With Earnings Behind Us, Here's a Trade Opportunity on Apple

Posted by Jason Ayres on Jul 25, 2014 11:39:00 AM

Apple (AAPL) released earnings this week and for all intents and purposes they were pretty good.  I'll spare you the overview and get to the point.  Apple is scheduled to release their latest iPhone upgrade in September.  Generally speaking, the stock tends to drift higher in anticipation ahead their product releases.  The risk is after the big reveal, if it doesn't live up to the hype, the stock will suffer.

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The Kumbaya Market

Posted by Patrick Ceresna on Jul 15, 2014 1:29:00 PM

Wikipedia: "Kumbaya" or "Kumbayah" or "Cumbaya" (Gullah, "Come By Here" — "Kum ba yah") — is a spiritual song first recorded in the 1920s. It became a standard campfire song in Scouting and summer camps, and enjoyed broader popularity during the folk revival of the 1950s and 1960s. The song is originally a simple appeal to a deity to come and help those in need, but more recently, it also is cited or alluded to in satirical or cynical ways that suggest false moralizing, hypocrisy, or naively optimistic views of the world and human nature.[1]

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I cannot think of a more appropriate analogy to the complacent investor mentality prevalent in this bull market advance than the image of investors standing around together holding hands and singing Kumbaya rejoicing how wonderful everything is.   In today's world, if investors seek returns, they must be in the stock market. There simply is nowhere else to be invested. You can't own low yield bonds, deposits pay nothing and real estate is relatively fully priced. So it has become a broadly accepted that you must own stocks for growth and dividends.

Here are the common arguments of the Kumbaya investors:

  • The stock market cannot go down because there is nowhere else for the money to go.
  • Bonds are too risky and interest rates are about to go up exposing bond investors to potential losses in value.
  • The Fed is in control and guiding the market to a soft landing and economic recovery.

Does this represent fundamental herd complacency? I for one believe that the cheerleaders for the Kumbaya market are in fact doing "false moralizing" and represent naively optimistic views of the market. Having almost 20 years of experience in the markets, I have come to know the stock market as the Great Humiliator.

If given enough time, the stock market will always dispel all misconceptions and naivety. Remember, bulls make money, bears make money and pigs get slaughtered. My advice: DONT BE THE PIG.

I ask some simple questions:

  • Throughout history, when has the stock market ever been safe?
  • Throughout history, when have Central Banks ever really been in control?
  • Throughout history, when has there ever been a bull market that does not correct it excesses with a subsequent bear market?
  • Everyone is touting that we are not in a stock market bubble because stock valuations are not grossly overvalued, but what if this is not a bubble in valuations but rather a bubble in complacency?

For now, investors continue to rejoice in the generosity of the market for enriching them in paper profits. While this continues, you can stay long and enjoy the bull market party. But do not doubt for one second that, if given enough time, this will end with pain and disappointment for those that naively believe that the stock market represents a happy place where all investors stand around hold hands and sing Kumbaya to rejoice as to how wonderful things are today.

So how am I positioned in this type of market environment?  I am using strategically hedged positions using options. This gives me the opportunity to participate with a defined and manageable risk. If you would like to learn more about how we use options join us ...

This Wednesday, July 16 to find out about our Stock & options Advisory Service.  For details and to register click the following link:  https://www3.gotomeeting.com/register/837383062

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What Technical and Fundamental Analysis Is and Isn't To Investing

Posted by Patrick Ceresna on Jul 4, 2014 7:49:06 AM

A fellow CMT, Andreas Clenow, took the opportunity to vent on the issue of why technical analysis was shunned by professionals. Holding nothing back, he ripped into the technical analysis community:

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