Don’t Fight the Fed
Plus, How to Make Money Trading the Trend
The Federal Reserve Tapers QE
While mortgage costs set to rise for many borrowers
The December FOMC meeting has concluded and the policy announcement has been issued.
The Fed has decided to slightly scale back its gargantuan monthly bond-purchases by $10 billion per month. (From $85 billion to $75 billion…)
So far, stocks and gold are holding up just fine.
The housing sector remains a problem. Inflation is still too low for the Fed’s taste. The Fed’s inflation target is 2% and anything below that number ”could pose risks to economic performance.” And political gridlock over America’s most pressing economic issues is “restraining” economic growth. So what is Bernanke’s solution? It is what it always was: “appropriate policy accommodation.” (Translation: Perpetual easy money policies.)
For the Fed, everything hinges upon an improved labor market outlook.
Overall, the U.S. financial markets had a positive reaction to the news. It was almost a relief, perhaps, that the anxiety of all of the build-up to a taper was finally over. When you couple this news with the fact that mortgage costs (not just rates, but actual mortgage costs) are going higher in 2014, it means that now is a good time to buy real estate, especially rental real estate.
With America increasingly turning into a “renter nation,” and with mortgage rates nowhere to go but up, now is a good time to scoop up cheap rental properties before the rules become even more strict.
Mortgage costs for borrowers without big down payments and with less-than-perfect credit scores are set to rise next spring as Fannie Mae and Freddie Mac prepare to boost fees they charge mortgage lenders.
Investors are already out in full force. According to real estate data firm RealtyTrac, all-cash purchases accounted for 42% of all sales of residential property in November 2013, up from 39% during the previous month.
Make Money in Stocks by Trading the Trend
There has been a lot of talk in the financial media about the next stock market crash. While there is no doubt it is coming, right now investors are overly optimistic. For example, according to the closely watched Investors Intelligence’s bulls vs. bears ratio, bullish advisers outnumber bearish advisers by a more than 4-to-1 ratio. That is rarely a good sign. But arguing with the markets is a fool’s game.
As famed economist, John Maynard Keynes once said:
The markets can remain irrational longer than you can remain solvent.
I have been a stock investor and trader now for 16 years. And during that time, most of my losses have come when I have attempted to argue with the stock market. I am not saying that there is not a lot of money to be made by being a contrarian. I myself, am a contrarian on a number of fronts (like uranium, for example).
One of the ways that I like to play uranium is through the world’s largest independent uranium miner, Cameco Corp. (Ticker: CCJ).
From 2004-2007, CCJ ran from a low of $6.86 to a high of $53.28 (That was a gain of 677% in approximately 38 months).
Cameco Corp. Monster Rally from 2004 to 2007
Since hitting that peak back in 2007, Cameco has fallen and has failed to rise to those levels again. Of course, the stock was hammered in the wake of the tragic Fukishima nuclear disaster as nations began to swear off nuclear energy. Today, the stock stands at around $20.58, and has been locked in a sideways up and down channel since late 2011.
Cameco Corp. Locked in Sideways Channel
However, I still trade Cameco stock to this day. But instead of simply buying “blindly” and “hoping” that the stock will go up, I use the trading system that I have developed over the last 16 years to play CCJ.
Let’s take a closer look at the sideways channel that CCJ has been in since 2011.
Cameco Corp. Buy and Sell Signals
While this all looks good in hindsight, how can you or I possibly buy on the green arrow and sell on the red arrow every time? We cannot. Unless you have a crystal ball, you and I can never time the exact bottom or the exact top in any stock, or even any market for that matter.
As investors and/or traders, the best we can hope for is to buy near the bottom and to sell near the top of any particular trend, which is why I rely heavily upon technical signals for my entry and exit points.
Now, let’s go back to Cameco’s chart, and I will show you how the trading system that I developed many years ago for my own personal use (now called the Trigger Trade system) performed with Cameco.
Wondering when to buy and when to sell? Our Trigger Trade system makes simplifies the trading process.
When it comes to the overall markets, we watch the big money. In other words, we follow the money. To do this, we monitor the money flows coming in from both Wall Street institutions and small investors.
Right now, big money flows are still occurring into individual stocks, mutual funds, and ETFs. Meanwhile, the big money is flowing out of bonds.
CNNMoney recently posted an article saying that 2013 has seen all-time high money flows into stock funds. Meanwhile, the bond market is on track for one of its worst years ever. Here is a brief excerpt from the story:
As memories of the financial crisis fade, the amount of money flowing into stock funds in 2013 has reached an all-time high.
Investors put $346 billion into mutual funds and exchange-traded funds that own stocks this year as of Dec. 23, according to data TrimTabs Investment Research.
That’s more than the $324 billion investors put into these funds in all of 2000, when the bubble in technology stocks burst, and is the largest annual inflow on record, said TrimTabs chief executive David Santschi.
The flood of money into stock mutual funds and ETFs, which are popular with individual investors, comes as stock prices rally to record highs.
Meanwhile, the bond market is on track for its worst year in history.
Investors withdrew $77 billion from bond mutual funds and ETFs this year, making 2013 the worst year ever for bond funds, according to TrimTabs.
This is the first time in nearly a decade that investors have taken more money out bond funds than they’ve put in — and it tops the previous record from 1994 when investors withdrew almost $63 billion.
A year or two ago, billionaire stock investor Warren Buffett was asked how he would approach investing if he did not have a lot of money. The question came during the Berkshire Hathaway annual investor conference. Buffett’s answer is revealing.
Just like everything else in business, stock prices are determined based upon supply and demand. Because the buying and selling that occurs on Wall Street is public knowledge and available to anyone through the internet, it is vital for smart investors to learn how to interpret those supply and demand figures. These figures are called volume, and learning to interpret market volume is an extremely important – and potentially profitable – skill for an investor.
When buyers outweigh sellers, prices go up. And when the number of sellers exceed the number of buyers, prices will fall.
Here at Follow the Money, we measure 10 different indicators at the close of each trading day to determine the general trend in the U.S. stock market.
Right now, as you can imagine, our Market Indicator System is flashing a GREEN light. However, this will change when the big money starts selling and locking in gains. When this happens, our market indicator system will turn YELLOW. And then, if the selling accelerates, it will cause our Market Indicator System to begin flashing a RED light.
But what I love about the financial markets is that you can always make money, no matter what the trend is.
If the market is flashing a RED light, our proprietary Trigger Trading system will continue to provide our subscribers with profitable trading ideas!
Next, Jennifer Robinson is here to update our FTM Insiders on Trigger Trading activity for the past two weeks. We sold three positions, were stopped out of one stock, currently have 10 stocks in play in the markets, and are awaiting the trigger price on six stocks. Listen for the full report.
Also, as the year nears its end, we have provided some 2013 Trigger Trading highlights in the table below.
Jerry Robinson's Stock Trading Highlights - 2013
|Date||Ticker||Trigger Price||Stop Loss||Status||Performance|
|12/10/13||KFY||$24.59||$22.62 on 12/10/13;|
$24.59 on 12/24/13
SOLD 12/24/13 at $26.13
|11/13/13||BR||$36.51||$33.59 on 11/13/13;|
$36.51 on 12/6/13
SOLD 12/23/13 at $39.95
|11/8/13||SQI||$25.22||$23.20 on 11/8/13;|
$25.22 on 11/20/13
SOLD 12/2/13 at $27.73
|10/31/13||SSNC||$40.06||$36.86 on 10/31/13;|
$38.64 on 11/20/13;
$39.34 on 11/21/13
SOLD 12/3/13 at $43.30
SOLD 9/12/13 at $59.03
|9/3/13||WEN||$7.84||$7.52 on 9/3/13;|
$7.84 on 9/13/13
SOLD 9/18/13 at $8.53
|8/22/13||MU||$13.92||$13.36 on 8/22/13;|
$13.92 on 9/6/13
SOLD 9/6/13 at $15.32
SOLD 8/27/13 at $7.44
|8/14/13||GDX||$28.34||$27.21 on 8/14/13;|
$28.34 on 8/16/13
SOLD 8/27/13 at $31.13
|7/24/13||FLT||$89.87||$82.68 on 7/24/13;|
$96.00 on 8/6/13
SOLD 8/6/13 at $98.69
SOLD 7/30/13 at $135.26
SOLD 8/5/13 at $235.03
|6/25/13||ESRX||$61.95||$59.47 on 6/25/13;|
$65.05 on 7/23/13
SOLD 7/24/13 at $67.37
|2/14/13||LGF||$20.42||$19.65 on 2/14/13;|
$23.10 on 5/2/13
|2/4/13||BOFI||$33.01||$31.99 on 2/4/13;|
$36.43 on 5/8/13
Edward Snowden’s Alternative Christmas Message
NSA whistleblower Edward Snowden released a Christmas message in which he said:
Together we can find a better balance, end mass surveillance, and remind the government that if it really wants to know how we feel, asking is always cheaper than spying.
You can view Snowden’s video message over on our video site: FTMFlix.
My position on Snowden is not new. In our age of corruption and greed, we cannot expect to stay on the rails without whistleblowers.
Personally, I think Snowden should be granted immunity and the Director of National Intelligence, James Clapper, should be sent to prison for lying to Congress.
Senator Ron Wyden questioned director of national intelligence James Clapper in a Senate hearing in March. Clapper has denounced revelations in the media that phone and internet records have been collected on a mass scale.
That was in March…
Then in June, the Guardian breaks the big story…
So James Clapper lied under oath and committed perjury.
Your government is lying to you.
Some lawmakers, like Rep. Trent Franks, are seeking a criminal probe into James Clapper.
If that were you or me sitting in Congress, I don’t think there is any doubt about where we would be spending our Christmas holiday. We would be in prison.
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DISCLAIMER: The above trading ideas are from my own personal stock watchlist and are for educational and informational purposes only. They are NOT specific buy recommendations. Trading stocks is risky and you could lose all of your money. Trade at your own risk. Jerry Robinson is not an investment advisor. You should always consult a trusted financial services professional before making any financial or investment decisions. READ FULL DISCLAIMER.