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Will The Cyclical Bull Market End In 2006?

Sep 30

Posted by admin in Stocks Mutual Funds

The first two charts below are same period weekly charts of the Nasdaq 100 to Nasdaq 100 Volatility Index and the Nasdaq 100. Over time, the Nasdaq 100 will rise, while its Volatility Index will trade in a range. So, the ratio will rise over time. Also, there\’s generally a negative correlation between the Nasdaq 100 and its Volatility Index, i.e. when the Nasdaq 100 rises (or falls), its Volatility Index will fall (or rise). Currently, the ratio suggests either an end to the cyclical bull market or a severe correction to increase volatility sometime next year.

Over the final year of the 18-year structural bull market, in 1999-00, the ratio rose and stayed above 50, which was well above the 100-week MA (blue line), and climbed to over 80. At that time, the Nasdaq was in a mega-bubble. However, a structural bear market started in 2000 (the previous structural bear market was from 1965-82) and in 2002, the Nasdaq began a cyclical bull market. Currently, the ratio is extreme enough, in the 120s, to indicate more potential Nasdaq downside than upside within the next six months, and that the bull market may be about over.

The catalyst for the end of the bull market may be rising long-bond yields, which may cause a contraction in the housing market. Consequently, consumption growth would slow, perhaps enough to slow GDP growth substantially, while mortgage defaults would rise. However, over the second half of December, instutitions may keep the market high for end-of-the-year window dressing. Nonetheless, volatility may also pick-up, because of uncertainty about the strength of the holiday sales season. Moreover, economic data and oil prices should contribute to volatility.

Monthly and quarterly economic reports next week are: Monday–None, Tuesday–PPI, Building Permits, and Housing Starts, Wednesday–Revised GDP and GDP Price Deflator, Thursday–Personal Income, Personal Spending, and Leading Indicators, Friday–New Home Sales, and Revised Michigan Consumer Sentiment. Also, weekly data are: Tuesday–Retail Sales, Wednesday–Oil Inventories, and Thursday–Unemployment Claims. Financial markets will be closed a week from Monday, December 26th, for the Christmas holiday.

The third chart is an SPX weekly chart, which also suggests the market is near a top. There are three major resistance levels around 1,280, i.e. the weekly upper Bollinger Band, the monthly upper Bollinger Band (not shown), and the upper line of the rising wedge. These levels work together to provide stronger resistance. A key support level is the 20-day MA, currently at about 1,262, and rising, which SPX rose above and held throughout the two-month rally. Also, the previous four-year high at 1,246 is major support.

Charts available at www.PeakTrader.com Forum Index Market Overview section.

Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA

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Stock Trading Signals, How To Buy, When To Sell

Sep 28

Posted by admin in Investing, Stocks Mutual Funds

Many of us spend years looking for the holy grail trading system. Signal services can be a great way to use someone elses carefully developed system. By following a trading system, market condition will at times be favorable to buy and at other times be favorable to sell. Clearly defined conditions give \’signals\’ that the educated investor can read and act on. Signals are not as crucial for the long term investor. For these people, market conditions and the value of particular companies can be watched on a daily basis. For day and what we call active traders, however, signals are crucial for acting quickly on stock market movements.

Investors who treat trading as a full-time job have the time to watch the market movements for signals. Oftentimes, however, signals can be automated and integrated into trading software. The investor can choose which signals to be alerted about and they will automatically appear on screen. Software signals are usually only available by subscription and some services charge hundreds of dollars a year for a complete package. This includes trading software and access to up-to-the-minute charts for the latest information about the stock market.

Investors who don\’t have the time to watch the market closely can subscribe to services which publish signals on a daily or hourly basis. These services may employ market analysts who may follow several indicators to arrive at a particular signal. More commonly, however, their systems are completely automated with signals being generated by software which examines market conditions. Some of these services have a better track record than others ? make sure you get a free trial before purchasing. Also, make sure you paper trade some of the signals first and see if they truly match up to reported results. This is the best test before spending your money on more books and software.

With any third-party signal provider it pays to know how the signals are being generated. Since there are such a large number of market indicators some of them may contradict each other. In addition, a particular indicator may send out conflicting signals depending on the time frame.

Market conditions also play an important part on the accuracy of indicators. During upswings in the market, for example, trend indicators will send out buy signals but longer-term oscillator indicators will view the market as being overbought and send out a sell signal. Generally speaking, trend indicators are most accurate during trend conditions and oscillators are best during times of transition. Both types of indicators are often in variance with the other.

Depending on the type of service you sign up for, signals can be delivered by email on a daily basis, available for viewing on a website, or be integrated into your trading software so that popups appear on your screen for particular signals that you are watching.

Companies which provide signals usually offer their services on a monthly basis. Some are quite expensive ? as high as several hundred dollars a month. These are obviously aimed at the professional trader but other services are also available at more reasonable costs. Keep this in mind. We have frequently seen peoples with $1,000 to invest pay $200 a month for a system. That system might be great, but is it really going to make enough every month (20% ) to cover just your fees? If your starting capital is small, so must be the investment you make in signals.

The value of these services has to be weighed by the individual investor. They can be a great time saver but they may also encourage laziness when it comes to analyzing the market. A knowledgeable trader should have the tools necessary to judge the effectiveness of a signal system and do some of the calculations himself to keep on top of the market. Finally, make sure your signal service provides an exact strategy when to sell. When to sell is usually what is the difference between the small number of super successful traders and the larger numbers of unprofitable traders. If there is no exit strategy, you do not have a system and you?ll want to move on. The best signal services give non-subjective entries and exits.

Anthony Trister provides stock trading analysis and investing advice and reviews at http://www.stock-trading-resources.com

Writen By : Anthony Trister

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Stock Indexes: The Inside Story

Sep 25

Posted by admin in Stocks Mutual Funds

Most of us have heard of stock indexes, but have only a fuzzy idea of them at best. This article aims to clarify some of the basics of stock indexes — what they are and how they work.

What Is A Stock Index?

A stock index is simply an average price for a large group of stocks, either those on a particular stock exchange or stocks across an entire investing sector. Indexes are formed from stocks with something in common: they are on the same exchange, from the same industry, or have the same company size or location. Stock indexes give us an overall snapshot of the economic health of a particular industry or exchange.

Many stock indexes exist; in the United States the most well known are: the Dow Jones Industrial Average, the New York Stock Exchange Composite index, and the Standard

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Stock Brokers — Just The Facts

Sep 25

Posted by admin in Stocks Mutual Funds

Most of the buying and selling on the stock market is handled by stock brokers on behalf of their clients, who are the investors. Many different types of brokerage services are available.

Full-Service Brokers

\”Full-service brokers\” offer a variety of ways to help clients meet their investment goals. These brokers can give advice about which stocks to buy and sell, and often have large research departments that analyze market trends and predict stock movements, for their clients.

Such services are not free, of course. Full-service brokers charge the highest commission rates in the industry. Your decision whether to use a full-service broker will depend on your level of self-confidence, your knowledge of the stock market, and the number of trades you make regularly.

Discount Brokers

Investors who wish to save on commission fees generally use discount brokers. Brokers in this category charge much lower commissions, but they don\’t offer advice or analysis. Investors who prefer to make their own trading decisions, and those who trade often rely on discount brokers for their transactions.

Online Brokers

Taking the discount concept 1 step further, online brokers are the least expensive way to trade stocks. Both full-service and discount brokers usually offer discounts for orders placed online. Some brokers operate exclusively online, and they offer the best rates of all.

Account Requirements

Whichever type of broker you choose, your first order of business will be to open an account. Minimum balance requirements vary among brokers, but it is usually between $500 and $1000. If you\’re shopping for a broker, read the fine print about all the fees involved. You\’ll find that some brokers charge an annual maintenance fee while others charge fees whenever your account balance falls below a minimum.

Cash Or Margin?

Brokerage accounts come in 2 basic types. The \”cash account\” offers no credit; when you buy, you pay the full stock price. With a \”margin account,\” on the other hand, you can buy stock on margin, meaning the brokerage will carry some of the cost. The amount of margin varies from broker to broker, but the margin must be covered by the value of the client\’s portfolio.

Any time a portfolio falls below a specified value, the investor will have to add funds or sell some stock. A greater opportunity exists for realizing gains (and losses) with margin accounts, because they allow investors to buy more stock with less cash. Involving greater risk than cash accounts, as they do, margin accounts are not recommended for inexperienced traders.

Selecting The Right Broker For You

You should carefully consider your needs as an investor before making the choice of a broker. Do you wish to receive advice about which stocks to buy? Are you uncomfortable making trades on the Internet? If so, you will be best served by a full-service broker. If you are comfortable buying on the Internet, and you have the knowledge and confidence to make your own trading decisions, then you will be better off with an online discount broker.

After deciding which type of broker you want, do some comparison-shopping between competitors. Significant cost differences can show up when you factor in all the annual fees and brokerage rates. Estimate how many trades you expect to make in a year, how much cash you can deposit into your account, whether you want to use margin accounts, and which services you need. Armed with this information, you\’ll be prepared to compare your actual costs for various brokers, and to make an educated choice.

Visit Stock Trade to learn more. Ron King is a full-time researcher, writer, and web developer. Copyright 2005 Ron King. This article may be reprinted if the resource box is left intact.

Writen By : Ron King

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Stock Markets Of The World

Sep 23

Posted by admin in Stocks Mutual Funds

\”Stock Market\” is a term that is used to refer both to the physical location for buying and selling stocks, and to the overall activity of the market within a certain country. When you hear \”The stock market was down today,\” it refers to the combined activity of many stock exchanges.

The major exchanges in the US are the New York Stock Exchange (NYSE), the American Stock Exchange (Amex), and NASDAQ.

The correct term for the physical location for trading stocks is the \”Stock Exchange.\” A country may have many different stock exchanges. Usually a particular company\’s stocks are traded on only 1 exchange, although large corporations may be listed in several.

Investing Around The World

There are stock exchanges located throughout the world, and it is possible to buy or sell stocks on any of them. The only restriction is the oparating hours of each exchange. Both the NYSE and NASDAQ, for example, operate from 9:30 am to 4:00 pm Eastern Time, Monday through Friday.

Other exchanges have similar opening hours based on their local time. When you trade on the Hong Kong Stock Exchange, your order will be executed sometime between 9:30 pm and 4:00 am New York time.

The locations of the major stock exchanges of the world are:

Japan (Tokyo Stock Exchange)
India (Bombay Stock Exchange)
Europe (London Stock Exchange, Frankfurt Stock Exchange, SWX Swiss Exchange)
the People\’s Republic of China (Shanghai Stock Exchange)
United States.

Stock Market Fluctuations

The economic health of a country will strongly influence its stock market. When the economy is doing well the market is bullish. Bull markets occur during times of high economic production, low unemployment and low inflation. Bear markets, on the other hand, follow downturns in the economy. When inflation and unemployment are rising, stock prices are usually falling.

Stock price fluctuations are also driven by supply and demand, which in turn are dependent to a great degree on investor psychology. Seeing a stock price rise rapidly can cause investors to jump on the bandwagon, and this rush to buy drives the price up even faster. A falling price can have a similar effect in the other direction. These are short-term fluctuations. Stock prices tend to normalize after such runs.

The stock exchange is only 1 of many opportunities for people to invest. Other popular markets include the Foreign Exchange Market (FOREX), the Futures Market, and the Options Market.

FOREX: World\’s Largest Market

The FOREX is the biggest (in terms of value) investment market in the world. FOREX traders buy 1 currency against another and can profit from small changes in currency value. Most FOREX trades are entered and exited in 1 24-hour span, and traders have to keep a close watch on the market in order to make profitable trades.

The Futures Market

The Futures Market is a market of contracts to buy and sell certain goods at specified prices and times. It exists because buyers and sellers of goods wish to lock in prices for future delivery, but market conditions can make the actual futures contract fluctuate considerably in value.

Most investors in the futures market are not interested in the actual goods — only in the profit that can be realized from trading the contracts.

The Options Market

The Options Market is similar to the Futures Market in that an option is a contract that gives you the right (but not the obligation) to trade a stock at a certain price before a specified date. These options can be traded on their own or purchased as a form of insurance against price fluctuations within a certain time frame.

Stocks: Low Risk, Long-Term

All 3 of these markets are considered quite risky without considerable knowledge and experience. They also require close monitoring of market movements. Stocks, on the other hand, are less risky because movements of the market are usually more gradual. Although short-term investment strategies are possible, most people view stocks as long-term investments.

Visit FOREX Trading to learn more. Ron King is a full-time researcher, writer, and web developer. Copyright 2005 Ron King. This article may be reprinted if the resource box is left intact.

Writen By : Ron King

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Stock Options: Limited Loss And Unlimited Profit

Sep 21

Posted by admin in Investing, Stocks Mutual Funds

Many people believe that the stock market can make you rich one day, but also make you bankrupt the next. Well, how eould you like to know about a method of stock trading that completely saves you from unlimited loss, but still leaves the door open for unlimited profit? That method is buying and selling stock options. How to trade stock options would best be explained using the following example.

Lets say a person who thought that a stock selling in the market at 50 would decline to possibly 30, that person could buy a Put stock option. Not, however, that in buying a stock options, one should have some idea to what extent the stock might move.

In inquiring what a Put stock option would cost, the person might receive a nominal quote of, say, $350 for a Put at the market for 90 days. Most options are negotiated \”at the market,\” which means at \”the current market,\” when the option can be obtained by the option-dealer.

Suppose that the stock is selling at 50 and the quoted price of $350 is satisfactory to you. You enter your order: \”Buy a 90-day Put on 100 XYZ [the name of the stock] for $350.\” If you are trading through your stock-exchange broker, the broker will give your order to an option-dealer who will contact one of their clients who sells options on that stock and will attempt to buy the option for you.

When, after this contact or several others, the dealer has obtained the Put option for you, the dealer reports to the stock-exchange broker who gave him the order, and the broker in turn reports to the customer: \”Bought Put 100 XYZ at 50 expires December 30 for $350.\” Let us say that the person who bought the Put option, expecting a decline in the stock, was wrong, and that the stock, instead of going to 30 (as expected), advanced to 70 and was selling when his option expired. The person would have lost the $350 that they paid for the Put option.

Bear in mind that the limit of the person\’s loss was the cost of the Put option, or $350, no matter how high the stock rose and no matter how wrong the person was, and that the person would draw on the equity in the account to that extent only. Suppose, on the other hand, the person had sold the stock short in the market. The loss would have been 20 points and still no knowledge as to the possible extent of loss until the person covered the short sale. But in the purchase of the Put option the account would read:

Bought Put on XYZ at 50 for 90 days: Loss $350

Remember, too, that no trade has been made in the stock, so no stock-exchange commission has been paid. A regular stock-exchange commission is charged by your broker only if a transfer of stock is made in connection with the option.

On the other hand, suppose the person\’s judgment was correct and the stock declined to 30. If the person had instructed the stockbroker to buy 100 shares at 30 and exercise the Put option, the account would look like this:

Sold 100 shares at 50 (through exercise of Put) $5,000

Total Receipts $5,000

Bought 100 shares in market at 30 3,000

Bought Put at 50

Cost 350

Total Cost 3,350

Profit on trade $1,650

The profit then would be almost 500 percent of the cost of the Put contract. The profit is the difference between the cost of the stock plus the cost of the Put option and the proceeds of the Put that was exercised.

In all of these examples showing the use of options, the commission cost has been ignored. But at no time could the loss have been more than the cost of the option – $350 – and any stock-exchange commissions would have been paid out of profit or out of possible recovery of part of the premium which was paid.

For more FREE information and articles on how to correctly buy stock options, when to trade, when to not trade, tips, tricks and advice — visit http://www.UnderstandingStockOptions.com.

Writen By : Jon Weaver

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