Obama’s Budget Seeks $1.9 Trillion Tax Rise
By · CommentsFresh from Bloomberg
” Feb. 2 (Bloomberg) — The Obama administration seeks a $970 billion tax increase over the next decade on Americans earning more than $200,000 and wants to take in an additional $400 billion from businesses even as it retools a proposed crackdown on international tax-avoidance techniques.
The administration budget released yesterday would reinstate 10-year-old income tax rates of 36 percent and 39.6 percent for single Americans earning more than $200,000 and joint filers making more than $250,000 as part of a broad $1.9 trillion tax increase proposal. It proposes to eliminate preferences for oil and gas companies, life-insurance products, executives of investment partnerships and U.S.-based companies that operate overseas. “
Liberated Stock Trader.
This news hot from Washington is important. The US has to refocus on reducing its deficit, Obama made this clear in his state of the Union speech. There are two ways to reduce the US Debt burden using Monetary and Fiscal policy. Monetary policy changes could be to increase interest rates, but this is not an option in today’s environment. Fiscal policy changes could be to reduce spending. Obamas hands are tied as he came to power promising more investment and reform specifically in health care, however the financing of huge investments in stimulus packages and job creation is taking its toll. Fiscally the US cannot withdraw the stimulus packages at this still critical point in the recovery. Monetarily I imagine that later this year or early 2011 interest rate will rise. Only a prime rate above 5-8% will have an extremely negative affect as we see from history.
2 Japanese Candlesticks – Bullish Reversal Patterns
By · CommentsThis in an excerpt from the forthcoming Liberated Stock Trader Book and Training Course
As we are concerned with spotting changes in price moves we will focus on the Reversal Patterns. This section is the Bullish Reversal Pattern meaning when a price is moving down and you see this sign, the price may change direction and start moving up in the short term. These are the most common patterns not an exhaustive list but it will give you an idea of what is common in all patterns.
The Hammer – this hammer can be either filled or hollow, the Japanese say the price is hammering out a bottom. What is important here is that at the end of a down move, the buyers and sellers test out an extreme low (the long shadow) however by the closing bell the price has returned higher.
The lows were tested but price found no comfort there, there were enough buyers at this level to move price back up.
Inverted Hammer – this hammer shows that at the end of a downward move the stock gaps significantly down there is much movement throughout the day moving back to fill the gap but the price settles lower for the day. This shows significant price action and that buyers are showing strong interest in the stock at these levels.
Bullish Engulfing – here we have a negative spinning top or a short day during a down trend, then followed by a long day of real power the long white body tells you something significant has changed and so has the sentiment, a clear trend reversal.
Bullish Harami – during a downtrend we experience a very negative “Long Day” followed by a short positive day. This indicates the market participants have found a level they are happy with. Candlesticks are most useful when predicting a change in trend, this might be from an “up” to a “down” trend or from a “down” trend to a “sideways” trend. In the case of this Harami, the change in trend may be from downwards to sideways.
Piercing Line – this shows a day of real strength following a very negative day. The White candle gaps down on open but the buyers show real demand throughout the day to retrace more that 50% of the previous day’s losses.
Summary
Each Candlestick pattern has a specific story to tell. If you can understand the story being told you do not need to memorize the name of each pattern and the text book meaning. Re-read this article and try to imagine the story. Combining the action of multiple days will allow you to understand the current psychology of the market participants therefore giving you an insight into tomorrows price action.
Market Continuing Decline, potentially more to come!
By · CommentsWell we are seeing continued decline!
As I flagged in my previous post on the 21st January here
“We essentially have 5 scenarios
- Today’s negative action halts today and builds a base at the intermediate support line
- We experience further downside action to the medium term support line at 1072
- We pullback to 38.2% of the July Trend (6 months)
- Pull Back to Fibonacci 50, at 1015
- Experience quite a serious correction releasing the tension of the March to date rally with a pull back to 980.
It has been a great rally since March but something inside has to begun to be extremely skeptical. Do not get caught the wrong side of a power sell off without a stop loss in place. Do not risk any more than 5 to 10% max on any one trade. Never make one trade worth your entire portfolio.”
Well Scenario 2 seems to be the target for now, the S&P500 has plummeted through support at 1119 and will come close to my 2nd specified downside target of 1072 over today and tomorrow. The next stop after that could be 1045. The market is not reacting well to any good news and that is a signal in itself. Be careful with your money, do not get dragged down betting against the odds your stock will rise in a falling market.
US Markets Capitulate – Potential Change of Character
By · CommentsDespite a buoyant start to 2010, today we saw what could be termed a change of character in the US Markets. It is at times like these that no matter how good the stock you own is, your stock may get pulled down with the rest of them. So if we see a pull back, and it is not unreasonable to imagine we will get a pull back, we were due one in December but the Market (SP-500) kept creeping upwards and sideways, how much will it pull back?
Using simple Trend lines and Fibonacci Retracement we are able to build scenarios which allow us to make plans for the future.
Setting Potential Downside Targets
We essentially have 5 scenarios
- Today’s negative action halts today and builds a base at the intermediate support line
- We experience further downside action to the medium term support line at 1072
- We pullback to 38.2% of the July Trend (6 months)
- Pull Back to Fibonacci 50, at 1015
- Experience quite a serious correction releasing the tension of the March to date rally with a pull back to 980.
It has been a great rally since March, but something inside has to begun to be extremely skeptical. Do not get cuaght the wrong side of a power sell off without and stop losses in place. Do not risk any more than 5 to 10% max on any one trade. Never make one trade worth your entire portfolio.
Keep your friends close, your enemies closer and your stop losses the closest.
ROC Rate of Change Indicator
By · CommentsThis is an excerpt from the soon to be released Liberated Stock Trader book and the accompanying “Academy Pro Training Course”
The rate of change is very similar to the Momentum indicator mentioned in the previous section, with one important difference, instead of a subtracting the latest price from the price X periods before it divides it. This is an important difference that improves the indicator.
Rate of Change = 100 (C / CX)
The results of ROC are similar but slightly better than that of Momentum as it handles large price swings better. As in the previous section, follow the numbered steps in the following Chart to understand how ROC can tell the story of future price movement.
Freestockcharts.com chart courtesy of Worden Brothers, Inc.
Now this is a busy chart.
- Using a trend line we can see that ROC breaks its downtrend at the end of November 2008. This is a useful way of using Oscillators, plotting trend lines on them. As oscillators are leading indicators using a trend line will show us when a trend change happens before it is reflected in price.
- The price then follows by moving up from 18.90 to 24.30 a 23% gain.
- Here we see a false signal, this shows us that no indicator is perfect. Always remember the price move is the most important, Oscillators can help us to improve our chances of guessing correctly. However this time it fails.
- ROC indicates a positive divergence, yet price hits resistance at 24.30 and then plummets south.
- ROC now corrects itself and 2 days before the actual severe price drop ROC shoots downwards, this is a warning sign top exit.
- Here again ROC shows a negative divergence.
- Price again hits resistance in June at 21.50. ROC’s divergence was correct and the stock drops.
- ROC Surges upwards in August and although price retraces in September ROC powers on showing a positive divergence.
- The first 2 weeks in October the price surges again.
- ROC shows another negative divergence with the price trend.
- No new price high
- Price falls, again predicted by ROC.
You are now familiar with positive and negative divergences, but also realize that price is the most important indicator and that Oscillators can be wrong. Wait for the indicator to scream, if it says nothing move on.
