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Trading Any Market

Stocks Stealth Bull Market Closes above Dow 8,000, Up 24% in less than 4 weeks

Stock-Markets / Stocks Bull Market Apr 05, 2009 - 08:25 PM GMT

By: Nadeem_Walayat

Stock-Markets Best Financial Markets Analysis ArticleThis article seeks to answer in part the approaching 150 emails in response to the recent stealth bull market trading analysis series. The stocks stealth bull market on Friday closed above 8,000 on BAD U.S. unemployment data, having rallied near 24% from the low of 6470, as expected the rally is STILL predominantly perceived as a Bear Market rally that contrary to some statements is still being AVOIDED by ALL but the Smart Money!


Yes after the market has moved 24%, EVERYONE IS STARTING TO HAVE SEEN THIS RALLY COMING ! - BUT NO ONE (me included) can invest or trade in a trend that they perceive as being corrective, secondary, inferior, an aberration, a subversion of the mighty bear market that seeks ever greater explanations of why it still remains intact, forget the 20% bull / bear reversal rules, instead lets hark back in time to the instances where bear market rallies could rally much further so as to always reinforce the distant juncture hypothesises, 20%, 30%, 40% ! FORTY PERCENT!

The problem here is that one CANNOT trade a trend that one is FEARFUL OF !, Whilst I get many emails asking where next?, what people really need to get a fix on is the emotional aspects of trading and investing which is that DOUBT breeds FEAR and PARALYSIS. So as readers, you are better off reading a few good books on trading psychology then ANY commentary on what ANY market is going to do next!

The facts ! i,e, the ones that actually count and pay the bills, the facts are the PRICE, and that PRICE is at Dow 8,017, ALL other reasoning (including from me) is JUST NOISE. Without conviction of a high probability of success there IS NO TRADE ! NO INVESTMENT, NO DECISION, JUST NOISE. What you need to learn to do is to TRAIN yourselves to have conviction in YOUR TRADING and INVESTMNET DECISIONS. To do so you need to focus on what you perceive as being the PRIMARY Trends that are IMPULSE in nature instead of CORRECTIVE ! For instance, I ONLY trade directions that have a HIGH probability of SUCCESS, and that predominantly MEANS trading the IMPULSE direction and NOT the CORRECTIVE, therefore even if my analysis is spot on for a correction i.e. last weeks 33% correction against the rally. I am NOT going to TRADE it as I perceive it to have a lower probability of success, then the IMPULSE direction which followed. Because there IS NO CRYSTAL BALL, ONLY PROBABILITIES OF SUCCESS, on the BASIS of WHICH DECISIONS ARE MADE.

I think I need to clarify something important that I take for granted but given by the emails many of my readers need to be reminded of that whilst it is great to have a series of forecasting hits right across multiple markets over a number of months, other than for timing of investments towards mega-trend investing i.e. in sectors such as water, energy, commodities (agriculture) and tek stocks based on the mega-trends of peak oil, emerging market middle classes and climate change, forecasts only play a minor part where real-time trading is concerned (i.e. in enabling me to focus on those markets that I expect to provide a large swing with little reactions and thus a high probability of success against low risk), as ALL positions are on the basis of entry and confirming triggers.

I do intend on writing a book this year on my trading methodology that has been REINFORCED over more than 2 decades of trading , which will hopefully allow many to cut through the ALL of the media noise and concentrate on the actual ACT of Trading on the basis of price triggers. The trading EDUCATION will continue at walayatstreet.com where the process of DECISION MAKING IN REAL TIME will be undertaken in support of the book i.e. to illustrate how trading signals are generated, stops adjusted, and positions reversed in REAL TIME, and as is the case for all of my analysis. This will hopefully mark a one off timeless resource that anyone an call upon to EDUCATE THEMSELVES TO TRADE OR INVEST IN ANY MARKET WITHOUT FEAR OR REGARD FOR THE CONSENSUS OR OF THE VIEW OF OTHERS.

However, I will answer one of the repeat queries here and that is how do I forecast the financial markets. The simple answer is that it is a skill that improves over time, but I cannot see how it can actually be taught or replicated as it is a function of having experienced numerous bull and bear markets through THESE EYES. But the good news is, and this is very Important ! The GOOD NEWS IS that forecasting skills are NOT necessary for successful trading, which the following article illustrates right from the early years of my trading life - 1987 Stock Market Crash

The Fundamentals are IRRELVANT at Junctures

Technical Analysis, Fundamentals, IT IS ALL 50/50. Meaning that you need to ALWASY BE SKEPTICAL of TA AND FUNDEMENTALS. WHich is why I have preached for several months to forget the fundamentals, and to start thinking outside of the box as the fundamentals are NOT important at market junctures, which I am glad to see is starting to see replicated elsewhere, even if some 24% LATE.

STILL a Bear market Rally ? , Will it Always Be a Bear Market Rally ?

There was a time when the consensus was that a 20% rally would turn a bear market into a bull market. The rally to date is 24% but apparently it is STILL a bear market rally, and when the market is up 40%, what then? It WILL STILL BE termed as a bear market rally ! Which is by DEFINITION what one EXPECTS of a A STEALTH BULL MARKET! To TRADE, To INVEST, One NEEDs a Decisive CONCLUSION, not that it could be this or that or the other, but IT IS until the price tells you otherwise. We ARE IN a STOCKS BULL MARKET THAT BOTTOMED AT DOW 6470!, The MARKET HAS DONE NOTHING OTHER THAN SUPPORT THIS TRADEABLE CONCLUSION!

You already KNOW the Reason Why, it is FEAR, FEAR of the bear market that has wiped out many investors portfolios, FEAR OF BUYING AT BARGAIN BASEMENT LEVELS, UNTIL YOU EXPERIENCE THE FEAR, AT LEAST ONCE, then you will NOT BE ABLE TO RECOGNISE IT FOR WHAT IT IS, Which is a PSYCHOLOGICAL BLOCK, which again brings us back to the key to successful trading and investing which is in getting ones emotions in check.

What's Next ?

I had hoped to have the time to get analysis done this weekend as to where the market may be headed next but the process of upgrading my systems and trading room have occupied much of the weekend. However I hope to get this done either tomorrow or the day after and email out on the prospects for the immediate term trend, as even though the Dow's short-term overbought state, the PRICE HAS NOT TOLD ME YET THAT IT IS ACTUALLY READY TO CORRECT. Likewise my update to the gold forecast of January 2009 that called for a rally to $960 by early March to be followed by a decline to $820 by Mid 2009 is pending, however Chris Vermeulen has made available his most recent analysis on gold.

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By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 250 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Nick DeStefano
06 Apr 09, 20:56
books on trading psychology

What books do you recommend on trading pschology? Also, do you recommend trading ETF's or trading individual stocks or indexes to get started?


Nadeem_Walayat
07 Apr 09, 19:25
Trading Psychology Books
There are numerous books out there on trading psychology, you could do some research to find whats ranked as the best of the most recent prints. Looking at my book shelf I see - Trading in the Zone, Market Wizards series, and Trading for a living, I would also get a copy of Reminiscences of a Stock Operator MOre info here - recommended books

Get your brain straight and you won't be bothered too much about what the market is going to do next which will make the market easier to read ;)

TO get started, pick ONE market and get in SYNCH with it, I would go with a major stock indices.

, the KEY here is ignoring everything thats written about the market you are trading and JUST going with what the price is talking back to you,
Sam K.
08 Apr 09, 11:35
Dow corrections

Well you did not see this weeks falls, to me it looks like off of a elliott wave fifth, kiss goodbye to your stealth bull market !


Nadeem_Walayat
08 Apr 09, 12:09
Dow Correction

1. I did not analyse or trade for this week as my systems upgrades are taking a lot longer than I thought they would!

2. The Dow has done NOTHING SO FAR to imply an end to the stealth stocks bull market, if your betting against it then you WILL LOSE!

Infact, I may take the opportunity to trade the END of this correction off of my laptop! while I finish setting up the new trading room.


Sam K.
13 Apr 09, 11:15
Stealth bull martket DEAD!

Today stocks are busting lower your stealth bull market is dead !


Nadeem_Walayat
13 Apr 09, 11:53
Stocks Target for 2009

Sam

Have you actually read my articles on the stocks stealth bull market ?

If you read them you will see that my original target was for a 30% rally from the low to YEAR END, this has been revised to 50%!

Stocks up 25% in 5 weeks IS WELL ahead of schedule, and therefore gives plenty of room for reactions lower whilst maintaining a stealth bull market that targets 50% by YEAR END !

SO please don't take every down day or even a 50% retracement to signal an end to the stocks bull market, as the year has over 7 months left to go !


Patrick
26 Apr 09, 10:42
Multi Month Correction Looming?

Hi Nadeem

Given the speed at which the market has bounced from the 5th of March and the seasonal tendencies to sell off in May do you see a multi month correction occurring?

While I agree we have seen the bottom I have noticed a lot of people are turning bullish very quickly (perhaps too quickly..?) and more are pointing to the beginnings of a bull than a bear...

I've also heard the argument given healthy bulls are led by stocks that were unrelated to the cause of the bear, right now stocks seem to be reacting to the financials than anything else...


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