Swing Trading Amid Global Turmoil

March 6, 2012

Swing Trading Amid Global Turmoil

by Jerry Robinson, FTMDaily.com Editor-in-Chief

Three years ago today, the U.S. financial markets reached their absolute low during the financial crisis. On March 6, 2009, the S&P 500 index hit an intraday low of 666.79. Three years later, the S&P has risen by over 100%. But those three digit returns were no easy ride. The stock market has been marked by an unbelievable amount of turbulence ever since. 

Despite the volatility, 2012 has been a stellar year for those who enjoy swing trading. For those who are new to swing trading, it is a form of trading that lies somewhere between the gut wrenching risks of day trading and the more hands-off approach of long-term "buy and hold" strategies. In essence, as a swing trader, I will often hold a position anywhere from 3 days to 3 months. I cut my losses short and let my winners run.

As a swing trader, I am constantly watching the markets for buy and sell signals. After trading for 15 years, I have learned that I prefer riding an uptrend in a market to attempting to catch falling knives. 

Over the last couple of trading sessions, stocks have been hit hard. So, what's driving down the prices?

The experts all have their opinions, so take your pick: The never-ending Greece fiasco, growing tensions in the Middle East, and the lingering doubts surrounding China's economy, are just to name a few.

Others point out that the recent rally in the market has led many investors to lock in their profits and pull their money out amid the uncertainty. 

Without a doubt, uncertainty over the rising tensions in the Middle East is a primary concern for most Western investors today. Syria and Iran are both a virtual powder keg and the West is holding their matchbook a little too close for comfort. As we reported yesterday, Western nations, who failed to gain approval for their anti-Syria campaign from the UN Security Council, appear to be managing the anti-Syrian actors, including Al Qaeda, in their revolt against the Assad government.

When the U.S. is working with Al Qaeda to topple a foreign government, you know the world is spinning out of control. After all, isn't Al Qaeda the excuse the TSA agents give for violating every American's Fourth Amendment rights, including the recent mother who was accosted in the airport by agents for having a breast pump.

Inevitably, every investor has to keep one eye on the Middle East at all times as it can shake domestic markets like few other outside forces can.  

So how about Europe? Yes, it too is a factor. But honestly, I am too bored with Greece to discuss it here. Suffice it to say, the mainstream media has it all wrong on Europe. The European central bank has morphed into a quasi-Federal Reserve and will pump in all of the money that the global elites want. It's all downhill from here with Europe. But remember, these are slow deaths. Nothing quick or fast. In fact, Europe will appear to rise for a time, just as the United States did, as they pump their worthless paper currency into their economy.   

What about China? China is often a scary word for Western investors for a variety of reasons, chief among them, China's utter lack of transparency. In essence, instead of simply lying to the American public with an abundance of its economic figures like the United States does, it lies to the public with very limited data. But what real numbers we do have tell us one very compelling thing: China is the global behemoth in the commodities markets. They consume an enormous amount of the world commodities.

According to Credit Suisse, China consumes

– 62% of the world’s iron ore

– 59% of the world's soybeans

– 29% of the world’s copper  

– and 11% of global oil supplies

And that's just a small sampling of China's ferocious appetite for commodities. In addition, China has been a major source of low-cost labor and manufacturing. China is still in the early stages of what will be an amazing rise to global economic hegemony. China knows it. And the West knows it. 

But the lingering question on investors minds is quite simple: How long will the West be able to exploit China’s economic growth? After all, the West does not really care if China succeeds economically, as that would increase offshore labor and manufacturing costs. It is a fact, however, that China is increasing domestic demand for its own goods. And as more of China's rural citizens migrate to urban areas, China's overall middle class is growing, which is slowly causing China's labor costs to rise.

It is my belief that the 21st century will belong to China, India, Africa, and the Middle East.

Those investors who bet against this trend do so either out of blind nationalism, or as bold contrarians with eyes wide open.   

Do I believe that China's economy will continue to move straight up? Of course not. No market goes up or down in a straight line. In fact, in these early stages of economic development, Eastern nations will suffer devastating blows. Only the strongest of investors will be able to stay aboard this trend. But the pay-off will be well worth it. And as a swing trader, I plan on exploiting the coming gains while limiting my downside risk. 

This week, Chinese Premier Wen Jiabao cut his nation's 2012 growth target from the typical annual 8% to 7.5%. He added that increasing domestic consumer demand would be the nation's top priority. China's ultimate goal is to reduce its reliance on its exports and its dependence upon foreign capital.

Investors expressed concern over China's lowered annual growth target, as this number represents an eight year low. (Most economists believe that China's continued growth requires a minimum of 7% GDP growth.)

China announced that it will seek to further increase domestic consumption by cutting income taxes on companies. They are also seeking to reduce their reliance on exports and foreign investment by cutting import duties on energy and commodities. China announced that it would also be spending more on public services like healthcare and education in an effort to prop up consumer spending. 

China faces a long uphill battle as it struggles with massive speculation in its inflated property market and growing debt levels at the local level. 

In the end, however, I believe the sheer force of China's economic dominance in the region, along with its astute long-range economic policies, will lead the nation to report a higher than anticipated growth rate at the end of 2012. 

If you would like to follow our swing trading ideas, you can learn more here.
 

 

The FTMDaily Roundup

  • More government waste… A new audit of the District of Columbia finds that nearly $700,000 was shelled out in Medicaid payments for dead people. One of those payments occurred almost nine years after the patient died.
  • Lehman Brothers is expected to emerge from bankruptcy this week. Lehman was every lawyer's dream with an estimated $1.6 billion in legal fees paid out to attorneys and consultants. It was, in fact, the largest bankruptcy in history. It is expected that Lehman will begin paying out $65 billion to bondholders. Their first payment of $10 billion will be made over the next six weeks.

Here's a list of the top five largest bankruptcies in U.S. History…  

5) CIT – $71 billion in total assets

4) General Motors (GM) – $91 billion in total assets

3) Worldcom – $103.9 billion in total assets

2) Washington Mutual – $327.9 billion in total assets

1) Lehman Brothers – $691 billion in total assets

  • Whatever you do, don't say these words on social media sites like Facebook or Twitter… The all-seeing eye of Big Brother is watching in order to protect you from Al Qaeda (whom they are working with in Syria.)
  • The IRS is cracking down on a nationwide scam that promises elderly and low-income churchgoers "free money"  by urging them to claim fraudulent tax refunds for non-existent Social Security refunds or other tax rebates and credits for which they don't qualify. The con artists are targeting low-income churches and are advertising their scam through flyers and online advertisements.
  • The Biblical Case for Ron Paul... Here's a well thought out op/ed piece providing a Biblical defense of Ron Paul's political ideas. The article tackles four key issues: foreign policy, life, education, and sound money.

VIDEOS

Chossudovsky: U.S. Will Start World War 3 With An Attack on Iran

httpv://www.youtube.com/watch?v=C4p1kD8CZX8

Teary-eyed Putin addresses 110,000 crowd near Kremlin

httpv://www.youtube.com/watch?v=MbqJg88UEBo

Ron Paul – "Blessed are the Peacemakers"

httpv://www.youtube.com/watch?v=lIsbldR96jg

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