Friday, November 27, 2009

Stock Market Update

Stock Market Updates:

Our recent stock market newsletter, sent 23rd November, stated that the markets were very top heavy, meaning they were at resistance levels. We advised that investors should remain out of the stock market until further notice.

"If investors or traders are holding positions that they should either look to exit at these resistance levels (traders)or be prepared to hold through the correction (investors) and then add to their holdings."

The Shanghai was the early indicator of the stock market weakness at resistance levels. The DAX then followed by making a lower top or lower high. These signals need to be heeded.

Then we heard about the Dubai World debt crisis. It only takes a small bit of negative news to discount the current stock market perceptions and create a sell off that we have noticed using technical analysis on the charts.

The interesting thing about the Dubai crisis is that the news is old. Maybe not to the public and the man in the street but the investors and bankers all knew about the announcement to come at least a few days before it was announced. Conspiracy? Yes, somewhat. Read the charts. Ask some questions!

Why didn't the global markets make new highs this week? The S&P 500, the Dow Jones, the DAX, Shanghai, FTSE 100 and even the local All Share Index in South Africa could not bring themselves to make new highs and break the resistance. The stock markets couldn't break this level as bad news was coming. The smart money was preparing to move out of the markets temporarily. They gave you and I, the little guy, warning for about 5 days.

The next question is, "Did you heed the warning?" Many people trying to invest and trade the stock markets aren't able to handle the emotional journey. They suffer from the emotional pull of the stock markets with fear after a sell off or correction or even recession with the greed that the stock markets will always climb higher. TIP: The stock markets never go up or down in a straight line! They always experience cycles.

How do stock market cycles work?
You get small micro cycles which people trade intra-day or in very short term periods of 1-3 days. You get swing cycles otherwise known as swing trades which can last from 3 days to 3 or 4 weeks. You also get minor cycles which can last for 3 weeks to around 3 months, sometimes extended through to 6 or even 9 months. The major cycles are those we see in the stock market as we go from stock market boom to stock market bust! Which time frame do you want to play in?

I teach people to take advantage of any one of these time frames. Different people enable different choices and needs and ability. some people can handle the daily emotional ebb and flow of intra-day trading... it's only a select few that can actually make a success of short term trading in the intraday arena. Perhaps as few as 2% of people can actually handle this form of trading.

The next type of person is a short term trader that can take trades from 1-3 days and also require especially strong emotional and mental discipline. So, 90% of the reason you will make money or loss it will be down to your personal psychology. About another 3% of people can handle this type of stock market trading.

The easier time frame to be involved in would be the swing trade! This stock market cycle is much easier on the energy, mental and emotional discipline as well as time required to short term trade. Many more people are able to take advantage of this stock market cycle also called a swing trade. It does take some practice as well as much skill in chart analysis. This can be learnt.

The simplest time frame is that of the investor or a major stock market cycle. We've just entered into the next 5-year boom cycle on the stock market and you could simply buy good shares in good sectors and leave them for 4 and a half years. My only TIP would be that you ensure that the sector and shares remain above the 89-day moving average. Do that and you can get good returns on average.

However, if you want better than average returns, you would need to shorten your stock market cycle and focus more on the swing trades to make money as the different sectors grow and pull back. Each time, you are making money in the growth cycle and exit at resistance levels. Then invest again in sectors that are performing to compound your portfolio growth.

Take the time to learn stock market cycles. Then train your emotions to be patient for entries and resilience to exit at resistance. Repeat!

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Monday, November 23, 2009

Dollar Weakens & Commodities Rally!

Dollar Weakens & Commodities Rally!

It's not entirely what I was expecting but the global markets seriously rallied today after the dollar took a pounding (ahem, excuse the pun)!

With that being said about commodities rallying, GOLD hit a new high again and is well on its way to my medium target of $1350! So hold on to the rodeo horse cos it's going to be a fun ride!

My favourite share of the moment, Kumba also closed up very strongly today. I missed the entry at 25000 by R1.00 on Friday with my automatic order in the system. Sometimes you get the trade, sometimes you don't. It would've been a fantastic entry however as the share closed R9.00 up from low of Friday.

Also, Anglo American and PSG were good trades today and I like the look of Datatec too. There is some convergence of the moving averages on that chart.

Platinum also pulled back on Friday and although it didn't quite reach my support level it certainly did weaken considerably. It gave entries to my other favourites Lonmin and Northam platinum. Both up on the day with Lonmin moving over R10 to the good which puts it at about 5% for the day. Can't complain!

Short term trading can still be exciting on day's like this when the markets run in your favour and you know you going to bank some serious profits over the next day or two. Stock market trading is not supposed to be a full time job. Learn to take short term trades with high profitability over time with consistent success!

Do this and you write yourself cheque for life! And you can enjoy life with some stock market trading inbetween!

Trade well, not often.

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Visit Aurora Global Markets for Global trading platform in equities, foreign exchange, commodities, precious metals and interest rates.

Thursday, November 19, 2009

Global markets at resistance

"Global markets at resistance" was the main heading for my recent issue of Stock Market Outlook, a trading newsletter I write for a club membership database on a weekly basis.

This weekly investment newsletter and trader's update focuses on the global indices, global commodities and then local stocks in South Africa as well as the Resources index and FINDI index.

I spoke about trading KUMBA Iron Ore last week Monday when it opened at 23200 and ended up at 26600 yesterday. Only 8 days to achieve over 10% return! That's no playing around! It's also not geared either. My medium term target for Kumba is 32000.

I was long of S&P 500, Wall Street and DAX last week to close near the highs of the top of the channels on these indices.

This week, the focus was off the stock markets and onto gold again. After sitting on $1000 it rallied back to my target of $1150within a very short space of time.

Now I wait for the global markets to settle at or near their support levels on the channel. Once this happens which should be by early next week I will be taking short term trades in the stock market again.

As the dollar weakens, commodities will rise. It is a patient game waiting for the dollar to turn, find resistance in its decline and then continue its downward movement. It is the opportunity to take longs on commodities again and stocks that mine those commodities.

It's fascinating but there's always something to learn.

Short term trading is't all its cracked up to be. People have a romantic disbelief about how exciting it is. The reality is that trading is mostly boring and repetitive.

It's a great hobby for retired persons and people who have wads of money. It is NOT for someone trying to replace their job.

Some people however, can find the happy medium of having a job and being patient while waiting for the trades to come. Building confidence in their trades but also mental discipline. Lastly growing their portfolio size over time like a professional golfer.

Support levels on the S&P 500 are 1093 in the short term. For the DOW it be 10100. The DAX is around 5400. KUMBA support is 24900 but could extend to 24400 odd intraday before closing on a hammer candle formation as example.

Watch the dollar. Keep an eye on the Baltic Dry Index. Copper is also a good early indicator as prices start to edge up.

Have a great trade,

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