Taking Stock: For the Short Term

I have been learning how to do short-term trading, with the aid of the now infamous Dan Fitzpatrick and his website, StockMarketMentor.com.

Making a great trade on Ashland (ASH). I got in at around $13, and am making enough to pay a month of rent.

Chicago Mercatile Exchange (CME) has yet to pan out for me.

Intuitive Surgical (ISRG) is doing nicely, especially today. It seems to be going the same way as Ashland, but maybe that is just wishful thinking.

There seems to be a commonality between multiple stocks, in that they are moving higher in a big way, banging up against their upper bollinger bands. Of course I am not complaining, but only making an observation. The broad market also seems to be inching its' way higher each day, but there are some doubts as to if it will lead to a brand new bull market. I doubt it also. The financials appear to be making steps toward improvement and getting at least somewhat healthier, but apparently they are not lending yet.

I couldn't help but think when I heard the earnings news for Wells Fargo (WFC), "Earnings surprise? How is it a surprise? They were not a part of the sub-prime lending scheme".

I made another interesting observation, in that there is a prominence and popularity amongst the activity in residential housing auctions, like ZetaBid.com. The thing that caught my attention is that the banks have the ability to auction off a considerable portion of the "bad assets" (not necessarily MBS) that they have on their books within a month or so. It isn't necessarily a new idea, but the idea under the current conditions and causes to those conditions makes it noteworthy.

A Thought: Is it worth it?

Anything worthwhile doing is never easy.

Taking Stock: Bank Stress

The government stress tests on the banks are going to be done this month, which I am looking forward to. The way I understand it, is that the tests will determine which banks are solvent and which ones are not. Maybe the government will do what Dr. Roubini is suggesting, which is to shut down insolvent banks. The reason Japan had such a long deflationary period is because the zombie banks remained zombies for so long. In other words, they just let them sit there. That's the difference between the U.S. and Japan. If banks are confident that other banks are solvent, then they will begin to lend to each other again, which will get credit flowing again.

I find it somewhat ironic that Roubini is suggesting some improvement in the U.S. economy, considering that Dr. Roubini is normally the epitome of a perma-bear.

My other guides and sources of information tend to agree with Dr. Roubini on the outlook of the economy, so that is more than likely what is going to happen. I'm leaning more toward what the growth of China will be like.

Does it make you feel ... ?

I wonder if there is anything that is completely devoid of emotion, especially when you consider what can stimulate human emotion. I have my doubts, but I suppose it depends on how emotional stimulus is classified. I don't think anything can be completely void of cognition, but I also suppose that cognitive necessity also depends on classification.

Taking Stock: Warning about Cramer

I have the same problem with Jim Cramer.

Did he predict the DJIA dropping below 7,000? I still remember when he was on TV capitulating. It seems as though whomever I meet that knows anything in relation to the stock market does not like Jim Cramer. Go figure. I'm not bashing him, but would simply like to issue a warning.

Although, I reiterate in that it seems as though one of the most difficult things to do in regards to investing is knowing what to learn and where to start. One of the other difficult things to master is having the right thought process and rationale for as to when to buy, and when to sell.

Taking Stock: Macros

For the present term, it appears as though the broad market is going lower. The theme for gold is that it will be going much higher. Ben Bear-nanke was claiming that there is no threat of inflation, but that has yet to be forseen. He gave hints to the overall economy possibly improving in the second half of the year. According to Dr. Stephen Leeb, inflation will prove to be a problem in the not so distant future. The way I see it, Dr. Leeb has been right about quite a few things in the past year or so that I have been following him.

I looked at some of the macroeconomic indicators this morning, and they appear to be just barely starting to improve. One of the first things that I noticed starting to improve was the fact that there is actually demand for oil in the recent report. It was not much demand, but it was better than nothing. We will see if the crude inventories continue to decrease. Something that Dr. Leeb has been saying repeatedly is that there will be more oil shocks coming, somewhat proportionate to the previous oil shock of last year. I am interested in seeing if that happens.

A few other macros that I noted:
-Personal Income increased for the prior two months by 0.4%
-Personal Spending increased by 0.6%, which is up from -1.0%
-Personal Consumption & Expenditures increased by 0.1%

I don't watch the unemployment rate or jobless claims quite so much because it is a lagging indicator. The consensus for the unemployment rate is that it will continue to climb.

The report from the Bureau of Economic Analysis for the preliminary GDP was a contraction of 6.9%, which is a huge contraction. I recall seeing a report from, if I remember correctly, National Bureau of Economic Research (NBER) that there would be a small contraction in 3Q08, large contraction in 4Q08, and anoher small contraction in 1Q09. So far, the 3Q08 & 4Q08 have proven to be true.

To me, it appears as though the overall economy could quite possibly be starting to recover, although it is going virtually unnoticed.

Taking Stock: Trading Patterns

There are a few well-known trading patterns:
-Pennant
-Flag
-Wedge

I came up with a new one recently, which I call the Bearish Cliff Pattern. We had one in the major indexes in October & November of 2008.