Your Daily Bit of Wall Street Wit & Wisdom

Martin Luther King, Jr.

Martin Luther King, Jr. photo by Ted Williams / Iconic Images /Getty Images

“We don’t have to argue with anybody. We don’t have to curse and go around acting bad with our words. We don’t need any bricks and bottles, we don’t need any Molotov cocktails, we just need to go around to these stores, and to these massive industries in our country, and say, … make the first item on your agenda–fair treatment, where God’s children are concerned. Now, if you are not prepared to do that, we do have an agenda that we must follow. And our agenda calls for withdrawing economic support from you.”
— Martin Luther King, Jr.

Dr. King’s legacy of working for positive change lives on. To honor the great Civil Rights leader, we’re thinking about how his words and actions can be applied to socially responsible investing.

As you step forth each day, strive to be a conscious consumer and investor.  You vote with your dollars.  Together with others, your individual vote becomes powerful.

Be mindful with your money and sensible with your speculation.

Walking together, we can move toward social justice.  One day, may we truly hear freedom ring for all.

Enjoy a happy and healthy holiday!

Best regards,

Steve

Your Daily Bit of Wall Street Wit & Wisdom

The First Bank of the United States

The First Bank of the United States, h/t National Park Service

“The stock market took a dive today. It was so bad, Goldman Sachs had to lay off three congressmen.”
— Jay Leno

Often, there’s a sad truth in humor. That’s the case here.  The market’s recent rebound has coincided with the US government shutdown, hmm…and boosted by sovereign central bank monetary stimulus.

The unfortunate cycle is politicians care about big banks thriving and big banks care about keeping politicians elected.  Whom they don’t seem to care about is you.

George Carlin spoke well on this subject.

Enjoy the long weekend!

Best regards,

Steve

Is The Market Rally Ready To Shift Into Reverse?

Shift to reverse

Shift to Reverse

Are stocks off to the races or set to reverse course?

Analysis and Outlook for the QQQ (Nasdaq 100 ETF):

The Qs are rebounding sharply from their Christmastime low to today’s high. We see shorts getting squeezed and the weaker hands being weeded out.  Tech stocks have steadily moved through resistance to reach higher levels of supply. In the aftermath of December’s waterfall decline, they’ve driven a good distance up in a short amount of time.

A big boost in central bank balance sheets, in large part courtesy of stimulus by the People’s Bank of China, has pumped in the liquidity needed to stave off impending disaster for investors.  The key question now is, “How high are we going to go?”

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Your Daily Bit of Wall Street Wit & Wisdom

Differing opinions in Wall Street trading

One man’s ceiling is another man’s floor

One of my favorite Wall Street expressions is, “Differing opinions make markets.”  And to quote, Paul Simon, “One man’s ceiling is another man’s floor.”  Man, that was a good song; I think I had it on 8-track.

The cartoon above is a good reminder to keep calm and approach your trading with a cool, unemotional mindset. But how do you do that?

At Options Hotline, our approach is to be prepared for whatever the market does.  That involves having your risk be always known and completely limited.  We have a complete game plan for trading success.  Our plan is built on the cornerstones of mind, method, and money management.

Successful speculation is as much about honing your survival skills as it is selecting winning trades.

We’re heading into a long weekend, with a markets fast approaching a potential curve.  Keep a cool head, eyes open, a steady hand on the wheel, and buckle your seat belts.

Have fun and enjoy the ride, vying for profit.

Best regards,

Steve

Your Daily Bit of Wall Street Wit & Wisdom

Mandelbrot set fractal

Mandelbrot set, fractal photo by Matthias Hauser

“The market is a fractal of human nature.”
— Basil Chapman

The term ‘fractal” was coined by mathematician Benoit Mandelbrot in 1975.  Fractals are simply defined as never-ending patterns that repeat at different scales.  Their property is known as “self-similarity.”  Although fractals are very complex, they are made by repeating a simple process.

Fractals are found and applied in: math, science, nature, art, architecture, music, the stock market, and more.  Arguably, fractals appear in all human pursuits, throughout the natural world, and the universe.

Mandelbrot studied financial markets and used a computer to analyze cotton price movement.  This led him to develop “fractal geometry” and the “Mandelbrot set.”

As Mandelbrot wrote, in his introduction to The Fractal Geometry of Nature (1982), “Clouds are not spheres, mountains are not cones, coastlines are not circles, and bark is not smooth, nor does lightning travel in a straight line.”

Markets may appear chaotic and rough.  I like to say market prices don’t travel along a one-way street.  Often, a familiar road map to price movement can be found.  Sometimes the market’s moves are natural and sometimes they are not.  I view it as an exciting and never-ceasing endeavor to catch the market’s twists and turns.

Technical analysis is a combination of art and science.

Human behavior (buying and selling) drives market price movement.  That is why Options Hotline uses Japanese charting techniques.  We use our charts to vividly reveal the human behavior behind headline numbers and help you stay a step ahead of the crowd.

We combine Japanese charting techniques with the best of western technical analysis. The addition of pattern recognition and the Superleverage power of options, to play the probabilities, and now we’re talkin’ sensible speculation.

Good luck in your trading!

Best regards,

Steve

 

Your Daily Bit of Wall Street Wit & Wisdom

glass half full

Glass Half Full

“The intelligent investor is a realist who sells to optimists and buys from pessimists.”
— Benjamin Graham

By nature, I am an optimist.  When it comes to markets, one must strive to quell their own nature and be a staunch realist.

Our focus at Options Hotline is on the art and science of sensible speculation.  To succeed, you must understand the difference between investment and speculation.  You also must be able to discern the difference between speculation and gambling.

Best regards,

Steve

PS Click here for rare footage of Professor Graham (2 minutes) speaking to students at Columbia University.

Goodyear Deflated

Goodyear Blimp Deflated

Goodyear Blimp Deflated

Goodyear Tire issued an earnings warning and shares drove south.  Today the overall market extended its rally, albeit on light volume.  As I recently wrote, we may be approaching a turn.

When the market is up and the shares you’re watching are not, that is a sign of weakness.  The opposite is true, as well.  When individual shares are up in a down market, it’s a sign of their strength.

As you can see below, Goodyear literally left a skid mark on my daily candlestick chart.

Chart by Steven Sarnoff

Chart by Steven Sarnoff, h/t stockcharts.com

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Your Daily Bit of Wall Street Wit & Wisdom

Irrational mind

Irrational mind

“The market can stay irrational longer than you can stay solvent.”
— John Maynard Keynes

This phenomenon is seen quite often in markets.   Oversold or overbought conditions can continue beyond your level of comfort.

That is why, as Larry Pesavento says, “Trade what you see, not what you hear or think.”

Best regards,

Steve

Anticipating a Turning Sign

U-Turn sign

U-Turn sign

A week ago, I posted my Analysis and Outlook for the S&P 500 (SPY).  The venerable index was rallying off its Christmastime low and I was anticipating where and when the balance of power was likely to shift.  At the time, I was on lookout for a turn.  That watch is now heightened.  Here’s my update.

As you can see on my daily candlestick chart below, SPY is reaching technical resistance.  Bulls could be slowing their roll.

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