Tuesday, February 10, 2009
Sunday, February 8, 2009
The Hope and the Reality
Hope is a wonderful thing in life. It gives us reason to continue and courage to move ahead. In stock market, HOPE is a dangerous emotion.
In his book, "How to Trade in Stocks", Jesse Livermore wrote the following on HOPE,
HOPE -- Hope lives hand in hand with greed when it comes to the stock market. Oce a trade is made hope springs alive. It is man's nature to be hopeful, to be positive, to hope for the best. Hope is essential to the survival of the human race. But hope, like it's stock market cousins, ignorance, greed and fear, distorts reason. Hope clouds facts, and the stock market only deals in facts. Like the spinning of a roulette wheel, the little black ball tells the outcome, not greed, fear, or hope. The result is objective and final with no appeal ... like nature.
To trade the market on hopium that the worst is over and Mr Obama and his gang is our savior is self destructive.
Let's strip all the noise and discover what is wrong under the hood.
First of all, let's make no mistake, the big trend is solidly down. The precipitous drop of the stock market world wide since Nov 2007 foretells us the tough road ahead.
Secondly, this market continues to trade on headline news and rumors. On 01.28.09, market followed through on the 6th day of the rally attempt on CNBC 'rumor' that the government was contemplating structuring a 'bad bank' to purchase the distressed assets of the major banks. Within the next five trading sessions, the market was followed with two distribution days to throw the market back to market undress pressure. On last Thursday and Friday, the market, again, moved higher on hope Obama is going to shot US economy a magical medicine next week. The market volatility continues to call for cautious approach to the market.
Thirdly, on the landscape of leading stocks, there is nothing popping up to feel excited. Education stocks, gold, food, medicals are dominating the IBD's top rated stock list.
On the short term, market looks bullish. Nasdaq composite lead the market higher and broke above both the 50MA and the downtrend line drawn from last August. SP500 bumps up right to the 50MA and the downtrend line.
It will be interesting to see how the market fares after the street scrutinizes the details of the financial rescue plan, which is to be announced next Monday. Whether the market will start a significant bear market rally or another leg down remains to be seen. Once the trend is established, there is plenty opportunity to participate, but at this moment of time, treading water cautiously is the best strategy.
Gold
In spite of the uncertainty of the broad market, there is one group of stocks showing solid accumulation and favorable chart patterns. When the governments world wide are printing a lot of money, the expectation of inflation is rising.
Gold has been basing for a year. After the three distinct down legs, starting Nov 2008, the right side of the base has seen solid accumulations. The long term moving average 200MA is flattening out and the golden cross of 50/200MA is about to happen.
I am holding some positions in GLD in both of my 401k acct and trading acct.
Stem Cell
Will Obama lift the stem cell ban? The stocks are saying yes. Let's take a look of a few very bullish stem cell stocks, ASTM, STEM, GERN.
I own some positions in both ASTM and GERN in my trading account.
In his book, "How to Trade in Stocks", Jesse Livermore wrote the following on HOPE,
HOPE -- Hope lives hand in hand with greed when it comes to the stock market. Oce a trade is made hope springs alive. It is man's nature to be hopeful, to be positive, to hope for the best. Hope is essential to the survival of the human race. But hope, like it's stock market cousins, ignorance, greed and fear, distorts reason. Hope clouds facts, and the stock market only deals in facts. Like the spinning of a roulette wheel, the little black ball tells the outcome, not greed, fear, or hope. The result is objective and final with no appeal ... like nature.
To trade the market on hopium that the worst is over and Mr Obama and his gang is our savior is self destructive.
Let's strip all the noise and discover what is wrong under the hood.
First of all, let's make no mistake, the big trend is solidly down. The precipitous drop of the stock market world wide since Nov 2007 foretells us the tough road ahead.
Secondly, this market continues to trade on headline news and rumors. On 01.28.09, market followed through on the 6th day of the rally attempt on CNBC 'rumor' that the government was contemplating structuring a 'bad bank' to purchase the distressed assets of the major banks. Within the next five trading sessions, the market was followed with two distribution days to throw the market back to market undress pressure. On last Thursday and Friday, the market, again, moved higher on hope Obama is going to shot US economy a magical medicine next week. The market volatility continues to call for cautious approach to the market.
Thirdly, on the landscape of leading stocks, there is nothing popping up to feel excited. Education stocks, gold, food, medicals are dominating the IBD's top rated stock list.
On the short term, market looks bullish. Nasdaq composite lead the market higher and broke above both the 50MA and the downtrend line drawn from last August. SP500 bumps up right to the 50MA and the downtrend line.
It will be interesting to see how the market fares after the street scrutinizes the details of the financial rescue plan, which is to be announced next Monday. Whether the market will start a significant bear market rally or another leg down remains to be seen. Once the trend is established, there is plenty opportunity to participate, but at this moment of time, treading water cautiously is the best strategy.
Gold
In spite of the uncertainty of the broad market, there is one group of stocks showing solid accumulation and favorable chart patterns. When the governments world wide are printing a lot of money, the expectation of inflation is rising.
Gold has been basing for a year. After the three distinct down legs, starting Nov 2008, the right side of the base has seen solid accumulations. The long term moving average 200MA is flattening out and the golden cross of 50/200MA is about to happen.
I am holding some positions in GLD in both of my 401k acct and trading acct.
Stem Cell
Will Obama lift the stem cell ban? The stocks are saying yes. Let's take a look of a few very bullish stem cell stocks, ASTM, STEM, GERN.
I own some positions in both ASTM and GERN in my trading account.
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