Sunday, September 25, 2011

A Quick Primer on Market Selloff...LIARS and CROOKS

There are a lot of dichotomies within the stock market that affect its direction from either bears or bulls. The two groups have two groupings within each. There are those who follow the fundamentals of a company. Are sales up? Profit margins? Future demands? Who did the S&P downgrade? At the moment the European financial crisis affects their decisions along with the emerging markets led by China. The other side are technicians who make their decisions by looking at charts, irregardless of the company. There is one common denominator for both: market trend which could be up, down or sideways. I can tell you. It is down.
The market direction is the first thing you need to know before you make a market decision. If you already have a position in a company, it breaks down to your situation like taxes, are you under water, is the dividend too important to lose if you sell. These things are personal and I won't delve on them.
The recent sell off actually began last March when the market corrected. It did this on high volume.
Gospel according to JFL
Volume in my estimation is one of the most important aspects of the market. People can say whatever they want about the market. It is rigged. It's a racket. It's only for the rich and insiders. Whatever! Volume will show you everything because it includes everybody. You can beat the big guys by learning candlestick charting with volume indicators. Institutions are like hugh ships. They cannot turn on a dime. Think Titanic. Whether selling or buying, they have to move millions of shares which can change the direction of any stock. You and I only have a few shares to sell or buy. Individuals do not cause a change in market trends. Institutions do. This takes us to the point.
It is the same concept from the movie. It is something that I have mentioned many times. Everything has a range. Personally, I follow gold on principle. I follow oil because it is a necessity. Food is just as important except I don't know enough to make money in the market from it. In any case, I track oil companies with charting. I record the volume at high and low closing, looking to find the "sweet spot" for my entry. When a company hits the bottom of its range, I buy. I sell before it comes close to its top in down markets like today. I do the opposite in up markets. You can make more money in markets today because you can play the volatility quicker than the big boys. You just have to be patient and go a little at a time. Do not go "all in."
What To Expect
The market will bounce next week. Why? The market hit its low in 2009 on the S&P with almost 4 billion shares trading. Last week the market could not even reach 2 billion shares trading. This volume amount translates into telling you that less than half of the market believes in this downturn. Bottom line: if the upward bounce can get momentum it would be like Mariano Rivera putting out the fire with a save. However, if the volume is not strong, then the market will retest last weeks low of 1100 on the S&P. I think it will break through to test the next support range at 1020 S&P. At that point we get to play the whole scenario again with volume being the real answer. Go! Make some money.
LIARS and CROOKS: How about government spending? Obama says he has a plan. The Republicans say they have a plan. This is reality. They both lie!
The Inspector General did a research on some of the spending habits of the Justice Department, concentrating on food costs. This report includes the Bush administration as well as the Obama's. The inspector found excess everywhere. In 2008 under President Bush, they spent $47.8 million on food. In 2009 under President Obama, they spent $73.3 million on food. Who are they feeding? Nothing like spending other peoples money with no accountability. For example, they would have a snack during a conference and have some popcorn at $32 a pop, soda at $12 a glass or a candy bar at $16 apiece. Cut costs! Leadership! BS is more like it.