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Tuesday, November 01, 2005
Market Recap
Well, they did it again. The Fed raised rates by .25 basis points today for the 12th straight meeting and used the same language they have been using (measured pace) since this relentless rate hike streak started. As always, the markets had this priced in and the reaction to the raise was very much muted. There was neither a rally nor a sell off on the news. The Dow lost 33 points, the Nasdaq was down 6 points, and the S&P gave back 4 points. This action today in the market was fine technically. The market has ran up with a nice rally that started last Friday and continued yesterday, so it is only natural for it to give some of those gains back. Minor selling on light volume after rallies is good. It is the huge selling on heavy volume and giving back the entire gain that we do not want to see after a nice rally. Apparently, the Fed will meet again in December. I was not aware of this meeting and I miss spoke last night when I said today's meeting would be the last one for the year. Great, that's all we need is another hike before the holidays.
Want to hear a rumor?
Rumor, “GOOG to join the S&P”? Rumor, “NTES run-up today caused by take over speculation”? These are just two rumors I heard today and they are just a couple of the many I hear each day. That is all they are is rumor. I doubt very much that the run-up in GOOG lately has anything to do with that rumor but that is what some ignorant market participants believe. The stock is up because earnings were fantastic and will continue to be. Earnings drive stock prices. NTES, being bought out? I doubt that to. Maybe the run-up today is because of the great earnings they are soon to release. I have been around this business a long time and I can assure you that 95% of the rumors you hear are false. Believe me, I have played the rumor game many times when I first started trading and I cannot ever remember making any money on a rumor.
Any rumor that comes from an inside person would be considered insider trading. However, the availability of those insider rumors is slim to none if they are at all factual. There are few people that actually have access to the kind of information that would move a stock price. Sure there are some, but that number is very small when compared to the masses. Maybe the executive officers and a few of their inner circle friends and investment bankers, but they do not leak the information very often. Do you think those are the kind of people who you will find posting rumors on message boards?
“Sell the News”
If I had information that would potentially move a stock up by 50% or more I would not be telling anyone. Why? Because I would want to keep the price low so that I could buy as many shares for myself as possible before the news hit the wire. I would wait for the news to come out, and then I would sell my shares to the herd reacting to the news for the big score. This is the classic “sell the news” action we often see. Chances are when stocks sells off on good news it is because the smart money already knew the news was coming and accumulated shares prior to the release. They unload those shares to the uninformed buyers that jump on the news. All that selling pressure quickly brings the stock back down and those that chased the news are left holding a stock they bought at higher prices.
If I had knowledge of any information that would drive the stock higher, why in the world would I want to share information like that with complete strangers on a free message board? Why would anyone pump a rumor on a message board if they knew it was true? Just accumulate your shares and wait for the press release, and then sell into the news and make your profit. I am sure most professional traders in the market think this way as well. So knowing this logic, the rumors posted on Yahoo message boards are likely false. How many times has a rumor been posted before hand that has actually happened? Probably very, very few.
The people spreading rumors on these boards are only doing it to pump stocks so they can sell there shares to anyone that will listen to them. Why? Because it is free, it is anonymous, and a lot of new or uninformed investors get their information from message boards.
It is usually the cheaper stocks that have this kind of unfounded rumor mill going. The stocks are cheap, so it is easy to buy a bunch and then make a huge profit after you have sold enough people on the rumor. You do not find nearly as much rumor talk in stocks that trade at $10 or more. It is too costly to take a position, and there is usually enough information known about the company that manipulation is not nearly as easy to do. So for this reason, we know that the GOOG and NTES rumors today had nothing to do with the movement of the stock prices.
Stockcharts listing
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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.
Earnings Calendar
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.
http://www.earnings.com
For New Members:
For all the new members with us, please make sure to read the link “How to use Bulletin” at the bottom of the Bulletin page on the website. It is critical you know 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.
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