Go Where The Real Growth Is
Posted by lasertrader on September 5, 2010
Yesterday while my wife and I were rambling up the coast of Maine and away from the tick by tick action of the markets, my mind started wandering on bigger picture thoughts that I occasionally revisit while the markets are closed. Incidentally, if you haven’t visited Nubble Lighthouse near York, Maine its a place you should see if you are in the area.
The first thought I had to do with the Twitter / Stocktwits stream. Like many of you, I follow a number of close friends as well as the list of very good traders you probably have on your follow list. There is a continuous flow of very good chart supported setups streaming on your Twitter time line all day and often all night. Stocktwits has been a game changer for the individual trader. Mixed in with the actual setups are many very good market observations. Many of these observations flow by and often you don’t give them a second thought. As I have learned to focus on my own setups, I have paid more attention to the flow of market observations. This has helped me see things happening before the trading universe jumps on them. Many times traders get lost in the minor theme and miss the big picture.
The example from this week has to do with the financials. For the past couple of months how many times have you read “this market isn’t going anywhere without the financials”. On Wednesday of this week the XLF broke through a long downsloping trendline on very strong volume but I wasn’t seeing this mentioned on the stream. Instead all I saw were Tweets about Goldman Sachs not moving. Yes from a micro point of view GS was acting like a dog but the rest of the financials were moving up nicely on volume. My Tweet mid day Thursday was:
“$XLF after weeks of people saying the markets not going anywhere without the financials. Now that they are running nobody notices?”
From Wednesday onwards I was trading the FAS and once GS finally kicked in on Friday it was game on 100%. This weekend I see the move in the Financials is being validated by the stream. Its time for this sector to show some leadership so keep it on your list. The point here is that in between all the great chart setups and post trade analysis on the Twitter Stream, there are very strong messages that often get lost in the short attention span of the trader. Keep a Diary of these thoughts and revisit it on a regular basis and you will be sure to spot opportunities before the majority of traders get on board. If you look to trade the XLF or FAS this coming week, you alrerady missed a 10% move.
The second thought I had was Growth. It seems there is lots of talk these days about economic numbers and whether they are real and if the growth in the U.S. is real or not. Every economic report that comes out swings the market back and forth and the numbers continually get revised. There are lots of cross currents in the U.S. economy and they have made for a very choppy and nervous market. Until a real and perceived sustainable growth trend appears we remain in a risky and choppy market that is difficult to trade. Even the old go to China market is exhibiting the same chop and nervousness. Just think, when there is finally a feeling that the U.S. and China are on a solid path again trading will get “easy”. We all keep waiting and watching for this so we can go all in long for the ride of our lives..if we don’t double dip and have the world come to an end before then.
One article caught my eye this week and has been spinning in my head since then. It was an article by a newsletter writer that I have lots of respect for and have read for more years than I care to admit. Here is an excerpt:
“Earlier today, India reported that its “real” (inflation-adjusted) GDP grew a sizzling 8.8% in the June quarter from the year-ago period. Unlike China, whose government-manipulated economy is coming under increasing suspicion both inside and outside the Middle Kingdom, India is experiencing genuine, balanced growth. Exports, for example, account for just 20% of Indian GDP, versus close to 40% for China, with its bloated industrial sector and starved consumer sector.
India’s stock market is also trouncing China’s in 2010. Year to date, the Bombay index is up 2.9%, compared with a 19.5% loss for the Shanghai index. Tune out the China hype and buy PIN”
I sit here thinking that while we are all waiting for “real” and sustained growth to show up on our shores, there is already an opportunity for us to reduce our risk by trading India stocks. This will be one of my trading themes for the weeks ahead along with the financials.
Some India stocks to watch are PIN EPI INFY HDB MTE RDY IBN IFN WIT IIF TTM INP SAY CTSI
If you need to think about the markets this weekend, toss around some macro themes that may help you choose better stocks to trade. There is never a shortage of trade setups. The key to making money is to choose the ones that will play out with less risk and potentially higher reward. Enjoy the rest of your long weekend.