Tuesday, April 20, 2010

The Daily Note - Flying Higher, Feeling Whooped

I don't know about  you but it seems this market may be feeling a little tired. It seems that now it's all about earnings and not much more, which is the way it was in 1999.  Earnings kept being better and better and when a stock was upgraded with a new target, eager traders snapped it up, or dumped it on a downgrade. Earnings forecasts were everything then along with whisper numbers and well, charts were not often mentioned. Who needed charts when the market was making new highs and not showing signs of slowing down.  It lasted over a year and it was wonderful especially for the amateur who could not do wrong as long as they were long and a day or two would correct an early entry with good rewards. 

The great debate on CNBC was whether the Dow will reach  10,000 and the Nasdaq 4,000. The Dow reached it and closed above it on March 29, 1999 for the first time and those who bet against were out, allowing the Dow to make continual higher highs. The Nasdaq took a bit longer but reached the "goal" at the end of the year on December 29, 1999. By that time the Dow was over $11,000 and the re-newed optimism into the year 2000, or the misnamed new millennium (actually the last year of the 20th century) was propelling the markets to higher highs. 

The Dow closed breaking two records at a new high above both 11,600 and 11,700 on January 14th, 2000,  but was showing signs of being tired by the beginning of March, when the Nasdaq closed above 5,000 for the first time on March 9th, 2000. Most traders were riding the wave and no one was listening much to the .com bubble debate; nobody could see the end as being near.  

Yes, it very much feels the same; yet it is not hyped as much. Today's traders are not  so quiet, they don't rely only on information from one source, CNBC, and they have a lot more information and advice available on the net. They are more savvy and more educated and it seems they are much better equipped.  But we, who have been there, know it's not all about equipment; it's about timing and being ready. The turning point can happen fast and your reaction depends on how fast you can recognize it, let go rather than hang on. It may take a day, or weeks with teasers in between allowing many to think it was only temporary reversal, and it can play with your head unless you have your stops firmly and convincingly set.  

Whether you agree or not with my analysis or anyone's about the current condition of this market is not the issue. The issue is whether you can survive the downturn and not give back what you have so painstakingly gained. 

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Happy Trading, Living and Dancing

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