As I write this, last week bonds have had their worst week ever in about two years. Treasuries were up sharply, this is impacting prices, pushing them lower. This could be just the beginning. As far as rates are concerned, the increase may not be anything out of the unusual. With alot of the reflation that's occuring, Treasuries may be pushing and inflating the economy to an extent that these safe-haven dollars have had their premiums removed. This is happening at the same time some key critical levels of the S&P are accuring.
A Critical level of the S&P, such as the retracement Fibonacci (A term used in technical analysis that refers to areas of support (price stops going lower), or resistance (price stops going higher) from our lows in March.
Fibonacci retracement is created by taking two extreme points (usually a major peak and trough) on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%. Once these levels are identified, horizontal lines are drawn and used to identify possible support and resistance levels.
The stock market is currently looking good for the next two quarters, and maybe on into the third quarter of next year relative to bonds. I continue to recommend that investors lighten their bond positions because to put it simply, too many people are moving to the same side of the boat, bonds are going to roll over. The same thing happened in Technology with the Dot.Com years of 1995-2000, and housing more recently. Many people went to the same place, and we rolled over and tanked. History does repeat itself.
How do you become a successful investor? You go it alone. Don't follow the herd. If you have received exciting news of a stock by friend, radio, publication, internet, or TV, the event has already happened. It would be like you hearing that there is a great horse at the race track that won, and now you rush to the track to place money on the horse, except that the race has already ended. The event has already happened, you missed it.
When you hear of a great stock that is a winner, take note of it, do your homework, and wait for the stock to come down to your price (1/2 of what it's worth). Learn if the stock you heard about is as great and wonderful is you've been told. Check its critical numbers. I teach how to learn the quality of a stock at http://www.youcontrolinvesting.com/ (we offer lesson 1 free).
Don't ever be in a hurry to place your money on a stock without doing homework (research). Watching your investment go down, will make you very unhappy. Perhaps you paid too much for the stock, and because you failed to use technical analysis, you bought the stock at its peak instead of on a pullback.
The stock market will continue making people money, but care must be taken. The investor must do research, be patient, invest without emotion, do daily checks of your stocks (about 10 minutes), and be confident in his or her choices.
On the subject of emotion as an investor, learn to put it aside. I'll give you an example of people losing money due to emotion. Not too long ago gas prices were going to the sky with no limit in sight. People with large vehicles that used large amounts of gas per mile wanted to sell those vehicles (emotion was unhappy).
Since nobody wanted gas hogs, the value of those cars and trucks went down, and the seller got very little in the sale. At the sametime because of high gas prices, small economical vehicles were getting premium prices. The Toyota Prius was in demand (50 plus MPG), getting the dealers an extra $2000.00 above the selling price, even with a month or more wait for delivery. The seller of the large gas burning vehicle sold at a cheap low price (loss), and bought a new gas saving vehicle at a very high price (another loss). This means that this persons wallet got very thin.
Today gas prices are reasonable, and large gas eating cars and trucks are in demand again. People want SUV's and people want more room (emotion is unhappy). Guess what, small car used prices are low, which will be a selling loss to the owner. The price of the larger vehicle which is back in demand will be high, (another loss).
Had people waited out the expensive gas period (not sold and bought on emotion), they could have prevented the loss at sale, and loss at purchase the first time. Now to do the samething again allowing emotion to control buying and selling, is to take another double loss again. This is a financial killer. The money lost buying and selling vehicles at a loss twice, could have been better used in the stock market growing in value.
Visit us at http://www.youcontrolinvesting.com/ to learn how confidence when investing will help protect you from buying and selling with emotion. For daily financial information visit www.Twitter.com/StockMktTeacher where you can remain informed on the markets daily moves.
Good Investing,
Bruce Cortez
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Good advice
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