedge starts spending the money even before the fund is profitable. This adds to the hype. We see fund managers driving fancy sports cars and living it up in penthouse condos and sprawling landed properties. Everyone wants that life and the market can give it to you.
So the average Joe, or in our case, Ah Seng, joins the hype bandwagon and puts his hard earned money into a few bets in the market. It makes money for sure. The bull run continues. So Ah Seng buys more and grows his wealth. He tells his friend, Ah Huat about it and he joins the bandwagon. Soon, the market is flooded with Ah Sengs and Ah Huats who know little about the danger they just got themselves into.
The fact is, the market had already been running up like mad which is where all the hype came from. By the time the new gurus, workshops and books emerge, the rally is almost always halfway there. This is when the aunties and uncles get wind of the easy money and this brings on the Sengs and Huats. Next thing you know, the market is over-cooked. Yet it continues to rally, albeit on suspiciously lower volumes.
The lower volumes are an indication that the smart money is already sidelined and waiting for the inevitable. The smart money knows when to get out and stay out. They know because the ignorant money has started to flood the market.
When the market is greedy, you should be fearful.” ~ Warren Buffet
Then the inevitable happens – the market stutters and falters … the easy money slows down … volatility begins to rule the market … the ignorant money slowly realize that they have left their arses hanging in the wind without protection. But they’ll continue to live in denial because of the hype.
The market slides south. But not in a hyped-up crash, mind you. The market is a sneaky place that gives you more rope than you need to hang yourself repeatedly. It takes a slow and steady slide with the occasional bull-trap to keep the ignorant money believing that the correction is a “normal” thing in this business. After a brief reprieve to bring hope to those living in denial and possibly bring in more ignorant money, the market continues its sneaky slide south. This goes on for a while and before the ignorant money realizes it, more than half the investment is down the toilet.
By this time, some of the gurus quietly “disappear” from the press, some workshops cease to exist, software traders start complaining that the system is not working as promised, fund managers appear in the news for the wrong reasons and my class starts filling out with dozens of traders looking for a fix and a more realistic way to survive the market.
The market gets down to an impossible low. Gone is the hype and all that came with it. In its wake, it leaves a massive trail of destroyed lives and emptied bank accounts. The market is now “a dangerous place” when it was once a dream maker. The market is a “casino” when it was once an ATM. When the hype is all gone along with the money, people get serious and stay away from the market.
This is when the smart money returns.
And this starts a new hype cycle that brings in the new ignorant money.
The question you should be asking is not; “when will the ignorant money start to suffer?”
If you thought of asking that question, YOU are the ignorant money.
The only question you should be asking is; “How do I become the Smart Money?“
March 2010 In Review, April Preview
MARCH 2010 REVIEW
As expected, March was once again as busy as it has been for the last three years. It was also the longest trading month I have ever experienced – 23 trading days in all. And it was a profitable month in spite of all the volatility amidst some of the narrowest ranges we’ve seen in a while. What I will remember about this March 2010 is that I found a balance between my time trading, with time with the family and still managing time to travel, teach and talk. But it must be said that it helps to have a productive team behind you and reliable supportive coaches to pick up your slack. To them I say a heartfelt “thank you“.
On Wednesday 3 March, Batch 36 in Singapore Graduated from the Pattern Trader Tutorial (WAT).
They were the first batch of 2010 and the first to receive the 28 Chapter, 8 Night version of the newly revised tutorial. This batch also saw the inauguration of my newest bunch of coaches; Diana, Roy, Gabriel and Leon to add to the already established batch of Henry, AT, Lawrence and the occasional Ruben. Thanks fellas … you make the tutorial special for me.
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The ATIC Asia Trader & Investor Convention was held at the Kuala Lumpur Convention Centre, Kuala Lumpur City Centre on the 20 and 21 March weekend,
My spot was on Sunday 21 March at 4:45pm in the NextVIEW room.
<< The room was so packed, the crows took drastic measures to get an ear in!
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28 March saw Wealth Academy graduate its 21st cohort of newly minted Investors.
Not as usual, the Coaches that came back were more motivated than ever and it was really good to see so many of the “older” and more senior coaches back and as dedicated as never before. You fellas really RAWK!
And that was one helluva long March. It felt like it would never end!
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APRIL 2010 PREVIEW
And now, on to April. If March was any indication of how busy I will be, then April is what March was implying! There will be another WA (in JKT), two public talks in KL,a Candlestick Workshop in SG and a TA Masterclass also in KL. Here are my highlight events for April 2010;
Friday 2 to Sunday 4 April – Technical Analysis Masterclass in KL
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Saturday 3 April – ShareInvestor in KL
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Saturday 10 April – Candlestick Workshop in SG
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Friday 16 to Monday 19 April – Wealth Academy in JKT
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Sunday 25 April – “Crash” Course with G.M. Teoh & me at CIMB in KL
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Friday 30 April to Monday 3 May – Pattern Trader Tutorial (WAT) in K.L.
And those are just the weekends, mind you. April is jammed PACKED!
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MARKET UPDATE
April is one of my most favorite months in the trading year obviously because it is the most bullish month of any year. Here are some of the statistics that come in April:
- April is traditionally the most bullish month of any year
- First day of April was up 12 out of the last 15
- April has one of the best opening weeks of any month
- The last Monday of April tends to be the most bearish of the month
- Expiration Friday in April has been up 11 out of the last 13
- April of 1999 was the first and only month that DOW gained 1,000 points in a month
- April has one trading holiday on Good Friday, 2 April.
- April ends the “Best six months” on the DOW and S&P500.
April also starts the second quarter of the year and the 2nd Earnings Season for the year. Volatility during this period usually reaches record levels for the year.
The market has been rather overcooked on very low volumes towards the end of March. This is not a good sign. If April does rally, volume have to pick up if the rally is to be reliable and sustainable. Further dips in volumes through April will see a major tanker in May 2010. This will be no ordinary tanker.
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So let’s go! Bring on April and let’s get busy! (I must be losing it …) After all, busy is better than not at all.
And this old man has still got a lot to give.
Happy Hunting to all!
Why Traders Fail – Lesson 2
Now we look at a controversial reason why most traders fail - The Attitude
It starts right at the start where most newcomers think that the market can be a get-rich-quick plan. This is akin to thinking that the market is like a casino. Consider this fact – the house ALWAYS wins. So if you treat the market like a casino, it will make you feel like most gamblers do. Gamblers always win a few but lose a lot.
Some trade like the market is a system to be beaten. Such traders ought to give themselves more credit. You’re insulting yourself if you have this attitude. To think that the market is a system is to include yourself in that system. Therefore, the system you are looking to beat includes you. Give yourself some respect and while you’re doing that, give the market the same respect – we’re not robots in the market and we’re definitely not part of a system. We’re humans that are driven by emotions. The market is an emotional place, not mathematical. You cannot have a system to beat an emotion because there is no math that can factor emotional irrationality.
Then we have those that don’t realize how unscrupulous the market is. Their ignorance is evident when they correctly assume the market is not that clear cut but will still buy into the hype. What is obvious is that the market is made up of all kinds of people especially those who will do anything to get an edge, even through illegal and criminal means. It is also full of experts who have spent years in Harvard and Princeton and then more years with established institutions such as Goldman Sachs, Morgan Stanley and the like. They have hugely experienced mentors to guide them to become the next generation of world class traders. These people have so much leverage and influence on market sentiment and to make their advantage more unfair, they collude with their competitive counterparts in order to corner the larger market for their own gains. With such power, how is a three-day workshop graduate expected to beat the odds? Yet more and more look past the obvious and end up throwing their hard earned money to the power-brokers.
These are also those who buy into the idea that the market can be analyzed fundamentally with valuations. Such valuations do help to reduce risk. But that is an investment-styled strategy and not suited for trading. Trading is way faster and seldom allows the security time to flex its fundamental muscles before the next gyration takes out the profits. Read the previous lesson to know the difference between the investor and the trader and you’ll have a clearer understanding of this.
Others rely purely on technical analysis. I can’t deny that I base a lot of my analysis on technicals. But that is not the end all. All it takes is one bit of macroeconomic news and all that technical analysis is out the window faster than you can say “Cut loss!” TA is great as long as there is no news to upset the prevailing sentiment and as long as volumes don’t dip. But the market is never so generous. So in the end, TA is only a “best guess” … and contrary to common belief, TA is not the best guess of when to buy or sell – rather it is most reliable when used to guess the best potential against the least risk or the most risk against unfavorable potential.
Then there are those who believe that a good tip from a trader is the key to easy money without putting in any effort. For this, I have only one analogy; Would you take a heap of hard-earned money out of your wallet and give it to someone you hardly know and expect to get it all back after a few weeks? And if that person was trustworthy, would you still do it? And do you really believe that it will come back with more than you gave him? If in life we don’t make such practices, then the same principles should be applied in the financial world and most of all, in the market. The desire to get-rich-quick-and-easy makes simple people do really silly things with their money. And it is always only after getting burned that you hear those famous last words, “ … if only I knew …“. Yes, you’ve heard the horror stories time and again and so has everyone else. Yet people continue to write new chapters into this horror story ever so frequently … all in the name of greed, gluttony and sloth.
The financial markets are like an office block in a busy business district. The people who go to work there are serious professionals who take what they do very seriously. They are highly experienced, very influential and extremely powerful. It is also like a hospital where the surgeons, doctors and nurses are highly qualified and trained professionals. People put their life in their hands everyday.
Then one day, some over-zealous graduate with three days of workshop knowledge comes into this office block and expects to beat everyone out of their jobs. Or this hyped-up graduate with only three days of experience comes into the hospital and expects everyone to trust him with their lives.
Okay, maybe that is a bit of a stretch but the implications are no different. Every professional takes years to study his craft and then spends more years honing the skills with hours and hours of practice and hard work. They also have a mentor to constantly guide them till the day they are ready to go solo. There is no easy path to success and there will be failures along the way. The financial market is to be respected and feared. There is no other attitude except humility that will help a trader survive it.
It is said that more than 80% of the market is made up of those who lose and less than 20% are winners. The truth is that those statistics apply to any profession – how many top rated lawyers, engineers, surgeons, etc are there compared to the many also-rans?
The big money is always at the top where there are few who have it while the small money is at the bottom where most have to fight for it. And there are only two ways to be at the top – either you are already there or work hard to get there.
Why Traders Fail – Lesson 1
This is the first of a series of mini-lessons on why so many traders fail. These mini-lessons aim to pinpoint some of the common (but not so obvious) mistakes they make and how some of the most common-sense practices go out the window the moment they start trading.
In Lesson 1, we look at where the problems all begin – The Education.
Most people know that trading is a stressful and dangerous job. Most also know that it isn’t easy and takes a lot of work and learning. Of course, there are the few who believe that the market can be beaten with a system or with some high-tech software. Then there are those who cling on to the ignorant belief that the market is a place that can get them rich quick.
Let’s not waste time discussing the dreamers and ignoramuses. Rather, lets look at the fellow who knows what it takes and is ready to work for it. Let’s look at the fellow who sincerely wants to learn all there is to know about this business but is unable or unwilling to get a formal education for it. It has been argued that one is able to learn about trading by reading books and obtaining information through the internet.
So if it is that simple, why do so many still fail? The answer is just as simple; Learning the wrong thing without realizing it.
Most of the books available, either at bookshops or at the library are about INVESTING and very few are actually about TRADING. So what happens is that most people don’t realize the real difference between investing and trading and will assume the two to be the same with slight variances. That could not be farther from the truth.
Investing is much easier to learn – like learning to drive a Honda Jazz. It doesn’t take much to learn it and it is easily understood and put into practice without much difficulty. The trick thereafter is not to crash.
Trading, on the other hand, is a very different skill and mind set. It is akin to driving a Formula 1 car. Unlike the Honda where the manual version has the clutch on the left foot, the F1 car’s clutch is a very different mechanism and is controlled by the right hand. Unlike the Honda which packs less than 80bhp, the F1 car stacks up an earth-shattering 900+bhp which, in untrained and inexperienced hands, could end up killing the driver.
There is so much more to trading than investing. The skills involved are very different, the psychology is worlds apart, the knowledge needed requires way more weeks and even months to acquire and the amount of research needed to be a good investor is nothing compared to the daily research and monitoring the trader is required to do to survive the market day in and day out. Where investing requires little or no practice, trading demands hours and hours of practice time to hone the skill. The financial management skills are also extremely different in that the investor protects his capital by how much he invests while the trader requires a different skill set to manage his finances – its called “cutting loss” – something easier said than done.
So without realizing it, most beginners will pick up an investment book or visit sites hosted by investors or have contributing members who are investors and assume that all that knowledge gained will stand him in good stead as a trader.
And when things don’t work out, it gets confusing. The common query that follows is always, “Why is it others can make it but I can’t?“
You can’t blame the poor fellow because there isn’t much literature on this subject and even some so-called gurus don’t know the difference. But all you have to do to know that this is true is to just look at Wall Street – how come the investors don’t have to be on the floor of the exchange everyday while the ones on the floor everyday are known as traders?
Knowledge … a little of it can kill you quickly while the wrong kind will slowly bleed you to death.
Even More Viewing Education
Economy recovering? Housing bottomed? Not really if you watch the following videos … there is still much so worry about.
The first video for this post is a fact-by-numbers housing report which doesn’t look at all like green shoots, let alone withering lallang …
This is the future of the Dollar …
And this amazing story is about interest rates on credit cards … 59.90% !!??!!
This is something Singapore needs to look at before out students get the wrong idea about spending habits …
And while the banks rape us for interest, they still refuse to lend … even the small banks have become Shylocks …
So while the banks don’t lend, small businesses can’t hire … and if they don’t hire, unemployment stays high … if employment is hard to come by, Americans stay broke … if Americans stay broke, the banks won’t lend money out to risky borrowers … a vicious circle.
And it was the banks that started this whole mess in the first place by lending to less-than-desirable borrowers that started the Sub Prime Mortgage Crisis. (Insert ironic jingle here.)
Here’s a little tidbit from my good friend RM;
Our machinations have hidden an actual, ongoing depression. More than $2 trillion in direct spent support by the government – borrowed beyond tax receipts in the last 18 months, constitutes 14% of annualized GDP. On an annual basis this is about 10%, and a 10% top-to-bottom contraction in GDP is the economist’s definition of Depression.
Lastly, don’t forget to read this very creative link: “I’m Sure Glad The Recession Has Ended“. You might find the format rather familiar! 
) (No, I didn’t copy him … just look at the dates of his postings to see who the original stylist is.)
March is traditionally a modestly bullish month and April is the best month of any year. We shall see how this “jobless” recovering economy will hold out during and after May.
Happy Hunting!
February 2010 In Review – March Preview
This is going to be a short post because February was quite uneventful in spite of the Chinese New Year celebrations. February was also my last chance to get as much rest and family time before the mad season began – which always happens the week after Chinese New Year. From this day forward, I can count the number of free weekends on half a hand all the way to November.
But I ain’t complaining … yet.
For the third year running, INVEST Magazine has chosen to feature an article from me. With this article, they’ve also requested that I write another piece for the next issue too. Looks like I might become a regular feature.
Amidst all the other usual activities, on the 20 and 21 March weekend, the ATIC Asia Trader & Investor Convention will be held at the Kuala Lumpur Convention Centre, Kuala Lumpur City Centre.
My spot will be on Sunday 21 March at 4:45pm in the NextVIEW room.
And that’s all I want to highlight for now … it’s just too messy to talk about everything else that March is about to throw at me.
But I ain’t complaining … yet.
MARKET PREVIEW FOR MARCH 2010
For the first time after three consecutive years, February has closed positively. And now we watch that extremely crucial December-low level of 10,235.63 and pray like mad that DOW doesn’t break below that by the end of March.
The DOW looks to have completed a Pennant and that Doji might just prompt some sort of break-out next week. 10,400 will become the next level of contention with a soft resistance at 10,440. On weekly candles, DOW wears a Hanging Man which implies a week of consolidation to come. Monthly candles give DOW a Bullish Harami (Inside Bar) – a break above the high of February could indicate some upside for March.
This leaves the DOW and S&P below their respective 50DSMAs leaving only the NASDAQ above all its major MAs. This fight against the 50DSMA is going to be a key battle in the coming week. If the market is to gain higher ground in the weeks to come, it will have to hold above the 20DSMA first.
March has a tradition of opening with a modestly bullish week. The second week of March tends to be the most bullish of the month while the third week goes into some major corrections and finishes badly in the closing week.
March is the longest trading month of the 2010 calendar with 23 trading session and no holidays. March Expiration is the first Triple Witching Friday of the year and is highly unpredictable.
The 14th of March (Sunday) will see Daylight Savings resume and will bring the clocks of Singapore and the U.S. closer by an hour. Local traders will welcome the favored 9:30pm (SG) opening bell in the U.S. starting on the Ides of March.
Remembering that we had a bearish January Barometer, investors will be watching the close of March for the quarter-ending December Low indicator. In recent years, March has failed to close with the usual end-of-quarter window dressing rally. Since 2005, the only time the last week of March was bullish was, ironically, the worse year in recent stock market history – 2008.
Following on the past week’s volatility and the end of earning season, normalcy should resume. Greece will continue to be a drag, Nonfarm Payrolls on Friday will be keenly watched, the dollar will continue to be a fear indicator, Wednesday’s Beige Book report will be highly anticipated and the market will continue its roller-coaster ride, albeit with less volatility.
SUMMARY
For now, I am going to take a deep breath and suck it all in and brace myself for the next 10 months. With everything else that’s going on, it’s going to be busy, it’s going to be rough and it’s going to be one helluva roller coaster … and that’s just the market I’m talking about.
And after all that, I’ll complain.
Happy Hunting!
You Want More Charts?
Following up on the original “You Want Charts?” posting on January 19, 2010, here’s an update with new charts and more shocking stats.
So it’s no longer just the men who are losing jobs. In past recessions, it was glaringly noted that women tended to retain their jobs better than men and also found jobs better than men. This time, the economy is making victims regardless of gender.
The weak economy is also not racist …
In a dated statistic, it would seems that this “Jobless Recovery” may have some credibility as the economic data improves …
… and unemployment stalls its meteoric rise …
… and the Leading Economic Index looking like something that would turn a rock climber on.
Still, the worrying signs are still there to ponder. Housing Starts are still down while vacancies soar …
… exports drop while other countries (did I say China?) take over …
… and we haven’t even touched on Commercial Real Estates yet.
The Plunge Protection Team is still packing a lot of punch with loads of back-up in store.
And as they pump more money into the system, companies like AIG pump it out to those that don’t need it the money …
… and the banks continue to stifle growth.
The obvious conclusion we can take from all this is that the market will continue to show strength, albeit an artificially inflated one, while the economy continues to groan and bleed.
The long-term problems are so deep and heavy that we cannot even start to imagine what the future is going to look like, short of depressing and troubled. Will history repeat itself in this day and age and will this massive imbalance in global economics lead to where all historical imbalances have led to … war?
With the on-going worries amongst the PIGS, Dubai and the U.S., the power of money and economic strength has obviously shifted to Asia. Monetary policy alone will not be enough to bring that power back to the west. This could just be the turning point in the planet’s history where yet again, power shifts. It’s been a long time since Asia held the world in the palm of its hand – the last guy to do it was Kublai Khan, 700 years ago.
Thinking that it may not be a bad idea, I’m tempted to write a new book titled;
“How the West was Weaned“.
Click here to post your treasured comments. Thank you!
Saturday 13 February 2010 – AMC
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Did I say something about inconsistency? 
In spite of a choppy and rather bearish week, we did finish the week with a modest gain. But it is going to get interesting from next week. In preceding Tiger years, the bulls have had it bad. I am going with the analysis that I did at the start of the year which is that it is going to be a volatile and range bound year. So far, the market has been right on track. We’re still down for the year and right on track for a fourth down February since 2007 and the third Down-Jan-Down-Feb since 2008.
DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)
10,099.14 -45.05 (-0.44%) Volume: 296,514,677 (+52.47%) Range: 9,983.82 – 10,137.39 (153.57 points)
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Friday was actually a rally day … but it was on the wrong side of the border. That Hanging Man is an interesting proposition and gels with the other technicals. DOW sits right under the downside FAN’s 61.8% resistance on a lower high after a lower low. Should that Hanging Man stall the rally, we’re going down again. Where to?
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February may be positive for now but we still have 9 days to go including a traditionally bearish expiration week and a February Expiration Friday that has been down 7 out of the last 10 years.
The 200DSMA still looms and the 100/20 crossover is imminent like a bad dream that won’t go away.
NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)
2,183.53 +6.12 (+0.28%)
Volume: 696,578,768 (+16.22%)
Range: 2,151.99 – 2,184.57
S&P 500 INDEX (SPX: CBOE)
1,075.51 -2.96 (-0.27%)
Volume: 3,793,567,200 (+2.80%)
Range: 1,062.97 – 1,077.81
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Advancers outpaced Decliners by an average 1.28 to 1 on higher volumes (+0.59%) on Friday (avg -0.14%).
So the day, it would seem, was more bullish than it was bearish. We did get a pre-holiday rally, albeit a very divergent one. The VIX dropped to a six-day low and settled under 23 points. If the bears don’t grab the initiative on next week’s shortened week, this will mean that the market is well and truly confused. Given that volumes are the typical pre-holiday weak levels, it remains to be seen if the bulls are really out of it. The internals don’t really spell a true picture as it was all over the place, especially in the closing hour. One thing remains clear though – the TRIN was bearish all through the day in spite of all the buying to bring the market up.
SUMMARY
I’m glad that week is over. I can’t stand those weeks that are difficult to read because it leaves you with little idea of what to do should things don’t work out when your opinions go out the window. And talk about volatility! I’ll be happy when February is over. 
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Tuesday is a long way away so I’m sticking my neck way out there and calling a down first day of the Metal Tiger. This is the one week in February that’s easy to call as it has a habit of being consistently bearish. Since I didn’t get any signs that the bulls were committed in the past week, I’m giving up hope and shorting everything … NOT! … but I will be bearish and be selling more than buying.
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To all my readers …
Have a Perfect,
Prosperous and Profitable
Year of the Metal Tiger
and may all your trades be great ones!!
And to all the Lovers,
Have a Wonderful
Valentine’s Day!!
From Conrad
Market Update: 8 February 2010 BMO
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All it took was one massive down day to bear-down the whole week. What happened on Friday was freaky – we’ll be looking very closely at what happened on Friday after 1400 hours …
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I would have preferred to have tanked instead of letting the PPT get back in the game.
Market Internals for Friday 5 February 2010 – 17:30
Leading Sectors: Financials (+1.22%), Tech (+1.10%), Telecom (+0.50%), Materials (+1.74%).
Leading Industries : Gold miners- GDX +5.4%, SPDRS metals/mining- XME +2.9%, Semis- SMH +2.5%, IGW +2.3%, nat gas- UNG +1.7%, iShares REITS & real estate- ICF +1.9%, IYR +1.9%, Basic materials- XLB +1.9%, IYM +1.25%, iShares US broker/dealers- IAI +1.8%.
Lagging Sectors: Health Care (-0.22%), Consumer Staples (-0.08%), Consumer Discretionary (-0.47%), Industrials (-0.56%), Energy (-0.12%),
Lagging Industries: RBOB gas- UGA -2.2%, Heating oil- UHN -2.2%, Commods- GSG -2.0%, Base metals- DBB -1.7%, Global shippers- SEA -1.5%, Crude/WTI oil- USO -1.7%, During OIL -1.7%, DBC -1.3%, India- INP -1.3%, iShares S Korea- EWY -1.2%.
NYSE :
Higher than avg volume @ 1562 vs closing avg of 1220
Decliners outpacing Advancers (adv/dec): 1326/1740
New highs outpacing new lows (hi/lo): 26/25
NASDAQ :
Higher than avg volume @ 2818 vs 2133
Advancers outpacing Decliners (adv/dec): 1433/1214
New lows outpacing new highs (hi/lo): 16/49
Other Market Moving Factors:
• Late day short-covering rally coincides with pullback in the dollar from 6-month highs
• January payrolls fall unexpectedly, but unemployment rate moves lower
COMMENTARY
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I take that back … never underestimate the power of the dark side … er … I mean the PPT … waitaminit, they one in the same! 
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TECHNICAL UPDATE – MONDAY 08 FEBRUARY, 2010 – BMO
DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)
10,012.23 +10.05 (+0.10%)
Volume: 308,320,075 (+1.34%)
Range: 9,835.09 – 10,031.96 (196.87 points)
The DOW and almost everything else in the U.S. market finished with impressive Hammers, implying an end to the downtrend and a strong possibility of a reversal on Monday. The DOW barely kept its head above 10,000 to give some hope to the purist technician. But it remains rooted below the 100DSMA for a second straight day.
NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)
2,141.12 +15.69 (+0.74%)
Volume: 823,186,454 (+1.14%)
Range: 2,100.17 – 2,142.27
S&P 500 INDEX (SPX: CBOE)
1,066.19 +3.08 (+0.29%)
Volume: 5,400,868,400 (+5.21%)
Range: 1,044.50 – 1,067.13
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I wrote that about the previous Friday’s (29 Jan) action. Last week, the Decliners swung into action at 1400 hours and drastically changed the numbers. Volumes picked up and prices tanked.
Last Friday, 5 February, it pretty much looked like a mirror. The Advancers swung into action by 1400 hours and changed the numbers while all the internals pointed to a bullish commitment by 1500 hours. The intraday recovery was an impressive 172 point rally.
The VIX dropped, total volumes (black) picked up, up volumes (blue) spiked and down (green) volumes stalled …
… the Tick and Trin reversed without any doubt … Just check out the swing on the internals in the last hour of trading …
Decliners outpaced Advancers by an average 1.07 to 1 on higher volumes (+30.63%) on Friday (avg +0.38%).
I just cannot be convinced that the market actually returned on its own merit. There is still something very wrong with this picture and I can’t put a finger on it. If you simply add up the hour-on-hour volumes, there is no way the last two hours of up volumes could outweigh the day’s down volumes between 0930 and 1400 hours.
In time, I guess we’ll find out.
COMMODITIES & BONDS – Summary for Monday 01 to Friday 05 February, 2010
Natural Gas Outperforms Commodity Complex; Precious Metals Worst Performers, While Ags Outperformed
Commodities were mixed this week, with metals turning out to be the worst performers and agriculture the best performers. Crude fell 2.3% on the week, while natural gas managed to gain 7.5%, while most other commodities were suffering. Silver was the worst performer with a loss of 8.1% on the week. Gold fell 2.8%. Copper futures posted a sizable loss of -6.4%, while the Baltic Dry Index fell 5.7%. The US Dollar Index was one of the largest contributors to weakness as it put in its highs for the week on Friday, after pushing into positive territory on Wednesday.
Looking more closely at energy, February crude oil futures extended last week’s loss of 1.8% by losing another 2.3% this week to close at $71.19 per barrel. Crude traded in positive territory for the first half of the week, hitting highs overnight on Wednesday and then showing a muted reaction to Wednesday’s inventory data (build of 2317K vs. consensus of a build of 400K). However, crude began to fall sharply ahead of the open of floor trading on Thursday, losing over $3 and pushing crude back to the unchanged line. In trading on Friday, losses extended and crude actually fell sharply for over $3 again, hitting a low not seen since Dec. 15, 2009. To end the week, crude closes just above its low for the week.
Natural gas was choppy all week but managed to stay in positive territory, despite late-week strength in the dollar. Inventory data (draw 115 bcf vs. consensus of a draw of 121 bcf) pushed natural gas to its lowest levels of the week on Thursday of around $5.273. However, natural gas bounced off that low to put in session highs on Friday around $5.60, closing just under those levels on the week.
Precious metals were pretty flat for the first half of the week, with only one volatile trading session, which occurred on Thursday when gold and silver fell sharply and into negative territory. Both precious metals extended losses on Friday and put in fresh lows for the week (Gold $1044.50, silver 14.65).
In industrial metals, March copper lost 6.4% the week to $2.86, while aluminum prices lost 1.7% to $2055.25/ton, now well under its recently hit 15-month high of $2370.50/ton hit on December 6.
Ag commodities outperformed the overall commodity complex, excluding natural gas futures. Wheat and soybeans were flat this week, while corn futures fell 1.4% primarily on strength in the dollar. The ag market is currently waiting to see how the South American soybean harvest ends up because it will have a large affect on corn and soybeans futures. For now, the next notable catalyst driving the ag market is the next USDA supply/demand report released on Feb. 9.
The dry bulk shipping sector, the Baltic Dry Index (the cost of renting ships) fell 11.1% to 3204, as indicated by the benchmark Baltic Dry Index (BDI).
Treasuries finished the week on a high note with the market getting back the past couple weeks in fairly dramatic fashion as stocks crashed, concern over the European situation and general uncertainty in increasingly volatile markets. The day’s payrolls report was still given much currency, but the sovereign debt risk issues weighing on the continent continue to suck out riskier business as the flight-to-quality trade rules. The possibility that some jitters will be soothed along with likely corrective action could add drag come Monday (as well as the end of a potentially tumultuous weekend).
The week ahead has a light calendar with the bonds big events being the $40B 3-yrs Tuesday, $25B 10-yrs Wednesday and $16B 30-yrs Thursday. There will also be the mid-week circus of Bernanke’s testimony on unwinding all the bailout schemes without blowing up the markets. Could be interesting, but the players should choose their words very carefully and Bernanke likely to do some fancy dancing to avoid being painted in to a policy or concrete plan corner. The curve was worked flatter in the late session with the 2-10-yr yield spread running 279.5.
The dollar was backed off its best levels late but the index is holding near July levels, the yen near its year’s best on the euro which was just whacked down generally, holding near its worst level since May on the buck.
Treasury Yields :
• 2 Year Note 0.76% -0.04
• 5 Year Note 2.23% -0.07
• 10 Year Note 3.56% -0.04
• 30 Year Bond 4.52% -0.02
2/30 Spread : 376bps (+2) … 2/10 Spread : 280bps (unch)
Two straight days of massive running into bonds as the dollar-equity carry trade becomes more apparent.
Gold (CMX ) April 10 ($US per Troy oz.) : 1,053.50 ( -9.50 )
Light Crude (NYM ) March 10 ($US per bbl.) : 71.19 ( -2.94 )
Earnings Highlights for week Monday 08 to Friday 12 February 2010
Monday:
BWP, CVS, ERTS, ESLR, FWRD, LNC, and TWTC.
Tuesday:
BIIB, BJS, KO, CTSH, CVH, TAP, NYX, WMG, NTGR, and DIS.
Wednesday:
MT, CCE, DF, DISCA, ELN, ICE, LVLT, S, WYN, ALL, BSX, PL, PRU, and SWIR.
Thursday:
ALU, EXPE, FLIR, JASO, MAR, PEP, PM, STRA, VIA.B, ACL, AB, BJRI, NILE, BWLD, CEPH, CAKE, CMG, CSTR, MFE, and PNRA.
Friday:
ALE, HCP, PAS, and UPL.
Events for week Monday 08 to Friday 12 February 2010
Monday:
None
Tuesday:
10:00 am Wholesale Inventories
Wednesday:
08:30 am Trade Balance
10:30 am Crude Inventories
14:00 am Treasury Budget
Thursday:
08:30 am Initial Claims
08:30 am ContinuingClaims
08:30 am Retail Sales Jan
08:30 am Retail Sales ex-auto
10:00 am Business Inventories
10:30 am Natural Gas Inventories
Friday:
09:55 am Mich Sentiment
Conferences and Shareholder/Analyst Meetings of Interest
for week Monday 08 to Friday 12 February 2010
Monday:
- WAG, HUM, UAM, WLP at UBS Global Healthcare Services Conference
- $24 bln 3-month and $27 bln 6-month Treasury Bills Auctions
- LINC, FFIV, PENN, RAX at Deutsche Bank Securities Small and Mid Cap Conference
Tuesday:
- ODSY, MHS, AET, SUNH at UBS Global Healthcare Services Conference
- RHT, SAP, ADBE, ENTR at Thomas Weisel Technology & Telecom Conference
- $40 bln 3-yr Treasury Notes Auction
Wednesday:
- AMTD, BAC, COF, WFC at Credit Suisse Financial Services Conference
- AMSC, FLO, FMC, POWI at Deutsche Bank Securities Small and Mid Cap Conference
- Fed’s Tarullo
Thursday:
- ZION Analyst Meeting
- AMP, LNC, MET, NYX at Credit Suisse Financial Services Conference
- $16 bln 30-yr Treasury Bond Auction
Friday:
- AXAS at NAPE Expo 2010
NOTE: Monday 15 February 2010 is President’s Day. The markets will be closed.
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SUMMARY
This week is going to be tough to call as the second week of February is always never consistent. It should be a fairly bullish week considering we have the eve of a three-day weekend on Friday and two of the most historically bullish February days within the week.
Technicals and the psychological 10,000 should also provide some upside impetus as the market takes a breather from too much tanking over the last three weeks. Upside should be limited to 10,300 while 10,000 should continue to provide some form of support.
However, if I get it wrong, we’re getting down to those 9,730 and 9,620 levels in a hurry and if we do, this will be a catalyst for worst things to come.
