The Big Win Market & Sector Review
This Week's Economic Reports
UPDATE: We are working on many changes and additions to the site and we are hoping for some input at this time. Soon there will be changes to the Daily Hot Market Scans, the first of which will be the Systems of Trading Masters. Research and programming is currently underway to add and possibly delete some of the current systems we scan each evening. If there is a particular trading system you have a desire to keep please take a moment, send and email letting us know which one or ones they are and every effort will be made to keep that particular scan. Thank you in advance for your participation and input!The Big Win
Most new traders dream of making the ultimate trade, the big win that will set them up for life. Perhaps by chance, you just happen to hold a large position in a company that the masses have decided is going to go through the roof, and the price shoots up for no sound reason. Whatever, the circumstances we all dream of making that big, exciting trade, the killing. Ask many seasoned traders about their biggest winning trades, and they will recount those few times where luck was on their side. Although no story is the same, many of the tales of success concern holding a huge position and being at the right place at the right time. As fun and exciting as these stories are to hear, you must put them in proper perspective. Planning on making a few lucky trades is much like hoping to win the lottery; it may happen, but it isn't something that you should count on. The most prudent way to make money trading is to work at it consistently, and through hard work and persistence, make steady profits.
Profitable trading is carefully planning your entry and exit strategies, your risk control, your money management skills. These strategies will not make you rich overnight, but they will help you make small steady progress over time. Some trades will be winners and some will be losers. Once you develop rock-solid trading skills, you will make steady profits and the odds of hitting that big one will increase with your skills. Eventually you'll see your profits begin to grow exponentially, but none of this will happen if you continue to fantasize about making the big winning miracle trade.
It may be fun to daydream of how the markets will move in your favor and make you a millionaire from a single trade, but that's unlikely to happen. In addition, hoping for such a lucky event is bound to distract you from what you actually need to do to become a consistently profitable trader: You need to learn to trade systematically, objectively, and consciously. Only then will you make the profits you desire.
Market & Sector Review
As I have stated several times I am looking for a major top sometime this year and that has not changed. In the last newsletter I mentioned that usually there is a blow off stage prior to the ultimate reversal of fortunes. It is the blow off stage that turns just about everyone bullish, the top pickers throw in the towel, and even I will begin to wonder if it's not indeed different this time. It appears for now we may indeed be in the blow off stage which many professional traders will use to distribute stocks. There is no telling at this time just how far the blow stage can take us, it may not be much further but it could be substantially higher as well. In perusing various message boards I get the distinct feeling that too many believe the top is in, enough so that I became a buyer again on Friday. Sentiment, an important but not a timing tool, that I speak of often, is beginning to become frothy enough to consider that we are getting close, not quite there yet but close. So play it a little cautious from the long side here. If you follow the Top Advisor Newsletter postings you may have noticed this chart in the Stock Watchers Newsletter this past week.
Personally I have no technical indicators currently pointing to an eminent change in trend for the overall market, some potential divergences developing but nothing concrete. The turn could be next week or it could be in December, but rather than try and time the exact top of the overall market or even individual stocks, simply adjust your strategies a bit. As an example on Wednesday AMGN reported a blow out quarter and the stock advanced some 15% on that day. BBH the Biotech Holders Trust advanced 5%. Both to new all-time highs! At the same time while compiling the reports for Wednesday evenings posting I noticed that BBH was ranked number 1 in both relative strength and PT-PPO of all ETF's. All indicators and technical's are very bullish while at the same time the RTN indicator was saying sell because we have advanced in excess of 20% over the 200-day moving average - an overbought indication. The situation is identical for the AMEX Biotech index and MG-516 the Drugs - Biotechnology group.
If we have learned nothing else from the 2000 thru 2002 bear market, it should be that nothing goes up forever. There is an old cliché "Bulls Make Money, Bears Make Money, and Pigs get Slaughtered", if you are long AMGN, DNA, or perhaps a similar situation, this is the time to take some off the table, and let the rest go. If you have 100 shares sell 20, a 1000 shares sell 200 or perhaps take out your original cost basis so the remaining shares are essentially free. Follow your original plan on your remaining shares or continue to gradually liquidate as it moves higher. I wouldn't try and pick "The Top" for all your shares, the odds of your selling the top are slim and none. Now the real important part -> have your broker send a check for half the profit and give it to your loved one to spend any way he or she desires, or book a nice vacation, or buy a new car. Don't have a loved one, take the money and spend it on yourself. This is a reward for your hard work. When I worked at Prudential Bache, a fellow broker made enough money in Resorts International (the first Atlantic City casino) that he bought a new Rolls Royce (paid cash) and purchased a vanity license plate with the stocks symbol (RT.A). That was his reward for having the foresight to build a substantial position over time and being absolutely correct. Incidently he sold nowhere near the top but I never once heard him complain about selling too early.
Another noteworthy development this week was China deciding to peg its currency against a basket of currencies and not just the dollar. Initially its value will increase by 2.1% against the dollar. This is the beginning of allowing the Yuan to float in value, the timing was a bit of a surprise but I think the timing was a result, at least in part, of our congress seriously talking about tariffs on Chinese goods. The initial reaction was for Gold to advance (remember Gold trades partly as an inflation hedge and partly as a currency), and the bond market suffered a decent decline on the fear that the Chinese will not be as big a buyer of our treasuries as before. While these are certainly normal reactions to that news, I am not sure, having read a lot of diverging opinions on what it means over the longer term for our investment dollars. Sy Harding, John Mauldin, and Stephen Roach of Morgan Stanly all have interesting article's on the Chinese revaluation this week, visit top advisors corner on site to read them.
OK, so you also think this market has more to go and you have some free cash to spend, but where? One of the fascinating things about the stock market this year has been the rotation of groups into and out of the forefront while many major averages have languished. I use that term because even with all the fluctuations and the recent sharp rallies most major indices are only slightly ahead on the year, while individual stocks and groups have soared and soured. So let's look for a long idea going forward.
What if I told you one of the above mentioned sectors is in an ongoing bull market, has undergone a 30% correction, been basing since March of this year, and just broke out! Are you interested? I certainly am!
Let's take this exercise one step further looking for individual stocks that might fit our criteria. The DJ US Stell Index naturally brings me to the Industry Group MG131 -> Metals -> Steel & Iron. Now what if I now tell you that in about 5 seconds I found 3 stocks with a relative strength ranking over the last 6 months of 97, 91, and 89 are you interested in what those stocks are? I thought so!
NSS -> NS Group, Inc. - A small cap value company R.S. rank 91
CLF -> Cleveland-Cliffs Inc - A small cap value company R.S. rank 89
A word of caution here though, two of the above NSS and CLF report earnings on Monday 7/26 and Tuesday 7/27 respectively. Last time out both dissappointed somewhat but there stocks are not acting like another dissappointment is at hand. Any or all of these issues may or may not be suitable for you, but it will be worth your while to spend a little time this weekend, looking here for potential.
Coming Weeks Economic Reports
Have A Great Week!BillDisclaimer: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.
Another noteworthy development this week was China deciding to peg its currency against a basket of currencies and not just the dollar. Initially its value will increase by 2.1% against the dollar. This is the beginning of allowing the Yuan to float in value, the timing was a bit of a surprise but I think the timing was a result, at least in part, of our congress seriously talking about tariffs on Chinese goods. The initial reaction was for Gold to advance (remember Gold trades partly as an inflation hedge and partly as a currency), and the bond market suffered a decent decline on the fear that the Chinese will not be as big a buyer of our treasuries as before. While these are certainly normal reactions to that news, I am not sure, having read a lot of diverging opinions on what it means over the longer term for our investment dollars. Sy Harding, John Mauldin, and Stephen Roach of Morgan Stanly all have interesting article's on the Chinese revaluation this week, visit top advisors corner on site to read them.
OK, so you also think this market has more to go and you have some free cash to spend, but where? One of the fascinating things about the stock market this year has been the rotation of groups into and out of the forefront while many major averages have languished. I use that term because even with all the fluctuations and the recent sharp rallies most major indices are only slightly ahead on the year, while individual stocks and groups have soared and soured. So let's look for a long idea going forward.
What if I told you one of the above mentioned sectors is in an ongoing bull market, has undergone a 30% correction, been basing since March of this year, and just broke out! Are you interested? I certainly am!
