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|Wednesday, December 21, 2005|
There is just no strength at all in this market right now. Every rally is met with sellers. The Bulls started out this morning like a house on fire. Someone pulled that chainsaw cord like we suggested may happen in last night's commentary and they ripped right through the baby Bears. But when the big Bears came out to play, the Bulls ran away to hide like the cowards they have been over the last few weeks. It is almost unreal how they just whimper away at the first glance of a Bear. After the indices sold down and lost most of their morning gains, a flurry of buying came in towards the close but is looked to be a feeble attempt at a recovery. It is really pitiful when a market cannot have a convincing powerful rally in December. After all, this is usually a very good month for stocks historically. The Dow gained 28 points today, while the Nasdaq gained 9 and the S&P gained 3 points. Overall it was not a great day for the markets considering that the big gains early in the day dwindled away. But for our day traders following our pre-market update, it was a super day. NBIX, HOLX, AMLN, FFIV, AAPL and ISRG all had super moves.
I guess the real blame goes to the Fed chairman Mr. GRINCHspan. He has succeeded in spoiling the much expected year end rally. The only reason the market is not rallying with all the terrific economic data out recently is the fact that the Federal Reserve has kept their strong arm policy of interest rate hikes in tact for 13 consecutive .25 basis point rates hikes. How can the stock market move higher when rates are going up consistently over the last two years?
We still believe there is a chance of further upside action in stocks going forward However, considering the recent bearish indicators we mentioned in Sunday night's commentary, coupled with the fact that the Bulls just don't want to fight for higher prices and some possible January selling, we have to remain cautious in our trading. We would like to dive in head first and load the boat for a year end rally but every time we think a rally is starting, the market fakes us out and reverses the opening move up. At this point, if the market does rally we would hesitate to chase stocks higher in a further move that may likely stall out in the first couple weeks of the year.
Should this January selling occur, there may be buying shortly after due to new IRA money flowing into mutual funds for the 2006 IRA year. This should start to happen later in January and possibly through the tax refund season when refund checks flow into the stock market. Keep in mind, this new money will be the novice investors, not the professional. Professionals do not get refund checks, they make too much money for that, they are paying taxes.
At any rate, if all this lines up and actually happens, after a small pullback in early January, there could be a rally for the first few months in 2006 because the market will sense the end of the Fed tightening ahead of time. Then, when they do stop raising rates, this will already be priced in and the market will likely sell the news. That is when the market will head lower and probably struggle for most of 2006. Some what like it struggled this year until the October lows. We called correctly by saying that markets usually bottom in October and head higher in November, that prediction turned out to be correct.
There is no guarantee that we will call the market correctly in 2006 but we want to make you aware of the possible scenario's we think may happen. It is too far out to predict market direction because we do not know what economic and geopolitical events will occur that will dictate stock price action. All we can do is try to forecast considering all the factors that we know now. It is nice to try and predict ahead of time what will happen in the market but it is not necessary to do so. In the end, the only thing that matters is the stock chart and its trend. Follow the trend and there is really no need to try and guess future market direction.
The markets are closed the next two Monday's to observe the Holidays on Sunday. The normal Sunday bulletin will be on Monday evening for the next two weeks.
Holiday greetings from STHQ
From all of us at STHQ, we hope you all have a wonderful holiday season with your family and friends. We would like to wish all our members a very Merry Christmas and Happy New Year. May 2006 be a great year for you and your loved ones. Please remember those that are less fortunate; if you can, please support your local Toys for Tot's organization so that a child or two can have a gift under the tree this year. They will not know who gave it to them but I will guarantee that their face will light up when they open their gift. Just knowing that makes it worth giving. God bless all of you and your loved ones.
Long Term Portfolio Closed
We have made the decision to do away with our long term portfolio as of Dec 31st 2005. This portfolio came about by request from members who wanted some longer term trades because they were not short term traders. These members are no longer with us and we see no need to keep this portfolio open when our primary trading style is short term. Overall, the portfolio was a success. There were a total of 9 positions traded with 10% of portfolio value in each trade. 5 positions were closed 4 winners and 1 loser. There are 4 positions still open, 1 winner, 2 losers and 1 flat. Even if all the positions were closed today, the portfolio would be up 11% since its inception. We feel the portfolio serves no practical purpose and therefore we have made the decision to remove the long term portfolio.
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STHQ Chart Index
If you go to the chart index in the left side menu, you can review and study charts we have annotated for each stock listed in the past.
We have added the earnings link for each stock on the bulletin. To access the link for earnings you can either use this link below or click the link on the bulletin for the corresponding ticker. Click the online bulletin in the left side menu for access to the earning calendar for each stock listed. It is not recommended to hold a position through earnings. You can always buy the stock back after the dust settles.
For New Members:
Please take a moment to read the "How To Use The Bulletin" link at the bottom of the Bulletin page on the website. It is critical you understand how to use this trading tool before trying to trade the stocks mentioned. The effectiveness of your trades will diminish if you do not completely understand how the information is presented.