Futures Market Blog

For the Week Beginning 2 March 2009

Price vs. Time

If you had to make a choice between making investment and trading decisions based on price or on time which one would you choose? The vast majority of traders and investors will choose price. People think about their investments in terms of prices. If crude oil looked “expensive” at $110 then what would we call it at $140? After crude oil fell to under $70 did it look like a good bargain? If it was cheap at $49 then was it a steal at $40? Many stocks are now at their lowest prices in many years. Do these low prices mean that the stocks are bargains or are they lows priced for a good reason? We may very well be tempted to think in terms of price simply because prices now look compared to how they looked 6 months or a year ago. I recommend that you AVOID thinking in terms of price no matter how seductive or attractive these prices may be. Make no mistake about it – the key to success in this market environment is TIMING and not price. I believe that now, perhaps more than ever before, timing will be your key to major profits over the next few years and even the next few days.

Be Careful what you Believe

Given the tenuous economic environment many investors and traders have understandably become very insecure. Their leaders have failed them. Their top thinking economists have failed them. Their brokers and advisors have failed them. And their portfolios have, as a consequence failed them. I look around and I see despair, negativity, bearish sentiment, fear, anger, frustration, indecision, confusion and a few more things that words cannot describe. We are being told that things will get worse. We are being told that recovery won’t be easy. The new President has gone on a public relations campaign to tell us how hard his job is going to be. When things get better he’ll look like a hero. And whether he be a hero or not, the fact is that we are being assaulted daily by news from every aspect of the media. Television, radio, newspapers, brokers, advisors, new experts, old experts, self appointed experts, ministers, Internet prophets, e-mail blasts, SPAM, bus advertising, matchbook ads, and more are giving us a steady stream of bad news. I have a suggestion for you. Think back to when you were being fed a steady diet of good news. Donald Trump and his “rich dad” friend and their pals went on the road with their get rich million dollar seminars all over the country. They packed the house in every major city. Hard working and hopeful people from every walk of life flocked to learn from the experts. The experts told them how to buy real-estate to get rich. They told them how to buy and flip properties quickly. They told them that the steady upward spiral in prices would continue. If you read my warnings – if you attended my Webinars – if you took seriously my persistent warnings that the real estate cycle was topping and that a low was due in 2009 then you fared well indeed. How sad it is that Donald and the other experts led so many hard working people to make serious errors. Yes it’s true that these people were all free to make their own choices. No one held a gun to their heads and forced them to do stupid things.

What this all boils down to is the fact that most investors are like sheep. They are attracted to what is obvious and they are followers as opposed to being proactive. We are now at yet another critical juncture in markets and in economic history. I want to go on record with some suggestions for you that are drawn not only from my over 40 years in the markets but also from my cycles, indicators, timing methods and my understanding of market and trader psychology. Here are some things to consider:

• Be careful what you believe, whom you believe and what you tell yourself. It’s clear that, as usual, the vast majority of experts missed the tops. In fact they didn’t even warn you. Now, after the fact, they’re telling you to be scared. I say that it’s time to think about and to do the exact opposite.

• The simple fact and the simple honest reality is that the vast majority of experts were not only wrong but that they will be wrong again.

• Make your own decisions and be a thinker not a follower.

• My long-term work with the real estate cycle says that 2009 is the year of an ideal or projected bottom. This means that lows are likely forming now while the news is the worst we have seen. Naturally this means that if you’re looking at the market now and evaluating the market based on what you wee then you will believe what the experts are saying. You need to be forward thinking. You need to remember that many of the so called experts who are now peddling disaster are the same as those who were bullish and predicted a continued bull market in real estate or, as worst, a slight slowdown. Most of the experts were wrong then and they’ll be wrong again.

• Now is the time to prepare your shopping stocks, futures and real estate that you want to buy when the next leg up begins

• TIMING is your key. Don’t catch the falling knife!

For the Week Beginning 2 March 2009

Price vs. Time

If you had to make a choice between making investment and trading decisions based on price or on time which one would you choose? The vast majority of traders and investors will choose price. People think about their investments in terms of prices. If crude oil looked “expensive” at $110 then what would we call it at $140? After crude oil fell to under $70 did it look like a good bargain? If it was cheap at $49 then was it a steal at $40? Many stocks are now at their lowest prices in many years. Do these low prices mean that the stocks are bargains or are they lows priced for a good reason? We may very well be tempted to think in terms of price simply because prices now look compared to how they looked 6 months or a year ago. I recommend that you AVOID thinking in terms of price no matter how seductive or attractive these prices may be. Make no mistake about it – the key to success in this market environment is TIMING and not price. I believe that now, perhaps more than ever before, timing will be your key to major profits over the next few years and even the next few days.

Be Careful what you Believe

Given the tenuous economic environment many investors and traders have understandably become very insecure. Their leaders have failed them. Their top thinking economists have failed them. Their brokers and advisors have failed them. And their portfolios have, as a consequence failed them. I look around and I see despair, negativity, bearish sentiment, fear, anger, frustration, indecision, confusion and a few more things that words cannot describe. We are being told that things will get worse. We are being told that recovery won’t be easy. The new President has gone on a public relations campaign to tell us how hard his job is going to be. When things get better he’ll look like a hero. And whether he be a hero or not, the fact is that we are being assaulted daily by news from every aspect of the media. Television, radio, newspapers, brokers, advisors, new experts, old experts, self appointed experts, ministers, Internet prophets, e-mail blasts, SPAM, bus advertising, matchbook ads, and more are giving us a steady stream of bad news. I have a suggestion for you. Think back to when you were being fed a steady diet of good news. Donald Trump and his “rich dad” friend and their pals went on the road with their get rich million dollar seminars all over the country. They packed the house in every major city. Hard working and hopeful people from every walk of life flocked to learn from the experts. The experts told them how to buy real-estate to get rich. They told them how to buy and flip properties quickly. They told them that the steady upward spiral in prices would continue. If you read my warnings – if you attended my Webinars – if you took seriously my persistent warnings that the real estate cycle was topping and that a low was due in 2009 then you fared well indeed. How sad it is that Donald and the other experts led so many hard working people to make serious errors. Yes it’s true that these people were all free to make their own choices. No one held a gun to their heads and forced them to do stupid things.

What this all boils down to is the fact that most investors are like sheep. They are attracted to what is obvious and they are followers as opposed to being proactive. We are now at yet another critical juncture in markets and in economic history. I want to go on record with some suggestions for you that are drawn not only from my over 40 years in the markets but also from my cycles, indicators, timing methods and my understanding of market and trader psychology. Here are some things to consider:

• Be careful what you believe, whom you believe and what you tell yourself. It’s clear that, as usual, the vast majority of experts missed the tops. In fact they didn’t even warn you. Now, after the fact, they’re telling you to be scared. I say that it’s time to think about and to do the exact opposite.

• The simple fact and the simple honest reality is that the vast majority of experts were not only wrong but that they will be wrong again.

• Make your own decisions and be a thinker not a follower.

• My long-term work with the real estate cycle says that 2009 is the year of an ideal or projected bottom. This means that lows are likely forming now while the news is the worst we have seen. Naturally this means that if you’re looking at the market now and evaluating the market based on what you wee then you will believe what the experts are saying. You need to be forward thinking. You need to remember that many of the so called experts who are now peddling disaster are the same as those who were bullish and predicted a continued bull market in real estate or, as worst, a slight slowdown. Most of the experts were wrong then and they’ll be wrong again.

• Now is the time to prepare your shopping stocks, futures and real estate that you want to buy when the next leg up begins

• TIMING is your key. Don’t catch the falling knife!

The S&P futures were slammed on Friday as Prelim GDP came in far below analyst expectations.  To make matters worse, Citigroup crashed nearly 40% on the news the U.S. government will convert most of its preferred shares to common stock, thereby diluting shareholder equity.  Bank of America followed suit, falling a whopping 26%.  Even though Bank of America remains afloat, the nationalization of Citigroup seems imminent.  With its stock trading at $1.50/share, investors are pricing the company for bankruptcy.  Seeing as the bankruptcy of Lehman Brothers resulted in a catastrophic freeze in the credit markets, the government will likely need to step in and finish the job as far as nationalization is concerned.  With the S&P futures closing beneath 2008 lows, we could witness a massive selloff to the downside in the near-term.  The futures are already trading down 2.2% in Monday’s pre-market.  The U.S. economy is slowing faster than expected, and the global economy is following suit.  Due to the interconnectivity of the global economy, as one domino drops the rest come crashing down, perpetuating the economic contraction in the around the world.  The EU and Britain are experiencing another wave of troubles in their respective financial industries with their largest banks reporting disappointing earnings and searching for ways to raise fresh capital.  Furthermore, the major economies of Eastern Europe continue their rapid deterioration, pulling down the EU banks with them.  It’s hard to find a bright spot in the U.S.  However, data released this morning showed U.S. spending increased while the Core PCE Price Index came in line.  Investors are now waiting on the ISM Manufacturing PMI to get an idea of how bad America’s manufacturing sector is.  With the other major economies contracting, it’s hard to believe demand for exports will provide any boost for U.S. manufacturing.  Correlation wise, Crude futures are dropping below our 2nd tier downtrend line as our uptrend line meets an inflection point.  Additionally, the 30 Year T-Bond futures are walking upwards while Gold bounces off our 1st tier uptrend line.  Hence, all of our correlations are pointing towards a continued selloff in U.S. equities.  Meanwhile, the S&P futures remain well below our near-term downtrend line, giving us little reason to be positive trend wise.  However, there is a positive note in the fact the S&P futures should find near-term psychological support at the 700 level.  Fundamentally, we find resistance of 724 with fresh 2nd tier and top-end hanging at 731.75 and 738.75, respectively.  To the downside, we see support of 716.75 with 2nd tier and bottom-end sitting at 711 and 700, respectively.  The S&P futures are currently trading at 718.75.

The S&P futures were slammed on Friday as Prelim GDP came in far below analyst expectations.  To make matters worse, Citigroup crashed nearly 40% on the news the U.S. government will convert most of its preferred shares to common stock, thereby diluting shareholder equity.  Bank of America followed suit, falling a whopping 26%.  Even though Bank of America remains afloat, the nationalization of Citigroup seems imminent.  With its stock trading at $1.50/share, investors are pricing the company for bankruptcy.  Seeing as the bankruptcy of Lehman Brothers resulted in a catastrophic freeze in the credit markets, the government will likely need to step in and finish the job as far as nationalization is concerned.  With the S&P futures closing beneath 2008 lows, we could witness a massive selloff to the downside in the near-term.  The futures are already trading down 2.2% in Monday’s pre-market.  The U.S. economy is slowing faster than expected, and the global economy is following suit.  Due to the interconnectivity of the global economy, as one domino drops the rest come crashing down, perpetuating the economic contraction in the around the world.  The EU and Britain are experiencing another wave of troubles in their respective financial industries with their largest banks reporting disappointing earnings and searching for ways to raise fresh capital.  Furthermore, the major economies of Eastern Europe continue their rapid deterioration, pulling down the EU banks with them.  It’s hard to find a bright spot in the U.S.  However, data released this morning showed U.S. spending increased while the Core PCE Price Index came in line.  Investors are now waiting on the ISM Manufacturing PMI to get an idea of how bad America’s manufacturing sector is.  With the other major economies contracting, it’s hard to believe demand for exports will provide any boost for U.S. manufacturing.  Correlation wise, Crude futures are dropping below our 2nd tier downtrend line as our uptrend line meets an inflection point.  Additionally, the 30 Year T-Bond futures are walking upwards while Gold bounces off our 1st tier uptrend line.  Hence, all of our correlations are pointing towards a continued selloff in U.S. equities.  Meanwhile, the S&P futures remain well below our near-term downtrend line, giving us little reason to be positive trend wise.  However, there is a positive note in the fact the S&P futures should find near-term psychological support at the 700 level.  Fundamentally, we find resistance of 724 with fresh 2nd tier and top-end hanging at 731.75 and 738.75, respectively.  To the downside, we see support of 716.75 with 2nd tier and bottom-end sitting at 711 and 700, respectively.  The S&P futures are currently trading at 718.75.