In This Week’s Issue: Overcome Your Enemy

• Weekly Commentary
• Strategy of the Week
• Stocks That Meet The Featured Strategy

 In This Week’s Issue:

– Stockscores’ Market Minutes Video – Chart Message and Timing
– Stockscores Trader Training – Overcome Your Enemy
– Stock Features of the Week – Trading Volatility

Stockscores Market Minutes Video – Chart Message and Timing
Some charts provide the message, others the timing for putting the message in to action. That and the weekly market analysis in this week’s Market Minutes Click Here to Watch

Trader Training – Overcome Your Enemy

Emotion is the enemy of every trader.

Our emotional attachment to money is what causes us to lose our discipline, to take big losses, to not let our strong and profitable trades run higher. It causes us to own too many stocks in one sector or fall in love with a stock that will only hurt us. Letting emotion in to our trading decisions is a fast way to insomnia.

The perception is that the stock market is too risky, many investors don’t like the potential for a sharp sell off that can destroy their portfolio in a very short time period. The collapse of the stock market in 2008 has given many a form of post-traumatic stress disorder, leaving them on the sidelines when it has not made sense to do so.

The stock market may be volatile at times but that is not what determines risk. Risk is how you respond to the volatility, how you manage the potential size of your losses. The stock market is not risky, the people that play it are. It is how you deal with price volatility that determines risk.

If you want to sleep well while invested in stocks, you need to have a plan for managing risk. The notion that you can buy some “good” companies and forget about them is outdated and reckless.

Here are my essentials to being invested in the stocks and sleeping well:

Plan to lose. When you buy a stock, know the price level where the stock market will have proven you wrong. Learn how to determine where a stock’s support price is and if the stock closes below that level, realize that the market is telling you that something is probably wrong at the company. Get out.

Know your tolerance for risk. How much are you willing to lose on any one stock trade? If you risk more than this amount, you will get emotional. Take the difference between the entry price and the stop loss price and divide that in to your risk tolerance to determine how many shares to buy. If you are buying a stock at $10 with a stop loss point at $9 and you are willing to lose $500 on any one trade then you should buy 500 shares.

Don’t obsess. You don’t need to watch your stocks constantly, if you are position trading then only look at the once a day or even once a week. You only need to check to see if your stock has given an exit signal, obsessing over every gyration will make you emotional and lead you to make mistakes.

Have a written plan. You must write down your trading rules. When will you buy, when will you sell, how will you manage risk and how will you review your positions. Keep the plan simple but concise enough that there is no room for interpretation.

Stick to your plan. Your plan should be based on strategies that you have tested and believe in. Deviating from the plan means you are going in to areas that have not been tested and that puts you closer to being a gambler. Gambling traders may win in the short term but in the long term they lose.

Remember that trading stocks is as risky as you make it. Not having a plan with rules for limiting the size of your losses leaves you exposed to big losses if the market corrects sharply. With loss limits and discipline, you should never be the victim of a major market correction.

The market is showing signs that further weakness is coming. There are few stocks showing strength and concern about what is happening with Greece has sellers taking a stance. While corrections cause anxiety for many traders, they do present great trading opportunities. Here are two Exchange Traded Funds that move up when the market is correcting:

1. VXX
The VXX is based on the CBOE Volatility Index (VIX) for the S&P500 Futures. When volatility is expected to rise, this index goes up which is why the price of the VXX tends to rise when the market is correcting. I like to day and swing trade the VXX when the market is pulling back but I don’t tend to hold it for very long as there is some value decay over time.

2. UVXY
UVXY is also based on the VIX but this ETF is leveraged two to one. That means a 1% rise in the VIX leads to a 2% rise in the UVXY. I find it tends to do a little less than 2 to 1 but it is still a good way for traders with less capital to trade volatility. It also suffers value decay over time so it is important to only use this is a short term trading vehicle.

References

• Get the Stockscore on any of over 20,000 North American stocks.
• Background on the theories used by Stockscores.
• Strategies that can help you find new opportunities.
• Scan the market using extensive filter criteria.
• Build a portfolio of stocks and view a slide show of their charts.
• See which sectors are leading the market, and their components. 

Disclaimer
This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don’t consider buying or selling any stock without conducting your own due diligencT

As I stated in last week’s column: “The Greek default is merely the opening act of the worst sovereign-debt crisis in history.”

And now that Greece has told European leaders to take a hike, the crisis will start spreading.

The consequences will unfold in a series of debt defaults, civil conflicts, social and financial upheavals and more.

It will spread — without a doubt — to the other peripheral economies of the European Union, namely Portugal, Spain and Italy.

Each one of them has unsustainable debts. Each and every one of them does not have the economic growth to support the debts.

Each and every one of them will eventually have to go the way of Greece, at first defaulting, then trying to stay in the euro, and then finally recognizing that it’s impossible to do so …

And that the only way out for their citizens and their economies is to leave the euro and take back their own currencies.

You see, when the euro got started, it contained the seeds of its own destruction.

For one thing, European leaders tried to put a one-size-fits-all hat on all of Europe, through a single currency. Nice idea, but it failed to recognize the many disparate languages, histories and cultures of Europe.

For another, it subjugated each country’s sovereign identity to the powers that be in Brussels and Germany, robbing them of their democracies, and enslaving them to the wishes of European leaders who were nothing more than power-hungry mongers back then, in 1999 … and are even more power hungry today, to try and keep the euro intact.

And for yet another, those European leaders who expected to unite the Continent from a political perspective to avoid Europe’s long history of wars, they are about to see the entire experiment backfire.

For in the end, Europe’s euro advocates tried to do what Hitler tried: Unite the Continent into one union, one country, one financial system.

Whereas Hitler tried it militarily, and no doubt, was the most insane man ever …

Europe’s euro masters thought they could unite Europe peacefully through economic might.

But they were wrong, dead wrong, and the crisis that is now unfolding is going to produce precisely the opposite:

A Europe financially war-torn because euro leaders like Angela Merkel think they can call all the shots … think they can enslave other countries and people with debt … and dictate everything to them, under threats of no new loans, no humanitarian help, no futures unless you comply with their wishes.

Well, now it’s unraveling, right before their eyes. The Greek “No” vote is the best thing that Greece could have done. Now, Greece has clout. Now, Greece has stood up for itself. Now, Greece can move forward. Now, Greece does indeed have a future.

But in the short-term, it’s not going to be pretty. For Greece, for other peripheral economies, for Europe as a whole.

Portugal will soon realize it can do the same and tell Merkel and Brussels to take a hike. Then Spain will jump into the fray. Then Italy, and more.

Protests and riots will spread. Civil conflict within nations between those who want to say yes to the euro and those who want to leave will erupt.

Conflict between the periphery and the core, namely Germany, will escalate.

The entire euro experiment will fail, violently.

And the entire process — as it unfolds over the months and years ahead — will turn everything you thought you knew about economics and financial markets, inside out and upside down.

What was once considered safe — like government bonds — will become the riskiest of investments …

While, on the flipside, what was once considered risky — like gold and precious metals, or even Greece’s stock market — will become the safest types of investments.

Mark my words: The crisis will change your life. It will threaten your finances like never before.

If you don’t have a handle on how the crisis will unfold, it will squash any chance you have at protecting and growing your wealth …

But if you do have a handle on it, not only will you be able to protect your wealth, you’ll be able to grow and multiply your wealth many times over.

My Real Wealth Report subscribers are not only tuned in to the crisis and what it means, they are and will always be prepared to protect their wealth and grow it as the crisis unfolds in the months and years ahead.

You can be too.

The first step is to educate yourself on how a crisis like this unfolded before.

For starters, I recommend reading Volumes II and III of President Herbert Hoover’s memoirs, available online for free via his presidential library.

Simply click on volumes II and III near the top of the page in his memoirs section to download the .pdf files.

Read them and pay particular attention to how he describes Europe’s sovereign debt crisis in the 1930s … and how capital darted back and forth around the globe “like a loose cannon on the deck of a ship in the middle of a torrent.”

It will open your eyes to how capital can move in times of crisis, and what kinds of investments are sought out, and why.

It’s the other side of the Great Depression that almost no one ever tells you about, yet is so very important for you to understand.

Your second step: Stay close in touch with my columns, and even better, consider joining my Real Wealth subscribers,
who, year-to-date, have handily beat the S&P 500 with a 13.3 percent return.

Best wishes, stay safe and stay tuned …

Larry

Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report, Power Portfolio and Gold and Silver Trader.

Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.

“The more resources authorities commit to propping up the stock market, the more they ratchet up the potential fall-out risks should the market continue to collapse,” said Andrew Wood, an analyst at BMI Research. “This could give rise to a crisis of confidence in the authorities’ ability to support both the stock market and the real economy.”

….read the excellent analysis in ZeroHedge posted July 6th HERE

also:

China stocks fall again despite support measures posted July 7th HERE

The past four years or so have been extremely frustrating for investors like me who have structured their portfolios around the belief that the current experiments in central bank stimulus, the anti-business drift in Washington, and America’s  mediocre economy and unresolved debt issues would push down the value of the dollar, push up commodity prices, and favor assets in economies with relatively low debt levels and higher GDP growth. But since the beginning of 2011…

….continue reading this comprehensive article HERE – MT Ed

STOCKS: In my opinion, the stock market gave a good account of itself today. In addition to bad news from the Greek election, The Shanghai Composite has dropped 30% in a very short time. Our markets don’t correlate well with those of Asia, but a drop like this is hard to ignore.

DOW                                                    – 47 on 850 net declines

NASDAQ COMP                                   – 17 on 500 net declines

SHORT TERM TREND                          Bullish  

INTERMEDIATE TERM TREND             Bullish

Help should soon be on the way. Check out the chart below.

GOLD:  Gold gained $5. With all the turmoil in the World, one would think the yellow metal would be doing better.   

NEXT DAY: Tuesday should be higher.

CHART:  Most market indices held their lows of late June, both intraday and on a closing basis. This is a positive, at least so far. We would not like to see those lows broken.

BOTTOM LINE:  (Trading)

Our intermediate term system is on a buy.

  System 7   We are long the SSO from 65.70. If there are more declines than advances at 3:45 EST, sell at the close.                     

  System 8   We are in cash. Stay there.                    

GOLD  We are in cash. Stay there.     

News and fundamentals:  This is a very light week for news. On Monday, the ISM services index came in at 56.0, less than the expected 56.3. On Tuesday we get job openings (JOLTS) and the trade deficit.

Interesting Stuff  Economics is the only profession that I know of in which an individual can be constantly wrong and still be considered an expert.   

TORONTO EXCHAN GE:   Toronto was down up 89.   

S&P/TSX VENTURE COMP: The TSX was lower by 7.       

BONDS:  Bonds surged in a flight to safety.                                                 

THE REST:  The dollar moved up mildly. Silver was higher. They took crude oil out and shot it. Down over 7%.           

We’re on a buy for bonds as of June 11.                      

We’re on a buy for the dollar and a sell for the euro as of June 23.                       

We’re on a sell for gold as of  July 2.                         

We’re on a sell for silver as of June 23.                        

We’re on a sell for crude oil as of June 4.                             

We’re on a sell for the Toronto Stock Exchange as of May 6.    

We’re on a sell for the S&P\TSX Venture Fund as of October 30.    

We are on a long term buy signal for the markets of the U.S., Canada, Britain, Germany and France. 

 INDICATOR PARAMETERS

     Monetary conditions (+2 means the Fed is actively dropping rates; +1 means a bias toward easing. 0 means neutral, -1 means a bias toward tightening, -2 means actively raising rates). RSI (30 or below is oversold, 80 or above is overbought). McClellan Oscillator ( minus 100 is oversold. Plus 100 is overbought). Composite Gauge (5 or below is negative, 13 or above is positive). Composite Gauge five day m.a. (8.0 or below is overbought. 13.0 or above is oversold). CBOE Put Call Ratio ( .80 or below is a negative. 1.00 or above is a positive). Volatility Index, VIX (low teens bearish, high twenties bullish), VIX % single day change. + 5 or greater bullish. -5 or less, bearish. VIX % change 5 day m.a. +3.0 or above bullish, -3.0 or below, bearish. Advances minus declines three day m.a.( +500 is bearish. – 500 is bullish). Supply Demand 5 day m.a. (.45 or below is a positive. .80 or above is a negative). Trading Index (TRIN) 1.40 or above bullish. No level for bearish.

      No guarantees are made. Traders can and do lose money. The publisher may take positions in recommended securities.