COMMON SENSE

Still, No Capitulation For the Bulls

Many have asked for help with their portfolios in view of the last two weeks of a minor correction. The simple answer is that for the last 3 years programmed trading has ruled the market. The derivative markets have artificially created the illusion of a bull market by supporting prices at the 50 day moving average. Now that the Fed has raised short term interest rates up for 16-17 consecutive times, institutional money managers are taking their profits. Meanwhile, small investors who have been late to the party are buying stocks on the dips trying to ride the bull to new 5-6 year highs. The small investor does not have a chance when swimming in the ocean of sharks, ie. (hedge funds and institutional money managers).

I am troubled that those who will be hurt by the coming capitulation are not paying attention to their long term investments inside their pension plans. The high level of apathy with these assets will lead to more “stock market” scandals in the months ahead. You should never trust anyone with your hard earned money, especially your stock broker, your insurance agent, and your financial planner.
The problems with these advisers is they all have their self interests in mind by selling you something. The stock broker sells you stocks to buy, which his firm probably “makes a market in” and he makes a commission. The insurance agent is the most devious of all, because his favorite arsenal of assault on your assets is his ability to sell you life insurance as an investment, called “variable life.” The insurance agent also has a “financial planning’ vehicle called an annuity with many hidden charges and withdrawal fees. Some insurance agents are even selling annuities as a “tax shelters” to roll over your pension plans if you are retiring, guaranteeing you a loss of principal when you activate your payment choices. Your financial planner will charge you for his time or he will receive a commission on any financial products as part of your financial plan. He may sell you a combination of insurance, stocks, and annuities to supplement his personal income.

Your financial assets are too important to let others steer you toward bad investment decisions, by using the Harmonic Stock Clock signal lines, you can determine when to take a profit on your long term investments, not your broker, insurance agent or financial planner.

The following rules for stock brokers. Never accept phone calls with a “hot stock” tip. You determine your stop loss and when you should protect your profits.

The rules for insurance agents: Look at last month’s statement for your variable accounts, and call the 800 number to see what the values are today. If you can’t sleep at night because the value has dropped too much, then you should probably switch your money into a money market account instead of the stock portfolio you have been in. If you have a good stock charting program like telechart 2000, you can apply the Harmonic Stock Clock signal lines to mutual funds and some of the major holdings within those funds to see how the prices are holding up.

Remember, if the yellow signal line has turned downward below the red signal line, institutional investors are selling forcing prices lower.

The rules for financial planners: Use only fee based planners, those who charge per plan or charge by the hour. Don’t let him combined two or more services in one product, like life insurance and investments, or savings, or annuities and tax shelters. This rule should apply to insurance agents also, who like to combine products like insurance and so called savings plans.
Looking at the Harmonic Stock Clock’s Signal Lines, you can see most of the Indexes are ready to capitulate below the red signal line. In most cases, once the yellow signal line crosses the red signal line, a cyclical bear market will begin, just like the 1973 cyclical bear. The result were a net loss for the S&P 500 Index and Dow Jones Index was in excess of 40% from the previous highs. The 1973 cyclical bear market lasted approximately 18 months from Jan 73 to Oct. 74. Long term investors failed to see it happening until it was too late to protect their profits from the 1970 short term cyclical bull market. I suspect things will be much worst today with the effects of programmed trading, hedge funds, and a derivatives, such as ETF’s, sector funds and options.

Good Luck to all
Doc

Doc’s Harmonic stock Clock should be used for Educational and training purposes only.

No advice is given. No recommendations given.
You are considered to be over 18 years old.
Doctraders Harmonic Stock Clock is based on technical market indicators which may predict short term and long term market trend reversals. Doctrader is not an investment adviser but has been involved in the markets since 1985. No system of trading or investing can prevent losses, you should do your own “due diligence” when determining the suitability of the information contained within this or other websites mentioned in this blog.

God Bless

Doctrader

Technorati Tags: bull market, Capitulation, funds, insurance annuities, investor, Market Forecast

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Friday the 13th

Looks like we are in the same situation as last week. The threat of a “Black Monday” is still a possibility given this Thursday’s closing prices. The Fed announced the expected rate hike, but they are still behind the curve, as per their modus operandi. If you read my previous posts, the Fed has always been behind the curve when predicting interest rates and inflation. The Fed missed the boat to begin raising interest rates back in 2003, when the current stock market bubble began. The Fed’s has been neutered by the markets ever since 1998, when their last pre-emptive rate cut saved the market from a necessary correction. In October of that year, the market was in the process of correcting the irrational exuberance, Mr. Greenspan choose to cut the prime rate by ½ point and cause another bubble to be formed in the stock market, cumulating in 2000. The millennium scare, the Russian economy, Brazilian currency crisis, and hedge fund crisis were swept quietly under the table. When the market was supported by the Fed’s rate cuts in 1998, the market’s cycle was disrupted from its natural boom to bust cycle. The Fed encouraged the last bubble in 2000 and they staved off the depression era collapse that should have occurred naturally. It’s ironic that the Fed had to cut rates back to the last secular bear market beginning in the 60’s to prevent the complete collapse of the NYSE stocks, however the Nasd stocks did suffer major losses which they cannot recover until the next appropriate secular market cycle. The temporary cyclical market cycle began in March 03 and has begun to collapse since the current “irrational exuberance” is wearing off. The market’s top was reached when 90% of the stocks were trading above their 200 day moving averages. In the last 6 months less than 50% of the total stocks are trading above their 200-day moving averages. There are young money manages who are in charge of major portfolios while their senior managers are on vacation in the Hamptons. The $64,000 question is if the senior managers left instructions or hard sell stop orders before going on vacation.

If the market closes on Friday once again, through the next century market on the Dow and the Nasd, a “Black Monday” warning is issued to protect any long-term gains you may still have left. The markets never move in strait line, but will oscillate between high and low based upon the Harmonic Heartbeat.

Friday’s market tone will be set by the CPI report, which should be noted that there have been changes in this report, most definitely under estimating inflation with it’s exclusion of food and energy. My prediction of $45 barrel oil was pre-mature, reaching this high level by Labor Day instead of Memorial Day. The master market manipulators have been building for a huge correction coming soon either in the stock market or in the oil market. The geopolitical concerns along with presidential politics leads me to suspect most government reports, both good news and bad news.

If the market’s trade higher in the morning by the first red zone time, it might be a good strategy to buy some put options for the late afternoon trading. This is because put option will be cheaper if the market rises. If the market sells off in the morning before the first red zone time, then buy put options later in the afternoon if the market internal are improving and the market goes positive. The market internals measures the advance/decline line, and is a simple measure of any real buying and selling pressure. If there are more than 2-1 declining vs. advancing stocks, margin calls on Monday morning could cascade downward. For short term day traders, the next few weeks could very profitable given this weeks volatility.

I will be working on the website this weekend, if you have any questions email me or post in the group.

God Bless

Doc

http://www.doctrader.com/

Technorati Tags: Analysis, bear market, behind curve, Black Monday, bubbles, bull market, economics, Fed, financial, Inflation, market, market cycles, Money, politics, rate cuts, secular markets, stocks, street

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Look who’s Talking?



It has been fun watching the cheerleaders finally see the light. After 5 years, the market has failed to set new all time highs, signifying a “new bull market”. One has to wonder why it was so important for them to always recommend buying stocks? Maybe it has to do with their advertising base? I wonder what they are paying the two cheerleaders to be eternally bullish? They are now questioning guests about a market that will trade sideways for the next 18 years…mmm Wonder where they have seen a stock chart of an 18-year secular market? You guessed it, my website. Do you think they would give me credit for pointing out the difference in cyclical market and secular markets? Now that most professional money managers are using the Harmonic Stock Clock, the small investor, swing trader, and day traders are the only ones listening to the “new bull market” mantra. Check out the history of program trading on the NYSE:

If you have not bought your copy of the Harmonic Stock Clock, now would be a good time to protect any profits you have left. It seems just in March, the cheerleaders paraded guest after guest urging people to buy stocks, now all those experts have taken losses. “The earning will be great, they say, but in every report I read, there are two problems with great earnings. A) They are not paying anything in the form of dividends, and B) there are “exceptions and one time charges” in almost all these reports. I won’t mention that 1/3 of the S&P stocks are still using per forma reports, and most are not expensing options costs yet. The good news is that you can still buy the Harmonic Stock Book, and preserve some of the wealth you have accumulated before it’s too late.

God Bless

Doc

http://www.doctrader.com

Technorati Tags: bull market, cheerleaders, harmonic stock clock book, new highs

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