Trading Strategies for the Stock Market Crash

The stock market sold off sharply last week. Investors must now decide if they should decrease exposure to the equity markets. This is one of the most difficult decisions for an investor to make since it carries high risks, even though those risks might be hidden. A decision to decrease exposure should include a decision to increase exposure again in the future. And, there are two parts to that decision to consider. Investors should determine how to increase their exposure to stocks if they are wrong and if they are right. Facing Up to an Error in Timing This could be the most difficult t...
More

This Clear Cut Signal Could Have Helped You Miss the Market Crash

Technical indicators can be useful. But, many indicators require a subjective evaluation. This makes technical indicators challenging to use. Indicators or trading tools can be broadly classified as subjective or objective. A subjective tool is one that requires some degree of interpretation. For example, when looking at divergences, a popular tool for analyzing indicators, subjective judgments must be made. Objective indicators offer clear signals defined by rules that are known in advance. Moving averages are popular objective indicators. A less well known objective indicator is th...
More

Trading the Presidential Cycle in Stocks

We are approaching the third year of the Presidential cycle. This is a four year cycle in the stock market that compares the performance of stocks in each year of a President’s four year term. Intuitively, this cycle has an appealing quality. It is based on the fact that politicians act like, well, politicians. Politicians tell stories to explain their plans and to rouse their audience. This has been especially true in the past few years with both the current President and his immediate predecessor often speaking to large and generally friendly crowds. The Presidential Cycle’s Under...
More

Time for Gold to Shine

Gold has a reputation among many investors. Some investors view the metal as a hedge against a crisis. Others view the investors who look at gold in that way as “gold bugs” and consider them to preparing for a scenario that is unlikely to unfold and therefore missing gains in other markets. The truth is that both sides of that debate are probably wrong. There may be times when gold is an excellent investment and there may be times when gold is not a good investment. Since gold can be readily traded in the futures markets, traders can easily benefit from up or down moves. But, when go...
More

What Momentum Indicators Tell Us About the Current Stock Market

Traders often use momentum indicators to assess the current state of the stock market. The guiding principle of this analysis is that momentum leads price. This can be seen with a simple example from outside the financial markets, something like running. If you are running a mile, you might get tired and slow down at a certain point. You may keep going, but you will change the speed you’re running at, slowing before eventually stopping. Traders believe a similar process unfolds in the stock market. They follow momentum indicators expecting the indicator to slow before the price trend...
More

Is It Too Late to Buy Marijuana Stocks?

Marijuana is a new market. As a new market, the stocks in the sector have been volatile. It’s important for investors to remember that this has always been the case. A recent example of the volatility of stocks in new industries is the internet. In the late 1990s, that industry became a bubble. Many companies failed to survive the subsequent crash but, a number of companies did survive and are now among the biggest companies in the world. But, that is just one example of this pattern in history. When automobiles were new, car companies bubbled and crashed. So did radio stocks in the ...
More

How to Know Exactly When the Next Bear Market Starts

Let’s face it. We all want to know when the next bear market will start. Fortunately, there is a way to know. There are actually many tools that will tell us exactly when the bear market starts. Of course, they all signal after the market turns. Even though signals from some tools will come after the down turn is underway, these signals could still provide a profitable warning. And, it could be that early signals are dangerous to your wealth. Early Can Be Devastating Stocks can be on a sell signal well before the market turns down.  The chart of the popular CAPE ratio is shown below t...
More

What Florence Could Mean for Stocks

  It’s a familiar story. A hurricane makes landfall and devastates a large area of land. There is a sad story from a human perspective. This year, the story is centered in North Carolina. Factset summarized the financial impact in a headline that read, “Insurance Industry and Financials Sector Earnings at Risk Again Due to Hurricane Florence.” The analyst noted, “Hurricane Florence is expected to cause significant property damage and business losses across the southeast coast of the U.S. over the next few days." From a corporate earnings perspective, what sectors or indust...
More

How Lehman’s Anniversary Could Shake Markets in 2018

It was ten years ago when Lehman Brothers went bankrupt. That was also in the midst of a bear market and that bear market was to become significantly worse. Lost among some of the headlines is the fact that stocks were already in a bear market when the Lehman crisis unfolded. That makes comparisons between now and then less significant. Now, Lehman was a Wall Street institution and the bankruptcy of important firms has always rattled investors. History Has Lessons for Today History shows that 2008 was not unprecedented. There were also problems with Wall Street firms in the past. Acco...
More

This is Where the Next Global Boom Could Start

  It’s been ten years since Lehman Brothers collapsed, plunging the global financial system into chaos. Regulators and legislators have taken steps to ensure that crisis won’t happen again. But, like the general who is always fighting the last war, legislation and regulation can’t address the next crisis. That leaves investors and financial analysts always on the lookout for the next crisis. They have had several scares over the years with nearly endless crises in the euro zone and deep market plunges in China. Lesser known problems could also develop into unexpected problems. ...
More