Web Statistics The Sentiment Trader

Sunday, 29 November 2015

losing money in the stock market

are we in a bear market


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losing money in the stock market ?

losing money in the stock market
losing money in the stock market

Losing money in the stock market is never fun. When your risk is unlimited and the potential profit is small, it may not make sense to go to sleep on a short sale.

Shorting a stock is a bet that the share price will fall. Traders borrow securities and sell them, expecting to buy them later at a lower price and then return the stock to the lender. Then they roll around in their money.

Unless things go wrong somehow.

A very unlucky trader for whom something did go terribly wrong was profiled on MarketWatch on Friday.

Apparently, this gentleman had $37,000 in his brokerage account and at least 1 short position -- in the pharmaceutical company KaloBios Pharmaceuticals.

Before Nov. 19, the chart for KaloBios looked like a flat line. The stock was worth only a couple of bucks. The company was floundering. Flailing even. Things were not looking good.

But then, as the trader turned his attention elsewhere, the price went straight up in after-hours trading as a takeover happened. An infamous pharmaceutical CEO purchased a majority of KaloBios shares and the price quintupled between the close on the 18th and the next day's opening price.

His name is Joe Campbell, and he claims he went to bed Wednesday evening with some $37,000 in his trading account at E-Trade. One notable development on the pharma front later, and Campbell woke up to a debt of $106,445.56. Now, he may end up liquidating his 401(k). And his wife’s.

That’s where you come in. At least where Campbell desperately hopes you come in. Of course, sympathy in the trading community over such gaffes is typically in short supply.

His is a cautionary tale of getting caught on the wrong side of one of the riskier bets on Wall Street. When you’re long, the worst you can do is lose is everything. But when you’re short, everything and a lot more is at stake. He should have known better, no doubt, but you have to feel for this poor guy.

This is what a true trading nightmare looks like:

KaloBios KBIO, +30.79%  stock had exploded, running up about 800% at one point in late trading after Turing Pharmaceuticals CEO Martin Shkreli (yes, THAT Shkreli) gained control of a majority of the shares. KaloBios had announced last week that it was winding down operations because it was running out of cash while developing two potential cancer drugs.

Here is the chart that was staring JOE in the face after he got short. You can see the chart below. He got short [or betted against KBIO ] right before the price skyrocketed. OUCH!

Now the short seller owes E-Trade $106,446, MW reports. Or, slightly less now, as he set up a GoFundMe account to solicit donations to cover his mistake. Generous donors gave him about $5,000.

There's a good lesson here: Don't short stocks. Unless you can really afford to lose.

The very idea of short selling makes my stomach hurt. You tell me. Short selling: Good idea or not?

This is what apparently happened, as Joe explains in his GoFundMe plea. This is what he said, when he posted.

“I was holding KBIO short overnight for what I thought was a nice $2.00 fade coming,” he wrote. “At the close of the bell I saw the quote montage clear out and figured today there was no action after hours in the stock. So I went to my office for a long meeting. I got out of the meeting and saw a message from one of my buddy’s, he asked if I was ok since I was short KBIO.”

So now Campbell is coming to the community for some help. Good luck.

his latest comment was : “If you don’t want to donate I understand, at least read my story of what happened today and protect yourself from the same happening to you!” he wrote. “This is a terrible lesson for me but if this helps just one person than I’m happy I wrote this.”

In all my years, you see horror stories like this all the time. It happens, and you will never be able to tell who is good, and who is going to be bad in this game. All I can say is that technology makes it very easy to put your money anywhere, but by god, you better have a good plan. You see not everything out there is solid gold, while people have this rendition in their head that they will click a few buttons and make a shit load of money, it simply just does not work like that. 

With careful planning one can do really well. And with the rapid development in the social trading, and other technologies, one could make a mint in the next 5 years if you knew what you were doing.  You just have to sit down and think in your own mind, what are the risks I am taking and is this all worth it. But basically when all is said and done you must be able to show assertiveness and awareness by coming up with a short term plan and longer term plan. In all my years, people that set goals, and have a plan and then work that plan each and every day. These are the people that usually succeed beyond their wildest expectations. 

 I cover more and more technical analysis ==> HERE in our VIP members section.


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Sunday, 22 November 2015

should the fed raise interest rates

are we in a bear market


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should the fed raise interest rates ?

The questions that our => MEMBERS HERE, keep asking us is ' should the fed raise interest rates ' or should the fed raise interest rates in 2016?

The Federal Reserve sent out new signals that officials will raise interest rates in December as long as job growth and inflation trends don’t take a turn for the worse.

Most officials meeting last month anticipated that December “could well be” the time to lift short-term rates after leaving them near zero for seven years, according to minutes of their last meeting three weeks ago, released Wednesday.

Any rate increase would be expected, well telegraphed, and signal a more positive Fed view on the economy. Early rate increases have historically been good for the market, and we would expect that to continue. I guess when you look back in history that has always occur, but past results are not indicative of future results, but we must take this into account.

Officials changed the wording of their policy statement at the October meeting—adding a reference to the possibility of a December increase—to ensure their options were open. The Fed has been waiting to see further improvement in the job market and to gain confidence that inflation, which is running below its 2% target, will start moving up.

“Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, these conditions could well be met by the time of the next meeting,” the October meeting minutes said.

Since the Fed’s October gathering, economic data have generally supported the central bank’s view that the job market is improving and offered some evidence wage and inflation pressures are slowly and gradually starting to build.

The U.S. central bank has now warned about rate increases so many times that investors appear to be getting used to the idea. Raising the cost of borrowing typically sends stock prices tumbling, but stocks rose Wednesday, a sign that a rate increase is already priced into markets.

The Dow Jones Industrial Average rose 247.66 points, or 1.4%, to 17737.16 Wednesday, registering its biggest move up after the Fed’s announcement at 2 p.m. Eastern time. Investors appear to have been comforted by Fed officials’ assurances they are likely to proceed slowly and cautiously after the first move, a message they amplified in the latest release of minutes by detailing discussions about the exceptionally low long-run outlook for rates.

The markets are rallying over the idea that they are not going to be raising rates very fast, so some traders minds have been put at ease, and SENTIMENT TRADER does like that. The funny thing is that rates are basically as low as they have ever been, so it is inevitable, that rates will have to rise soon. There are no two ways about it. If you do not believe that, we have included a chart below that depicts what interest rates have done for the last 60 years. The chart is particularly interesting.......

You can see below on the chart, below, which is pretty interesting. You can see the rapid inflation and skyrocketing interest rates back in the 1980's. Since then, we have not been this low since the 1950's. So as you can guess I seriously doubt interest rates can go lower than where they are. There is only one way for interest rates to go, and that way is UP!

should the fed raise interest rates
should the fed raise interest rates

And wouldn't you know it, plenty of stock uncertainty is in the mix. Already, choppy global stock trade colors the week that puts the U.S. Fed—and its hand-wringing interest rate decision—smack in the spotlight.

Last week, the broad-based S&P 500 (SPX) logged a 2% gain  while the blue-chip Dow Jones Industrial Average ($DJI) rose 2.1%. It was a solid performance considering that higher Fed rates have implications for global profits, business borrowing costs, housing markets, and the relationship between fixed income and equity investments.

Which Way Will They Go?

As recently as early August, the Fed funds futures market was pricing in a better-than-50% chance that the first Federal Reserve interest rate hike since 2006 would come in September. Then, a spate of worrisome Chinese economic data and subsequent stock rout, a washout in global commodities prices, and other factors likely fueled a Fed policy rethink. As this week kicks off, Fed funds futures odds for a September rate hike stand at about 26%.

Predictions are mixed among industry economists, too. A slight majority has said it expects the Fed to hold off, but quite a few consider the decision a complete toss-up. Former Treasury Secretary Lawrence Summers has been a notable voice against a hike just now. But remember, the latest employment report included an unexpected drop in the jobless rate to 5.1% with relatively healthy job growth. The government also nudged up Q2 GDP growth in a revision, now at 3.7%. Inflation? Not a real problem yet.

All told, the global interest-rate differential will keep currency markets under watch. Dollar strength is likely to continue to factor in the U.S. earnings picture, hurting multinational profits.


The CBOE Volatility Index (VIX), the market’s “fear gauge,” has slipped below 25 as the broader stock market has steadied. VIX is logging smaller intra-day moves in recent sessions.

Commodities Are a Factor

It could be interesting to see how much lip service the Fed gives to the global commodities retreat. Europe-traded Brent and U.S.-traded West Texas Intermediate (WTI) have declined in 9 of the past 11 weeks.

What’s more, a handful of banks have joined Goldman Sachs in pushing down their crude price expectations. Among them, Jefferies lowered its 2015 forecast on Brent oil by 9% to $54 per barrel and by 10% for the 2016 forecast of $61 per barrel.

Behind the scenes of the October meeting

The meeting minutes indicate that, "Some participants thought that the conditions for beginning the policy normalization process had already been met" in October. "Normalization" is Fed-speak for raising benchmark interest rates from record-low levels.

Even more telling, the document says, "Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, these conditions (for a rate hike) could well be met by the time of the next meeting" in December.

Federal Reserve Bank of Richmond President Jeffrey Lacker told CNBC that he still believes the central bank should hike rates. He dissented from the group in October because he wanted to raise rates then.
Rob Kaplan, the new president of the Dallas Fed, says it's time to move away from zero interest-rate policy. The benchmark federal funds rate has been parked at between 0% and 0.25% for years.

Federal Reserve Bank of Cleveland President Loretta Mester was quoted telling a New York panel that she believes the U.S. economy can "handle" a quarter-point rate boost in December.

Since the October meeting …

A whirlwind of events has occurred since the Fed last met. The world was shaken by the deadly terror attacks Friday in Paris and ensuing heightened tensions. There’s no indication, however, that the seemingly modest economic impact will compel the Fed to delay a rate boost.

Indeed, the Richmond Fed's Lacker has said, "We've been through episodes like this before in which some disruption of a certain geopolitical or military nature affects things. For a time, people can get cautious and pull back a little bit. These tend to be transitory."

Earlier this month, the Labor Department reported that employers added 271,000 jobs in October, substantially more than expected. Wage growth, or average hourly earnings, was reported to have accelerated, up 2.5% over the past year. There's one more jobs report due for release before the Fed's last scheduled meeting of the year, Dec. 15-16.

Stocks holding up

The stock market has appeared to embrace the seemingly growing possibility of a rate hike. The major stock averages remained in positive territory after release of the hawkish October minutes on Wednesday. SENTIMENT TRADER do find this interesting and we  believe stocks could see higher prices no matter what the fed does, of course we can be wrong, so we will see what happens.

It is a real shame that we hear people crying out on the street that the market is about to crash. Sure there are some problems, and some risk associated with a low rate environment. But then again, what you must know is that when interest rates have cycled from a low rate environment and start lifting it has presented some very nice trading conditions, and furthermore has been a period where professional traders and institutes have been able to spot 300% more opportunities. So there is no reason to be all BEARISH, and ALL PESSIMISTIC here.

Also you must remember that the FED have basically painted themselves into a corner now, which means, they have left rates too low, for far too long, and that means that they cannot raise rates to quickly or it will mean death to the stock market, and they have already warned us that that is not what they are going to do.  So if they do start lifting rates slowly, its going to make trading conditions favorable, and leave us with lots of vehicles to trade. If you look back over the last 40-50 years, any time the fed has raised rates slowly from the all time lows, it means there was lots of opportunities both short term and long term. We can already see the beginning signs of that, as many large funds and institutes are starting to slow sniff and get excited about YIELDS and some of the FINANCIAL sectors. Because if you are unaware, these sectors normally do particularly well, as rates start to rise.  But we talk more about that in our FULL REPORTS below. 

 I cover more and more technical analysis ==> HERE in our VIP members section.


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Monday, 16 November 2015

are we in a bear market

are we in a bear market


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Are We In A Bear Market ?

The questions that our => MEMBERS HERE, keep asking us is ' are we in a bear market ' or Are we in an early stage bear market or a late-stage bull market?

This seems to be a complicated subject I guess, and while no one is an accurate subject we do have a few charts that seem to be giving us a huge advantage in trying to answer this tricky topic.

A bear market in stocks generally undergoes three stages.

Source :  MarketWatch


The first is confusion: The market stalls, and its direction sways back and forth as investors are divided as to whether it is a correction amid an ongoing bull market or the beginning of a new bear market.


In the middle stage, the market falls steadily and orderly as investors acknowledge it is a new bear market.


In the final stage, the market decline accelerates as investors capitulate.

We do not think that today’s market looks  like the early stage of a new bear market, although the economic backdrop doesn’t seem like it would support a severe or lengthy one. Even though the S&P 500 Index hit an all-time high of 2,134.72 as recently as May 20, it mostly has been stuck in a narrow range (between 2,050-2,100) since December.

The most important chart here does not really seem to suggest we are in the start of a BEAR market at all. Of course we can be wrong, but normally when you see the start of a BEAR MARKET, you do not see such VIOLENT and QUICK recoveries! See the chart below. You can see we had a HUGE sell off of 300 points, from 2100 on the S&P right back down to nearly 1800, and then a swift and quick rally back up to the old HIGHS!

are we in a bear market
are we in a bear market -  large sell off has recovered!

I can hear the cries on the street right now, by many analysts saying that the HUGE dip we saw in AUGUST on the CHINA news is the start of a bear market, and we are experiencing a dead cat bounce before a HUGE crash that will come in 2016.

I guess that is just a guess, because right now, when you sit back and take a look at things intelligently that sell off in AUGUST might have just been an extremely good opportunity for bulls waiting for their DIP to get back into the market, and make off like bandits. I mean, if you did take that sort of action, you would be sitting back in the pool sipping on your martini smiling, while others out there are perplexed and confused to exactly what is going on?

Just quietly, the charts we are looking at now, seem to suggest, that the bull market that started back in 2009, is not done just yet, so do not hold your breadth. Just 2 months ago, many people were calling TOPS and DROPS and saying this THE "EFFING" END OF THE WORLD COMING!..... LOL

Then you fast forward several weeks, and the S&P is back up at the old highs of 2014. That was one hell of a rally, we just saw if you don't mind me saying!. Of course the market has died down a little, but it seems like its way to early to write off the bulls just yet.

The recent market rout pushed the S&P 500 down to as low as 1,867.01 on Aug. 24, a 12.5% drawdown that exceeds the 10% threshold generally regarded as a correction. This is the first market correction since 2011, which occurred during the U.S. debt-ceiling crisis. The market has recovered somewhat, and based on the closing price Sept. 15, the S&P 500 needs to fall another 13% to reach the 20% drawdown threshold generally considered to be a bear market. Although we are less than halfway there, the correction-versus-bear-market debate has heated up. So are we already in the early stage of a bear market?

It’s only in hindsight, when we look at the data, that we know for sure the exact moment when a bear market began. Past recessions have been blamed on a variety of reasons, from Internet investors going crazy during the dot-com bubble to a complacent Federal Reserve ahead of the Great Recession. But as anyone who has experienced these periods can attest, no one really knows for sure when recessions begin, not even the almighty Fed. It is my belief that it also is important not to get hung up on numbers like 10% for a correction and 20% for a bear market. Investing is not an exact science, and these numbers serve only as guidelines, unlike the temperature at which water freezes. And whether a market is labeled “correction” or “bear” may not concern investors: a 19.5% drop is just as ugly as a 20% drop.

Here is the upshot to that. If the S&P 500 indeed dips below the 20% drawdown point due to market volatility, and thus enters into bear territory, it might be the perfect time to buy.

Unlike recent market downturns, which were shallow and short, this decline indeed feels different. We can blame Greece, China or even the Fed, but I feel the fundamental reason for this downturn is that the stock market had become expensive after more than a six-year, near-non-stop advance, in which its value had more than tripled. With the Fed’s interest-rate “lift-off” approaching, it is hard for investors to justify paying up for risk assets (any asset that carries a degree of risk). During previous market sell-offs, including the scary 2011 U.S. sovereign-debt crisis, investors took advantage of those downturns to scoop up stocks because they were still cheap and thus worth the risk. That may not be true anymore; today’s price-to-earnings multiple, based on $118 for 2015 earnings, is still a hefty 16.7.

There are two ways for stocks to become cheap again: Prices must fall or corporate earnings must rise, assuming stock valuations are unchanged. With all the volatility and anxiety caused by the recent market rout, stock prices now are 7% cheaper than at their peak, a relief for a stock market in which the fundamental issue was rich valuations. With 2016 consensus earnings projected at $130 per share for S&P 500 companies, the S&P 500 forward price-to-earnings ratio is 14.8 — very much in line with the long-term average of 15. If the stock market really enters bear territory (below the 20% drawdown point of 1,707.87), and earnings projections hold, then the S&P 500 will trade below 13.2 times 2016 projected earnings, once again becoming a bargain.

The current data suggest that the 2015 stock market is much different from the 2007-2008 Great Recession and the 2000 dot-com bubble (the previous two bear markets). In 2008, there were systemic risks in the entire financial system; in 2015, economic fundamentals are much healthier. In 2000, stock valuations reached absurd, stratospheric levels; in 2015, stocks (even though expensive), are still within sensible territory. The current economic environment and stock valuations simply do not portend a full-blown bear market.

The upshot is that if the S&P 500 indeed dips below the 20% drawdown point due to market volatility, and of course that COULD happen. That would probably  enter us into bear territory, it might be the perfect time to buy. With a full-blown bear market a remote possibility, there will be little impetus for the stock market to keep declining after a 20% fall, as it already will be a relative bargain. Lots of people are confused, but perhaps this clears things up a bit for you?

None of this rules out the effects of a rate increase by the Fed or further erosion of China’s gross domestic product. I mean that could happen too. When investors get spooked, it can be difficult to predict their behavior. But once the dust settles, prudent investors will look at market fundamentals and take advantage of relative buying opportunities. Solid earnings and reasonable price multiples have been stalwarts for investors in past cycles. There is no good reason to assume they won’t again serve to keep the bear in his cave.

It just seems that the exact time the market suffers a drop, and the bears do come out of their cave and prophecy THIS IS THE END OF THE WORLD, and SCREAM from the rooftops about a MARKET CRASH for the ages, if you look back over the last 7 years, when they got highly negative, and predicting bad things, it was a perfect time to BUY or GET BACK in the stock market!!!!! If you took this course of action, you will be in serious profits so far. Just saying!

So in total, I would say that we are NOT in  BEAR MARKET, or in the beginning stages of a BEAR MARKET. But it could come soon, and we are even open to that idea. But for now, we must follow and watch the charts carefully as the volatility increases in the global market environments.

In conclusion, we could be right in the Beginning of new reset bull... I guess there are several points above that now basically tell us that we are IN FACT NOT IN A BEAR MARKET! That would be our prediction, but we might be coming to the latter stages of a bull market. I mean our members has done ridiculously well since 2009, at a time when everyone else was screaming the market was about to crash, our indicators back then, said a MULTI-YEAR bull market was on the way. Here we are years later, and that turned out to be very true. 

Now we are in a market environment where lots of BULLS and BEARS are totally confused and I can tell you that its creating HUGE PANIC, but not only that, its also creating HUGE OPPORTUNITIES going into XMAS. Most people forget, when other people see PANIC, and VOLATILITY, smart people see BARGAINS and OPPORTUNITIES for the plucking. As a trader, timing is everything, and right now we are coming into a time where someone who knows what they are doing, can make the next 12 months very profitable. 

 I cover more and more technical analysis ==> HERE in our VIP members section.


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