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Monday, January 02, 2006
Market Recap
It was a lackluster end to a lackluster year on Friday as the Dow lost 67 points, the Nasdaq lost 13 points, and the S&P lost 6 points. We say lackluster because 2005 was a year of underperformance for the big 3 indices. In 2005, the Dow was down .05%, the Nasdaq was up only 1%, the S&P was up 3%, and the Russell was up 3%. This is the result of a market that traded flat and in a trading range for most of the year. The trouble started last January when an early sell off put the market in the hole early in the year and it had to fight its way back all year.
STHQ vs. The Market
Our portfolio is up 22% overall for 2005, outperforming the market by 20%. Although excellent compared to the market, this performance was not up to our standards. We could have done much better if we had taken more buy points listed in the bulletin over the year and traded more aggressively with those buy points. We did not take the trades with an official alert so they do not go into our official performance results. However, if you look back, you will see that we could have had many 10 or 20% gainers from those original buy points. It all depends on how aggressive you want to be, and the market in 2005 was not a market to be too aggressive in. We played it more conservatively and with a conservative approach we cannot expect the big reward without the big risk that goes with it. We also had some big losers that we admit were unacceptable and those hurt our performance. Without these big losers, our performance would have been well over 30% this year. A couple of large losses can cut into the gains for the year and this is certainly proof of that.
Our goal this year is to be more aggressive. We will try and take most of the buy points listed in the bulletin and take the small gains we may get even if those gains happen in the next day or two. We like to give our entries a chance to run, but in the process of holding them we may give back the gain and we want to avoid that. Quick profit taking may have to be the answer. We do not know if 2006 will be a market that starts to trend, or if it will be another flat year. Until there is a trend in place, we will have to take the small gains of 5-10% because that is all the market is willing to give. Should that change and the market starts to trend up or down, we will adjust our trading style for a trending market. Until then, we will continue to do what we have done for most of 2005, and that is:
- to take the quick gains,
- to cut the losers quickly,
- to preserve capital, and
- to maximize the overall performance of the portfolio's return.
Market Outlook
As far as the indices are concerned and where the market is headed from here, we have to look at the charts.
The Dow
The chart of the Dow is looking negative and headed down. Some of the indicators I look at are very negative at this point. The CMF is signaling distribution, the ADX is negative, the MACD is still above the zero line but it is very near going below it, the A/D and OBV are negative, the RSI is below 50, and the Slow Stoch is not yet oversold. All these indicators are signaling more downside. However, the Dow is below the lower Bollinger band and just above its 50 SMA area of support where it could get a bounce. This support is at 10693 and that is only 25 points below the closing price on Friday.
The Nasdaq
All of these same conditions apply to the Nasdaq as well, but the Nasdaq is just 2 points above its 50 SMA so it could bounce right here. A close below it would not be a good sign to start the year.
The S&P
The S&P is in the same boat with all of the same negative technical conditions as the Dow and Nasdaq. The S&P is 8 points above its 50 SMA which tonight is 1240. This is a good price support area as well so maybe the market can bounce off this level should we get a quick down spike at the start of trading Monday.
All three indices are near price support at the bottom of their trading ranges and the bases that they had formed over the last 5 weeks of the year dating back to the November high. We either bounce very soon or drop below this area of support. At this point, the market is in jeopardy of getting off to another bad start like it did in 2005.
Stockcharts Listing
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http://stockcharts.com/def/servlet/Favorites.CServ...
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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:
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. |
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