The selling continues across the board as stocks, bonds and commodities take a much anticipated breather. At this point we are calling this a correction rather than a crash for U.S. and Canadian equities however key support levels are being tested. Much like a small hole in a dam, once there's a trickle, the risk of an all out collapse is always a concern. Both the S&P 500 and the S&P/TSE Composite are at levels that are testing the resolve of the most dedicated bulls. We were watching for the "buy on dippers" to filter in today, however at the time of the close Monday we had only seen a moderate snap back of off the lows. This was most likely short covers then bargain hunters but another day of price action should give us some more evidence. Take a few minutes to watch today's Market Forecast to see what we think is in store for the rest of the week.
During our trading education tutorials, I often reference a line from the famous value investor Benjamin Graham's allegory describing Mr. Market. He describes Mr. Market as "...a patient if somewhat bipolar fellow. Subject to wild mood swings, he is always willing to offer you a bid or an ask." I love this colorful depicition because it truly puts things into perspective in terms what investors and traders are dealing with on a day to day basis. My reason for bringing this up is that we have been on a wild ride as of the last few weeks. U.S. stocks have been up and down, the Canadian stock market just down, gold and silver sideways, bonds sideways and the list goes on. All this can be attributed to the uncertainty that the Feds and the rest of the global central bankers have brought about in their effort to avoid an economic melt down. Logic suggests that this kind of central banking intervention cannot go on forever and yet the consequences of pulling the proverbial patient off of life support are too scary to think about.
This week is bound to be even more volatile as the world waits to see what Wednesday's Fed meeting is going to yield. This indecisiveness is outlined in this week's market profile. However despite the fact that markets are fraught with uncertainty, price action seems to be respecting important support and resistance levels. Every trend has a point at which it pauses and either reverses or continues..the media often then searches for the reason. We are at that point with many assets and must be patient. As the old saying goes..."when in doubt...stay out" and I will add, if you are in, be sure to have a management plan to handle risk. It's not up to you which way the market is going to go, but you do have control over how much risk you are exposed to in the face of uncertainty.
Take a few minutes to watch this weeks market forecast and whether you are an experienced investor or aspiring to learn to trade for yourself, remember..."Mr. Market has no ego, he does not care about being right or wrong; he only exists to separate the rubes from their money". Thanks Benjamin Graham for your simple and timeless description of our "opponent".
Weekly Market Forecast - June 17, 2013
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As a trader and educator, one of the the most important yet often misunderstood considerations is the impact that implied volatility has on the success or failure of an option trading strategy. This is why when people seek us out to help them learn to trade stocks and options, we spend a significant amount of time focusing on this concept.
Many of the assets that we track have been exhibiting significant volatility as bulls and bears jockey for control. For the investor learning to trade the markets this can result in a rollar coaster ride of emotion. In this weeks market forecast we take a look at important support and resistance levels for stocks, currencies, commodities and bonds. These levels help the active investor identify turning points in the market for risk managment and profit taking. Be sure to click READ MORE and watch this weeks short video.
Market Forecast Video June 10, 2013
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We suggested that stocks were uncertain in last weeks market forecast...with a bias to the downside. The price action of the S&P has not disappointed. Last Friday's late day sell off spilled over into this mornings open however today's snap back brought the S&P back above a short term support at 1630. All eyes will be on Friday's monthly employment report. Commodities have been bouncing with in a range and precious metals continue consolidate. The U.S. dollar has lost ground against most major currencies while bonds appear over sold and ready for a reversal.