Seasonal Bias?

Normally I am a big believer in seasonal bias but I also believe that we are in a long term secular bear market and that should take precedence over all else. This means that we should be extremely careful in guarding our capital as a secular bear market will strike when we least expect it and in ways that we least expect.

A major theme for me is that we have only seen one other true secular bear market in U.S. Stock market history and that started with the crash of 1929 and bottomed in July of 1932. This time will be different, of course, but will use the same tactics.

One difference is that it will be longer in duration. The run up to 1929 with 8 years; the run up to 2007 was at least 25 years and possibly 33 years, if you consider the secular bull market as having started in 1974. This suggests a minimal bear market of 7-8 years with a possible 10-11 year correction. But I believe we can also take a longer term view of the secular bull market as having started in 1932 and that we may see an extended slow growth period that lasts until 2030. This fits in well with our demographic issues.

But back to the seasonal issue: If you look at the decline from 1929 to 1932 you see that there really are no clear seasonal biases. An argument to that is that because the decline was so steep over such a short period of time that the stock market simply did what it had to do to get where it had to go while this time around the decline is much more leisurely. The counter to that is that the stock market must use everything at its disposal to destroy wealth and that it seems that we are starting to see unusual seasonal moves. The low in July makes sense but prior to that and since then we have seen the market move in seasonally unexpected ways.

They only answer up front is to protect your capital. When you take a shot at a short or a long, make sure you have a clear exit strategy.

--Fred

Patience No More

I will be all in on the short side here within the next few days...just looking for the best entry point(s).

--Fred

The Week Ahead

I expect to take a position in SDS if and when the S&P hits 1,218, with a two percent stop.

--Fred

http://www.acclaiminvesting.com

Staying Focused & Solvent

At this time I am out of the stock market and simply waiting...

I believe that to become a good stock trader one must hone their skills just as an athlete or salesman would. One of the most important traits on the road to success is being focused and when dealing with the stock market it is easy to become distracted by those who truly believe in a particular stance and those who simply have been trained to keep you bullish on whatever they are selling.

A year and a half ago I stated several times publicly that I believed the stock market would likely "close the gap" up to the July 2008 lows around 11,000 on the Dow. At the same time I continued to trade with a bearish bias; why did I do so? There are a number of reasons but the main one is that I knew that our troubles are long-term and when someone would state a bullish stance I felt the need to correct them...BIG MISTAKE because this got my ego involved and got me distracted from the trade.

Another reason is that I listened to too many smart people who make a living out of voicing their opinions. I don't mean Jim Cramer, I mean Richard Rusell and Gene Inger, both people I respect but I have found out that neither are good for me as a trader because they are selling a service and that service really has little to do with stock trading.

To make a long story short I now make every effort to look at the stock market with total objectivity and I always keep in mind that, "the market can remain irrational longer than I can remain solvent."

--Fred

NY Fed Manufacturing Index Takes a Dive

http://globaleconomicanalysis.blogspot.com/2010/11/ny-fed-manufacturing-survey-new-orders.html

The above report on the NY Fed Manufacturing Report came to me from Mish's blog, always an excellent source of information.

But how does this factor in to the trade? For a long time now it seems that the stock market has been levitating way above where it should be. Yes, I expected the DJIA to reach the 11,000 level before resuming the secular bear market and it did so right on cue, but since August of this year the stock market has been on a tear that made little sense, except, of course, for the affect of Quantitative Easing.

But now that that has been front ran and all the little guys have been suckered in it seems like all the dominoes are lined up perfectly and even the slowdown warned about by Consumer Metrics seems to be finally showing up in the official economic numbers.

LOOK OUT BELOW!

--Fred

Stopped Out - Flat Trade

I was stopped out of the SDS trade initiated earlier today, resulting in a flat trade, with no loss and no gain to speak of. My sale was a bit higher than the buy but just barely made up the commission.

I'm prefer that as I do not want to be in the market over a weekend unless we are really building to a panic and the price action today suggest we are not quite there.

I will also point out that historically, buying about two weeks prior to Thanksgiving offers a positive bias, so let's see how next week goes.

--Fred

Stock Market Trading: Short Via SDS

I've decided to start fresh on this blog now that I've moved from my hosted site to blogger.com.

Today I took a 50% short position in SDS at $26.40 with a stop loss order at $26.20.

Reasons: Extreme bullish sentiment according to Investors Intelligence and AAII; entering the weekend with a potential panic developing over the European debt issue and currencies wars; over extended stock market; longer term bearish expectations in the macro economy based on Consumer Metrics Institute data.

Adjusted stop loss to $26.45 at 11:26 PST.

--Fred