Become A Savvy Investor
For those of you who did
not read Mark
Boucher’s piece over the weekend, I suggest you do. While I favor him due to
his incredible discipline, he also laid out a good macro view of potential
scenarios going forward and specifically what you can do to capitalize. My focus
here at TM naturally is daytrading, however, I view daytrading as my income
source. It is from daytrading that I pay my mortgage, save for retirement, etc.
The bigger picture, however, is how do you get those assets you have accumulated
to consistently beat the major averages, and more importantly, outpace the
debilitating effects of inflation? This is how one accumulates wealth.
Become a savvy investor. If there were ever a
better time to learn, it is now. If you can navigate these markets and show a
good return, nobody will ever accuse you of being a bull market genius portfolio
manager. It will take some work though, and lots of it. The majority of my time
away from daytrading-related work is spent meticulously going over my portfolio
each day, making absolutely sure that my positions are panning out. This is
tough. There have been many situations where I have become so convinced of a
very large move that I have been reluctant to take nice gains and look for
re-entries vs. giving back everything. With discipline, however, you can put
yourself in total control of your portfolio.
Going back to Boucher’s theme, which was rising
currencies in Australia and New Zealand, this is indicative of inflation on the
horizon. These are commodity-based economies, as are countries like Brazil. The
massive growth in the U.S. money supply in recent years is the cause for future
inflation, not a general rise in prices. A recent essay by Dr. Frank Shostak
pens a convincing argument which argues against the currently accepted
definition of inflation. He believes that massive increases in money supply lay
the foundation for inflation and currency erosion, not a rise in prices. Shostak
goes on to say: "Since increases in money supply set in motion an exchange
of nothing for something, it diverts away from wealth generators toward the
holders of the newly created money. It is this that sets in motion the
misallocation of resources and not price rises as such." I have read
other pieces on this subject that document this all the way back to the days of
the Roman Empire. It is Greenspan and company, through, artificially suppressing
rates which is the biggest obstacle going forward. By trying to stimulate the
economy through massive liquidity injection, they have inadvertently laid the
foundation for inflation.
Now, I am no economist and certainly no expert on
monetary policy. But I think anyone with an ounce of common sense would
see that the recent easing policy has not rescued our economy yet. If you go
back in history, there have been only two other times that the stock market was
not higher after such aggressive monetary easing: right after the 1929 crash and
in early 1980s. It appears that early 2000 may be the third time. You see, in my
opinion the Fed truly does not realize what ails this economy, a bubble, and as
a result, far too much capacity and not nearly enough final demand. How else
does one explain the returns seen in not only gold, but commodity-based
economies, as well as the current drop in the value of the dollar? By no means
am I proclaiming any of these ideas as absolute, but in an environment that is
punishing most equity investors, you need to evaluate other options, wherever
they may be.
Domestically speaking, Retail,
Consumer Finance and Housing
stocks (see table below) are probably ripe for some downward price action, but
at present they are merely on my radar screen. It is still a bit too early,
although, Centex
(
CTX |
Quote |
Chart |
News |
PowerRating) and Household
International
(
HI |
Quote |
Chart |
News |
PowerRating) broke down on Friday. As Boucher indicates, not
only is the Australian Dollar
(
ADM2 |
Quote |
Chart |
News |
PowerRating) compelling on the long side, but so is
the Swiss Franc
(
SFM2 |
Quote |
Chart |
News |
PowerRating), not only from a technical view, but as its status
as a beneficiary in times of uncertainty. Remember, just like trading, the
simplest approach is usually the most effective, and the same applies to
investing. For me, finding some harmony between fundamental and technical
indicators offers compelling longer-term positions.
Looking ahead to today’s session,
the S&P and Nasdaq futures are within striking distance of the recent lows.
I expect more of the same narrow-range trading to continue. Again, the first
hour for me is where my day is made or broke. After that, the odds of
high-probability setups goes down dramatically as volume tapers off. In a market
like this you do not want to be trading with the specialist, we know who will
win that game. Later in the week there will be Retail Sales and Housing Start
numbers out which may offer some direction and put a little more
"juice" in the tape.
Key Technical
Numbers (futures):
S&Ps |
Nasdaq |
| 1094 | 1255 |
| 1089 (key resistance) | 1235 |
| 1080 | 1223-25 (confluence) |
| 1069-71 | 1211 |
| 1062 | 1188 |
| 1049 | 1177 |
| 1044-45 (massive confluence) | 1164 (confluence) |
| 1031 | 1144 (contract low) |
| 1017 | 1129 |
Thought For The Week:
“Speculation,
in its truest sense, calls for anticipation.â€
Richard D. Wyckoff
As always, feel free to send me your comments and
questions. See you in TradersWire.