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Wednesday, April 26, 2017

THE LESSONS OF HISTORY


“Main street to Wall Street!”

The lessons of financial history are so vast, interesting, and compelling it would take me 500+ pages simply to go through what I’ve seen in my own trading career; needless to say, for many the “lessons” to be learned are forgotten quickly and punted to the sidelines for another day, when in fact they should be tattooed on the inside of the eyelids so you can constantly be reminded of what “not to do”.


And as I write today’s blog, it never ceases to amaze me the “ebb & flow” of people’s emotions when it comes to investing; the “fear, hope, greed” cycle very much at play. Today, more than ever before, we find ourselves in a society where information overload has never been higher; where you can get anything … everything … in seconds downloaded to your phone, tablet, or laptop. Any company, stock chart, indices chart, company history with earnings, etc., right along with the best & brightest “talking heads” in the biz at your fingertips, and yet so many people are so totally confused. “You’re right … Ok, what’s the solution?

Trading, investing … whatever name tag you want to put on it, isn’t about “the numbers”, the facts, and/or economic statistics [never has been, never will be]; “it’s about collective human psychology. And until you can tap into this realm of thinking, the stock market [companies and/or the indices] will forever remain a mystery to you and most likely lose you money”.

To that end, and in a never ending attempt on my part to get you to READ. THINK. STUDY. ACT. PROSPER., so you can be as educated as humanly possible going forward, I’m going to be offering all of my readers today the following book I think you will enjoy: written by Charles MacKay in 1841, “Extraordinary Popular Delusions & The Madness of Crowds”. I have it in Adobe PDF, and if you’d like a copy simply email me at traderzoogold@gmail.com and I will send it to you. Even though this “financial classic” was written 176 years ago, MacKay chronicles some of the greatest “bubbles” and “mania’s” the world has ever seen prior to the modern age; and what is particularly important and makes this book relevant to all of you, is that you can read “first hand” the emotions of those going through the “bubbles” and how collective human behavior NEVER changes when it comes to investing, trading, or any other type of financial speculation; “as I’ve said many times, only the names change, not the behavior of the crowd”.

And I’m betting that most of you didn’t know that the origins and founding of that great American city known as “New Orleans, Louisiana” were predicated on a stock scam by a guy named “John Law” [from France of all places]. It’s all in the book, right along with the “tulip mania” in Holland, and makes for fascinating reading.
 





And after you read the book, you too can be as “savvy” as Homer Simpson, and make the rest of the world look like chumps.


Here in the early A.M., stocks seem to want to stay slightly higher into the open in a couple of hours; the big news today being President Trump’s tax cut plan, which more than likely will end up being “buy the rumor, sell the fact” and could precipitate a short sell off in the indices. Bloomberg’s Mark Cudmore put out a note via ZH calling Trump’s tax cut plan a “fait accompli” for new “recorder-er” highs in the next couple of days in the indices [SP500 & Dow30], which I guess means “buy with both hands” for the easy money, but anytime Bloomberg comes out with an “idea”, I’d check my back pocket to see if my wallet is still there.

On the other hand, I haven’t seen Gartman pile into stocks yet, so there’s more than likely a strong statistical probability we haven’t seen the highs yet either; it’s a very tough choice, fade Gartman or fade Bloomberg? But I seem to remember last year at this time Gartman uttered his famous, “Crude oil will NEVER, EVER again in my lifetime trade above $44 per barrel”! Of course, since he spit this out it’s been onward & upward ever since, and while nobody is perfect he’s been uncanny in his wrong opinions about stocks as well.

The most likely scenario I see today is our old buddy, “speed of light … crickets” trading, hopefully with a sell off sprinkled into the mix followed by a slow rise [maybe fast, who knows] into the close that sees the Dow30 touch 21,200 before backing off some. Like so many other days, it all depends on the “tone” of President Trump’s tax plan, AND what he says unscripted to reporters. If it’s bold, confident, savvy, and “can do”, I’d say the Bloomberg guy is right. On the other hand, throw in some off the wall comments on other stuff like tariffs, or Syria, or whatever that takes away from the spirit of “MAGA”, given the fact we sit where we sit in the indices, some selling may come quick and fast. So, Pols doing what Pols do, which is “blah blah yada yada”, and the stock tree gets shaken yet again.

One thing I can say for certain; 1) stock indices go up 80% of the time, and 2) you have to wait for the corrections to buy, and can’t buy/sell the technical support/resistance areas so popular among traders. That’s a losing proposition that is slightly less than a 50/50 shot.

Forty minutes after the open in New York, what with the institutional shenanigans out of the way from the opening mutual fund, ETF, and hedge fund crowd orders, and I sense a real reluctance on traders part to stay long anything, given the news flow. Problem is, though, who’s gonna be first to “pull the trigger” and sell? … cuz if you’re wrong, you’ll be buyin’ ‘em back at much higher prices should the various Pols light up the scoreboard with “MAGA”. Cutting through all the crap, though, the weak longs need to be “shaken out” of the SP500 & Dow30, and a few light stops run on the downside … after that, if we can get it in the first part of the day, then there’s a decent chance of an afternoon rally to a new high. Simply put: it’s a crowded “long” trade at the moment that needs very much to be “uncrowded” a little.

And suddenly @ 15:44 server time [Turnkey], after a sudden jaunt to a new high, the market “discovers” the downside and is reacquainted with gravity; it’s about time, now how about some more serious carnage on the downside? Market still hanging about a dozen points above the NY open, and what we need to see is a move below 21000, and a new low, to get the long liquidation rolling into some sell stops. Again, which brave short seller is gonna be the first to lead the party down, cuz the last ones are dead and gone?

How quickly it starts on the breakouts, and then how quickly it fades the other direction; that tells me there is no interest at these levels to buy or sell, and that leaves the action up to those in the market with longs and shorts to battle it out; your guess is as good as mine. And we sit and wait for the “big” tax cut plan; “Ok, wow me, but it ain’t me you have to worry about cuz this is only going to be hot air if Congress won’t pass it; so the $64,000 question is what parts if any will Congress pass, and when will traders wake up to this fact [if ever]”?

Well, that escalated quickly now didn’t it? Nothing like down 50 Dow30 points in 3 minutes on the SP500 failure to break 2400 for like the 9th time today; still, this stuff needs to go lower. All we are is back to the open for cryin’ out loud. Pols are talkin’, and that’s all you need to know really.

Ok, so now what? [In the infamous words of Richie Breslow over at Bloomberg] Market can’t rally, market can’t break … the range for today is a trading disgrace … firms with access to order flow picking all stripes of traders off at the highs and lows taking the other side as we see yet again the “Flying Wedge of Death” make its way onto the battlefield and obliterate more than few indices traders; “how many times do you buy near the high and/or sell near the low looking for that magical breakout that isn’t coming today”? My guess is more than a few, and when you give up it will scream somewhere.

Here an hour and a half before the close, it’s been a complete “yo-yo” the entire session, with no real rallies, no real breaks, and zero signals of significance cuz nothing is going anywhere; we’re where we were at 20 minutes after the open … since then it’s been “a little song, a little dance, a little seltzer down your pants”. And from where I sit, what’s going to really piss off a lot of traders who’ve been short all day and the Dow30 hasn’t gone down much at all, is if they come in tomorrow morning and it’s sitting at 20960 [or something like that] and breaks down immediately on the New York open; and in one fell swoop [about 10 minutes worth] there’s your break.

Half hour before the close, and I’m throwing the proverbial “I give up” towel into the ring with no trades today; another totally worthless day I could have better spent cleaning out kitty litter boxes; for a market that’s up 700 points in the last 6 days, the vast majority of which came on a Holiday Monday and this past Sunday night open, the action this week [last 3 days] has been very, very poor in New York. Small ranges, worthless signals because there are no rallies or breaks that mean anything, and conflicting economic & political news that make it even worse; in essence, we sit around and wait so we can sit around and wait for the next most important event in the world which turns out to be mush, and then rinse / repeat until you go nuts. And as we’ve seen from ZH, plenty of people are losing it.

And going forward into tomorrow, if we don’t get some kind of trading break in New York at some point during the day, my fear is that the end of this is going to be really, really messy. I’m not looking for some massive slide down, but some “normal” profit taking is to be expected, and my hope is we get it early tomorrow morning. Tomorrow’s another day … just like yesterday, if it moves we can capture some profits … when it doesn’t, there isn’t anything I can do; it has to go somewhere and give us a signal.

PAMM/MAM spreadsheet directly below.
 




Time for the beach, dog’s screamin’ at me! … I’m outta here … until tomorrow.


Have a great day everybody!
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OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!
  



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