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Hello traders everywhere! Adam Hewison here, co-founder of MarketClub with your mid-day market update for Wednesday, the 5th of October.
Beware of Mob Madness!
What is it about mobs that make them so dangerous? The problem is mob mentality. Here you have a group of people who individually are regular folks, but put them in a crowd and they lose all sense of what is right and wrong. They justify their actions because of what they see other people doing.
Using social media sites like Twitter and Facebook, mobs were getting together for the Arab spring in the Middle East. Now we have mobs getting together in Greece and other parts of Europe, even my homeland, England! And we have the same problem here in major cities in the United States. This is what I call the dark side of social media, and one that I believe is so very dangerous.
Is it healthy? Is it good for America, or any country? Absolutely not!
One of the most fascinating books I have ever read about the market is Charles Mackay's, "Extraordinary Popular Delusions and the Madness of Crowds." It is a history of popular folly, first published in 1841. The book chronicles its subjects in three parts: "National Delusions", "Peculiar Follies", and "Philosophical Delusions". This book has gathered a body of academic support as a work of considerable importance in the history of social psychology and psychopathology. I highly recommend that you pick up a copy.
As you see, 170 years later we haven't changed very much as human beings. Understanding this mob phenomenon can be a huge advantage and is going to be one of the keys to being successful in the next 12 months. As always, we will do our best to keep you informed and on the right track.
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3 STOCKS IN THE NEWS
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COSTCO (Symbol COST) - Trade Triangle (Monthly) Long from $83.45 on 9/16/11.
Now trading @ $81.50
MORGAN STANLEY (Symbol MS) - Trade Triangle (Monthly) short from $26.70 on 4/12/11.
Now trading @ $13.89.
RESEARCH IN MOTION (Symbol RIMM) - Trade Triangle (Monthly) short from $57.48 on 3/25/11.
Now trading @ $23.55.
Now let's go to the 6 major markets we track and update every trading day and see how we can create and maintain your wealth in 2011.
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S&P 500 INDEX
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The S&P 500 index fell dramatically yesterday in the first several hours of trading. It was only an hour before close that the market realized it was heavily oversold and rallied dramatically. This rally did not change the overall trend of the market and we expect we will once again see the S&P 500 index roll over to the downside. Currently the S&P 500 is at an area of resistance and we do not expect it to move over the 1150 area. Look for resistance at 1134 which is a 50% Fibonacci retracement from the lows that were seen at 1073 yesterday. We would not rule out our ultimate target zone for this index which is the 1000 to 950 area. Intermediate and Long-term traders should continue to hold short positions in this index.
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 90
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Suggested S&P 500 Trading Instruments:
Non Leveraged ETF's: (Long SPY) (Short SH)
2 x Leveraged ETF's: (Long SSO)(Short SDS)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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SILVER (SPOT)
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The spot silver market, which made a low on September 26th around $26 an ounce, continues to move sideways with little direction. If we see the close this week below $29.60 it will represent a new low close for silver and a push down to our target zone of $20.00 an ounce. As always we will rely on our Trade Triangle technology to keep us on the right side of the trends. Traders who are following our Trade Triangle Technology should be short this market with appropriate stops.
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trend = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 100
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Suggested SILVER Trading Instruments:
Non Leveraged ETF's: (Long SLV) (Short the ETF SLV)
Leveraged ETF's: (Long AGQ) (Short ZSL)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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GOLD (SPOT)
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Like the silver market, gold continues to move sideways and lacks any real direction. One difference between gold and silver at this point, is the monthly Trade Triangle for gold is positive and the monthly Trade Triangle for silver is negative. A potential play could be buy gold and short silver. I think most traders would be better off just watching from the sidelines until the volatility subsides. Only long-term traders should maintain long positions with the appropriate money management stops in place.
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Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = - 55
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Suggested GOLD Trading Instruments:
Non Leveraged ETF's: (Long GLD) (Short the ETF GLD)
Leveraged ETF's:(Long UGL) (Short GLL)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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CRUDE OIL (NOVEMBER)
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The crude oil market continues to follow the movement of the equity markets. Coming from a heavily oversold condition, this market could rally back to between $81 and $82 a barrel, which represents approximately a 50% and 61.8% Fibonacci retracement, respectively. Overall we still view the trend in this market as negative. We would not be surprised to see a move down to the $70 a barrel level. Intermediate and Long-term traders should continue to be short the crude oil market.
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 90
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Suggested Trading Instruments:
Non Leveraged ETF's: (Long USO) (Short the ETF USO)
Leveraged ETF's: (Long UCO) (Short DTO)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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DOLLAR INDEX
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What is important for the markets is how we close for the week. At the moment, it would appear we have put in a minor top around the 79.80 level basis this index. This could well be an interim top. as the energy field below this market is still very much intact. We may need to see further consolidation above the 79 level before this market moves to new highs. We continue to be friendly to this market and want to hold positions with money management stops. This index is coming from a large energy field that is capable of carrying it much higher. Intermediate and Long-Term traders should maintain long positions with the appropriate money management stops in place.
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Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = + 100
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Suggested DOLLAR INDEX Trading Instruments:
Non Leveraged ETF's: (Long UUP) (Short UDN)
Leveraged ETF's: (Long) (Short)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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REUTERS/JEFFERIES CRB COMMODITY INDEX
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The REUTERS/JEFFERIES CRB COMMODITY INDEX has completed the Fibonacci retracement outlined in previous reports and we would not be surprised to see a a further recovery from current levels. This does not mean that the overall down trend is over, it just means that we seen an adjustment perhaps for the next leg of the move. We expect rallies back to the 302-304 level to run into resistance, and we would not rule out a retest of the recent lows. We expect the trend to continue until our Trade Triangles inform us that the trend has changed. Short, Intermediate and Long-Term traders should maintain short positions with the appropriate money management stops in place.
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 90
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Suggested REUTERS/JEFFERIES CRB COMMODITY INDEX Trading Instruments:
Non Leveraged ETF's: (Long CRBQ) (Short the ETF CRBQ)
Leveraged ETF's: (Long) (Short CMD)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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WIN A FREE 1 YR SUBSCRIPTION TO MARKETCLUB ON A HP WiFi TABLET
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This is Adam Hewison for MarketClub and I'll see you tonight on MarketClub TV at 5pm EDT. Don't forget to enter for a free 1 year subscription to MarketClub on a HP WiFi Tablet!
All the best,
Adam Hewison
President, INO.com
Co-creator, MarketClub
sorry for the typo, we moved down to 1075 not 1175
Hi Adam,
I have a question.. For future index trading (like ES, emini s&p future etc), I think it is very difficult to follow trade triangle. As per weekly trade triangle S&P cash sell signal was at 1136. After that we move down to around 1175, almost 60 points down but no trade triangle signal to book profit. Now S&p back to 1160 , loss of 25 points after leaving 70 points gain..Would like to know how this trade triangle works for future trading..Thanks
SP500 1156 whew hoo!
ADAM ONCE AGAIN YOU'RE SHOWING HOW FARKING TOTALLY OUT OF TOUCH YOU REALLY ARE!
/You are truly a clueless idiot!
Russell 2000 got the positive confirming candle today.
Expect SP500 to close above 1150 tomorrow.
"when people are exercising their freedom of speech their attempting to step on someone else’s freedom and liberty."
Yes, Jackson, freedom's sword has many edges. Some thought freedom was to discriminate on the basis of race, sex, age, religion, nationality or class. Today, some think freedom means taking what isn't yours by means of fraud, extortion, identity theft or insider trading, as a few examples.
The kids and young adults currently taking to the streets have had their future stolen from them by means of executive decision, corruption of the marketplace and of our political process. There are many protesters with advanced degrees that had faith in a economic model that's collapsing globally due largely to systemic abuse by the most privileged therein.
Many in banking think it acceptable to leverage risk to infinity and manipulate an algorithmic driven market with super-computer-micro-precision, legal impunity and to the material disadvantage of absolutely everyone else. Trading wisdom centuries old and the attendant laws governing markets have been abandoned along with personal and professional ethics.
There's some freedom for you'!
It's a great thing to see people exercising their first amendment rights. Protests have always been the start of new beginnings. However, not every change is good, nor does it add to the backbone of the constitution. The constitution give you right to your own property that you created or worked for. The recent protests in Greece is people demanding more money from the government that isn't there. The recent protests on Wall Street are there to take out the foundation of capitalism and bring in 'something' else. I only ask one thing. Leave me alone! I do believe that is the definition of liberty... 'to be left alone".
Be aware that sometimes when people are exercising their freedom of speech their attempting to step on someone else's freedom and liberty.
Mob, Adam? Seems to me that these are young AMERICANS exercising their first amendment rights peacefully in protest to their collective experience of political and economic disenfranchisement. The only violence so far has been perpetrated by the police, much like what occurred during the civil rights movement.
Not healthy for our country? We would not have a country had there not been those willing to demonstrate their displeasure with another government over precisely the same complaint.
What's not heathy is stereotyping on the basis of misperception or misunderstanding. That's the dark side of any media.
So far it has not been the mob that has gone mental (in response to some of the comments about mob mentality) but rather the over-zelous police force. There is a place for civil disobedience in our society lest you forget how our ancestors wrested this great country from the British. It is time to clean our collective acts up and what better place to start then Wall St. and the Banking community?
Finally someone said it; 'there is a dark side to social media'.
Hi MArket Club Team,
Boring technical suggestion, but it would be really useful to have the size of the videos a little bigger - like they are when a guest logs in. I know you can maximise them and that is what I usually do, however this means the whole screen is taken up. If the standard size of the videos were larger, it would be possible to see the detail of the charts whilst doing something else on the screen at the same time - like writing notes about Adam's ace advice.
Any chance of changing that? Just a suggestion that I thought you wouldn't mind hearing.
Cheers
Tristan
sorry for the typo in my previous post, I meant that 1150, not 1100 is basically line in the sand
"Charles Mackay’s, “Extraordinary Popular Delusions and the Madness of Crowds.”
I read that, too. It's wonderful. It's probably available online for free, too (it's public domain), so all it would cost anyone to read is their time.
Thanks Adam..In S&P 500, 1100 is basically line in the sand. In worst condition if we close above 1150 in next few days, do you advise to close short or wait for weekly trade triangle to reverse?