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  • Moving Averages 101

    The simple premise is that if the price of security (or market) is trading above a moving average then the action is healthy and if the price is trading below an important moving average then the action is not as healthy. It is also important to note that it is healthy to see a stock (or market) move back to a moving average on light volume during an uptrend (converse is also true) and then bounce off that moving average on higher volume (ideal scenario). This natural occurrence is actually considered healthy as most leading stocks (and markets) tend to do this during a protected uptrend. That said, moving averages offer prudent investors a healthy chance to accumulate a position as the underlying investment pulls back to a logical area of support. However, a technical sell signal will be triggered once an important moving average is broken (especially if volume is heavy) and that is an important warning sign most investors should look for.

  • 7 Things That Concern Me About This Rally- Right Now

    1. We have come too far too fast. How many times do you remember seeing the SP500 soar 17% in 3 weeks (or know of it ever happening in history)? And the kicker- the move has been on below average volume! Moreover, if the market is to get back to 1370 (2011 highs) by year end- it will have to move 28% from Oct 4- Dec 31. Possible, but probable?
    2. Nothing has changed- the “fundamental” mess that sent a slew of risk assets lower over the summer (i.e. US and EU debt issues, anemic economic growth, etc.)- are still unresolved… Everyone (right now) is focused on Greece. However, even if Greece is “handled” it does not address the broader issue: The other PIIGS are broke!
    Don’t Be Left Behind!
    Always Know Where The Leaders Are!
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    3. Most bear markets last 18-24 months- not less than 1 day. The S&P 500 officially hit bear market territory on 10/4 (down 20% from its 2011 high) and that lasted for a tenth of a second because that was the exact low for the year (so far). Normally, the 18-24 months allow stocks to reset their bases and paves the way for new leadership to emerge.

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