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Know This Before The Fed Raises Rates Soon!

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Posted by Business Insider

on Thursday, 24 January 2013 06:22

  • What Happened To Markets The Last 15 Times The Fed Tightened. One question has gripped investors perhaps more than any other: when will the Fed start tightening monetary policy, and what will happen when it does? 

    Deutsche Bank Chief U.S. Equity Strategist David Bianco says, "Don't fear interest rate normalization." That's the title of one of his recent research notes, which takes a deep dive into what happened to markets each of the 15 times the Fed has embarked on policy tightening since 1965.

    Bianco writes, "DB economists and rate strategists forecast an unchanged Fed Funds rate until 2014. However, they forecast a 3.0% 10yr Treasury yield at 2013 end. When QE ends it will likely be akin to early-cycle Fed tightening and the uptick in long-term yields will represent a cyclical rise in rates, both of which are bullish."

NikkeiJan-2013

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Strategy & 10 Bright Lessons Reveal These Two Hot Moves to Make

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Posted by Tyler Bollhorn - StockScores

on Wednesday, 23 January 2013 10:00

Ignore Information, Listen to the Market!

perspectives commentary

Screen Shot 2012-12-03 at 10.05.10 PM

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Stockscores Market Minutes Video
Where there is smoke, there is fire. Hot stocks start with abnormal activity and in this week's Market Minutes video I show you how to spot these stocks early. You can watch it by clicking here. To receive email alerts any time I upload a new video, subscribe to the Stockscores channel at www.youtube.com/stockscoresdotcom.

This week's Trading Lesson
In theory, information should make the stock market's world go round. Information about companies and their ability to make money in the future is what should determine share price. As the market learns of new information, price is adjusted up and down to reflect the value of that information.

This implies that investors should focus their analysis on information so they can predict where share prices should go in the future.

While this makes good sense, I have found it to be extremely rare that investors who use information are able to consistently beat the stock market. With smaller retail investors (you and I) in particular, the use of information for making investing decisions is more destructive than it is beneficial. Here are ten reasons why:

1. Information is Usually Already Priced In - most investors use publicly available information. That means it is widely known and available to anyone considering the stock. If information is available to a large number of investors then we should expect that the market will have priced that information in to the stock. Therefore, the information has not value to us.

2. Information Usually Comes with a Bias - as a general rule, people do what they are financially motivated to do. If someone is encouraging you to purchase a stock, there is a good chance that they have some financial motivation to do so. Before you trust the information you receive, understand the financial motivation. If you find the reason, you will often usually find that there is a strong bias in the information being provided to you.

3.Trading on Truly Insider Information is Illegal - there are few risk free trades in the stock market, but trading on significant, inside information is one. You stand to make a lot of money buying stock in a company that will be acquired by another at a premium tomorrow. If you have that information and act on it, you are trading on inside information and that can land you in jail.

4. Gathering Good Private Information is Expensive and Time Consuming - there are investors who are able to uncover information that is not priced in to a stock but is not considered inside information. This private information is valuable because it can lead to market beating returns. However, gathering private information typically requires significant resources, knowledge and time. For small investors, it is not feasible to do this kind of work across a broad range of stocks.

5. Information Causes You to Ignore the Market's Message - when you have an understanding of a company's story, there is a tendency to fall in love with that story and ignore new information that goes against your outlook for the stock. This leads the committed shareholder to hang on to a losing position, allowing the loser to bog down the performance of the overall portfolio.

6. You May Not Have All of the Information You Need - the market tends to focus on two or three key information points that affect the price investors are willing to pay for it. An investor who does a thorough fundamental analysis of the stock may still have an incomplete understanding of the company's business. If missing one of the key points, this investor can make a gross error in valuing the stock.

7. The Market May Not Be Trading On Fundamentals - in theory, stock price is based on the present value of future earnings expectations. In practice, there are often very non fundamental influences on share price. A large investor that has a liquidity crisis may be forced to unload a large position with little regard for price. Often, the laws of supply and demand affect share price even though theory tells us that they should not have an influence.

8. Your Interpretation May Not Be the Same as The Market's - Our mood affects how we judge information and the same can be said for the market in general. Your fundamental analysis may be correct in an optimistic environment, but if the market is in a pessimistic mood, the investment can lead to losses. Even the market is wrong, it is right.

9. There Is No Standard for What Information is Worth - There are many formulas for determining what a company's share price should. Many fundamental analysts look for stocks to trade at a certain multiple of their earnings with that multiple to be based on growth. However, there are great variations in accounting methods that can have a profound effect on how earnings are reported. More importantly, there is no rule that a company should trade at a certain multiple of earnings, that target multiple is just an opinion.

10. We Tend to Focus On Information That is Easy to Get - we often looks for the easiest way to achieve a goal. With information, there is a tendency to focus on the information that is front of us. Rather than work to find something to disprove our thesis on a stock, we instead look for information to strengthen our thesis. In doing so, we present our own biased outlook for our investment decisions that can often be very incomplete and wrong.

Ultimately, I look at the market's interpretation of all available information when I look at a chart of price and volume. It shows not only every bit of information detail but also what the market thinks of it.

perspectives strategy

In this week's Market Minutes video, I show how you can use the Stockscores Market Scan tool to find stocks trading with abnormal price and volume activity. This week, I ran a scan that used those filter and found the following two stocks which are making breaks from good chart patterns.

SEED has been a pretty boring stock lately, trading sideways and unable to get through resistance at $1.60. Today it broke through that price level with abnormal volume with a chart pattern that warrants strong Stockscores indicators. Support at $1.57.

HNSN has been building rising bottoms on its chart since September and broke out through resistance today with abnormal volume supporting the break. Support at $2.18.

perspectives stocksthatmeet

1. SEED
SEED has been a pretty boring stock lately, trading sideways and unable to get through resistance at $1.60. Today it broke through that price level with abnormal volume with a chart pattern that warrants strong Stockscores indicators. Support at $1.57.

Screen Shot 2013-01-23 at 3.08.30 AM

2. HNSN
HNSN has been building rising bottoms on its chart since September and broke out through resistance today with abnormal volume supporting the break. Support at $2.18.

Screen Shot 2013-01-23 at 3.08.51 AM

References

  • Get the Stockscore on any of over 20,000 North American stocks.
  • Background on the theories used by Stockscores.
  • Strategies that can help you find new opportunities.
  • Scan the market using extensive filter criteria.
  • Build a portfolio of stocks and view a slide show of their charts.
  • See which sectors are leading the market, and their components.

     

    Disclaimer
    This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don't consider buying or selling any stock without conducting your own due diligence.

 

 

 



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ChartoftheDay

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Posted by ChartoftheDay.com

on Tuesday, 22 January 2013 23:59

The Dow just made another post-financial crisis rally high. To provide some further perspective to the current Dow rally, all major market rallies of the last 112 years are plotted on today's chart. Each dot represents a major stock market rally as measured by the Dow with the majority of rallies referred to by a label which states the year in which the rally began. For today's chart, a rally is being defined as an advance that follows a 30% decline (i.e. a major bear market). As today's chart illustrates, the Dow has begun a major rally 13 times over the past 112 years which equates to an average of one rally every 8.6 years. It is also interesting to note that the duration and magnitude of each rally correlated fairly well with the linear regression line (gray upward sloping line). As it stands right now, the current Dow rally that began in March 2009 (blue dot labeled you are here) would be classified as well below average in both duration and magnitude. However, when compared to the most recent post-major bear market rally (i.e. the rally that began in 2002), the current rally has already surpassed it in magnitude and required less time to do so.

Notes:
Where's the Dow headed? The answer may surprise you. Find out right now with the exclusive & Barron's recommended charts of Chart of the Day Plus.

20130123

Quote of the Day
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January 27, 2013 - NFL Pro Bowl
February 02, 2013 - Groundhog Day
February 03, 2013 - Super Bowl XLVI

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-- Which stocks are making big money? Find out with the biggest stock gainers today.
-- What are the largest companies? Find out with the largest companies by market cap.
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Ride the Tide While It Rises

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Posted by Andrew Ruhland of Integrated Wealth Management

on Monday, 21 January 2013 18:52

Ruhland Andrew - compressed tie horzWell, the folks in Washington D.C. certainly did another number on investment markets with a slightly- later-than-eleventh-hour “fiscal cliff fluff deal” that does nothing to address a life-threatening spending addiction by the US federal government. And now we get to listen to endless yammering about raising the debt ceiling.

Over the next six weeks this debate will escalate, with the predictable grandstanding, digging in of heels, standing on principle, then caving in at the last minute to prevent both a shutdown of the US Federal Government and any kind of default on outstanding US debt obligations. It will likely become the primary hot button topic for everyone, cause a significant rise in market anxiety and serve as a wonderful distraction from everything else that is happening. In a democracy, a nation gets the government it deserves.

John Boehner was humiliated in the fiscal cliff fiasco and the NRA-funded Republicans are looking increasingly dogmatic in reference to gun violence issues. Obama is riding yet another wave of popular support, enhanced by the mainstream media’s intellect-numbing love affair with him. From my seat in the Crows Nest, the Republicans simply don’t have the political might to force permanent and necessary spending cuts in exchange for raising their “line of credit” so their debt/death spiral will continue to accelerate.

In our current environment we appear to have a struggle between some slightly-improving macro-economic metrics and somewhat negative corporate earnings news. To be brutally frank, the data are not clear. When in doubt I always recommend simply looking at price patterns for clues. Ultimately, price action is what determines portfolio returns, so why not make price Rule #1?

In the past 6 or 7 trading days we appear to have shifted from a healthy consolidation phase (following the upward spike in the first few trading days of 2013) to an anaemic upside breakthrough of resistance on the S&P 500 and the Russell 2000. The Dow and NASDAQ have not yet broken to the upside. The TSX may have just broken through resistance on Friday January 18th.

Next week should be very interesting. If we can manage to hold the gains of late this week, there is scope for the S&P 500 to rally into the 1510-1515 range, possibly higher. While we’ve had a nice rally recently, equity indices are not yet really overbought, and valuation levels are still reasonable. Long US Treasuries have been creeping up gradually, indicating that not everyone is convinced that equities are the safer bet right now. Ultimately, it is wisest to ride the tide while it rises, but remain vigilant for early signs of major pullbacks.

Regardless of how much one may have currently allocated in non-cash positions, my personal opinion is that one should always have a “trailing stop” in place to protect from massive downside risk. Markets don’t make public announcements warning of pending downturns, so one must take personal responsibility for managing risk. Trailing stops are not a perfect solution but they are very helpful in allowing even nervous investors to hold upward trending positions, especially in an “irrational rally.”

Gold and silver are extremely interesting here. Over the last week we’ve seen a grind higher in gold while silver has done a little better. The charts for both include rising bottoms and declining tops resistance, so price patterns will have an increasingly difficult time staying within these formations. While I remain long term bullish on Precious Metals, I’m getting increasingly concerned that we might have a downside scare before getting back to the secular trend. If gold manages to break through resistance at $1693 then there is scope for another rally toward strong resistance at $1800 again. Just remember that regardless of how logical or inevitable a long term outcome may seem, there is no guarantee it will unfold as we picture it. See Rule #1.

Click here to listen to my Talk to the Experts radio program from January 12th on QR77 radio.

I’m looking forward to speaking at the World Outlook Financial Conference in Vancouver on February 1st and 2nd. Michael Campbell’s annual conference is always chock-full of excellent big picture thinking and specific investment ideas, all of which I incorporate into our wealth management and portfolio management processes for clients. After that, Larry Berman of ETF Capital Management and I will be speaking here in Calgary on Wednesday February 20th.

Patience and Discipline are accretive to your wealth, health and happiness; Fear and Greed are destructive.

Andrew Ruhland is the founder of Integrated Wealth Management Inc. an independent holistic wealth management boutique. In partnership with ETF Capital Management Andrew and his team serve affluent clients from their Calgary offices.



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The Bottom Line: Take Profits

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Posted by Don Valiloux - Timing the Market

on Monday, 21 January 2013 08:28

The “hoped for” short term stock market spurt triggered by a favourable resolution of the Fiscal Cliff has provided an opportunity to take profits on strength on a wide variety of seasonal trades (e.g. agriculture, technology, semiconductors, biotech) and to rotate into other sectors that have a history of outperformance during the January to April period (e.g. energy, platinum, copper).

P.S. Nice breakout by the TSX Energy Index on Friday!

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The S&P 500 Index added 13.93 points (0.94%) last week. Intermediate trend is up. The Index closed at a six year high. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators remain overbought.

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The TSX Composite Index gained 123.51 points (0.98%) last week. Intermediate trend is up. The Index closed at a 10 month high. Short term momentum indicators are overbought. Strength relative to the S&P 500 Index remains neutral. The TSX Composite Index has a history of outperforming the S&P 500 Index between the third week in January and the end of April.

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Gold improved $23.00 per ounce (1.38%) last week. Intermediate trend changed from down to neutral on a move above $1,695.40. Gold remains above its 200 day moving average and moved above its 20 day moving average. Short term momentum indicators are trending up. Strength relative to the S&P 500 Index is negative, but showing early signs of change.

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Copper added $0.01 per lb. (0.27%) last week. Intermediate trend is up. Copper recovered back above its 20 day moving average. Short term momentum indicators are neutral. Strength relative to the S&P 500 Index is neutral at best.

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Platinum improved another $43.40 per ounce (2.66%) last week. Intermediate trend changed from down to up on a break above $1,674.00. Strength relative to gold remains positive

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.....so many more charts & comments & Commentary HERE

 

 

 

 

 



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