Friday, 23 December 2011

Trading Fundamentals.

First of all; wish all of you Merry Christmas and Happy, Prosperous New year.

Isn’t it wonderful to put your trading on auto pilot? When you have taken a position and you know that it is going to be achieved. No more anxiety attack and looking for intraday signals. At least I find it much better this way. 

Yes, the rally is not a normal, fundamental driven rally. It is a Santa rally. Fairy tale rally. But who cares? At the end of the day, if we are on the right side of the market and have been able to take our profit, we would be happy, even if the profit comes from a non-fundamental, economically bad rally. That is the reason I keep telling my readers, please do not mix economics and trading. And possibly, stop reading blogs which espouse conspiracy theories and have so far convinced you that everything is fake and should be sold.
The reason I say this because everywhere I see normally sane, intelligent people are selling the rally. They are either liquidating their long positions or entering into new short position. They are giving up the sweet easy money that is all there for the taking. And by going short at this point of time, they will have to bear agonies of seeing their position under water for a considerable amount of money and time. When the time will come to short and make money on the other side, these people will be just glad to cover their losses. Sad indeed! And guess who wins?

Every day morning, before trading starts, I tweet my readers my take on the market and how I expect it to perform for the day. Normally that’s how the trading goes, irrespective of the news flow of the day. That just proves that news is noise.  The markets action tells you the future. Looking beyond the obvious helps.

Anyway, here is a daily chart of SPX with lots of straight lines. As you know the quickest and shortest way is always a straight line. And sometimes, simple things are true.

Today we broke the six month downward sloping line. That is good news for the rally. We also broke past the 1st price target, which was the closing price of December 7. The next price target is the closing price of October 27. If we can close above 1284 area of SPX in the next few trading days, then we are looking at a blow out top.  That would convert lots of doubters who are still sitting outside and not participating in the rally. By that time, most of the easy money would have been made and what better way to convince the sheeples about the new dawn, than breaking the closing price of July 21st.   

Remember folks, it is a game played at different levels and with the collective mind of the investors as well.  I urge my readers to take a print out of the above picture, keep it posted in front of the trading desk and ask yourselves every day, where are you in terms of the market sentiment. If you are feeling comfortable with your sentiment and they are in line with the general market expectation, possible you are next in line for sheering. 

Have a wonderful Christmas weekend with your loved ones. Thank you for following me in Twitter.(@BBFinanceblog) I know lots of you have  great following, so please retweet to your friends and followers. You could be giving them the best Christmas present, for all you know.  Visit regularly and profit from the World of Finance.


  1. I love your blog - thanks. You are very impressive and rational. What are your favorite books? How did u learn to swing trade with such accurac?

    Merry Xmas and thanks again

  2. Thank you for kind words. I have been trading for the major part of my life. Have lost money by the bucket by listening to all these boneheads. Now when I have seen through their game, I am doing OK by the grace of God.
    Merry Christmas to you and thank you for reading my blog.

  3. thanks! any specific books you recommend to help young traders develop? Have a great holiday and thanks again for this blog!

  4. Great calls. What percentage of your portfolio do you invest/speculate in these positions. thanks

  5. That depends. Right now I am 100% invested on the long side.

  6. what do you mean by "I have seen through their game?" Again, thanks so much for this blog! Any books/teaching tools you can point me to will be greatly appreciated.

  7. Hello, thanks for your blog, i just found you, On a pullback would you buy more of your positions, I have not bought, just found your way? Peace mc

  8. Hi Rippy, What I mean by seeing through their game is that everyone comes with an agenda and what they say in public is very often opposite of what they do in market place. 90% of the trading is done by 50 big investment bankers and they control the market. Understanding their motivation is the key. These folks work on a very long term time frame. What they want to do six months down the line, will be initiated today.
    Regarding books, there are many out there and its too many to list. Trading is like get better by doing it and learning from your own mistakes. I monitor over 67 parameters at any given time and interpretation is subjective and intuitive. So I am not sure what book to suggest you. As I am an accountant by profession, I have been doing these things for over 30 years now. So hard to say. Just keep an open mind and learn some TA to start with.

  9. Hi MC,
    I doubt we will have any major pullback at this stage. But there will be plenty of trading opportunities along the line. SPX can go upto 1310-1340 from here but the time frame/ window of opportunity is becoming smaller. May be we will one last shot on the long side on Tuesday or early Wednesday but I am not sure. At this stage, I would consider any pullback is a buy. But it will be a very quick trade. Stay tuned to the blog for the next signals.