Monday 5 March 2012

The Unthinkable.

The unthinkable happened today! Apple shares fell over 2%. I am shocked!

What will happen to all the Hedge Funds who are charging their clients 2 and 20s. Almost every hedge fund or any fund for that matter is loaded with Apple stock. If there is a disappointment on Wednesday with the new IPad 3 release, the exit doors may prove to be too small.

News of the day  was the reduction of growth forecast from China. Once again, I fail to understand the fascination of the commodity sector with everything Chinese. Don’t they know that every figure that comes out of China is made to order to please the politburo? How can anyone believe any number coming out of China in the 1st place and develop a trading strategy? Anyhow, the prices of copper, gold and silver fell along with equities. Nasdaq was the loss leader with 0.86% loss.

But SPX does not have a 1% correction for the 44 days running. While BJ-Tran and Russell 2000 are down and are in the sell zone. Does it mean that people are moving from small cap to big cap? But overall most markets are facing resistance. The following is a chart from Chris Kimble.

Fundamentally, we are not sure what is happening in the Greek PSI front. Will there be a hold out? Will there be a default? We will have to wait till 9th March.

Veteran market observer Ned Schmidt, suggests that making investment decisions based on what turns out to be little more than “conventional wisdom” (which is often anything but wise) presents risks to your wallet. Here then is the world of investment-driving fantasies that Mr. Schmidt has compiled for us to consider:

·         Government spending creates prosperity
·         Hyperinflation is imminent
·         Federal Reserve is running the printing presses
·         Keynesian economists are better forecasters than airport cab drivers
·         QE1 will produce economic growth
·         Inflation is good for gold and silver
·         Deflation is good for gold and silver
·         The sun is coming up for gold and silver
·         QE2 will produce economic growth
·         Gold is going to more than $2000 this year (a perennial favorite)
·         Silver is going to more than $100 this year (another perennial favorite)
·         QE3 is imminent, buy everything!
·         US dollar is to implode
·         Euro is to implode
·         Social networking sites are real companies
·         CNBC is more informative than the Cartoon Channel
·         Bear market rallies are prices breaking out
·         Junior mining stocks are investments
·         Apple is a buy at $540, as per 54 out of 59 analysts
·         Iran will not build a nuclear weapon
·         Vladimir Putin is not a threat to world peace.

Well, that covers almost everything that is important to consider for investment.  That is why I would rather follow the price action in the market and not worry too much about the news. In terms of price action, as I said before, we still do not have any sizable pull back and no lower low to confirm a trend change. May be it will be news driven after all.

A strong trend like this one does not reverse on a dime. And even if we have some pull back, it will definitely go back and test the highs. So bears should rather wait for confirmation. Speaking of confirmation, here is today’s trend table.

To end here are some interesting reads:

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  1. Hi'
    I sincerely hope you are enjoying a well deserved vacation. Resource yourself and take in these precious memory. An up date on my early January entry on the Canadian index Tsx under Horizon HXD shares. I have day traded on occasion and added and kept mysel just below water line. But I did not let go my belief that you're call for a reversal was right. It was a good call but market manupilation base on sheer liquidity pushed this climb much further. Now today I am in solid profit. I am holding several thousand shares . So not bad all in all had tomwait over 8'weeks but I believe the reward will be solid plus plus take care and come back rested.