Don't let a Spring Break "break" you.
Tuesday, March 21, 2006 | Teeka TiwariRating:
Spring can be a rough time for stock prices. And even though we're seeing good action in the big indexes, the broad market is looking a little peaked. Outside of energy and metals, I would be very cautious here. To this old trader, the broad market looks like it may be ready for a little spring "break" of its own.
I'm not talking about an orgy of destruction, but a nice broad thwack nonetheless.
Could be some good shorting opportunities for the more fleet-footed.
Just recently, Fannie Mae came out with more mea culpas … keep an eye on this situation; these guys are so hard-wired into the economy that even a mild stumble could have far reaching repercussions.
We've seen a significant breakdown in the technical picture of the US dollar, and it looks as if the dollar bear market is set to resume.
This should provide a nice cushion to all commodity players out there, especially in gold and oil. (Global commodities are priced in US dollars. The lower the dollar goes, the cheaper oil, gold, copper etc. becomes to other countries, because they can buy more dollars with their home currencies which in turn spurs greater demand which ultimately leads to higher prices.)
Those of you that know me know that I'm no fear mongerer.
What I'm seeing, however, are my broad market short-term indicators all going negative.
Again, I'm not looking for a complete meltdown, and what I'm doing now is putting together a shopping list of my favorite "names."
If the market does take a short term hit, I'm going to be ready, and so should you.
A strategy that has served me well is to buy into market declines when my favorite "names" pull back to their 200-day moving averages. These usually prove to be excellent entry points.
Is it perfect?
No, but nothing about this game is, always remember that.
Market pullbacks should not be feared, they should be welcomed.
Admittedly, it can take the starch out of a fellow to see his portfolio roughed up by a particularly bad day in the market. But if you're in good names (holding quality stocks), and playing multi-year trends, then the natural ebb and flow of the market is a necessary "evil" that we as investors require in order to make truly spectacular gains on our stocks.
Remember that pullbacks are integral to a healthy market; you need them for a sustained bull run. Each pullback washes out the weak hands in a stock and sets the stage for the next move higher.
Intellectually, in the comfort of one's study, this is simple to understand … but under the unrelenting "guns" of investment war it is much harder to put into practice. And that is why the profit potential exists in the stock market.
The stock market rewards patience, forbearance and calculated risk-taking.
And it punishes indecision, irrationality and emotionalism.
Don't let it punish you. The big picture is a bright one, the global economy is BOOMING, and the opportunity to make a fortune in the stock market is open to EVERYONE.
(Yes, EVEN YOU!!)
"Let the Game Come to You."
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Teeka Tiwari
Chief Investment Officer
ETF Master Trader
