MONEY AND POLITICS.
When the newspapers and the radio shows are full of information on government intervention, you need to sit back and really consider the intent of the people in charge.
Ralph R. Reiland in the IBD said: "Bottom line, Obama is saying we'll get more jobs by way of less oil, less gas, fewer jets, fewer home sales and lower levels of charitable giving."
And then one of my favorite financial experts (one I'd make Secretary of the Treasury), Lawrence Kudlow intimated that the President won't tell us the details of his tax and spend plan . . . "but one things for sure: This new Buffett tax is a penalty on investment, risk-taking and job creation." It was good to see this week that Mr. Buffett disassociated himself from this new "Buffett" rule. Maybe there's hope for him yet.
Mr. Ludlow went on to state what seems obvious to any right thinking person: " . . . the evidence is absolutely clear that a lower capital-gains tax produces huge gains in revenues. Raising the capital-gains tax lowers revenues." I've written extensively on this in one of my "PATRIOT ESSAYS." We live in dynamic ways. Nothing is static. There is always the aspect of unintended consequences. People adjust, adapt and improvise---always looking out for their own best interest. Wouldn't it be wise to have a government that realizes that and figures out a way to get out of the way to let people's best interests direct their efforts to bettering the whole society? I have a lot more on this topic. Later.
And last comment from Mr. Kudlow. He was writing about how Mr. Reagan was so overwhelmingly re-elected. "Why? Because low tax rates reignited the economic growth and job creation."
I add once again, We need broad-based, permanent tax cuts and to shrink the size of government. We don't need temporary, targeted tax manipulations and more government spending.
Your comments please.
Wade
Tuesday, October 4, 2011
Saturday, October 1, 2011
Business and Politics
Everyday I read and hear about more business leaders coming down on the government for too many regulations, too much red tape, and the threat of more odious regulations and taxes. This uncertainty has driven many to the side-lines. Business does not function in confusion and doubt.
One problem that is an offspring of this overbearing government is that businesses are making decisions, not based on solid business, marketing and accounting functions, but on politics. It's hard to imagine that every decision to grow and expand, develop new products or sources of revenues, and even decisions of pensions and 401Ks has business leaders turning their heads to Washington D.C. !
It's all backwards. It should not be this way. All of us need a stable environment, steady tax rates, low or no government intrusion. Business would flourish.
In short we need to "GROW OUT OF OUR PROBLEMS." If the current administration would do what I listed above, this would happen. We'd bring down our deficits and our debt with an expanding economy. We'd bring down unemployment with growth opportunities. New companies would start. Businesses would expand and grow. It would be a dream America again.
"Government is not the answer, it is the problem." Where is Ronald Reagan when you need him?
One problem that is an offspring of this overbearing government is that businesses are making decisions, not based on solid business, marketing and accounting functions, but on politics. It's hard to imagine that every decision to grow and expand, develop new products or sources of revenues, and even decisions of pensions and 401Ks has business leaders turning their heads to Washington D.C. !
It's all backwards. It should not be this way. All of us need a stable environment, steady tax rates, low or no government intrusion. Business would flourish.
In short we need to "GROW OUT OF OUR PROBLEMS." If the current administration would do what I listed above, this would happen. We'd bring down our deficits and our debt with an expanding economy. We'd bring down unemployment with growth opportunities. New companies would start. Businesses would expand and grow. It would be a dream America again.
"Government is not the answer, it is the problem." Where is Ronald Reagan when you need him?
OCTOBER'S MARKET
Hello my fellow friends.
Well the Dow is acting not so funny. In fact, the VIX, or the Volatility Index says there will be several days of movements, say, up 100 or so, then down 100 or so.
Here is my current thinking. This week was negative. I think some money wants to get into the market in advance of October. Yes, October has historically been an erratic month, but usually on the upside---as long as the news is good. There will be plenty of good news in the form of earnings, but also a lot of commentary and hedging on each companies' future.
It will give us a lot of movement. So here is a good practice/paper trade. I offer this here in the learning context to see the movement of the Dow and the options. Here's why:
1) As stated above, it's October. It feels like it wants to move up.
2) Thursday was Rosh Hashanah. Many people were on the sidelines on Thursday and Friday.
3) The Greek Tragedy might be ameliorated.
4) It's October. Oops, I already said that. Note that there are three weeks to the main option's expiration date.
So Molly jumped back in. I don't know if these are real or practice trades. What I do know is these prices are real. And beating the Autumnal Dog to death---it's October.
She bought the DIA (yes, that's the ticker symbol of an ETF trust that owns all of the Dow 30 stocks, and mirrors the Dow at 1/100). Options are in $1 increments. She bought 5 contracts or the DIAs $112 call options for $2.57, and 5 contracts of the DIA $114 call options for $1.69. Molly then put in orders to sell the $112s at $5, and the $114s at $3.40. This represents a double of the money.
Back-Up. One reason I like this trade is this: Even though this is designed to be a 2 to 3 day trade---not counting the weekend---if it doesn't work, she can get out and cut her losses or wait. It's October, with many days to go. I'll put in my projection. I think the Dow will go to around $11,600, maybe push up to $11,800. It's not a prediction, but a projection. We all do the best we can. But think about the potential. If you owned the right to buy a stock at $112 and the stock went to $118, the option would have to be at least worth $6, plus a little more if there is time left to expiration. Six dollars is in the money---above the strike price. Her $2.57, or $1,285 for the five contracts (each contract represents 100 shares), could turn into nothing if it goes down, but if it goes up to the $118 range, she would make $5 or $6 times 500. I think it was smart for her not to get too greedy and sell these for $5. That would be $2,500 is she gets filled, and that represents a net of $1,215. She'll make more on the $114 if the Dow goes up.
Back to our test. Watch the Dow on Monday and Tuesday. Ascertain how accurate our 50 cent rule of thumb is. If the Dow goes up 100 points, the option goes up 50 cents. The Dow would have to go up 400 to 500 points to make this kind of money. There is no guarantee We'll watch and learn. She can always change the order, sell it at a lesser profit, and get back in on the next dip. Too much fun.
And one last thing, this is all done with a back-up of more time in October for it to work out. Yes, it was designed as a two to three day trade for cash flow purposes, but it's nice to have some time if the trade doesn't work out right away.
Keep reading wadecook.blogspot.com and invite your friends.
More later, Wade
Well the Dow is acting not so funny. In fact, the VIX, or the Volatility Index says there will be several days of movements, say, up 100 or so, then down 100 or so.
Here is my current thinking. This week was negative. I think some money wants to get into the market in advance of October. Yes, October has historically been an erratic month, but usually on the upside---as long as the news is good. There will be plenty of good news in the form of earnings, but also a lot of commentary and hedging on each companies' future.
It will give us a lot of movement. So here is a good practice/paper trade. I offer this here in the learning context to see the movement of the Dow and the options. Here's why:
1) As stated above, it's October. It feels like it wants to move up.
2) Thursday was Rosh Hashanah. Many people were on the sidelines on Thursday and Friday.
3) The Greek Tragedy might be ameliorated.
4) It's October. Oops, I already said that. Note that there are three weeks to the main option's expiration date.
So Molly jumped back in. I don't know if these are real or practice trades. What I do know is these prices are real. And beating the Autumnal Dog to death---it's October.
She bought the DIA (yes, that's the ticker symbol of an ETF trust that owns all of the Dow 30 stocks, and mirrors the Dow at 1/100). Options are in $1 increments. She bought 5 contracts or the DIAs $112 call options for $2.57, and 5 contracts of the DIA $114 call options for $1.69. Molly then put in orders to sell the $112s at $5, and the $114s at $3.40. This represents a double of the money.
Back-Up. One reason I like this trade is this: Even though this is designed to be a 2 to 3 day trade---not counting the weekend---if it doesn't work, she can get out and cut her losses or wait. It's October, with many days to go. I'll put in my projection. I think the Dow will go to around $11,600, maybe push up to $11,800. It's not a prediction, but a projection. We all do the best we can. But think about the potential. If you owned the right to buy a stock at $112 and the stock went to $118, the option would have to be at least worth $6, plus a little more if there is time left to expiration. Six dollars is in the money---above the strike price. Her $2.57, or $1,285 for the five contracts (each contract represents 100 shares), could turn into nothing if it goes down, but if it goes up to the $118 range, she would make $5 or $6 times 500. I think it was smart for her not to get too greedy and sell these for $5. That would be $2,500 is she gets filled, and that represents a net of $1,215. She'll make more on the $114 if the Dow goes up.
Back to our test. Watch the Dow on Monday and Tuesday. Ascertain how accurate our 50 cent rule of thumb is. If the Dow goes up 100 points, the option goes up 50 cents. The Dow would have to go up 400 to 500 points to make this kind of money. There is no guarantee We'll watch and learn. She can always change the order, sell it at a lesser profit, and get back in on the next dip. Too much fun.
And one last thing, this is all done with a back-up of more time in October for it to work out. Yes, it was designed as a two to three day trade for cash flow purposes, but it's nice to have some time if the trade doesn't work out right away.
Keep reading wadecook.blogspot.com and invite your friends.
More later, Wade
MOLLY'S MONEY
A good trade in the market.
There is a lot I'd like to write but time is short. Molly made $2,390 in three days, based on $2,610. That should add up to $5,000. Here's what she did. I helped on the sidelines as I do not do trades from here.
The Dow had sold off. It was way down. It bounced off of $10,600. The Dow Jones Industrial Average is the most widely watched index in the world. Yes, there are bigger groupings of stocks, like the S&P 500, the Fortune 500, even the New York Composite and the Nasdaq Composite. So why the Dow? For me, it's simple, the numbers are everywhere. Every time I walk by a TV, there it is. When anyone generically says the market is up or down, they are talking about the DJIA. Don't confuse this with Dow Chemical, ticker DOW.
You can trade the index, or the DJX. I think a good alternative is to trade the DIA. That's a ticker symbol for an ETF, a trust that has the 30 Dow Components in it. It trades like a stock. If the Dow is at $10,680 the DIA will be 1/100 of that, or $106.80, plus a little more change.
Okay, Molly ascertained that the Dow was at a low. September is almost over, one of the worst months historically of all the months. October is coming up, usually an up month, but definitely a green-light month. It's a news reporting month---meaning a lot of earnings info to be released. Molly bought the call options on the DIAs at the $110 strike price. Buying calls she's hoping the Dow rises. It did. She paid $2.61, so 10 contracts cost $2,610. The next two days the market rallied. Remember my test question? For years there has been a ratio, though not perfect, of this: If you have a call close to the money---say $110 when the Dow is around $11,000---then as the Dow moves up or down the option will move about 50 cents. It sure seemed to hold this week on this trade. I checked several times and it was very close. This means if you paid $2.00 for the option and the Dow goes up 100 points (not just in a day but even in a few days) your option will go up 50 cents. That would be $500 if you owned 10 contracts (or the right to buy 1,000 shares). $2,000 to $2,500 in an hour or two or a day or two. Oh, and don't forget if the Dow goes down 100 points you lose the 50 cents.
Again, Molly thought after two really bad days that the Dow looked like it wanted to move up. One group of people say to stay away, another group says that a lot of money will move back into the market in advance of the October earnings season. I'm in this latter camp. One more quick thought on October. Even if this trade doesn't work this week, it still has time to work. October expiration date, the 21st is still 3-1/2 weeks away.
She was going to go for a triple, but in just two days the market went up nicely and she got out at $5.00. On the 10 contracts, that is $5,000, netting her $2,390 ($5,000 - $2,610 [cost] = $2,390). Not a bad two-three days work. Oh, and when she did the market went down quite a bit and she would have not made any profits until the next rise. I'll comment on this strategy later.
Congratulations Molly. Way to Go. Impressive, you Sky Walker.
UPCOMING: More comments on Business and Politics and Molly is in another DIA trade. It's just so exciting.
There is a lot I'd like to write but time is short. Molly made $2,390 in three days, based on $2,610. That should add up to $5,000. Here's what she did. I helped on the sidelines as I do not do trades from here.
The Dow had sold off. It was way down. It bounced off of $10,600. The Dow Jones Industrial Average is the most widely watched index in the world. Yes, there are bigger groupings of stocks, like the S&P 500, the Fortune 500, even the New York Composite and the Nasdaq Composite. So why the Dow? For me, it's simple, the numbers are everywhere. Every time I walk by a TV, there it is. When anyone generically says the market is up or down, they are talking about the DJIA. Don't confuse this with Dow Chemical, ticker DOW.
You can trade the index, or the DJX. I think a good alternative is to trade the DIA. That's a ticker symbol for an ETF, a trust that has the 30 Dow Components in it. It trades like a stock. If the Dow is at $10,680 the DIA will be 1/100 of that, or $106.80, plus a little more change.
Okay, Molly ascertained that the Dow was at a low. September is almost over, one of the worst months historically of all the months. October is coming up, usually an up month, but definitely a green-light month. It's a news reporting month---meaning a lot of earnings info to be released. Molly bought the call options on the DIAs at the $110 strike price. Buying calls she's hoping the Dow rises. It did. She paid $2.61, so 10 contracts cost $2,610. The next two days the market rallied. Remember my test question? For years there has been a ratio, though not perfect, of this: If you have a call close to the money---say $110 when the Dow is around $11,000---then as the Dow moves up or down the option will move about 50 cents. It sure seemed to hold this week on this trade. I checked several times and it was very close. This means if you paid $2.00 for the option and the Dow goes up 100 points (not just in a day but even in a few days) your option will go up 50 cents. That would be $500 if you owned 10 contracts (or the right to buy 1,000 shares). $2,000 to $2,500 in an hour or two or a day or two. Oh, and don't forget if the Dow goes down 100 points you lose the 50 cents.
Again, Molly thought after two really bad days that the Dow looked like it wanted to move up. One group of people say to stay away, another group says that a lot of money will move back into the market in advance of the October earnings season. I'm in this latter camp. One more quick thought on October. Even if this trade doesn't work this week, it still has time to work. October expiration date, the 21st is still 3-1/2 weeks away.
She was going to go for a triple, but in just two days the market went up nicely and she got out at $5.00. On the 10 contracts, that is $5,000, netting her $2,390 ($5,000 - $2,610 [cost] = $2,390). Not a bad two-three days work. Oh, and when she did the market went down quite a bit and she would have not made any profits until the next rise. I'll comment on this strategy later.
Congratulations Molly. Way to Go. Impressive, you Sky Walker.
UPCOMING: More comments on Business and Politics and Molly is in another DIA trade. It's just so exciting.
Wednesday, September 28, 2011
Money and Politics
MONEY AND POLITICS
I promised I'd try to not get so personal (read mean) when it comes to the liberal governing class. I'll try, yes but that's all I can do. This new so-called jobs bill is a joke. Okay, so my new-found attitude almost last a paragraph. No, seriously what are they smoking?
Henry R. Nothhaft, writhing in the Wall Street Journal weighed in with some heavy-duty insights. He said: "We know for starters, that 100% of net job growth in the U.S. comes from entrepreneurial start-ups, as a Kauffman Foundation report documented in 2010. If you took start-ups out of the picture and looked only at large or incumbent businesses, job grown over the last 35 years would actually be negative. In the words of Kauffman's Tim Kane, 'When it comes to U.S. job growth, start-up companies aren't everything. THEY ARE THE ONLY THING.'" (emphasis mine)
So why isn't' the government, and specifically this administration doing anything and everything to foster new start-ups? Why aren't we encouraging companies to move here? With a simple wire transfer, people and businesses can move billions of dollars around the globe, to better tax and business friendly countries, but we can't wire transfer or email workers like the money.
"Over the last 10 years, U.S. multinational firms cut their domestic work force by 2.9 million while boosting hiring abroad by 2.4 million." (Ibid Notthaft)
So please, Mr. Obama, please stay home and be quiet. We Americans will solve all of these problems. If you will get government off our backs and out of our wallets, we will work wonders and restore the American Dream. Government cannot do that, so please stop trying.
More Later, Wade
I promised I'd try to not get so personal (read mean) when it comes to the liberal governing class. I'll try, yes but that's all I can do. This new so-called jobs bill is a joke. Okay, so my new-found attitude almost last a paragraph. No, seriously what are they smoking?
Henry R. Nothhaft, writhing in the Wall Street Journal weighed in with some heavy-duty insights. He said: "We know for starters, that 100% of net job growth in the U.S. comes from entrepreneurial start-ups, as a Kauffman Foundation report documented in 2010. If you took start-ups out of the picture and looked only at large or incumbent businesses, job grown over the last 35 years would actually be negative. In the words of Kauffman's Tim Kane, 'When it comes to U.S. job growth, start-up companies aren't everything. THEY ARE THE ONLY THING.'" (emphasis mine)
So why isn't' the government, and specifically this administration doing anything and everything to foster new start-ups? Why aren't we encouraging companies to move here? With a simple wire transfer, people and businesses can move billions of dollars around the globe, to better tax and business friendly countries, but we can't wire transfer or email workers like the money.
"Over the last 10 years, U.S. multinational firms cut their domestic work force by 2.9 million while boosting hiring abroad by 2.4 million." (Ibid Notthaft)
So please, Mr. Obama, please stay home and be quiet. We Americans will solve all of these problems. If you will get government off our backs and out of our wallets, we will work wonders and restore the American Dream. Government cannot do that, so please stop trying.
More Later, Wade
PICTURESQUE
STOCK MARKET AND POLITICS
I've never attempted to write what I'm about to write. I use metaphors from time to time, but I'm not that good at them. I'm a little out in left field, metaphorically speaking.
I would like to draw a picture for you. This is not that tough because I'm going to use a picture as the subject matter, and try to make this whole process picturesque. There will be four components and we can learn lessons from each one of them, but the main lesson I hope to convey is that what we see, what we understand is all part of something else, something bigger. And this something else has a part in determining the direction of each of these components. This idea is sort of a "No man is an island," to use another metaphor.
I'm sure you've seen a picture of a fox hunt, probably in ol' England. The hunters are adorned in their red coats, their riding helmets. The fox has taken off and the dogs lead out. The hunters jump hedges and streams which somehow the dogs get through. Okay, do you have that picture in mind? Focus in on the horses jumping the hedges.
Now, back off a little and you'll see more countryside. Trees in the distance. A farmhouse off to the left. The fox has skedaddled off over the next rise.
Now, look some more and you'll see the skies, the clouds and the wind blowing. This artist is good. It's a blustery day, a good day to be up on a tall warm-blood. It's synergy in motion.
Now, consider your own life, your history, the scenes you've seen and you'll realize what you see, what you think about and what you feel is an integral part of how you see this picture.
Let's come back to the American stock market. You are chasing the fox. The blood hounds are out. You're ready for the adventure. You look hard and realize your viewpoint is part of something bigger.
1) You're looking at a specific company. Will it come out with good earnings?
Will it disappoint? Will it be the right investment for you?
2) It's part of a major industry which is really growing. It should do well.
3) But the economy is in the doldrums. The earnings are good, but all these stock seem stuck.
4) News keeps coming out about the European debt crisis. Greece is about to go under.
How can debt in Italy or Greece, and the housing market here, and our new trade numbers with China, and the threat of new taxes, effect your little "Micro-Chip" stock? Because it's a part of the whole. The components effect the larger picture and the larger picture effects you small company.
Think how inter-connected everything is. A small computer chip company in Southern Idaho, doing business in the computer industry with it's rapidly advancing changes; stuggling to make it in America, with an economy which has strengths and weaknesses; all transpiring on the back canvas of the world stage. It's mind boggling and very exciting as we try to make sense of it and figure out how to trade. Molly Farragut from Fairbanks just did really well with this on a great trade on the whole market---the Dow---trading the Diamonds (DIA). She took $2,610 and sold it for exactly $5,000 three days later---netting $2,390. More later.
So how do you trade? How do you make money? One, put the market forces to work for you. Be a seller, as in a covered call writer. Focus on the short-term, make sure there's a forklift to move your stock. Think about the exit before you go in the entrance. Do things with a purpose. Connect the dots better.
See my new revised book STOCK MARKET MONEY MACHINE to learn how to get these market forces to work for you, not against you. It's available on Amazon.
Wade
I've never attempted to write what I'm about to write. I use metaphors from time to time, but I'm not that good at them. I'm a little out in left field, metaphorically speaking.
I would like to draw a picture for you. This is not that tough because I'm going to use a picture as the subject matter, and try to make this whole process picturesque. There will be four components and we can learn lessons from each one of them, but the main lesson I hope to convey is that what we see, what we understand is all part of something else, something bigger. And this something else has a part in determining the direction of each of these components. This idea is sort of a "No man is an island," to use another metaphor.
I'm sure you've seen a picture of a fox hunt, probably in ol' England. The hunters are adorned in their red coats, their riding helmets. The fox has taken off and the dogs lead out. The hunters jump hedges and streams which somehow the dogs get through. Okay, do you have that picture in mind? Focus in on the horses jumping the hedges.
Now, back off a little and you'll see more countryside. Trees in the distance. A farmhouse off to the left. The fox has skedaddled off over the next rise.
Now, look some more and you'll see the skies, the clouds and the wind blowing. This artist is good. It's a blustery day, a good day to be up on a tall warm-blood. It's synergy in motion.
Now, consider your own life, your history, the scenes you've seen and you'll realize what you see, what you think about and what you feel is an integral part of how you see this picture.
Let's come back to the American stock market. You are chasing the fox. The blood hounds are out. You're ready for the adventure. You look hard and realize your viewpoint is part of something bigger.
1) You're looking at a specific company. Will it come out with good earnings?
Will it disappoint? Will it be the right investment for you?
2) It's part of a major industry which is really growing. It should do well.
3) But the economy is in the doldrums. The earnings are good, but all these stock seem stuck.
4) News keeps coming out about the European debt crisis. Greece is about to go under.
How can debt in Italy or Greece, and the housing market here, and our new trade numbers with China, and the threat of new taxes, effect your little "Micro-Chip" stock? Because it's a part of the whole. The components effect the larger picture and the larger picture effects you small company.
Think how inter-connected everything is. A small computer chip company in Southern Idaho, doing business in the computer industry with it's rapidly advancing changes; stuggling to make it in America, with an economy which has strengths and weaknesses; all transpiring on the back canvas of the world stage. It's mind boggling and very exciting as we try to make sense of it and figure out how to trade. Molly Farragut from Fairbanks just did really well with this on a great trade on the whole market---the Dow---trading the Diamonds (DIA). She took $2,610 and sold it for exactly $5,000 three days later---netting $2,390. More later.
So how do you trade? How do you make money? One, put the market forces to work for you. Be a seller, as in a covered call writer. Focus on the short-term, make sure there's a forklift to move your stock. Think about the exit before you go in the entrance. Do things with a purpose. Connect the dots better.
See my new revised book STOCK MARKET MONEY MACHINE to learn how to get these market forces to work for you, not against you. It's available on Amazon.
Wade
Friday, September 23, 2011
Market Thoughts
I would like to put in my thoughts on the market right here, right. It's September, historically a very bad month. It's the end of the red-light period (no-news) and has been left with non-earnings news, mostly from around the world. It's been pretty bleak. Then the Fed disappoints, and bam, it's down.
This period is about over. The market has pretty good support at 11,200. That's the DJIA. If it hits 10,800 again, which it might do, that is even more firm support. But companies are making huge amounts of money. Official earnings season begins about Oct. 10th. However we're wrapped up with a government which is doing more harm than good, and this puts a damper on everything.
If you have a chance to look at an IBD, Wall Steet Journal or Barron's, or even look it up online, look for a 30 day chart---one that incorporates August and September up to now. Look at the last few days of August. In technical analysis, or in any charting way of thinking, you look for a double bottom. Specifically a chart or bounce that looks good is called a "double bounce, with a raised right cheek." I'm not making this up. It's like a double dip but the second dip---if it does not go as low as the first dip---signals that the market, or a particular stock, will go up more. If you have a triple dip, with two lows that are higher than the first low, it's even better. The market moves up. I think we're about to have a quadruple dip, and the market will rebound nicely.
This means that the market the rest of this week bounces off 11,200. If not, all bets are off.
You can play the whole market---either an index trade on the Dow, DJX, or by buying calls or puts on the DIA, an ETF that owns all of the DJIA 30 stocks. These are called the Diamonds. They have $1 and $2 strike prices. For example, if the Dow is at 11,200, you could practice trade (first to learn how to do this) the DIA $112 or $114 calls. Play is for a double. An old rule of thumb was that if the Dow went up 100, that represented about 50 cents on the option. Check it out and see if it's still true.
Let me know how it goes.
This period is about over. The market has pretty good support at 11,200. That's the DJIA. If it hits 10,800 again, which it might do, that is even more firm support. But companies are making huge amounts of money. Official earnings season begins about Oct. 10th. However we're wrapped up with a government which is doing more harm than good, and this puts a damper on everything.
If you have a chance to look at an IBD, Wall Steet Journal or Barron's, or even look it up online, look for a 30 day chart---one that incorporates August and September up to now. Look at the last few days of August. In technical analysis, or in any charting way of thinking, you look for a double bottom. Specifically a chart or bounce that looks good is called a "double bounce, with a raised right cheek." I'm not making this up. It's like a double dip but the second dip---if it does not go as low as the first dip---signals that the market, or a particular stock, will go up more. If you have a triple dip, with two lows that are higher than the first low, it's even better. The market moves up. I think we're about to have a quadruple dip, and the market will rebound nicely.
This means that the market the rest of this week bounces off 11,200. If not, all bets are off.
You can play the whole market---either an index trade on the Dow, DJX, or by buying calls or puts on the DIA, an ETF that owns all of the DJIA 30 stocks. These are called the Diamonds. They have $1 and $2 strike prices. For example, if the Dow is at 11,200, you could practice trade (first to learn how to do this) the DIA $112 or $114 calls. Play is for a double. An old rule of thumb was that if the Dow went up 100, that represented about 50 cents on the option. Check it out and see if it's still true.
Let me know how it goes.
Subscribe to:
Posts (Atom)