| What Stinks? |
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| January 8, 2008 |
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Volatility Equals Opportunity
The volatility we’re seeing in the market now reminds me of a Trading Wisdom Dr. Janice Dorn, MD, PhD, wrote for traders at Trending123 in 2005:
“Twenty-five years ago, Robert Shiller produced what he thought was an ironclad argument against the efficient market theory in his book “Irrational Exuberance.” According to the efficient market theory, movements in the stock market should always reflect genuine news about future earnings. But Mr. Shiller showed that actual stock prices fluctuated much more than any possible rational forecast of prospective profits; he thought that this “excess volatility” result would settle the point.
Of course, it didn’t. Efficient-market theorists defended their thesis by putting forth elaborate statistical critiques of Mr. Shiller’s calculations. During the 1987 stock crash, Mr. Shiller had the presence of mind to carry out an instant survey of investors. This timely survey obliterated all the so-called rational explanations for the crash, because it showed that the only reason any significant number of investors gave for selling stocks was that prices were falling.”
And it doesn’t take a genius to figure out that volatility creates opportunities. After all, if the market never veered off course, no one would be able to beat it. But it does. So here’s your opportunity: Join me as a member in the web’s top technical analysis community, and I’ll show you how to beat the market with a portfolio of 75% winning trades in 2008.
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The market internals, that’s what. We have not seen the internals look this bad since 2002! Now if we were talking an aged wine, that would be decent. If we were talking an aged cheese…um, maybe (I’m not sure I’d want a cheese that stinky!). But we are talking money here people—my money, your money. The lesson here folks, is that we can’t be blindly throwing our money at a market that is rotting at the core.
Let’s take a look at the somewhat jolting numbers:
- The average stock is down 32.55%. Now you might be wondering why the indices aren’t down by 32.55%. Well, that’s because the indices are weighted by market cap, not percent decline off the high.
- 9 Sub-sectors are in a pullback.
- 12 Sub-Sectors are in a correction.
- 223 Sectors and Sub-Sectors “technically” have entered bear markets because they are down 20% or more from the highs.
As a rule of thumb, this is how it works: pullbacks are considered between 10%–14.99% while corrections begin at 15% and go almost to 20%. But when we definitively hit 20% or higher, what we are dealing with is a bear market.
Right now, we don’t have any index that has even hit “correction” mode. But nonetheless, there is a certain amount of panic. There is fear. And you know what? That’s okay. Fear CAN be a good thing. It can keep us in check — and from making any frivolous mistakes.
We must exercise patience and good judgment if we want the 2008 market to work for us and not against us.
There is money to be made—no doubt about it—but we must proceed with caution if we want any type of success. And if you know me at all, you know I won’t stop until we reach success over and over again!
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The Stinkiest of the Year
At the beginning of every New Year, we are overrun by predictions for what this year will bring. Not to follow the pack—that is not the way I normally operate—but I have to warn you when necessary. And right now, I’m telling you to stay very far away from anything that closely resembles a commodity. A lot of people don’t realize this but most commodities topped back in May, June, July, August and October — very few have gone on to make new highs.
2008 is going to reek from the market carnage that will result from gold, silver, copper, oil, refineries, shipping, aluminum, steel… basically ANYthing and EVERYthing commodity-related.
Take a listen (and a look) at the 20 Stinkiest Commodity Stocks currently plaguing our market. If you are anywhere near these — back up slowly while holding your nose!
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Sincerely,
John Lansing
Trending123
P.S. I laugh in the face of volatility! I’ve earned it — in 2007, we closed 113 trades at Trending123 — 85 winners and 28 losers meant a winning percentage of 75%! Better yet, we averaged an 85.09% annualized gain on each trade! We want to do EVEN BETTER in 2008 — please join us in our future success!
P.P.S. 2008 is going to be a tug-of-war. The Fed will cut interest rates, trying to keep the economy afloat. Investors are going to get whipsawed trying to guess what will happen next. It’s time to quit the guessing games! It’s time to KNOW what will happen before the rest of the market gets wise to it! Get an insider’s tour of the trading world — take this special offer to try Trending123 today!
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