INCREDIBLE HULK AND A TOPPY MARKET — LOTS TO BE LEARNED
There are no static, concrete rules in the financial markets. Every single thing you learn about trading or investing is subject to negotiation, obfuscation, and discombobulation. What you think is the truth about a method or rule today, will turn out to be what digs your grave and gives you a shove right into the awaiting coffin tomorrow. Market tops and bottoms make for especially difficult trading conditions, as the financial markets will pull out every single deceitful practice and outright lie in its arsenal in an effort to confuse the maximum number of market participants at any given moment. The reason this is the case is due to the fact that those who manage to actually catch the market and position themselves correctly around an intermediate term top or bottom, can reap a very large amount of profits very quickly. Traders and investors realize this possibility and begin taking on large positions in an effort to capitalize at the maximum possible rate. The market, of course, hates giving away its treasures without first testing the conviction of those who seek its rewards. The more significant the market top or bottom, the more severe the test has the potential to be. What makes these points in the markets especially dangerous is that a test of the intestinal fortitude of a trader attempting to pick a top or bottom, can quickly turn into a dance with death, should the trader be overexposed and inexperienced. The market will often times begin to signal its intentions to cause mayhem and destruction amongst the herd that has become hypnotized by its seemingly calm demeanor. It begins this process by sudden, slight changes in character. It typically starts with an increase in volatility or volume that has not been seen over a period of months. It continues with even more dramatic changes in behavior: intra-day reversals, massive volume, seemingly trustworthy intra-market correlations breaking down, leadership shifting. The more significant the market top or bottom, the more violent these shifts in character will be. It's similar to the Incredible Hulk when he is agitated and about to transform from a calm scientist to a green monster that causes widespread mayhem. You'll see twisting, turning, ripping of clothes and then eventually all out rage and destruction. The market does exactly that when it wants to move from bull mode into bear mode or vice versa. The reason I bring this up is due to the fact that we are at one of those points here and now. The market is beginning to shift personalities. It's right at the point where Dr. David Banner (Incredible Hulk's calm,...
10 CHARTS TO HELP YOU STAY IN PEACE, AND NOT IN PIECES, DURING THE WEEK AHEAD
(click on the charts below to enlarge)
SPECULATION – IT’S ALL THE SAME GAME, NO MATTER THE VENUE
It's all the same game. Yes, absolutely...100%. It doesn't matter if you're attempting to make money in the markets, betting football or playing poker...the contrarian angle wins. Not every single time, but a majority of the time you come out on top. This recent Superbowl was a case in point. A few days ago, I wrote about how I thought the Green Bay Packers would end up winning the game and covering the point spread based on experience with the Google IPO. Yes, it's a strange connection to make. If you haven't read the article click here to understand. All games of speculation, where there are vast sums of money involved, involve the 3 D's: deception, deciphering, and denial. 1. Deception - the masses, herd, fish, sheep...whatever you want to call them are constantly being manipulated into taking the wrong side of the trade. The bigger the venue, the bigger the manipulation. The more money at stake, the more slight of hand is involved. It doesn't matter if it's the markets in 1999 when everyone went all-in on technology or the Superbowl, where a majority of people thought that Vegas was handing them a gift with Pittsburg +3 points. Deception is as much a part of speculation as emotions, money and numbers. 2. Deciphering - all games of speculation require those who wish to prosper as a result of their efforts to be able to decipher the truth from the myth. Success comes with the ability to read into what the game is attempting to advertise or the diversion it is attempting to lay, and take the opposite side of the trade. It is similar to magic, where skillful magicians will divert your attention so well through repetition or slight of hand, that something could be going on right beneath your nose and you will fail to realize it. 3. Denial - never underestimate the power of human beings to live in denial. Generally speaking, people don't want the truth and prefer to live in their own dream. In speculation, this ends up being a lethal trait, as the market instinctively reinforces your false beliefs through momentary success or the illusion of success, only to render your efforts futile in the end. Denial is the reason gamblers (some who, by the way, are successful in all other aspects of life), whether in the form of stock market speculators, card players, or casino junkies end up throwing everything away over the long-run. Since these types of participants make up such a large part of the world of speculation, denial of the facts at hand makes up a large part of...
VIDEO — THE 3 MOST IMPORTANT CHARTS FOR THE WEEK AHEAD
Please make sure to enlarge chart to full screen by clicking the arrows located at the bottom right hand corner of the video...
TOP 3 MOST POPULAR CHARTS FROM THE PAST WEEK
1. NFLX - Daily chart from 1/30 - Bullish 2. SPY - Daily chart from 2/1 - Bearish 3. GLD - Daily chart from 1/30 -...
TOP 3 MOST POPULAR POSTS FROM THE PAST WEEK
1. HOW TAKING THE PACKERS AND BUYING GOOGLE WHEN IT IPO'D IN 2004 ARE VERY SIMILAR 2. NETFLIX CONFOUNDS BULLS AND BEARS 3. TODAY'S THOUGHTS
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CAN’T COMPLAIN, BUT I WILL ANYWAYS
It's a trader or investors nature to complain regardless of how good things are going. This is a game where you could always do better. It can become maddening at a certain point, if you get too critical regarding your every move. It's so important to keep your mental state stable whether you do this for a living or as a hobby. What is more important is discovering a strategy that allows your mental state to remain in optimum mode for the longest stretches of time. That is key. Most people take years upon years to realize this...and a majority give up without realizing it at all. It is impossible to remain in a "zen-like" state, without interruption. However, if you know yourself well enough, you can design a strategy that prolongs a positive mental state. I believe that this is one of the most important components of a trading strategy, as this game is 90% mental and 10% system. I could have done some things better this week. One thing I am happy about is that we bought more of our oil/gas spinoff and advised Zenpenny members to do the same last week when it was dipping. It was up 26% this week. Sellers are absent in the stock and it's a difficult one to buy size in when it's going up. Last week was one of the rare occasions when I bought stock as it was dropping for that exact reason. I'm a believer in buying into strength and not weakness, with last week being a rare exception. The rest of our names were more or less flat this week. Minimal volume, minimal participation. Just undiscovered really. It's not their fault. And I know that eventually they will all make similar moves to the upside. Not a matter of if, simply a matter of when. Technology permitting, I will be putting out a video this weekend going over some chart points. Also, our popular "10 charts" on Sunday. Hope everyone had a profitable and peaceful...
THE POISON REMAINS THE SAME, MARKET SEEMS TO STILL BE CONFUSED AS TO WHICH TO PICK
The market seems to be having a difficult time picking its poison here. If you are so inclined, it may be an opportunity to begin bringing in your long positions and scaling into some shorts over the short to intermediate term. There is a coin-flips chance that the S&P breaks out of this 4 day pinch it has worked itself into. At which time, it will be clear that it has chosen the second form of poison, as outlined a couple days ago. Here's the description from Feb. 2nd: 2. The S&P 500 blows out the top end of its ascending channel, going into overdrive and annihilating the bears completely and totally. On the surface, this may seem like a dream to the bulls. In reality, it will prove a lot more damaging in the long run. It will be similar to Charlie Sheen on his last bender before entering rehab. It’s reckless, may cost the bulls a lot more money than its worth and will prolong the misery of the coming correction phase, otherwise known as rehab. The opinion remains the same. A strong surge upwards by the bulls, will be counterproductive to their long-term efforts. It will be a reckless move by an ill patient. Nevertheless, traders must be prepared for all types of outcomes. Keep in mind that this outcome remains a possibility here, as the market seems confused as to what it wants to do...
NEW ADDITIONS TO ZENPENNY COMING SOON!
I'm working on adding a weekly video screen cast to go over some charts and give our readers a better understanding of exactly what to look for, as well as our unique interpretation of technical analysis. It will be a nice addition to the site. Members are going to videos several times a week. Again, a good way of being crystal clear on the thinking behind our investments. My view is that the more lines of communication I have with readers and especially members, the more effective and profitable our service will be. Until tomorrow....