Stock Market Paradigm Shift

“I care not what puppet is placed on the throne of England to rule the Empire, …The man that controls Britain’s money supply controls the British Empire. And I control the money supply.” Baron Rothschild advice given to the ECB and FOMC.

 After today, a paradigm shift in our market has occurred, in my humble opinion. Not just any old shift, a paradigm shift. I’ve always understood that by adding the word paradigm it somehow makes it seem incredibly different, incredibly important. We’ll see.
We are seeing the end of central bank support in Europe, which started the selling today, as well as the posturing of our Fed to hike rates, as Mr. Lacker says, as soon as November. You saw the market reaction… stocks, bonds, gold, currency, all down.
I’ll go one opinion further and say that I believe a November rate hike is exactly what we’ll get, after the election.
Since both GOP and Dem candidates have been forecast to cause a correction (crash).. what better plan can the Fed ask for: raise rates in November, allow the crash (correction), blame it on the politicians.
You can day trade, swing trade, or position trade… but you have to be in the market to even have a chance at making money while putting your money at risk. Oh, and when you’re in the trade, you have to manage that trade.
It all makes sense at some point since there is method to the madness.
Posted in black swan event, day trading, economy, Fed, FOMC, interest rates, janet yellen, market direction, market gurus, paradigm shift, psychology, rate hike, Stock Market, stock market direction, stock market trading, swing trading, think outside the box, trading, Trading Stock Market | Tagged , , , , , , , , , | Leave a comment

U.S. Steel Corp. Is Too Heavy

Summary

Even next week’s Organisation for Economic Co-operation and Development meeting regarding global steel capacity and pricing won’t help.

All steel manufacturers are not created equal. Management, operations, and technology combine to make a difference.

In the end, earnings and management do matter. U.S. Steel Corp. is a short.

Originally submitted on April 17, 2016

Since 1901, U.S. Steel Corporation (NYSE: X) has evolved its operations into three major segments: Flat-rolled steel – for use in automotive, consumer, industrial service, and mining markets; U.S. Steel Europe – for construction, container, appliance, oil, petrochemical, and transportation; finally, the Tubular segment goes to oil, gas, and petrochemical markets.

Recent Upside in The Steel Industry – Demand or Luck?

So far this year, U.S. Steel Corp. stock is up 200% from the February low. That’s considered pretty good when a company is, you know, actually making money. U.S. Steel Corp. is not, so what gives?

I believe the recent upside is luck.

See the full article at SeekingAlpha.com.

Posted in earnings, economy, Short, speculation, Stock Market, stock market trading, swing trading, think outside the box, trader psychology, trading, Trading Stock Market, U.S. Steel Corp. | Tagged , , , , , , , , , , , | Leave a comment

Bear Toast To Bull Boast- 1995 Redux

The Baltic Dry Index measures the rise or fall of fees charged by shippers to move raw material. Why would shippers feel they could charge more unless things were improving?

The shipping company stock charts are trending up on those higher fees.

Charts are unemotional, unbiased, non-opinionated… real money moving in and out leaves a trail shown on the charts as a trend. What do we see?

You cannot see my grimace as I smack the keyboard with bandaged paws. My bear paws were burned, stomped on, and gored by bulls that frankly I thought were running solely on Fed supplied hopium. How else could we explain so many “V” bounces in the last three years?

In the end, does it matter why it happened? I think most market participants will point to the Fed and zero interest rates; the end result was too many too hot to handle flaming “V” bounces.

At this point, however, I want to explain why, when these bandages come off, I hope I’ve morphed and see hooves rather than paws.

See the full article at SeekingAlpha.com.

Posted in day trading, economy, Fed, market direction, position trading, Stock Market, stock market direction, stock market trading, swing trading, trader psychology, Trading Stock Market | Tagged , , , , | Leave a comment

The Inviting Stock Market Rabbit Hole

“There is a place. Like no place on Earth. A land full of wonder, mystery, and danger! some say to survive it: You need to be as mad as a hatter. Which luckily I am.”- The Mad Hatter from Alice in Wonderland.

The rabbit hole metaphor has been used by teachers and authors to demonstrate the adventure of learning. One’s comfort level during the trip notwithstanding, it’s all about the lesson(s) learned.

What can be more adventuresome than trading the stock market?

For that matter, if you’re new to the stock market and trading, is there a seemingly deeper rabbit hole than learning how to trade once you enter? A new student’s life flashes before him as the market’s rabbit hole reveals deepening entryways with tangential pathways.  A look over his shoulder reveals more doors amid hallways with stairways up and down to more levels.

The stock market rabbit hole (SMRH) is not as shallow as the one seen in Bugs Bunny cartoons. Elmer Fudd would stick his head down the hole and voila, there sat Bugs in an easy chair chewing his carrot. A second or two later we’d hear, “Eh, what’s up, doc?” Mr. Bunny’s residence did not have hallways or split-foyers to give Bugs’ home depth.

To a beginner, the stock market rabbit hole (SMRH) appears to have more permutations, twists, turns, paths and tunnels than Boston’s Big Dig. The SMRH expands, contracts, twist and turns in and on itself as traders seek a rewarding adventure.

Rabbit hole travelers, whether scurrying through a mind map, subway map, process map, or stock market finance map follow twisting paths in search of a truth, knowledge, or the nature of things. The “nature of things” in the SMRH means profit. SMRH travelers search for truth, knowledge, and profit.

The function of the stock market is referred to as price discovery. It “discovers” price every minute of every day as it accounts and then discounts all relative data affecting stocks, bonds, and future cash flow.

A new SMRH traveler gets a taste of the market’s fickleness, volatility, fear, and greed as price moves sharply through well-considered but doomed calculations that logic (or was it the Chesire Cat?) declared valid.

The rabbit hole becomes crowded with bulls and bears clogging up the hallways and stairways. Paws are slapping downward onto rising horns with both taking positions as opposing armies might on a field of battle.

The stock market’s rabbit hole is multi-leveled and multi-chambered according to size and economic significance. The bond market, for example, may not be as splashy as the stock market but it is easily two to three times the size of the stock market.

Furthermore, the way market participants move around (trade) within each level, within each chamber makes for the bull-bear drama that makes day to day headlines.

It’s the Mad Hatter’s tea party and the Queen of Hearts croquet game in progress simultaneously. All participants are, like poor Alice, changing in size, significance, and outlook.

Some time later a cry is heard: “Eh, what’s up, doc?”

Startled students reach out and turn the page of their book, “How to Trade Stocks,” Chapter Two.

Posted in culture, day trading, economy, Fed, FOMC, game plan, lifestyle, market direction, problem solving, psychology, speculation, Stock Market, stock market trading, trading coach, trading for a living, Trading Stock Market | Tagged , , , , , , , , , , , , , , | Leave a comment

Wall St. Shrinking Workforce- Not Good

Oh really?
One thing I’ve learned over the years of being on, around, with, under, on top of, and at the bottom of Wall Street’s markets: when brokerage firms start laying off brokers, traders, and staff, there is a major slowdown coming (recession?). Bank of America is preparing big layoffs in investment banking and trading, oh and there’s more, lots more, here.
What do you see from clicking that ‘here’ link? Right. Wall Street firms are laying off, thinning payroll because they expect less business. Those firms hire in advance of business booms and layoff in front of big slowdowns. You may not like Wall St. firms, but they are not stupid.
Here’s why that’s important to me: I’ve been trying to make a relatively bullish case in the Trading Room pointing out rising industry ETF charts and so on. In other words, as bearish as I’ve been all along I recently could find reasons to think bullishly until that latest Bank of America headline. It reminded me simply of previous bank downsizing in recent years. As a result, I’m back to being cautiously optimistic realizing that the market always gives us a last chance to exit before a breakdown.
Pull up a 20 yr. daily SPY chart. Follow the chart action paying particular attention to: 10/21/97, 7/22/98, 8/25/98, 9/1/2000, 11/7/2000, 12/10/07, 9/19/08, 12/1/15, and 12/16/15. Notice that last rally that failed to get back to previous highs?
How about Friday’s bearish candle (2/26/16) or will it be 2/29/16 that tops out? If you draw your downtrend line from 12/2/15 maybe SPY moves to just under 200 but can’t break above and rolls over. I certainly don’t know how it will play out but my bearish antennae are on full alert going into March even though I know Mr. Draghi will pull the trigger in March…. just when I thought it might make sense to sharpen my bull horns.
(Once again, why do I write out chart data I want you to examine rather than just show you the chart… because when YOU do the chart work you’ll remember it, it will mean something to you. If I just give you the chart, you look at it and shrug… and move on.) Come on, learning to trade means you have to do some work.
May we live in interesting times…. oh, wait… we do! Meanwhile, trade what you see while preparing for what you don’t see.
Posted in black swan event, day trading, economy, market direction, market gurus, psychology, speculation, stock guru, Stock Market, stock market direction, stock market trading, swing trading, trader psychology, trading, Trading Stock Market | Tagged , , , , , , , | Leave a comment

Did They Really Just Kill The Bull?

It is 2009; the Fed rides to the rescue saving the banks, housing, and our beloved stock market the old-fashioned way with nearly free money. The goal was to have corporations hire folks and then that demand for workers would produce wage growth. That wage growth, as we know from experience, would ignite inflation that in turn would allow for a tightening of rates to get us back to normal.

It is now 2015 and trillions of dollars of debt later there is no inflation and wages are dormant.

I used to suggest that technology will be the death of us. Maybe it is not a joke. If it is, it’s not funny. The humongous change in technology that has forever changed the global labor market is, and has been, changing things for the worse. This change has been responsible for the abnormal recovery coming out of the Great Recession.

The Fed kept talking as if we were recovering from any old recession while ignoring or not admitting that something substantive, and negative, was at work in the workforce.

Human beings of all ilks have a more than passing interest in the implications of these changes. Economies in the past have grown as a result of demand spurring labor-intensive manufacturing that generated income that allowed greater consumption.

Technology has lowered demand for labor; less labor less income. Less income less demand. Less demand less growth. Less growth lower profits. Lower profits lower stock market.

The days when the so-called Bernanke put, now the Yellen put, would fire up the buy-the-dip-vigilantes and a rally would ensue are, I think, behind us for now; at least until the next QE starts. 

The Fed’s mantra included observations that issues were of a transitory nature and inflation was bubbling just below the surface. However, what was bubbling below the surface was not inflation, it was the noted behavior in the stock market as it made new highs in 2015. Leadership stocks were not participating. In fact, they were in reverse.

Mid-year of 2015 the stock market had to contend with Greece’s collection of kicked cans now piled up at the end of the road. More recently, we discovered that Chinese numbers just don’t add up and not only that, we cannot get a grip on what they are.

Should we have been surprised at August’s flash crash? Moreover, if you thought August was ugly, there are more months to follow according to my calendar.

During this time, the buy-the-dip-vigilantes were active, sopping up fallen prices like new sponges just as sure as the bond vigilantes were doing their intimidating thing in the late ‘90s.

Along comes Janet Yellen and her FOMC posse on Sept. 17, 2015. For the umpteenth time, the market media trumpeted this meeting as “the most significant” since the invention of money. If the FOMC does not raise rates, the rocket fuel of the past for a market pop, does it indicate economic weakness? Yes. Yes, it does.

Well, the boys in the band, the FOMC, with aging lead singer Janet Yellen flinched by not raising rates… again.

The market promptly went south in a big way. For one thing, we were right back where we were hours earlier, i.e., will they, won’t they? Major banks like JPM and GS are looking beyond October.

Has the global growth engine gone into reverse? Lack of growth, loss of jobs has started anew. WFC, HP, Qualcomm, Deutsche Bank, Johnson Controls, cut a combined 57,482 workers. Now WFC’s 182 workers doesn’t seem like much until you note that it’s in their North Carolina mortgage department. WFC is the nation’s largest mortgage banker. What do they see? Less income to spend, less demand, less growth, less profit, equals a lower market.

Technology does not eat, doesn’t spend money, and doesn’t require health care; it just sits there waiting to be utilized.

Moreover, what do corporations do with the money they save? They’ve been buying back their stock.

Meanwhile, the unemployed carbon-based human forms eat, have mortgages, rents, health care bills, among other life needs. They are going back to where they were in 2009.

Increasingly, technology is replacing humans at a time when humans are replacing themselves faster than death can absorb the new population growth.

We are all grown-ups here, does anyone think this is sustainable?

I believe this market will continue to fade rallies and continue to make new lows. Arguably, maybe at the 1870 level on the SPX will usher in QE4. Oh, yes, they can, and oh, yes, up we would go.

The argument may not be so much when will the Fed raise rates? Maybe the question is, can they?

Posted in economy, Fed, FOMC, inflation, interest rates, janet yellen, market direction, Stock Market, technology, trading, Trading Stock Market | Tagged , , , , , , , , , , , , , , | Leave a comment

How To Know If You’re An Investor Or A Trader

“Calling someone who trades actively an investor is like calling someone who repeatedly engages in one-night stands a romantic. – W. Buffett

Mr. Buffett has a way with words, doesn’t he? He also makes an important point to anyone contemplating entering the stock market. Know yourself first.

Everyday people with average funds, average intelligence, above average hopes, and probably below average fears, want to get into the stock market. They just want to make money, ideally without losing any and they are aware of the risk.

Most people attracted to the market are aware of one of two ways to participate. They know about buying low to sell high, also known as buy and hold; and they know about day trading. The two are similar but vastly different in analytical methodology, time, strategies, as well as different human character types that tend to participate in each.

Let me clarify something that people get hung up on about the distinction that Mr. Buffett points out: whether investing or trading, you are speculating. What we’re really talking about, in my opinion, is a matter of degree.

Speculation is trading in an asset that has a risk of losing some, most, or all of one’s initial outlay. The objective is always a substantial gain. You would not take a speculative risk if you were looking for the same return you can get in a bank certificate of deposit.

While trading or speculation is mistakenly compared with gambling, a key difference is that speculation is equal to taking a calculated risk and is not dependent on pure chance. Plus, you can always exit the position anytime. Gambling depends on chance or random outcomes; and try taking your bet off a casino table.

Most people would not consider real estate investing as speculation. Review your paperwork from your last purchase. Show me the line in your contract that says your house will appreciate a guaranteed percentage every year. Having said that, isn’t there a term known as “spec homes” in the real estate industry? I mean, it does stand for speculative after all. Hmm, go figure.

In the stock market, if I buy a blue chip stock like IBM in 1998 and sell it in 2007, that is a trade, a buy and a sell. If I buy IBM at 9:45 AM and sell it later the same day, say at 1:45 PM, that is a trade, a buy and a sell. The fact that one was long-term, presumably a buy and hold investment, and the other a short-term day trade is immaterial.

In both situations I have no guarantee of a substantial return. I have a risk. I may have taken steps to hedge my risk, but all the ingredients of speculation are there whether long or short-term trading.

The major distinctions between Warren Buffett’s “investor” and his “active trader” are:

  • Investors do think long-term. That could be holding from one quarter to the next or could be years worth of business cycles.
  • Traders think in terms of minutes to days. Their sole criteria for a trade is a potential for price movement with room to run.
  • Investors think in terms of quarterly improvements in earnings, cost control, cash flow, sales, management, and outlook.
  • Traders think the charts already reflect what investors think and thus believe they can see price patterns (behavior) in the charts.
  • Is it safe to say traders are impatient vs. investors? My experience says yes, we are an impatient lot.

As far as I know, traders and investors make the best romantics.

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