Newsletter

July 14, 2007

Your Beliefs are the Ultimate Self-Fulfilling Prophecy

Zeroing In

Largest Changes In Raw Numbers (21 Days)
Your Beliefs are the Ultimate Self-Fulfilling Prophecy

Most people have similar end values, but each of us experience them differently. This is simply because of both major and subtle differences in our beliefs. Beliefs take two forms: Broad generalizations about life, people, and things; and rules we use to measure the worth of our own and others' actions. Rules are more definitive. Rules determine, in our minds, the things and events that must happen in order to experience results in a particular way. Rules take the form of "if, then" statements such as "If I make a million dollars, then I'll be happy" or "If I make a mistake, then I'll learn from it." All of us have our own unique set of beliefs and rules, and it is this unique set that gives each of us a distinctive personality.

One of the attributes of a successful trader is self-confidence. Feeling self-confident comes from recognizing your personal worth and effectiveness. How you feel about yourself depends not so much on what you actually do, but how you judge what you do, and how you judge what you do depends on your beliefs about what it takes to be a worthwhile person. To gain self-confidence, you must establish standards that make it possible. Suppose, as a successful business person, your standard is to cover your overhead and make a profit each month. Now suppose, instead, that your standard is to net $1 million dollars each month. It would be hard to be self-confident under those circumstances. Set your goals high, but be easy on yourself in setting standards for evaluating your self-worth.

Your beliefs are the ultimate self-fulfilling prophecy. Remember your subconscious is gullible - it believes what you tell it to believe. If you believe you don't deserve to be rich, it won't let you be rich. If you believe you don't deserve love, it won't let you achieve love. If you believe that you aren't intelligent enough, it will make you stupid. And believe me when I say to each and every one of you, you are intelligent enough!

The statements we make to ourselves and the questions we ask are both a cause and a consequence of our beliefs. When you say something to yourself like "I am so stupid!" you are both stating and reinforcing a belief, however briefly you may think it is true. You may not mean this in a fundamental sense, but if you say it often enough and especially in a highly emotional state, then your mind is very likely to start believing it.

When defining new rules that you want to adopt, remember to rig the game of life so it's easy to win. Rules that allow you to feel passion, love, happiness, success, and so forth don't have to be difficult or even impossible. We all need challenge in our life, but there is more than enough challenge in striving, for a constant progression of goal achievement without setting ourselves up for failure. Life is too short, too precious, and too full of potential to waste time by setting ourselves up to experience life as futile.
Zeroing In

Late June in Trading Notes section presented for members I pointed to a sector of interest; Electronics. Since that posting I've received several emails asking me to outline just how I zeroed in on that sector at that time. I thought it worthy of a newsletter. Although most of the data referred to is reserved for supporting members, what I think is really important is the thought process involved. Not that my thought process is any better or worse than yours; it just maybe a little different. Different is a good thing because we learn from others that think differently than we do, not from those that think the same.

While I am not a fan of most "technical analysis indicators" I am a big fan of relative strength. That is why a good deal of the data presented on site deals in one way or another with relative strength. This is not to be confused with Welles Wilder's relative strength index or RSI. I think being an investor or a trader is much like being a detective. Think of your favorite books, movies, or TV mysteries. The detective spends his time searching for clues; clues that will aid in solving the mystery. So to are we detectives searching through stock screens, technical and fundamental market and stock information, sectors and industry groups hoping to find good clues as to where and what our next purchase or sale should be. What will be the next sector to catch fire or fall from grace? One of the better tools in this author's opinion is relative strength. Strong sectors and groups will act relatively well during market declines (a clue) and weak sectors and groups will act relatively weak during market advances (another clue). The best way to see this, in this author's humble opinion, is with relative strength.

A few years ago I began publishing, in this newsletter, the largest changes in relative strength for industry groups, ETFs, and Indexes. Basically this is those that have had the largest moves (relative to the overall market) over the last 21 trading days (approximately one month). These are not necessarily those that rank at the top at this point in time but those that are giving clues to possible impending movements. Often times you will see those that rank at the top also appear as the most improved; this is a case of the strong getting stronger and the weak becoming weaker. However my interest often times is simply what is not at the top but is showing good relative strength now. This may be an indication of an impending move. The reports are now published in such a manner that scrolling through the last few weeks or months is just a matter of scrolling down the page. If you have reasonable recollection power you'll begin to notice patterns develop over relatively short periods of time. I like to think of them as footprints of accumulation or distribution. Ah, the detective is coming out.
Ind. Groups ETF's Indexes
Week 1 832
Week 2 832
Week 3 832,834 IGW,QTEC
Week 4 832,834 XSD SOX,DJUSSC
Week 5 831,837,838 SOX,DJUSSC

See a pattern? Those of you that are TeleChart subscribers know that MG830 is the Sector - Electronics which is made up of industry groups 831 through 838. Notice in the above spreadsheet how one group 832 showed up two weeks in a row, then two Electronics groups then three. Notice the ETF's also showing up (IGW) Semiconductor iShares GS; (QTEC) First Trust Nasdaq 100 Te; and (XSD) Semiconductors SPDR. Now add in the indexes (SOX) Philly Semiconductor index and (DJUSSC) DJ US Semiconductor Index. Electronic stocks appear to be under accumulation. The next step was to look at the sector chart for Electronics, first a long term weekly chart as of the time of the notes published:

The sector is on the verge of a big multi-year breakout. Moving down to the daily:

Something is definitely happening here if you hadn't noticed it before. A current chart as of 7/13/07 mid-day.

The point of this newsletter is not to point to any kind of genius; there isn't any. This is not rocket science. The point of this newsletter was to share a thought process. A process that brought me to this sector by just utilizing some observation and then a more detailed analysis. This is merely Directed and not scattered thought. Finding the clues that help solve the puzzle. Can you accomplish this same thought process without being a member? Absolutely! If you can find the information or construct it on your own!

The big institutions and hedge funds do not ring a bell and says hey I'm going to buy a ton of this or that stock, want to get in ahead of me? In fact they rarely say anything, but they do leave footprints and clues. Our job is to find them.
Largest Changes In Raw Numbers (21 Days)

[ Reserved for supporting members, now posted in members area ]
Have A Great Week!

Bill

Disclaimer: Trading in securities, of any type, may not be suitable for all individuals. The contents of this newsletter are not a solicitation to buy or sell securities. The opinions expressed are solely that of the author. You must do your own research, contact your own financial advisor for suitability of any investments. Data gathered is from sources believed to be reliable, but NO guarantee as to their accuracy is made.