Weekly Market Forecast for the Active Investor - June 17, 2013

Posted by Jason Ayres on Jun 17, 2013 1:54:00 PM

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. 

mr.market is a somewhat bipolar fellow

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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Options Trading Strategies for a Volatile Market

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Weekly Market Forecast for the Active Investor-June 3, 2013

Posted by Jason Ayres on Jun 3, 2013 5:10:00 PM

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.

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Topics: Market Forecast, learn to trade stocks, trading education

Weekly Market Forecast for the Active Investor-May 28, 2013

Posted by Jason Ayres on May 28, 2013 9:13:00 PM

Uncertainty continues to reign supreme in this weeks market forecast as investors and money managers try to make sense of it all.  Stocks in general made a valiant attempt to erase the losses from last week, however sell into strength was the name of the game today.  The Euro continues to lose strength against the U.S. Dollar.

 market forecast may 28

The U.S. Dollar strength has put some pressure on commodities evident in the volatile price action of oil.  Gold and silver respectively chop about as traders remain gun shy after the significant drop and feel the pressure of the strong dollar.

While one would expect that bonds to strengthen under such uncertainty, the U.S. Feds comments on "easing" has spooked bond holders and yields have widened.  For a detailed overview of the markets check out this weeks market forecast video.

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Topics: Market Forecast, trading education, stock market training

Stock Market Training: From Buy and Hold To Active Investing

Posted by Jason Ayres on May 28, 2013 4:01:00 PM

Traditionally, the only training an investor receives as they begin to participate in the stock market is the ol’ buy and hold methodology.  Buy and hold has been a piece of investing wisdom handed down from generation to generation.  While this approach works well in a market that is consistently trending up, it fails to address the notion that at some point what goes up has the tendency to come down.  While buy and hold makes sense if you are participating in the trend, so often the approach is more closely resembles “buy and forget” which results in complacency and in many cases regret.

stock market training

The very nature of the buy and hold  approach suggests that if securities are bought and held for a long period of time, over a 10-20 year period, prices will go up regardless of market fluctuation. Historical data (prior to 2000) does indeed support this claim, however this methodology assumes that in a capitalistic society profits will grow, prices will rise and dividends will increase as the economy expands.  This assumption is correct…until it isn’t.  Leaving the consequences of being wrong open ended. Now, of course we have to consider the open market operations of the global central banks in their effort to avoid an economic collapse.  Under current central banking policy the mandate to the mandate is to (in laymen’s terms) make money cheap to stimulate spending and subsequently growth.  We have to recognize that this cannot go on forever and while we want to benefit from the current environment, we also have to recognize that the global economy is on a form of “life support”.

active investing

One thing is for certain, with changes in technology and increased market access, there has never been a better time to take a more active role in managing personal wealth.

It is amazing how the pain of loss from the 2007/2008 market crash has been almost numbed by the 100% plus percent recovery witnessed since the lows in March 2009. Many investors who were reeling over a significant loss of wealth have been lulled into a false sense of security as the markets have surpassed (moderately) historical highs.

Although the intermediate trend appears to be up,   it is important to remember that the markets do not move in a straight line.  The caveat will be to make sure that investment capital is being protected and profits are locked in which will require a change in philosophy  and a shift from the traditional stock market training that many long term investors have come to rely on.

It is important to clarify that active investing is not about being in and out of the market on a day to basis, it means paying attention to market conditions and taking action as needed.  This might mean adding put options as protection or writing call option to help mitigate market volatility or simply offsetting a position entirely. 

Understand of course, that this will require some time and effort.   It is up to the individual to determine just how active they can realistically be. Many investors are on a mission to recover their losses; however the primary consideration should be to protect what they still have. 

The first step is investing and trading education.  Knowledge is power.  Regardless of how much time one has to allocate to the pursuit of recapturing lost wealth, learning the dynamics of the market will put things into a greater perspective.  Stock market training needs to focus on the recognition that one can profit when the market is going up or down.  This will allow the investor to participate and ideally profit without bias. 

There has been an evolution in services provided by many brokers.  One initiative has been the development of educational programs such as the ones that we have been part of with the TMX/Montreal Exchange, T.D., iTRADE, Disnat and National Bank to name a few.  These learning initiatives have been designed to provide insight and ideas to investors looking for answers.  To use an old cliché, a house is not built (or rebuilt) without a solid foundation.  An investor who is on the road to recovery from the last market decline must continue to evaluate goals, establish a time frame and select an approach that is going to help in attaining those goals.

Understanding the options market allows the investor to protect and preserve their capital, take decisive market positions with a limited and identifiable risk exposure and generate cash flow in a market that is trading sideways.  All of these characteristics are extremely important considerations when building and maintaining a portfolio.

Active investing should be boring. If there is one guarantee, "thrill seekers" are separated from their capital fast.

There are some common characteristics shared by many active investors. 

  • An active investor has been trained to be constantly learning, looking for new ideas and opportunities in the pursuit meeting their objectives.

  • An active investor is not concerned with which direction the market is going, just that it is moving, and that they are on the right side of it. 

  • An active investor is constantly evaluating risk and reward, putting capital preservation first on the list of priorities. 

  • An active investor leaves emotions at the door, consistently looking for signs of being wrong, regardless of how much time has been spent researching and rationalizing an opportunity. 

  • An active investor has an entry and exit strategy based on the time frame that they have allocated and they have the discipline to stick to it.  

  • An active investor has a confident understanding of how to read a price chart recognizing that company fundamentals are an important consideration but it is ultimately the price action that dictates profitability. 

To be a successful active investor, one must realize that the price of a stock is only worth what someone is willing to pay for it, not necessarily what the company is “assumed” to be worth, be well aware of the psychology behind what drives the market and, once again, learn to control emotion.

There is no secret to being successful at navigating these markets actively.  Relying too much on fundamental and technical analysis has its shortcomings.  In the end, Your stock market training program should include a combination of personal discipline, a sound methodology and a sensible approach to money management…this will keep you on the path to prosperity.

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Topics: learn to trade stocks, trading education, stock market training

Learn To Trade Stocks With a Different Approach to Risk Management

Posted by Jason Ayres on May 23, 2013 9:01:00 AM

How much money should I allocate to a position? 

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Topics: protective puts, learn to trade stocks, trading education

Weekly Market Forecast for the Active Investor-May 21, 2013

Posted by Jason Ayres on May 21, 2013 8:46:00 PM

The U.S. stock market continues to defy gravity lulling investors into a false sense of security and seemingly rendering our weekly market forecast obsolete however Patrick Ceresna our Chief Market Strategist made some great points in this months Market Timing Strategist Newsletter (www.markettimingstrategist.com)

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Topics: Market Forecast, trading education, active investor

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