This week we'd like to start with our usual market comment/forecast and end with a simple but useful Q&A session.
This past week we saw the markets continue higher but volume has not been as strong as we like to see on break outs. The markets are overbought, but as as we have seen in the past they can easily get more overbought before turning back down. We have a target of 1228 for the SPX which is about 7% higher from where we are now.
There are three ways that the market can get to our target price: one - is we continue moving higher in an orderly fashion moving down to a near support area then moving higher, making higher highs and higher lows; two - is we move sideways and base for a few weeks or months then start the next leg up, and; three - the market moves up in a very fast exhaustion move to our target price or slightly above or below. All three scenarios are very possible and of course so is the possibility that we are wrong and the market goes down immediately, or goes sideways for the next few months then breaks down instead of up. However, for now our charts are pointing up, so we will continue to trade in the direction of the trend and stay long until proven wrong.
We had a great start to the new year closing out 7 trades with gains of 9.97%, 7.04%, 5.19%, 14.21%, 2.23%, 4.95% and 8.53% our average hold time is 5 days. We will be starting this week with 4 open positions, with unbooked gains of 6.63%, 3.79% and 2.93%. We have one position showing a small 0.44% loss.
Finally, this being the beginning of the year we want those of you who are fairly new to trading to read the following common questions and answers. We think it will help you in your quest to make money in the market.
Q. What is your definition of a successful trader? A. The answer should be;
A successful trader is someone that can obtain consistent positive returns.
Those positive returns should be measured based on the time frame being traded and this can be weekly for day traders, monthly for swing traders and yearly for position traders.
Q. So how do you become a successful trader? A. Here are a few tips. Every one is as important as the next and critical to your success.
Create a plan before entering any trade. This includes how you will enter and exit the trade.
Learn how to take a loss and move on. Keep your losses smaller than your winners.
Use good money management. If you are a beginner split up your money in to more than 5 positions.
Stop trying to hit a home run with every trade. If you have a good trading system the big winners will come, but the small winners add up faster.
Keep it all simple. A simple plan will increase your chances to follow it and stick with it.
Always trade with the trend. Trading with the trend will increase your success rate.
Set your buy and stop orders when the markets are closed. This will keep your emotions out of your trades.
Build confidence in your system by starting out small and increase size in steps.
Have patience. Chasing a stock or the fear of missing a good trade is a portfolio killer. The market is open 252 days per year, there is always another trade
The Nasdaq Composite Index
First support is at 2269, 2220, and 2190. Resistance is at 2350 and 24000.
Standard and Poors SP-500 index
First support is at 1130, 1115 and 1100. Resistance is at 1168, 1200 and 1228.
The Dow Jones Industrial Averages Index
Support is at 10505, 10430 and 10330. Resistance is at 10750, 10800 and 11037.
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The KBW Bank Index
Support is at 45.70 and 44.90 Resistance is at 49.20. The banking index bounced strongly off the double bottom that we mentioned in last weeks forecast. Look for a quick bounce from any weakness.
GOLD - via the GLD
Gold moved up breaking above our first resistance area. Support is at 110, 109, and 107. Resistance is at 113, and 114.
OIL (light sweet crude)
Oil broke above the down trend but like gold it was on low volume and we expect a retracement to the break out area.
The US Dollar (Dollar Index ) The U.S. Dollar moved sideways this week it is pointing lower for the short term with support at 77.00 and 76.80. We are bullish on the dollar long term. First target price is in the 79.50 area.
This week we'd like to start with our usual market comment/forecast and end with a simple but useful Q&A session.
