Today's Market
by Dr Invest

"Market conviction" is a firm belief that what you know as truth will ultimately prevail. At this moment the market is scurrying upward, with no real truth to underpin the rise in market. Today's unexplainable rise is due to the "Irrational Exuberance" remaining in the market. Here are some things that this morning's traders are assuming: 1.) Europe will work out their economic problems; 2.) Bernanke will introduce a new TWIST to stimmulate the economy; 3.) That stimmulus will promote new growth and both the U.S. and International economies will be booming once again. (Listen, I got a bridge I want to sell you! Yeah! The Brooklyn Bridge!)

As said in my previous blogs for May, I do expect to see a small rise in the market from June to July but with the overall market remaining largely flat as demonstrated by the "seasonal chart" for the DOW JONES. I do expect that more bad news coming out of Greece and Spain will continue driving down the market to the lows of 2011. I also expect that Bernanke will attempt another "stimmulus program" to create bragging rights for the encombant president, but not so much that the Republican challenger can't point to the presidents dismal record in handling the economy. (I call this the ole political stand-off. The political playing field has to be leveled so there is a fair election and Bernanke will do what all his predecessors have done in a political year.) My view, is that stocks will be a great buy toward the end of October and will continue a strong up trend until the end of 2012 because of Bernanke's stimulus. But watch out in 2013!

The Truth

No! You can't handle the truth! 1.) Problems are going to persist in Europe - The debt is just too large and budgets too bloated to stop the trend downward. 2.) We now know that Bernake's stimmulus programs only did two things reliably - inflated prices and gifted Wall Street with a rising market. A more appropriate name for Bernake's packages is "a Wall Street Stimmulus Package". There has been no dramatic rise in unemployment and one could argue that whatever marginal decrease we haves seen in unemployment has been due to seasonal effects. 3.) If recovery comes at all, it will be measured in years, not months.

Playing the Game Your Way

Don't let the talking Wall Street heads convince you to play the market their way. "Their Way" is to get your money invested in what will profit them, then sell when the time is right to make money for their clients. I promise, you will see that you are left holding and empty bag. Now, more than any previous time, you need to make carefully crafted investments and guard yourself from frivolus emotion driven investments that will rob you of potential gains later.

You will hear a term called, "Chasing the Market". Chasing the market is when you are attempting to buy the hottest stock...but the rally for that stock began many months before it got HOT. Now that you hear about the "Hot Stock", you buy just before all the real traders sell. Your purchase simply sweetens their gains, so when they sell as amateur investors are attempting to buy, they reap the gain and leave you with the bill.

When you have a dip in the market of nearly 2% one day, and a few days later a gain of 2%, it is hard to catch that gain. Most amateurs sell after loosing 2% and when they see a rise in the market of 2%, they buy once again only to see the market descend yet again. Total losses to the amateur? They lost 4% or more. If you do this only three times in a year, you have lost 12%. Ouch!

This is why real traders use a "TRADING SYSTEM". It insures that decisions are made without emotion and that you stick to your "TRADING CONVICTIONS".

Bond Investments Down (for now)

I just bought BND and TIP, first in May and then in June. I am still to the positive in the overall investment, but the past 6 days has not been nice to bond type investments. Don't get panic, people are speculating on a stimmulus in Europe and the U.S.  The Ivy Portfolio trading method is not concerned about rumors or speculation. The method is built on fact. If the price falls below the 9 month moving average, sell! And according to the rules, you only sell at the FIRST OF THE MONTH. You just bought the stock! FOLLOW THE TRADING METHOD.

Wall Street is so attached to government stimmulus, they expect it! No! They demand it! I don't think that Bernanke can do anything right now, other than make promises. For example, Bernake stimulates the economy and then three months from now, the economy tanks again..... would he stimmulate the economy once again before the election.....come on! You don't really think so, do ya! No! Bernake is only going to use the stimmulus when he knows it will provide a fair election for the presidental election in November. DON'T EXPECT A STIMMULUS PACKAGE RIGHT NOW! Expect promises, but not a package.

More bad news is on the way from Europe and when it is clear that no stimmulus is immediate, the market will continue its tumble. Get some conviction and stick to your TRADING METHOD. (See Sidebar)

Update (added at 3:30)

Remember what I predicted earlier in today's blog, no stimmulus until August or September when we may reach last year's lows. I can't help but laugh at the AP headlines: Fed survey: US economy, hiring improve at steady though moderate pace. This is so far from the TRUTH, that it should be criminal to print it.  http://finance.yahoo.com/news/fed-survey-finds-us-growth-180200698.html 

"The U.S. economy grew moderately in most regions of the country this spring and companies kept hiring, according to a Federal Reserve survey released Wednesday." The TRUTH reports that the  unemployment rate just rose from 8.1 to 8.2 last week?  

"The positive survey, which is anecdotal, also makes it less likely that Fed policymakers will take further action in the coming months to lift the economy. The survey doesn't suggest the economy is in dire need of help, many economists said." The TRUTH is that the VIX (fear index) has been rising and recent influxes into the purchases of BONDS and TREASURIES reveal the level of that fear. Finally, as I said, Bernanke will not commit to stimmulus until just before the election.

"This report (I thought it was a survey.) was more upbeat than probably anyone expected," said Jennifer Lee, an economist at BMO Capital Markets. That suggests that "some of the soft reports on payrolls, auto sales, and manufacturing may be temporary."  The TRUTH is that all this positive ooze has no basis of fact, other than a survey. And note: This survey moved from a survey to a report. And note the well crafted wording: SOME OF THE SOFT REPORTS......MAY BE TEMPORARY.

If you are to grow into being a good investor, you need to identify the difference between spin and truth. After one, two, or three days, a market that has decimated your investments for 2012, suddenly is reported as growing moderately with hiring improving. Think with me for a moment. Is this possible that you could lose all the gains in the market for 2012, see a decline in employment, and believe a SURVEY.

Positive news spin supports the "Irrational Exuberance" and spurs the innocent to invest into a market destined to decline in the days, weeks, or months ahead. Stear clear! JPMorgan believed their own PR (public relations) and got scalped 2 Billion. Trained economist and financial analysts are believing this to and guiding your portfolio. When the lies are exposed by the truth, there will be billions more in losses.




(Note: the above article is for entertainment purposes only and not to be used as investment advice.)