oldprof

All articles by oldprof

 

Weighing the Week Ahead: Is the Housing Rally Over?

With soft housing data last week and higher interest rates expected, it is a good time to ask: Is the housing rally over? Last Week Recap The big economic news last week was the Fed policy decision and guidance. Friday’s announcement of the Amazon purchase of Whole Foods grabbed the headlines. Attorney General Sessions’ Senate
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Stock Exchange: Can Psychology be Applied to Market Behavior?

Our Stock Exchange is all about trading. Each week we do the following: Discuss an important issue for traders; Highlight several technical trading methods – including current ideas; Feature advice from top traders and writers; and, Provide a few (minority) reactions from fundamental analysts. Our goal is to be both educational and fun. We welcome
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Weighing the Week Ahead: Is it Time for New Leadership?

Friday’s eye-opening decline in the strongest gainers for 2017 has many people wondering: Is it time for new market leadership? Last Week Recap The big news last week was the Comey hearing and speculation about what it meant. Markets have not been reacting to the political news, but it still commands media attention. CNBC provided
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Stock Exchange: Buy the Dip (VOYA) or Buy the RIP (DPZ)?

The Stock Exchange highlights the results from different technical trading methods. We also provide contrast, and often dissent, from a fundamental analyst. While the methods sometimes agree, our emphasis is on trading. Review Our last Stock Exchange took up an important question – how to deal with a losing trade. Any trader who has not
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Weighing the Week Ahead: Is the Bond Market Sending a Message for Stocks?

After the news-heavy calendar last week, there are few market-moving economic reports in the week ahead. It is also the quiet period for the Fed. How will the punditry fill those empty minutes? Last week’s trading revived a question that many find puzzling. I expect pundits to be asking: How can bonds and stocks both
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Possible Changes in WTWA

I have been considering some changes in my long-running WTWA series. While it is working well for its main function – focusing my own thoughts and communicating with clients and followers – some changes might make it better. It takes a very long time to prepare. I also find that many of my colleagues, who
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Stock Exchange: How to Deal with a Losing Trade

Each week the Stock Exchange highlights the results from different technical trading methods. We also provide contrast, and often dissent, from a fundamental analyst. Usually we get to celebrate winners and consider new picks. This week a couple of our participants need to face the music, discussing a losing choice. Review Our last Stock Exchange
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Weighing the Week Ahead: Will a Big Week for Data (finally) Bring Volatility?

The holiday-shortened week ahead features many economic reports, including the most important. The biggest news is at week’s end, so both market participants and pundits will have time to settle in after the long weekend. When they get around to the calendar, I expect many to be asking: Will we finally see some volatility? Last
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Stock Exchange: A Fresh Look at Health Care and Biotech

Each week the Stock Exchange highlights the results from different technical trading methods. We also provide contrast, and often dissent, from a fundamental analyst. It is always interesting when we find a pick where multiple methods agree. This week the entire group gives the nod to health care stocks, and there is even some fundamental
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Weighing the Week Ahead: Will the Fed Change Course?

We have yet another quiet week for economic reports, and it is in front of a holiday. Don’t worry. Pundits will find something to fill the empty time and space! It is possible that we will have another week of political stories, but I expect a shift. Many will find it time to digest the
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Stock Exchange: Time to Buy the Dip in IBM?

Each week we highlight the results from different technical trading methods. We also provide contrast from a fundamental analyst. It is always interesting when we find a pick where multiple methods agree. This week, two different approaches choose IBM. Review Our last Stock Exchange featured multiple stock ideas from our group. That is normal with
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Weighing the Week Ahead: Should Investors Fear Another Watergate?

We have a very quiet week for economic reports. The housing data are quite important, but it will be a Tuesday story without legs. The White House drama will be compelling for the media. Whether investors like the idea or not, we should expect another week of news that is mostly political. My mission at
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Stock Exchange: Experts Disagree on Big-Name Stocks

Last week we highlighted a rare consensus among our models and our guest expert. The result was a very successful pick. Readers have often asked why there is so much disagreement among our models. The essential reason is simple. Each has a different method, and they rarely align. This week there is no consensus, but
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Identifying “Hard” Data

During recent weeks, much of the punditry has suggested a sharp difference between “hard” and “soft” data.  The former seems to show sluggish economic growth while the latter paints a more optimistic picture.  The general distinction seems to be that surveys are “soft” and other data are “hard.”   Results are rather arbitrarily placed in one
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Weighing the Week Ahead: What is the Message of the Market?

We have a quiet week for data. The ObamaCare drama is finished for now. The Fed meeting is over. Earnings season is past the peak. Don’t worry! The punditry will find something new. Analysts will look deeply into the charts and ask: What is the message of the market?   Last Week Last week the
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Stock Exchange – Four Thumbs Up for Nvidia!

Readers have often asked why there is so much disagreement among our models. The essential reason is simple. Each has a different method, and they rarely align. This week provides a rare opportunity to illustrate this, while also showing the process for each model. That would already make it one of our most interesting posts
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Weighing the Week Ahead: Can Employment Continue as the Engine of the Economy?

Market data has remained mixed.  The weak Q1 GDP is not consistent with some of the most important measures.  This week I expect pundits to be asking: Will the jobs report signal continued strength? Personal Note In response to reader interest I am trying to do an abbreviated WTWA when I am away.  I will
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Stock Exchange: How to Use Backtests Effectively

  Everyone interested in managing their own money ought to keep an old idiom in mind: if it seems too good to be true, it probably is. Unfortunately, greed is a powerful motivator. It’s tempting to see a new model with an incredible backtest and think this could be the answer. Experienced investors know that
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Stock Valuation and Occam’s Razor

Among competing hypotheses, the one with the fewest assumptions should be selected. William of Occam   The use of this principle is valuable, but not completely determinative in science.  It often has an important application in investing. Let us consider two hypotheses. A method of valuing markets that relies upon backward-looking data, looks at replacement
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Weighing the Week Ahead: Time to Rebuild the Wall of Worry?

As some market worries have been put to rest, there is a growing appetite for new ones. Pundits who say that things look OK are not very exciting. Last week we saw a shift in attention. Despite healthy earnings and good economic data, I expect pundits to be asking: What should investors be worried about?
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Stock Exchange: Long-term (Energy) and Short-term (Finance and Software)

Every trader has a method linked to a time frame. Our group has some new ideas, but the members are sticking to their guns on some positions. Long-term viewpoints emphasize an economic rebound, with materials and energy stocks leading. Short-term methods show opportunities in financial stocks and software. Review Our last Stock Exchange discussed contrarian
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Weighing the Week Ahead: How Should Investors Cope with Geopolitical Risk?

Last week I suggested that the market might be ready for some real news—corporate earnings. That is still a key topic, but attention is focused on world events. Pundits will be asking: How Should Investors Respond to Geopolitical Risks? Last Week Last week the economic news was good, but mostly ignored. Theme Recap In my
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Stock Exchange: Three Contrarian Ideas

Every trader wants to be a contrarian. You get to be the “smart money.” You buy low and sell high. Buy the dips and sell the rips. Contrarians may not always be right, but they certainly get attention. Brett Steenbarger, everyone’s favorite expert on trading, did a study of this in 2006. He compared two
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Are You Fooled by this Chart?

Throughout the big rally investors have been bombarded for reasons not to join in.  It is very profitable to play upon fears.  You then sell page views and advertising, conferences, gold, annuities, or fancy structured products. I have taken a much less popular path – trying to educate investors.  Even though the issues at hand
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Weighing the Week Ahead: Will an Earnings Surge Revive the Stock Rally?

Are you ready for some real news? How about corporate earnings? While there is some economic data on tap, the Q1 earnings season starts in earnest this week. With questions about economic strength, the dollar and the Fed in mind, pundits will be looking for fresh data. They will be asking: Can resurgent corporate earnings
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Stock Exchange: Finding Trading Ideas in a Low Volatility Market

Ted Williams was a terrific ball player, but he had one tactic that many found…questionable. He almost never swung at the first pitch. Many short term traders and individual investors could take a lesson. The market has been dragging sideways for weeks. Volatility is low. There’s a great temptation to force in a few trades. It
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Weighing the Week Ahead: What Can We Learn from the Trump-Xi Meeting?

We have a big economic calendar and potential Fed news. Those stories will take a back burner this week. My safest prediction is that we are about to see a new rash of China experts both in print media and on CNBC! These freshly-minted pundits will be asking: What will the Trump-Xi meeting mean for
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Stock Exchange: Are You Guilty of Voodoo Chart Reading?

Michael Kahn, a leading technician and columnist, provides the inspiration for this week’s Stock Exchange. In a recent post he take on a quest: Unmasking the Voodoo of Chart Reading. This topic really hits home with our Stock Exchange Group. Since they cannot explain their methods in great detail, outsiders sometimes think of them as
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Headline Spin — Recession Forecasting is Back!

Investors have learned from both data and personal experience that business cycle peaks (popularly known as recessions) are associated with the most important stock declines. It is natural that any news about a possible recession gets extra attention. There are so many sentiment measures – surveys of different populations, including non-investors – that it is
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Weighing the Week Ahead: What Does the Health Care Decision Mean for Stocks?

The economic calendar is light, but it really would not matter. The defeat (via retreat) of the effort to replace Obamacare will dominate financial market stories this week. The pundits will be asking: What does the health care decision mean for stocks? Last Week Last week the news was mostly positive, but irrelevant. Markets were
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Stock Exchange: Trading in a Time of High, News-Driven Risk

Many seem convinced that market risk is elevated – perhaps at an all-time high. I know this from contacts on my vacation, where I see many high-net worth people, messages from my clients (an intelligent and cool-headed lot), and even some objective measures of angst. Whether it is uncertainty about the new President and policy,
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Stock Exchange: The Role of Valuation in Trading

  Investors who use valuation do it in an absolute sense — the way we do in our Great Stocks program — but what about traders. When the market sets a price that is much different, it reflects broad-based opinion that the typical valuation method is not accurate. Our models sometimes pick that up. Our trading model
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Stock Exchange: Can Humans Compete with High Frequency Traders?

Many individual investors have been frustrated by the growing prominence of High Frequency Trading. Complicated algorithms can process new information and react in fractions of a second. It sounds intimidating, and in some sense, it is. Individual Investors would be poorly suited for direct competition. Instead, stick to what the market is giving you. The
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Weighing the Week Ahead: Will a More Aggressive Fed Derail the Stock Rally?

The economic calendar is light until the Friday employment report. Most of the punditry are still digesting the more aggressive talk in the recent speeches from Fed participants. With many observers expecting a correction and looking for a catalyst, pundits will be asking: Will a more aggressive Fed derail the rally in stocks? Personal Notes
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Stock Exchange: How to Trade an Overbought Market

For the last three weeks, the term “overbought” has been frequently used to describe the overall market as well as many specific stocks. What does this really mean? It has a dangerous sound, and that is indeed the common message. A stock, or a sector, or the overall market has rallied more than expected over
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Trump’s Address to Congress: A Preview for Investors

A Presidential address to Congress is an important occasion. In the first year of a term, it is called just that. In later years, it will be called the State of the Union Address. The circumstances, ceremony, and protocol are the same. I have been watching these speeches for decades, first as a political science
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Weighing the Week Ahead: Have Stock Prices Lost Touch with Reality?

It is a big week for economic data and the first address to Congress from the new President. Most of the punditry is engaged in a collective head-shake about overbought conditions. Even if the data flow remains strong, pundits will be asking: Have stock prices lost touch with reality?   Personal Notes I always try
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Stock Exchange: How to Play Sector Rotation

Sector rotation is a regular media topic, but few really understand it. Stock moves are often described in sector terms – retail, transports, industrials, biotech, etc. You get the drift. There has been a movement to define sectors in terms of ETFs, but the slicing and dicing was not very accurate. Trades often included companies
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Weighing the Week Ahead: Will Trump Policies Extend the Business Cycle?

We have another holiday-shortened week with little fresh data. While there are some Fed speakers on tap, it is not enough to feed the avaricious punditry. There are two competing themes: the spike in inflation and the continuing assessment of Trump Administration policies. Once again, I expect the two to be joined in most commentaries.
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Stock Exchange: How to Buy the Dips

Pure traders love to buy the dips – and of course sell the rips. Everyone wants to buy low and sell high. Is this part of your strategy? Do you know when and how to make that your plan? Today’s Stock Exchange will help. As a bonus, we have some interesting ideas to explore. Review
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The Fastest Way to Improve Your Investment Results

Here is the key concept: Abandon that which is not helpful! Background One of my best friends loved “investing” in baseball. He had an opinion about every team and every game. He also had a happy bookie. He called me after taking a course in baseball betting. He explained that you could improve your results,
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Weighing the Week Ahead: Trump V. Yellen Round One

A week featuring the Fed Chair’s semi-annual Congressional testimony, and daily speeches by most of her Fed colleagues, would normally represent a commanding first choice for the upcoming theme. This time is different. (Yes, I know that you are never supposed to say that). The first weeks of the Trump Administration have generated daily news
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Stock Exchange: Is your trading skillful or just lucky?

Would you like to know whether your trading is lucky or good? Today’s Stock Exchange will help. As a bonus, we have some interesting ideas to explore. [Important Update – Market Open 02/10/17]  Holmes gave a “sell” alert on CASY this morning.  Obviously I did not expect this, or I would have used a different
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Weighing the Week Ahead: Is Market Optimism Justified?

We have a rather light week for economic data. The biggest reports came last week. Earnings season continues. Everyone is keeping a close eye on President Trump, wondering what might happen next. Meanwhile, stocks are at all-time highs and interest rates have stabilized. This combination creates more questions than answers, which will lead the punditry
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Stock Exchange: Finding Your Trading Sweet Spot

Our last Stock Exchange (two weeks ago) discussed diverse ideas from our experts, and also explained why I vetoed one of the recommendations. When trading using models, you can link directly to a platform if you do many trades and have a very short time frame. Otherwise you should not blindly follow the model. A
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Why You Never See the Best Employment Data

On the first Friday of each month the Bureau of Labor Statistics releases the Employment Situation Report. The data – especially the payroll employment change – is the subject of much speculation, forecasting, and spinning once it is announced. Most sophisticated analysts (like me) regularly report that the sampling error is +/- 120K jobs or
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The Quest for Investing Excellence and the Lesson of Dow 20K

The new movement to passive investments is a sharp break from the historical quest for excellence. Many articles claim that no one can do better than the market average. If that is true, you should just throw out your investment library and skip the popular lists of “best investment books.” This post will suggest a
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Finding Investment Excellence

There is a lot of recent buzz about active management – basically showing that excellence is difficult to achieve. The conclusion is popular, especially among those who have no aspiration to beat average. I cannot do this in a single post, but I must start somewhere. As I often do, let me start with something
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Weighing the Week Ahead: Will Policy Uncertainty Increase Stock Volatility?

We have a normal calendar for economic data. There will be important news will come from corporate earnings reports. Since this earnings season is part of an inflection point – the end of the earnings recession– it is special. That said, the uncertainty over policy change has market observers both divided and on edge. I
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Stock Exchange: Diverse Ideas, but a Presidential Veto!

Last week’s Stock Exchange illustrated how human traders could call upon models as “consultants,” effectively creating their own trading room. If you missed the post, please check it out. This week the gang is short on fresh ideas — and I vetoed one of them! We never reach for new trades, and that itself is
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