Never try and pick a bottom but look for the clues
The action yesterday on the NASDAQ was particularly interesting as market movement resulted in a "gravestone doji," which is a Japanese Candlestick formation that often signals a turnaround.
What a "gravestone doji" means is that the buyers and sellers are in an evenly matched tug-of-war and potentially signals the first clues that the NASDAQ may be putting in an interim low.
Take a look at the chart and see what you think. If the NASDAQ market closes higher than yesterday's high point, which is 1,806, then there's a good chance that we'll see this market at least have what some traders call a dead cat bounce.
It is not profitable to try to pick the top or in this case a bottom. What you want to look for are clues that maybe, just maybe, the market is beginning to put in a low.
Japanese Candlestick charts are a fascinating form of charting as they represent both a visual and psychology view of the market. If you're not familiar with this form of charting, INO.com will be happy to send you a e-book that explains most if not all of the major candlestick charting patterns. You can reach us at 1-800-538-7424, or email se*****@in*.com
to ask for the candlestick e-book.
I know the e-book will help your trading as it did mine.
Every success in trading,
Adam Hewison
President, INO.com
Co-creator of MarketClub
You might find this earlier post on GM very interesting given today's market activity.
First posted on June 27th.
"What is good for General Motors is good for America"
Back in 1955, Charlie Wilson, then chairman of General Motors Corp. made this somewhat pompous statement. Here we are, some 53 years later and look what is happening to the stock of General Motors (NYSE_GM). This stock is at a 53 year low and shows no signs of turning around.
So the question becomes, what happened to America and General Motors? How did this company lose its edge in the marketplace?
HOW DID GM GET IT SO WRONG?
Digging through the history of GM, I found one fascinating item. GM developed an electric car back in 1996 when gas was $1.28 a gallon! They named the battery powered car the EV1 and then basically scrapped it in 2002.
Today there is very little evidence that this car was ever in existence. I am sure you're thinking right about how we could sure use a car like that today with gas prices trading over $4.00 a gallon.
When you look at the stock of General Motors, you'll see that the high for the stock in the last eight years was around $68 in 2002. What's interesting is that high point in the stock was right around the time GM scrapped its EV1 car.
So what happened to GM's first electric car? GM claims there was not enough public demand. That could be, but I think the story is a lot more complicated than that.
You can see all the GM - Big Oil conspiracy theories in the movie
From a business standpoint, why would GM want to improve something that would kill the goose that lays the golden egg? General Motors tends to make most of its money on sales of replacement parts. Up to 40% of its profits come from selling replacement parts for existing GM automobiles, so why would they sabotage their own cash flow?
Unlike a gasoline driven car, which has many moving parts, an electrical car like the GM's EV1 has very few parts to go wrong, so therefore part sales and cash flow would go right into the tank for GM. The other perception problem GM has with an all electric car with zero emissions is this: if GM produces an all electric clean car with zero emissions, it's making an admission that all of their other cars are dirty, spew out harmful emissions and pollute the planet.
But look at how GM got it wrong. This may be one of the biggest blunders ever in American corporate history. GM took the lead in electric car technology (smart move), but was not convinced that they as a company could be profitable selling electric cars.
WHO OWNS THE MOST ADVANCE BATTERY TECHNOLOGY?
One fascinating piece of information is that GM acquired advanced battery technology from Ovonic's in the form of a NiMH battery. This battery produces a stronger, longer lasting charge, and was the ideal battery for their second generation of EV1 cars. What came out later was truly a shocker, GM sold this amazing battery technology along with the patent (dumb move) to Texaco who was later taken over by Chevron. Now Chevron owns the technology and the patent!
You have to ask yourself the question... why would an oil company be interested in purchasing advanced battery technology from a major car producer like GM?
I'll let you draw your own conclusions.
Fast forward to 2008 when everyone is mad as H#LL for having to pay over $4.00 for a gallon of gas. Back in 1996 when GM launched the EV1 with very little fanfare, the cost of gas was around $1.28 a gallon.
Why GM decided to scrap the EV1 and look for short-term profits in big cars as opposed to building and preparing to adopt a different business model is still a mystery and one that has decimated GM's stock price in the last five years.
The automobile business has not changed in almost a century and the industry appears reluctant to embrace change. It would now appear that GM's business model like many of its big cars is rapidly becoming outdated and destined for dinosaur land.
LET'S LOOK AT THE STOCK OF GM
Let's take a look at the GM stock chart and see how you would have fared had you purchased GM stock at $68 in 2003. Then let's look at the same stock using a MarketClub's proactive approach. As you can see the results of a buy and hold strategy have been a disaster losing 79% of its value for all share holders while the proactive results have been quite stellar.
If a major company like General Motors can fall to a 53 year low, so can any stock on the big board.
Readers of this blog know that MarketClub uses a proactive approach when taking positions in the marketplace. The world has changed, and it has changed not only for GM but for many other mature companies that are using business models and products that are rapidly becoming outdated and will prove to be noncompetitive in the long run.
I'll finish by saying: "What is good for America in the long run, are smart businesses that embrace change." Maybe General Motors will get it, maybe they won't. The market will decide that one.
Hi, this is Adam Hewison. I have just finished a new video on gold that I would like you to see. This new video deals with some of the strange events that we've been going through the past two or three weeks, or in some cases several months.
I know most of the gold bugs have been disappointed that their favorite yellow metal hasn't skyrocketed to new highs. Some people said that we'd hit two to three thousand dollars an ounce when gold topped the one thousand mark a few months ago. I'm not sure that we will see levels like that, but the reality is, we could be seeing more interest come into this market which could push it higher.
In this short five minute video, you will get to see how well our "Trade Triangle" technology has done in the gold market. I will also show you when I think gold should hit its peak.
This is an educational video that is meant to inform you on the dynamics of the gold market and how it can help you improve your trading and timing in the future.
Best of luck in life and trading,
Adam Hewison
President, INO.com
Co-creator, MarketClub
Associated Press Economic Writer (AP:WASHINGTON) The Federal Reserve and six other major central banks from around the world slashed interest rates Wednesday in an attempt to prevent a mushrooming financial crisis from becoming a global economic meltdown.
The Fed reduced its key rate from 2 percent to 1.5 percent. In Europe, which also has been hard hit by the financial crisis, the Bank of England cut its rate by half a point to 4.5 percent and the European Central Bank sliced its rate by half a point to 3.75 percent.
Also cutting rates were the central banks of China, Canada, Sweden, and Switzerland. The Bank of Japan said it strongly supported the actions.
"The recent intensification of the financial crisis has augmented the downside risks to growth," the Fed said in explaining the coordinated action.
The Fed action will reduce borrowing costs almost immediately for U.S. bank customers whose home equity and other floating-rate loans are tied to the prime interest rate. Bank of America, Wells Fargo and other banks cut their prime rate by half a point to 4.5 percent after the Fed announcement.
White House spokesman Tony Fratto welcomed the cooperation among the Fed and other countries' central banks to battle the crisis. "It's important and helpful that central banks are working in a coordinated way to deal with stress in the financial system," Fratto said.
But analysts were cautious about the impact of the central banks' coordinated action.
"At first blush, while this is a big step, it is unlikely to prove sufficient to stem the rot. Additional rate cuts are likely and further measures to inject liquidity and re-capitalize banks are needed," said Marc Chandler, global head of currency strategy at the investment firm Brown Brothers Harriman.
The rate cuts came against a backdrop of increasing anxiety in global financial markets. Investors have been fleeing shares on worries that neither the Fed, nor other central banks, could move fast enough to stop the rising turmoil.
Today I'd like to welcome John Rubino from DollarCollapse.com. Over the past few months I've come quite accustomed to checking out DollarCollapse.com to get the latest breaking news on the stuff that REALLY moves the markets. John focuses on metals, the economy as whole, and yes the Dollar. Great site, take a look. He's also written a book talking directly about the collapse of the dollar, check it out here. Today I've asked John to talk about some interesting ways to take advantage of the markets recent implosion!
The gold bugs are about to be proven right in a very big way. Most of them have placed their bets on the general proposition that the U.S. economy would implode in four distinct stages. First, the three-decade flood of easy money would cause a "crack-up" boom in which banks gave loans to pretty much anyone with a pulse and turned the resulting bad debts into toxic bonds and derivatives. Then, in Stage Two, the sheer weight of this misallocated capital would cause everything to fall apart (which happened this past month). Then (Stage Three) the world’s governments would panic, flooding the system with liquidity by lowering interest rates, bailing out banks and buying up pretty much any asset that threatened voters’ jobs or nest eggs.
With the passage of the U.S. bank bailout and similar plans in Europe, we’re clearly entering Stage Three. Now it’s time to start considering Stage Four, the credit bubble’s grand finale. This is when a critical mass of people notice that with government printing presses running flat-out, paper money is about to return to its intrinsic value--zero. The result: a global run on fiat currency, in which the dollar, euro, and yen all plunge, and the dollar price of real things like gold, silver, and oil soar.
It’s crucial to understand the role that precious metals play in this kind of currency crisis. They aren’t commodities like oil and wheat. They’re alternative forms of money that have functioned as a medium of exchange and store of value since the beginning of recorded history. After each failed experiment with fiat (i.e. government created and controlled) currency, these "sound" forms of money come back into style. Why? Because gold and silver can’t be created on a printing press. The only way to get more is to mine it from the ground, and historically we’ve found only about 2% more each year. This constrained supply means unscrupulous and/or panicked governments can’t simply legislate more money to buy votes. So gold and silver tend to hold their value. It takes about the same amount of gold to buy a bushel of wheat as it did in the Middle Ages. Today an ounce of gold buys the same ten or so gallons of oil as in the 1950s.
So as the world’s paper currencies are shredded into so much confetti, investors will swap their increasingly worthless paper for real money as fast as possible, at whatever price the market requires. Gold and silver will soar in dollar terms, and the market value of the companies that mine these metals will rise even further. Today, in short, is a once-in-a-generation chance to load up on precious metals miners. And the junior miners--the smaller companies that most people have never heard of--are especially interesting. They’ve been absolutely crushed by the recent credit troubles, as investors assume that they’ll be unable to attract the funds necessary to bring their newly-discovered reserves to market.
This is a classic case of throwing the baby out with the bathwater. Some junior miners are indeed in financial trouble, running out of cash and unlikely to find more. But many others raised capital before the credit crunch and have adequate cash to build their mines and start producing. When gold and silver take off, these stocks will go parabolic, putting up double-digit gains on a daily basis and tripling or better in a good month. There will be lots of good months. Here are three that fit the profile: Small, obscure, but with properties that have the potential to become highly-profitable mines. And more than enough cash on hand to see them through to the beginning of Stage Four, when the markets will shower them with capital.
Detour Gold (DGC.TO) is developing the Detour Lake deposit in Ontario, which contains more than 11 million ounces of gold, a huge resource by new-mine standards. On June 30, Detour had $65 million of cash and short-term investments and no debt. So it won’t need outside capital for at least the next two years. Claude Cormier, publisher of the Ormetal Report and an expert on Canadian juniors, really likes this one, and expects it to find more gold and eventually to be taken over by a senior miner for a big multiple of today’s price.
Andina Minerals (ADM.V) has a mine in Chile that Louis James, senior metals analyst with junior miner specialist Casey Research describes as “a genuine monster that is getting much bigger.” In its last financial report it listed $25 million in cash and no debt. Back in July, James referred to Andina’s $3.50 share price as “not cheap.” Since then it has fallen to around a buck.
Rubicon Minerals (RBY) in 2002 bought some land from a bankrupt miner in Canada’s Red Lake district, home to industry giant Goldcorp’s most productive mine. Since then Rubicon has found gold all over this property, both near the surface and far underground. The find looks like a true blockbuster. Rubicon has $22 million in cash and no debt, and its stock is down from a year-ago $2.25 to $1.40.
I’ll go out on a limb and predict that all three of these, plus about twenty other junior miners with similar profiles, will be ten baggers in the next few years. Golden opportunities indeed.
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