The Problem with Market Commentaries -- By: Bill Kraft
Copyright 2008, Makin' Hay, Inc., All Rights Reserved
Bill Kraft
Editor |
A recent note from a subscriber alerted me to discuss what I am
trying to do with the Newsletter articles and why I am doing it. The
subscriber chastised me for failing to comment on the financial meltdown
in last weekend's article and suggested that I did not write about those
developments as every other Newsletter writer to whom he subscribed
did. He took it as a sign that I wasn't paying attention to the
market. While I understand his issue, it comes from a misunderstanding
of what I am trying to do with the Newsletter articles and my beliefs
about market commentaries in general.
I do watch the markets quite closely because I make my living
trading. It is a rare day when I am not monitoring movements and
looking for entries. However, I do not intend to make the Newsletter
articles a regular weekly commentary on the markets. I reserve my
market comments for paid subscribers in my weekly Summaries to them and
generally try to make the weekly Newsletter articles relevant to trading
principles, methods, or strategies. In the Newsletter articles, I try
to talk about things I believe are important to traders in general and
that might advance their trading knowledge and, perhaps, show some
approaches that have worked for me over the years.
The subscriber pointed out that all the other market Newsletters he
read did discuss the current financial plight in the U.S. As I
suggested in my response, I am not writing a market commentary and have
no intention of following the herd. What can one say other than things
looked bad and bearish plays continued to be in order. No one,
absolutely no one knows what the future will be so attempts by
commentators to predict the future are nothing but pure speculation. We
can come up with all sorts of rational, logical guesses about what the
markets are going to do, but they are just that -- guesses. Just
consider the jolt the news that Lehman Brothers was in trouble and the
news of its subsequent bankruptcy caused. Until that news precipitated
the further news that our whole financial system was on the verge of
collapse, the markets may have seemed OK, if not great. I did have a
subscriber a few weeks ago who commented that he expected another big
failure after Bear Stearns, but he made no prediction of which financial
institution it would be. In any event, no matter what the talking heads
on TV may say and no matter what market commentators may predict, we
must keep in mind that it is nothing more than speculation. If any of
us knew tomorrow's news, we would be instantly wealthy beyond belief --
we could buy the winning PowerBall ticket.
One thing thing I will say with respect to the financial crisis is
that I am absolutely sick of politicians. As usual, even in these dire
financial times, they have directed their attention to posturing and
finger pointing. Everyone but the guy speaking at the moment is accused
of being at fault. How about being intellectually honest for once and
taking some of the blame themselves. How about working together to serve
the people rather than working to blame the other guy? I know it isn't
just the politicians who created the mess, but, for sure, they helped.
When are we the people going to rise up and demand that the politicians
represent us rather than themselves. I know I have mentioned politics
and that mere mention usually brings out a lot of political comment, but
I would appreciate it if readers would restrain themselves from writing
political diatribes or defenses of their particular party or candidate
since we really do want to limit the commentary to specific trading issues.
Well, that is my "market commentary" this week. Going back to the
issues of prediction, all of us have no choice but to trade in the
present. The past, of course, is gone, and try as we might, we cannot
know the future until it becomes the present. When we make a trade, it
is now. Without insider information, we have about a 50/50 chance of
success on any particular trade no matter what we think or believe or
bet will happen. In my view, that is why it is critically important to
successful trading to have entry and exit strategies in place before we
ever enter a trade. In that way, whatever may happen, we have set up a
position in which we cut our losses and let our profits run. That method
and money management will take us farther as traders than the thought
that we can predict the future. Remember, we can have 50% winning
trades (or even less) and still be successful if we manage our money
properly and have a disciplined strategy to cut losses and let profits run.
Good Trading!
Bill Kraft
Success Trading Group -- by the Success Trading Group Team
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Here is a play from the Success Trading Group:
Kinder Morgan Energy Partners L.P. (KMP)
Our Success Trading Group members scored 2 more winning trades this week.
We have many of our "old favorites" on our radar for trading next week. One
of our trades this week was Kinder Morgan Energy Partners, L.P. (Ticker:
KMP). We will be looking at placing a trade on KMP on a dip below $53.
Have a great weekend and we'll trade next week.
Success Trading Group Team
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Option Trader -- by Bill Kraft
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The Option Trader service utilizes standard trading in Puts and Calls as well as strategies using Leaps, Straddles, Credit Spreads, Calendar Spreads, and Naked Puts. But no matter how sophisticated a strategy may be, we ALWAYS know our downside potential on every trade.
Here's a look at a trade Bill is currently working on:
SPDRs (SPY)
Perhaps the easiest trades in the current atmosphere are
index type trades. SPY tracks the SP500 so I look to buy calls if it
looks more certainly like the bailout has passed and puts if not. In
either case, I will be considering options that expire in 4 to 6
months. In either event, if I happen to be wrong on the direction, I
will look at creating a spread by selling another shorter expiration
call or put as the case may be to bring in some income and attempt to
reduce risk in the long leg. In the event the play goes my way, I would
suspect the trade could be very short term.
Good Trading!
Bill Kraft
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Trend Trader -- by Bill Kraft
Trend trading as we try to practice it is a form of momentum trading. We prefer to try to capture profit out of the middle of the trend rather than try to catch reversal at bottoms and tops.
Here's a look at a trade Bill is currently working on:
Vector Group Ltd. (VGR)
Vector Group (VGR) is in the tobacco business and if the
past couple of weeks haven't made you start smoking again, you've
probably conquered the addiction. Unsurprisingly, this sector has moved
up over the past several days and with it VGR. I am watching this one
for a retreat to the trend line and then, perhaps, another leg up.
Currently, the uptrend line beginning in late June is passing through
about $18.40 on a daily line chart.
Good Trading!
Bill Kraft
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$10 Trader -- by Bill Kraft
We really enjoy trading stocks that are $10 and under. Often they provide the chance to enjoy high percentage gains and, of course, at worst, the risk is limited to what we paid for the stock.
Here's a look at a trade Bill is currently working on:
IAMGOLD Corp. (IAG)
Once again, the gold related stocks are worth watching. IAG
has been in a downtrend for most of the year. It tried to break a
downtrend line earlier in the week, but failed. The stock closed around
$5.87 on Friday and has a support nearby at about $5.72. The downtrend
and price support lines are converging and reaction in the area of the
convergence often gives a hint at upcoming direction. A break above the
trend line, currently in the vicinity of $6.10 will have my interest as
a potential bullish play.
Good Trading!
Bill Kraft
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