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It seems to me that with the market we have been experiencing over the last 18 months that there is an awful lot of overhead resistance. How is this market going to recover anytime soon with everyone, who has bitten the bullet on their stocks over the 18 month period, just sitting there waiting to pull the trigger and get out of those positions the minute they reach breakeven or less? Maybe a lot of these would be sellers have already taken their lumps and sold but that’s just the way I see it.
Your underlying premise is absolutely correct: time will wear out most buyers no matter how high they bought. Indeed that is the theory of basing stocks: loss of value and time weed out the sellers. They give up and move on. A lot of sellers got out of dodge last fall and earlier in the […]
My question is, will the rate cuts have any positive reaction as long as the bank regulators keep money lending tight as they have been doing? Who controls the regulators and why have they not loosened up?
Very solid point. One of the problems even with the money ‘sloshing around’ the economy is that the banks have been very reluctant to lend it. And why? Because most banks got boxed on the ears by the Fed back in 2000 for making ‘risky’ loans. One of the Fed’s behind the scenes methods of […]
[On the QQQ put option play] why [buy options] so deep in the money? There are only 578 open interests at today’s close and they are expensive for average investors. I understand the time decay on owning an option works against me (vs. selling). What guidelines do you use in determining the strikes you are interested in?
Put plays are usually faster than upside plays. Why? Because when investors decide to sell in mass, no investor wants to be the last one out of the door. So, we don’t anticipate being in the play that long. That being the case, we want lots of movement on our options. With the OEX or […]
When I sell a covered call and the stock runs up in price, is there a certain point at which I’m better to close out the position early, rather than hold until the stock is called away at expiry?
If a stock you want to keep turns on you and runs instead of falling, keep your head. Is there resistance nearby up ahead (maybe why you sold the call)? Has the move up been on light volume? Those factors could cause you to wait to see if the move is going to stall again […]
I was paying attention to the resistance marks in your [Thursday] reports so was aware of watching out (Thank You). But looking at market action [Thursday], I was seeing strong volume breakouts, up volume trouncing down volume, advancers beating decliners. All kinds of buy signals. So I was still somewhat surprised to see the big selloff on no news to speak of. Almost like there was program trading set to sell at certain markers. Kind of gives one the impression this market is rigged. Institutions buy big initially to run prices up and then sell it off. Still sounds like profit taking to me. Maybe it wasn’t modest, low volume profit taking but still profit taking.
Your comment on selling at ‘certain markers’ is more on the mark than you might think. Institutions and investors are creatures of habit beliefs, and those habits and beliefs cause them to act certain ways at certain times. As we have said before, understanding market psychology is a major key to success. That means knowing […]
How do you know when a stock or index will use the 10 day MVA or 18 day MVA? Especially in this strong run up? Do you play the 10 and see if it holds? Or do you go for the 18 day?
The stronger the move to the upside, the more a stock uses its 10 day MVA as near term support. As we teach in the online seminars, what we often see in a rally is that a stock breaks out of a pattern, and then tests the move, usually back to the pivot point or […]
How do you see “tax-loss selling” impacting the market over the coming weeks? Someone told me that the first 2 weeks in December the Mutual Funds dump a lot of their little companies and window dress for the last 2 weeks where they buy the GM’s and other big companies to make their funds look good for their customers? They then sell a lot of the big companies and go into the little ones again in January? What about puts for the first 2 weeks in December and calls for the last 2 weeks?
There are several theories following stocks this time of the year. One maxim is to buy stocks in October and sell in May. Another is tax loss selling. Another is window dressing for year end reports. And then there is the January effect where small stocks tend to outperform the big caps. Last year there […]
I have started using options more. I am buying deeper into the money than you usually suggest. That way my premium is much less. It also appears that the option moves more directly with the stock. Obviously my leverage is not as good. Any thoughts? When you use options, do you base your “Stop” on the cost of the option, or the cost of the stock?
You are right about paying less for the nonintrinsic or that portion of the option that is not in the money also known as intrinsic value. As we discuss in the seminars, the deeper you go into the money, you are buying intrinsic value, i.e., value that is equivalent to to real dollars because if […]
Mortgage rates have just increased substantially (0.65 %) on 2 years + terms (at least in Canada)!!! Why is that so when the Fed in the US and the Bank of Canada are reducing rates??? Is that just temporary or will the trend continue towards increases rather than decreases of mortgage rates?
Mortgage rates are somewhat impacted by central bank moves, but you need realize that central banks deal in the shorter maturities, and any impact on the longer end is more of a ‘trickle through’ effect. Normally there will be an impact, and indeed ther was an impact occurring. Problem was, long term rates were not […]
As a primary investor in mutual funds I am not sure how to interpret the following: 1. put/call ratio; 2. vix; 3. vxn; 4. support/resistance for exchange, i.e., Nasdaq support, resistance, channels, etc. Extremely interested in wanting to know how to understand your e-mail and use above data.
The first three are what we call sentiment indicators. They are measures of how excited, complacent, bearish and bullish, scared or elated investors are about the market. As measures of investor emotion, they are best at flagging potential changes in market direction when they get to extremes. And they work inversely to the sentiment. For […]
