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I got into trading and investing because I wanted to build an expertise in financial markets.  I knew the only way to learn is to trade with real capital and dive into the markets with both feet. 

I knew it would help my career in the financial services industry if I developed a trading/investing skillset and pursue the CFA designation.

But quickly realized that many variables have to be factored in to analyze markets and stocks in general.

So, my quest began:

1st component was to learn to trade/invest

• so I started trading with real capital
• I studied great traders/investors on how they achieved success
• And I read many many books about trading and investing to enhance my knowledge.

2nd component was to learn to be an analyst

• For this, I am currently pursuing the CFA designation (Just wrote CFA L2 this June)
• Although it's a very tough program, the CFA curriculum is top notch! and I gained tremendous knowledge and  enhanced my analytical skills while preparing for the exams.

So, is the distinction between the 2 components that significant?

Can you master one component and do well in the markets?  I think it's possible.  But, personally, I think mastering both components gives you a upper hand vs the other market participants.

The diagram below gives you a breakdown of a company and it's stock:

An analyst looks at the real world metrics of a company and formulates an expected stock price based on fundamentals.  A trader on the other hand looks at the technicals to make short term bets on the movement of the stock. 

In the end, fundamentals trump technicals because earnings are what drive a stock price higher.

* – The above diagram is inspired by a presentation I watched by Ralph Acampora explaining the 2 components of analysis

I hope this post was helpful in assisting you to chart a path for your own quest to become a an independent trader & analyst

wow, what a signal from the market that new stimulus from the FED will not be sufficient to provide anykind of relief for the economy.

It is time to go short!  but it's also critical not to get caught.  So, if you're setting up the trade you have to be mindful not to get trapped.

The charts clearly shows familiar patterns like the bearish flag and mini head & shoulders on the daily charts.  These patterns are so obvious for the whole world to see. Therefore, one should be cautious of getting trapped.

Here are the charts: and wow do they speak volumes about the current state of the world and investor's confidence of where things are headed.

If s&P breaks down here, we are head for below 1000 (to 950 – 980) .  Nasdaq is performing a little better and given apple broke out in the last week certainly helps the tech index.

A beautiful bearish flag has formed on the sp500 and that does not bode well for the markets.  Essentially this is a continuation pattern that will possibly take SP500 down to 800-900 area.  The pattern isn't validated until it breaks down through the flag portion.  Will be watching this closely

Here we go again…we continue with the volatility. 

The market put in a 38.2% retracement from it's recent high of 1347 to it's recent low of 1101.  Take a look at the chart below and look at the wide ranging bars posted in the last few weeks.  We have a much wider range (1101 to 1208) for the market to move in and that's exactly why we're seeing so much volatility.

Gold Performing beyond expectations and VIX confirms the move

Gold has hit another record above 1800.  My initial target was 1728 and we are close 100 above that target.  I didn't expect that!  However, looking at the VIX suggests the market is very very fearful and that fear is resulting in buying safe haven assets such as bonds and gold.

VIX is nowhere near 2008 crash levels, it's close to 2010 april/may levels right now.  My hunch is we stay at these levels until he market settles into a new trading range that closely matches the economic situations in the US and Europe.

I bought Wilan (win.to) in the recent downturn. I was surprised to see them announce a hostile takeover bid for Mosaid Technologies yesterday (Aug 17). 

The reason I bought wilan is because patents all the rage these days.  Two significant deals most recently increased the awareness of the importance of patents. 1)  4.5 billion offer for Nortel patents 2) 12.5 billion for Motorola by Google.

I do not know enough of this industry to state an expert opinion.  Here are a few articles that shed light on why patents have suddenly become a strategic asset.

Cnet.com:  Google's 12.5 billion to acquire motorola mobility

Patent Wars: Arm for battle (CNBC)

Personally, I would like to see the Mosaid deal fall apart.  This way both companies will trade at a much higher multiples given both companies have significant patent portfolios.  Wilan currently trades at a forward p/e of 8, still lower than it's industry peers.  By comparison, MSD trades at a 10 multiple.  I believe both these firms deserve a higher multiple but we might have to wait as the market conditions don't accomodate for p/e multiple expansion.  Nonetheless, the floor is set for wi-lan at 5.50 minimum, unless mgmt destroys shareholder value.

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At the height of the credit crisis the junior mining sector suffered huge losses as investors fled the sector as commodities prices dropped like a rock.  

Many exploration companies either ran out of cash or were forced to halt exploration activity to conserve the cash burn.  Also,  producing miners suffered from high operating costs due to high oil prices.  Eventually the sector recovered as markets stabilized and commodities prices recovered.

This time (2011) is different for the following reasons:

1. Precious metals are in the driver seat.  And all gold mining companies are prime targets for takeovers.
2. Oil is at 81 due to concerns about global economic slowdown.
3. US dollar decline will help commodites' prices (inversely)
4. Inflation/debasement of currencies will force investors to invest in hard assets besides gold/silver (like copper)

I'll try to do a more indepth article on this with particular stock names; but for now I want to see how the markets fare tomorrow and the rest of the week.

I live for this S#@t!!!  What a day.  Days like today is what's it's all about.  It's exciting because you can buy good companies for cheap as investors run for the hills.

I was up 20% for the year 2011.  Took a big haircut this past week!!! down -14%.  Still up 6% for the year.  The market downturn has been massive and caught a lot of people by surprise, including myself.  I managed to raise cash and ready to deploy, looking for deals.

My targets (see previous posts) on Gold and S&P both surpassed my price targets.

• Gold -> target 1728 surpassed; SPX -> downside target of 1130-1140 also surpassed. 

This mean I don't know how bad it will get.  However,  I continue to buy stocks that I think will do well the second half of the year. 

This Head and shoulders pattern will be remembered in history.

I've been posting this chart of SP500 since June/July.  Here it is updated for today Aug 8.

This head and shoulders pattern will be remembered in history.  It's one of the best ones ever!!!

I've also been posting this chart for a while now and here it is updated for Aug8.  Just 8% of stocks in the SP500 are above the 200 day moving avg. Is this signaling a bear market?

Aug9 – What I'm looking for:

President Obama tried to assure the market today that united states is still AAA country.  But the market didn't buy it. 

Now it's the FED and ECBs turn to calm the markets.  I am waiting for a policy response by the FED in the next few days which should stabilize the markets a bit.  However, there are no guarantees!  Where is the plunge protection team when you need it?

Avoid CNBC website/TV

Financial journalism mimics the markets so well that you don't really need to watch the news, just watch the tape (market).  CNBC like clockwork brings on the doomsday pundits (roubini, whitney, faber, schiff, rogers) when markets are down big.  And When the markets are climbing they will have asset managers pumping stocks all day long. 

Why you should watch the Tape (market)

After a several down days, the selling will eventually dry up.  This is what I'm looking for,  By that time the best stocks would have rebounded and are one of the first ones to lead the market higher.  That's why it's far more important to watch the tape than listen to experts calling in a bottom.

Wow, two days ago I posted an article suggesting that 'all hell is about to break loose' and here we are.

I posted this chart Aug2 and have been posting it since June.  And cnbc has finally picked up this technical patten (link) 

So where to from here?  This is the scenario (I am betting on) that will unfold the rest of the year. And will likely position the portfolio.

• Any policy response will have to come from the ECB not the FED.  The reason is FED has intervened in the markets via QE1 and QE2 programs.  ECB on the other hand continues to be in denial suggesting that the Euro zone is in better shape than US
• My Bet:  The ECB will respond by cutting rates and hinting an easy monetary policy. 
• The FED can then step in and announce similar measures for the US.

Implications:

Currencies

• I expect a lower EURO in the coming months waiting for ECB to respond to current fiscal crisis in the eurozone.
• The dollar will continue to rally until a further FED announcement of sorts.

Commodities

• Gold/Silver continue to be in the driver seat.  To think that gold is up +40% in the last 12 months is an EPIC statement of the condition of world governments and continuous money printing of the central banks.
  
• Oil/Copper are both economic sensitive and will continue to move with the markets barring any supply disruptions

Emerging Markets

• India/China might face a dilemma between tightening (fighting inflation) and easing once again in the face of another slowdown in world economic growth

I'll try to expand on these ideas a little further.  I want to see how the market opens tomorrow (friday aug 5). 

So far Dow has posted losses 8 days in a row.  I've largely stayed out of commenting on the Debt crisis as I was more interested in positioning the portfolio correctly.  That is, where to make money in these markets.

I've posted these charts several times tracking the markets' progress.  Today I'm troubled as the markets are indicating a major downturn is to come in the next few months.  The levels at which the SP500 settled today (aug 2) is key if we are to rally from here…I'm following SP500 closely, but other indices are indicating the same gloom and doom

The chart below indicates # of stocks that are above 200-day ma.  Until recently, it was encouraging to see it hold above 50%. That changed today!  In summer of 2008,  we went below 30%.

Just to give a broader perspective, here is the same chart as above but expanded to include 2009 march bear market bottom.  It's comforting to know we are not there yet!

TSX continues to rollover

TSX continues to rollover even though Gold/Silver seems to be outperforming everything else.   Here are the stats for the individual sectors within the index.

Notice Healthcare sector has outperformed all other sectors.  That's just due to one stock: SXC Healthcare (SXC.TO) (+35% ytd)
Notice Information Technology sector is the worst performer this year: That's due to Research in Motion (-50% ytd)

So, where to find oppurtunities in this market? I will cover that in the next post.

Looking at the previous two runs, gold looks like it wants to run 1720 – 1730 area by the end of this year.  It's so charged up right now that anything can start an explosive move in the metal and in silver as well.  Although gold is currently outperforming silver, in the long term silver is a better investment. 

The debt deal is supposed to pass today Aug 2.  Regardless of it's resolution.  Investors will continue to flock to the safety of gold & Silver as they lose confidence in paper currency and government's ability to control the country's fiscal matters.

The Uranium sector completely collapsed after the nuclear disaster at Fukashima Nuclear Power Plants back in March.  Many stocks fell by more than 50% from their peaks.  It's been 5 months since the earthquake and these stocks look to have bottomed.

Good (positive) news seems to be slowly trickling in.  All we need to need is one positive news release either by govts endorsing nuclear power once again or analysts recommending this sector once again.

I will do a more detailed post in a few days