U.S. Stocks Advance as Confidence, Home Sales Beat Forecasts

Wednesday, November 25, 2009

Aug. 25 (Bloomberg) -- U.S. stocks rose as better- than- estimated consumer confidence and home prices bolstered optimism the recession is ending, while falling oil prices dragged down energy producers. Treasury yields declined after a record-tying $42 billion sale of two-year notes.
Macy’s Inc. and Bed Bath & Beyond Inc. added more than 3.5 percent as the Conference Board’s measure of consumer sentiment increased to 54.1, topping the median projection of 47.9. Pulte Homes Inc., the nation’s biggest builder by market value, rose 3.7 percent as the S&P/Case-Shiller home-price index for 20 U.S. cities dropped by the smallest amount since April 2008. Energy companies fell as crude lost 3.7 percent from a 10-month high.
The Standard & Poor’s 500 Index added 0.4 percent 1,029.73 at 3:01 p.m. after rallying as much as 1.2 percent. The Dow Jones Industrial Average advanced 48.30 points, or 0.5 percent, to 9,557.58, gaining for the sixth straight day. Both measures reached their highest levels of 2009.
“Obviously there’s a lot of questions about whether the economic recovery is sustainable, but stocks tend to react before the fundamentals do,” said Jeffrey Coons, who helps oversee $21 billion as co-director of research at Manning & Napier Advisors Inc. in Fairport, New York. “We haven’t yet begun to see investors shift more assets into equities, so we think stocks have more room to appreciate.”
The S&P 500 has advanced five straight months and in five of the past six weeks following better-than-forecast corporate profits and signs of an improving economy. More than 72 percent of its companies beat the average analyst estimate for second- quarter earnings, the most since Bloomberg began tracking the data in 1993. The Conference Board’s index of leading economic indicators has risen every month since April. With today’s gain, the S&P 500 has risen 53 percent from a 12-year low in March.
Europe, Asia Shares
The Dow Jones Stoxx 600 Index of European shares advanced 0.4 percent after earlier falling as much as 0.8 percent. The MSCI Asia Pacific Index slipped 0.3 percent as the Shanghai Composite Index slid for the first time in four days, decreasing 2.6 percent. Wen Jiabao, China’s premier, said yesterday that excess industrial capacity may limit growth and authorities can’t be “blindly” optimistic.
Treasury yields, which move inversely to the price of the securities, declined after the auction. The new two-year notes were sold at a yield of 1.119 percent, higher than the 1.115 percent average estimate of eight bond-trading firms surveyed by Bloomberg News.
Today’s auction will be followed by $39 billion of five- year notes tomorrow and $28 billion of seven-year notes on Aug. 27. The U.S. government is selling the securities to fund the record budget deficit that resulted from measures to prop up the economy. The deficit will widen to $1.5 trillion next year, reflecting a “deeper recession” than previously expected, White House budget chief Peter Orszag said today.
Teen Clothing
Macy’s, the second-biggest U.S. department-store chain, rose 4.2 percent to $15.96. Bed Bath & Beyond, the largest U.S. home-furnishings retailer, climbed 3.9 percent to $36.60. The S&P 500 Consumer Discretionary Index advanced 1.2 percent, the most among 10 industries, following the consumer-confidence report.
Pulte Homes, the biggest U.S. homebuilder, advanced 3.6 percent to $13.07. The four homebuilders in the S&P 500 gained 3.2 percent as a group, and reached the highest level since Oct. 2. The S&P/Case-Shiller home-price index declined 15.4 percent in June from a year earlier, less than the median economist estimate of 16.4 percent. Prices rose from the prior month by the most in four years.
Energy companies in the S&P 500 retreated 1.6 percent, the biggest drop among the 10 industries.
Big Lots Inc. rose 5.7 percent to $25.41. The closeout retailer said second-quarter profit from continuing operations was 35 cents a share, or 15 percent more than the average analyst estimate.
Burger King Holdings Inc. increased 7.6 percent to $19. The second-largest U.S. hamburger chain said fourth-quarter profit was 43 cents a share, topping the average estimate by 32 percent, as the company expanded overseas.
Harman International Industries Inc. rose the most in the S&P 500, climbing 9.7 percent to $29.72. The maker of audio systems for homes and vehicles was rated “overweight” in new coverage at JPMorgan Chase & Co., which said the company has the potential to cut costs and boost sales.
Most U.S. stocks fell yesterday, led by financial companies, after SunTrust Banks Inc. said lenders face more credit losses and commercial real estate may falter through 2010. The S&P 500’s five-month rebound left it the valued at 18.9 times the trailing 12-month operating profits of its companies last week, the highest ratio since 2004, according to data compiled by Bloomberg.
Ouster From S&P 500
Manitowoc Co. fell 4.9 percent to $6.51. The crane maker was picked to replace CareFusion Corp., which is being spun off from Cardinal Health Inc., in the S&P 500.
Denbury Resources Inc. fell 7 percent to $15.70 for the biggest drop in the S&P 500. The oil and natural-gas producer was cut to “neutral” from “buy” at UBS AG.
U.S. companies with the worst finances are beating the S&P 500 even as their funding deteriorates, a sign their rally may falter should the economic recovery stall, Armstrong Investment Managers said.
The weakest non-financial companies in the S&P 500 surged 90 percent since March 9 through last week. After the S&P 500 sank to a 12-year low five months ago, those with the best finances gained 49 percent, data from Armstrong Investment show. The companies were identified using New York University Professor Edward Altman’s Z-Score method.
READ MORE - U.S. Stocks Advance as Confidence, Home Sales Beat Forecasts

LATEST:- CREDIT MARKETS: Goldman Earnings Boost Market; CIT Stabilizes

   By Kellie Geressy-Nilsen

NEW YORK (Dow Jones)--Credit markets were lifted Tuesday as Goldman Sachs Group Inc. (GS) beat analysts' estimates for second-quarter earnings, helping to give a much-needed boost to the battered bank and finance sector.

Goldman posted record profits - reporting second-quarter earnings of $3.44 billion, 65% higher than last year's $2.06 billion. The better-than-expected results inspired investors and helped to buoy financial bonds and cut the cost to protect them.

Goldman credit default swaps were down sharply following the second-quarter results, quoted at 142 basis points, down from 150 basis points prior. CDS levels on other finanicals were also down, according to Phoenix Partners Group.

And risk premiums on Goldman's outstanding non-guaranteed bank debt narrowed by as many as 10 basis points, according to one bond trader.

Earnings reports from Citigroup (C), JPMorgan Chase (JPM) and Bank of America Merrill Lynch (BAC) are expected later this week.

Meanwhile, CIT Group Inc. (CIT) may be getting some aid from the federal government, but a decision on whether or not the lender will be spared from bankruptcy filing is still pending.

And despite a concrete decision by the government pertaining to aid, some think that a bankruptcy of CIT isn't imminent. Goldman Sachs analysts Louise Pitt and Joseph Schatz write that restructuring of its existing capital and debt structure is a priority which could lead to government aid. But even if CIT is able to carry out initiatives to boost its near-term liquidity, the analysts are still concerned over the viability of CIT from a longer-term funding and profitability perspective compared with larger, better-rated domestic banks.

Also Tuesday, the U.S. Department of Justice announced it had opened an investigation into the complex market for credit default swaps - a sector of the market that was a major contributor to the credit crisis.

Market Group Holdings Ltd. received a request from the DOJ's antitrust division for information relating to price transparency in the credit derivatives and related markets, according to one person familiar with the inquiry.

"We will work with the Department to provide any information requested of us," Markit said in a statement. Markit buys and distributes some news feeds from Dow Jones Newswires.

Still, credit derivative markets showed little reaction to news of the probe.

   Corporates See Moderate Activity

The high-grade corporate bond market was relatively quiet on Tuesday, as the focus remained on earnings reports.

CareFusion Corp., was in the market with a benchmark-sized three-part bond offering that included three-, five- and 10-year senior notes. Deutsche Bank, Goldman Sachs and UBS served as active bookrunners for the issue. CareFusion is set to become public from the planned spinoff of Cardinal Health's clinical and medical products businesses.

And the benchmark high-grade credit derivatives index, the Markit CDX North America Investment Grade derivatives IG12 index, was last quoted 3.5 basis points narrower on the day to 139 basis points, according to Phoenix Partners Group.

The high-yield market was generally flat, with activity again dominated by CIT Group Inc. (CIT). Several CIT issues stabilized and traded slightly higher on the day, after falling in previous days, amid reports that CIT remains in talks with the government about receiving some sort of federal aid.

Several market participants said they anticipate some sort of debt exchange offer may be in CIT's future, citing a similar offer by GMAC that reduced that company's debt burden before the government stepped in with assistance.

The cost of protection on CIT's senior bonds via credit-default swaps fell initially Tuesday, to 37 points upfront from 41 late Monday, but rose again later to 40 points upfront, according to Phoenix Partners Group, which noted that trading in the CDS was limited. That means it now costs about $4 million plus a $500,000 annual fee to insure $10 million of CIT bonds for five years.

   Commercial MBS Index Hit

Bonds backed by commercial mortgages were hit Tuesday after Standard & Poor's downgraded several CMBS issues.

The CMBX Series 5, the most recent derivatives index based on bonds backed by commercial mortgages, was down by three points to 72 cents on the dollar, according to Derrick Wulf, a senior portfolio manager at Dwight Asset Management in Burlington, Vt.

S&P cut several of these securities because of a recent change in its rating methodology.

   Mortgages and Agency Debt

Mortgages pulled back after widening earlier in the day, says John Sim of JPMorgan. According to Sim, the current coupon spread over a blend of 5-year and 10-year Treasurys narrowed about half a point to 145 basis points.

Spreads widened out even further in Agency market afternoon trading, according to Tradeweb, amid a sell-off and correspondingly rising rates in the Treasury market.

Short-term paper continued to be the hardest hit, but 5-year, 7-year and 10-year paper followed suit.

Agency spreads had narrowed into the low single digits, before the widening this week. Fannie Mae 1.375% 2-year notes were recently quoted 4 basis points wider at 8 basis points/5.3 basis points bid/offer, according to Tradeweb.


Treasury prices fell again Tuesday as investors, cheered by stronger-than-forecast retail-sales data and upbeat earnings from Goldman Sachs, moved away from the relative safety of the government bond market.

Data that showed an unexpected hefty boost in producer prices also gave investors pause about heading into Treasurys, especially longer-term ones. Higher inflation hurts long-dated Treasurys as rising prices eat into fixed returns. The day's losses built on weakness Monday, when Treasurys fell as stocks rose.

Selling has put the brakes on the rebound Treasurys were making over the past month, which had pushed the 10-year note's yield down more than 50 basis points after pushing up to 4% in early June.

In afternoon trade Tuesday, the 10-year note was off 28/32 to yield 3.46%. The 10-year was yielding 3.30% on Friday. The 30-year bond was in the worst shape, down by 2 to 4.36%. The two-year note was down 2/32 to yield 0.94%. Bond yields move inversely to prices.

- By Kellie Geressy-Nilsen; Dow Jones Newswires; (212) 416-2225; kellie.geressy@dowjones.com

READ MORE - LATEST:- CREDIT MARKETS: Goldman Earnings Boost Market; CIT Stabilizes

LATEST:- U.S. Markets Wrap: Stocks, Treasuries Rise on Improved Outlook

By Dakin Campbell and Matt Townsend

July 20 (Bloomberg) -- U.S. stocks rose, sending the Standard & Poor’s 500 Index to its highest level since November, as a gauge of economic indicators topped projections and speculation grew that CIT Group Inc. will avoid bankruptcy. Treasuries rose and the dollar fell.

Caterpillar Inc. and Alcoa Inc. rallied at least 3.7 percent as the Conference Board’s gauge of the economic outlook increased for a third straight month. CIT Group jumped 79 percent as a person briefed on the board’s deliberations said the lender has reached a financing agreement with bondholders. Federal Reserve Chairman Ben S. Bernanke may outline his strategy tomorrow for exiting history’s biggest monetary expansion in testimony to Congress.

“Given the general weakness of the economy and concerns over corporate profitability going into the second quarter, reports to date have been a pleasant surprise,” said Dean Gulis, part of a group that manages $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. “This week it’s going to continue to rally. The worm has turned a little bit. People are feeling better about the economy.”

The S&P 500 added 1.1 percent to 951.13 at 4:05 p.m. in New York, above its best close since Nov. 5. The Dow Jones Industrial Average rallied 104.21 points, or 1.2 percent, to 8,848.15, erasing its loss for the year and closing at a six- month high. Treasuries rose, pushing yields down from the highest levels in almost four weeks, amid speculation Bernanke may ease inflation concerns. The dollar dropped to a six-week low against the euro.

Industry Groups

All 10 industry groups in the S&P 500 rose today, led by consumer, commodity and industrial shares. Goldman Sachs Group Inc. boosted its forecast for the index, saying improving earnings will spur the steepest second-half rally since 1982. The bank raised its year-end target for the S&P 500 to 1,060, a 15 percent increase from its projection of 940 on June 30.

Earnings topped analysts’ estimates by an average of 15 percent for S&P 500 companies that reported quarterly results since July 8, according to data compiled by Bloomberg, with 35 out of 43, or 81 percent, beating estimates.

Ten-year note yields fell the most in six days before the central bank chairman’s semiannual economic report to lawmakers at 10 a.m. tomorrow in Washington. U.S. debt fell earlier and stocks rose as CIT, seeking to stave off bankruptcy, was said to be offered financing from bondholders, damping demand for the safety of government debt.


“The focus of Treasuries is on Bernanke’s testimony,” said Kevin Giddis, head of fixed-income sales, trading and research at the brokerage Morgan Keegan Inc. in Memphis, Tennessee. “We are caught in a summertime range trade. The general feeling is that he will say things are getting better, but make no mention of when the economy will do a full turn.”

The 10-year note’s yield fell four basis points, or 0.04 percentage point, to 3.61 percent at 5:03 p.m. in New York, according to BGCantor Market Data. It earlier touched 3.72 percent, the highest level since June 23. The price of the 3.125 percent security maturing in May 2019 rose 11/32, or $3.44 per $1,000 face amount, to 96 1/32.

The dollar fell while the yen slid as the possibility of a CIT debt restructuring encouraged higher-yield demand. The U.S. currency declined 0.8 percent to $1.4234 per euro at 5:03 p.m. in New York, from $1.4102 on July 17. It reached $1.4249, the weakest level since June 5. The yen depreciated 0.9 percent to 134.11 per euro from 132.85 after trading at 134.76, the weakest level since July 3. Japan’s currency traded at 94.22 versus the dollar, compared with 94.19.

‘Risk Assets’

“People are looking for risk assets, not with a lot of conviction, but with equities there is some appetite,” said Brian Kim, a foreign-exchange strategist in Stamford, Connecticut, at UBS AG, the world’s second-largest currency trader. “They’re leaning away from safe havens, and the dollar and yen kind of suffered.”

The Dollar Index, which the ICE uses to track the greenback against the currencies of six major U.S. trading partners, touched 78.799, the weakest level since June 3. The index, which reached the highest in almost three years on March 4 and the lowest in 2009 on June 2, traded in a range of about 1.5 points above or below 80 since the beginning of last month.

Crude oil rose for a fourth day. The commodity advanced after a measure of economic indicators signaled that the worst of the recession is over. The Conference Board’s gauge of the outlook for the next three to six months increased 0.7 percent, more than forecast, and climbed three straight months for the first time since 2004.

‘A New High’

“We’ve reached a new high on the back of the weak dollar and equity market strength,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “There’s increased optimism and some earnings are better than expected.”

Crude oil for August delivery rose 48 cents, or 0.8 percent, to $64.04 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices reached $64.90, the highest since July 7. Oil has gained 44 percent this year.

Gold climbed to a five-week high as a weaker dollar and higher oil prices boosted the metal’s appeal as an alternative investment and a hedge against inflation.

Gold futures for August delivery gained $11.30, or 1.2 percent, to $948.80 an ounce on the New York Mercantile Exchange’s Comex division. Earlier, the price reached $955.40, the highest for a most-active contract since June 12.

“Gold is moving up today due to the lower U.S. dollar,” said Lannie Cohen, the president of Capitol Commodity Services Inc. in Indianapolis.

READ MORE - LATEST:- U.S. Markets Wrap: Stocks, Treasuries Rise on Improved Outlook

LATEST : Oil rises towards $69 as dollar dips and ahead of stocks data

SINGAPORE (Reuters) - Oil rose toward $69 a barrel on Tuesday, snapping two days of falls, on a weaker U.S. dollar and ahead of weekly stocks data forecast to show a fall in U.S. crude inventories.
The dollar took a breather on Tuesday after rallying in the wake of last week's U.S. jobs data, which stirred talk that the Federal Reserve may raise interest rates later this year.
U.S. light crude for July delivery rose 52 cents to $68.61 a barrel by 0206 GMT, having settled 35 cents lower on Monday at $68.09, more than $2 below a seven-month high above $70 touched on Friday.
London Brent crude was up 52 cents at $68.40. "The currency market has been driving the oil market since the middle of May. Traders are looking more at the dollar than at equity markets now," said Tetsu Emori, fund manager at Tokyo-based Astmax Co Ltd.
"It is quite difficult to take positions above $70 for now. It is too risky," he added.
Oil prices have more than doubled since the lows of this winter, tracking stronger equities markets, with the S&P 500 index rallying 39 percent since sliding to a 1-year closing low on March 9.
Hopes for a global economic recovery have also sustained the current price rally, and the world's top oil forecasters are likely to paint a slightly more bullish outlook in their monthly market reports this week, suggesting oil demand could bottom out and inventories start falling in the next few months.
Nobuo Tanaka, executive director of the International Energy Agency (IEA), adviser to 28 industrialized countries, told Reuters on Monday the agency expects oil stocks in the developed OECD economies to fall to 57 days by year-end from the current 63 days, if OPEC's output continues at current levels and demand recovers.
More market direction could emerge later on Tuesday as industry group the American Petroleum Institute releases its weekly U.S. inventory data at 2030 GMT, to be followed by U.S. Energy Information Administration data on Wednesday.
Analysts polled by Reuters said they expect crude stocks to have fallen by 400,000 barrels last week, while distillate and gasoline stocks could have risen by 1.2 and 1.3 million barrels respectively.
Last week, U.S. crude oil stocks rose by a more-than-expected 2.9 million barrels
READ MORE - LATEST : Oil rises towards $69 as dollar dips and ahead of stocks data


Understanding Forex Capital Markets

The Forex Capital Market in the foreign exchange arena worldwide is a nonstop, no nonsense cash market. The different currencies of nations are traded here for profit and the transactions are typically taken care of by dedicated brokers. Foreign currencies in the Forex Capital Market worldwide are consistently bought and sold. This buying and selling of currencies takes place across local and global markets.

The overall exercise is to ensure that the investments of the traders involved increase in value. These profits are in turn generated by the currency movements. The conditions in the Forex capital market arena are subject to change at any time and are substantially influenced by a number of real time economic news and events. The main attraction of this market for retail traders includes 24x7 trading and nonstop access to the global Forex dealers. You can literally trade at any time of the day!

The currency markets worldwide are enormously liquid and this nature of the market makes it easy to trade the major currencies (U.S. Dollar, Euro, Swiss Franc, Japanese Yen and British Pound). This highly volatile and liquid market offers investors a number of profit raking opportunities. A trader's ability to quickly profit with the rising or falling of prices is what lures the industry big players to keep earning and investing regularly.

The market offers foreign exchange trading within a leveraged arena, with low margin requirements. The market also offers investors and traders ample of options to benefit from with zero commission trading.

The currency market deals with sensitive capital investments from all over the world, and aims to profit from volatile foreign currency movements around the globe. Forex trading within the dedicated market is always conducted in currency pairs. The numbers are referred to as foreign exchange rates and investors need to understand how to interpret its values. For example, the rate of EUR/USD = 1.4000 means that one Euro can be traded with 1.4000 U.S. Dollars.

The lucrative trading opportunities from all over the world enable the investor to enjoy the benefits of a high return on investment in the Forex market. Compared to other forms of trading, currency trading can potentially yield a 30% return (or more) within a very short time period. Also, compared to a stock which may be worth absolutely nothing in the case of a bankruptcy, it is highly unlikely that a currency can be completely worthless.

When trading currencies in this unique market, traders deal only when the currency being bought is expected to increase in value as compared to the currency being sold. This financial rostrum also flaunts scope for open trades or open positions, where the trader buys or sells a particular currency pair, but does not transact the equivalent amount to close the position.

The arena is very speculative in nature. The currencies in are traded in pairs and exchanged one against the other and exchange rates are mostly determined against the US dollar (USD). This financial market works along the determined minimum security that is intended to cover trading losses and the margin enables private investors to trade in high minimum units and enhanced rates of profit!

Most actively traded companies on Canadian stock markets

TORONTO — Some of the most active companies traded Tuesday on the Toronto Stock Exchange and the TSX Venture Exchange:

Toronto Stock Exchange (10,588.79 down 15.27 points):

Uranium One Inc. (TSX:UUU). Miner. Down 29 cents, or 13.74 per cent, to $1.82 on 30,272,324 shares. The stock has been heavily traded since late last week after reports came out suggesting the Toronto-based company's joint venture in Kazakhstan may be under investigation by authorities.

Connacher Oil and Gas Ltd. (TSX:CLL). Oil and gas. Down six cents, or 5.26 per cent, to $1.08 on 11,834,788 shares. The energy subgroup on the TSX led the losers as the price of light, sweet crude oil dipped three cents US to close at $68.55 on the New York Mercantile Exchange.

Azure Dynamics Corp. (TSX:AZD). Hybrid electric and electric powertrains. Down seven cents, or 21.21 per cent, to 26 cents on 9,520,746 shares. The Oak Park, Mich.-based company nailed a partnership deal with Champion Bus, which will offer an Azure hybrid electric drivetrain as an option in Ford E-450 shuttle buses.

Eastern Platinum Ltd. (TSX:ELR). Miner. Up three cents, or 5.17 per cent, to 61 cents on 9,252,960 shares.

Teck Resources (TSX:TCK.B). Miner. Up six cents, or 0.32 per cent, to $18.71 on 8,006,189 shares.

Bombardier (TSX:BBD.B). Transportation equipment. Down eight cents, or 2.03 per cent, to $3.87 on 7,720,130 shares.

TSX Venture Exchange (1,141.74 up 1.19 points):

Gold Wheaton Gold Corp. (TSXV:GLW). Miner. Up five cents, or 19.61 per cent, to 30.5 cents on 21,698,200 shares.

Stem Cell Therapeutics Corp. (TSXV:SSS). Drugmaker. Up three cents, or 33.33 per cent, to 12 cents on 7,486,624 shares.

Companies reporting major news:

Brick Brewing Co. Ltd. (TSX:BRB). Beermaker. Up a penny, or 1.54 per cent, to 66 cents on 15,700 shares after the founder of the small Ontario beermaker has been sued by his former company for alleged "wrongs" against the corporation over several years.

Domtar Corp. (TSX:UFS). Paper giant. Up three cents, or 2.08 per cent, to $1.47 on 320,090 shares on news its board has authorized the implementation of a reverse stock split at a one-for-12 ratio of its outstanding common stock.

Magna International Inc. (TSX:MG.A). Auto parts conglomerate. Down 91 cents, or 2.55 per cent, to $34.80 on 351,165 shares as chairman Frank Stronach says he expects the company's newly acquired Opel unit in Germany to break even in three years and turn a profit in four years.

READ MORE - Most actively traded companies on Canadian stock markets

How to Read a Chart & Act Effectively


This is a guide that tells you, in simple understandable language, how to choose the right charts, read them correctly, and act effectively in the market from what you see on them. Probably most of you have taken a course or studied the use of charts in the past. This should add to that knowledge.


There are several good charting packages available free. Netdania is what I use.

Using charts effectively

The default number of periods on these charts is 300. This is a good starting point;

  • Hourly chart that’s about 12 days of data.
  • 15 minute chart its 3 days of data.
  • 5-minute chart it’s slightly more than 24 hours of data.
You can create multiple "tabs" or "layouts" so that it’s easy to quickly switch between charts or sets of charts.

What to look at first

1. Glance at hourly chart to see the big picture. Note significant support and resistance levels within 2% of today’s opening rate.

2. Study the 15 minute chart in great detail noting the following:

  • Prevailing trend
  • Current price in relation to the 60 period simple moving average.
  • High and low since GMT 00:00
  • Tops and bottoms during full 3 day time period.

    How to use the information gathered so far

    1. Determine the big picture (for intraday trading).

    Glancing at the hourly chart will give you the big picture – up or down. If it’s not clear immediately then you’re in a trading range. Lets assume the trend is down.

    2. Determine if the 15 minute chart confirms the downtrend indicated by big picture:

    Current price on 15-minute chart should be below 60 period moving average and the moving average line should be sloping down. If this is so then you have established the direction of the prevailing trend to be down.

    There are always two trends – a prevailing (major) trend and a minor trend. The minor trend is a reversal of the main trend, which lasts for a short period of time. Minor trends are clearly spotted on 5-minute charts.

    3. Determine the current trend (major or minor) from the 5 minute chart:

    Current price on 5-minute chart is below 60 period moving average and the moving average line is sloping downward – major trend.

    Current price on 5-minute chart is above 60 period moving average and the moving average line is sloping upward – minor trend.

    How to trade the information gathered so far

    At this point you know the following:

  • Direction of the prevailing trend.
  • Whether we are currently trading in the direction of the prevailing (major) trend or experiencing a minor trend (reaction to major trend).

    Possible trade scenarios:

    1) Lets assume prevailing (major) trend is down and we are in a minor up-trend. Strategy would be to sell when the current price on 5-minute chart falls below the 60 period moving average and the 60 period moving average line is sloping downward. Why? Because the prevailing trend is reasserting itself and the next move is likely to be down. Is there more we can do? Yes. Look for further confirmation. For example, if the minor trend had stalled for a while and the lows of the past half hour or hour are very close to the 5 minute moving average then selling just below the lows of the past half hour is a better place to enter the market then just below the moving average line.

    2) Lets assume prevailing (major) trend is down and 5-minute chart confirms downtrend. Strategy would be to wait for a minor (up trend) trend to appear and reverse before entering the market. The reason for this is that the move is too “mature” at this point and a correction is likely. Since you trade with tight stops you will be stopped out on a reaction. Exception: If market trades through today’s low and/ or low of past three days (these levels will be apparent on the 15 minute chart) further quick downward price action is likely and a short position would be correct.

    3) A better strategy assuming prevailing trend down, 5-minute chart down, and just above days lows is to BUY with a tight stop below the day’s low. Your risk is limited and defined and the technical condition (overdone?) is in your favor. Confirmation would be if today’s low was a bit higher than yesterday’s low and the price action indicated a very short-term trading range (1 minute chart) just above today’s low. The thinking here is that buyers are not waiting for a break of today’s or yesterday’s low to buy cheaper; they are concerned they may not see the level.

    4) Generally speaking, the safest place to buy is after a sustained significant decline when the bottoms are getting higher. Preferably these bottoms will be hours apart. By the third or forth higher bottom it is clear a bottom is in place and an up-move is coming. As in the example above your risk is limited and defined – a low lower than the last low.

    5) The reverse is true in major up-trends.

    Other chart ideas

  • There are always two trends to consider – a major trend and a minor trend. The minor trend is a reversal of the major trend, which generally lasts for a short period of time.
  • Buying above old tops and selling below old bottoms can be excellent entry levels; assuming the move is not overly mature and a nearby reaction unlikely.
  • When a strong up move is occurring the market should make both higher tops and higher bottoms. The reverse is true for down moves- lower bottoms and lower tops.
  • Reactions (minor reversals) are smaller when a strong move is occurring. As the reactions begin to increase that is a clear warning signal that the move is losing momentum. When the last reaction exceeds the prior reaction you can assume the trend has changed, at least temporarily.
  • Higher bottoms always indicate strength, and an up move usually starts from the third or fourth higher bottom. Reverse this rule in a rising market; lower tops…
  • You will always make the most money by following the major trend although to say you will never trade against the trend means that you will miss a lot of opportunities to make big profits. The rule is: When you are trading against the trend wait until you have a definite indication of a selling or buying point near the top or bottom, where you can place a close stop loss order (risk small amount of capital). The profit target can be a short-term gain to nearby resistance or more.
  • Consider the normal or average daily range, average price change from open to high and average price change from open to low, in determining your intra-day price targets.
  • Do not overlook the fact that it requires time for a market to get ready at the bottom before it advances and for selling pressure to work it’s way through at top before a decline. Smaller loses and sideways trading are a sign the trend may be waning in a downtrend. Smaller gains and sideways trading in an up trend.
  • Fourth time at bottom or top is crucial; next phase of move will soon become clear… be ready.
  • Oftentimes, when an important support or resistance level is broken a quick move occurs followed by a reaction back to or slightly above support or below resistance. This is a great opportunity to play the break on the “rebound”. Your stop can be super tight. For example, EURUSD important resistance 1.0840 is broken and a quick move to 1.0860, followed by a decline to 1.0835. Buy with a 1.0820 stop. The move back down is natural and takes nothing away from the importance of the breakout. However, EURUSD should not decline significantly below the breakout (breakout 1.0840; EURUSD should not go below 1.0825.
  • After a prolonged up move when a top has been made there is usually a trading range, followed by a sharp decline. After that, a secondary reaction back near the old highs often occurs. This is because the market gets ahead of itself and a short squeeze occurs. Selling near the old top with a stop above the old top is the safest place to sell.
  • The third lower top is also a great place to sell.
  • The same is true in reverse for down moves.
  • Be careful not to buy near top or sell near bottom within trading ranges. Wait for breakaway (huge profit potential) or play the range.
  • Whether the market is very active or in a trading range, all indications are more accurate and trustworthier when the market is actively trading.

    Limitations of charts

    Scheduled economic announcements that are complete surprises render nearby short-term support and resistance levels meaningless because the basis (all available information) has changed significantly, requiring a price adjustment to reflect the new information. Other support and resistance levels within the normal daily trading range remain valid. For example, on Friday the unemployment number missed the mark by roughly 120,000 jobs. That’s a huge disparity and rendered all nearby resistance levels in the EURUSD meaningless. However, resistance level 200 points or more from the day’s opening were still meaningful because they represented resistance to a big up move on a given day.

    Unscheduled or unexpected statements by government officials may render all charts points on a short-term chart meaningless, depending upon the severity of what was said or implied. For example, when Treasury Secretary John Snow hinted that the U.S. had abandoned its strong U.S. dollar policy.

    By Jimmy Young

  • READ MORE - How to Read a Chart & Act Effectively

    Mutual Funds: Picking A Mutual Fund

    Buying and Selling
    You can buy some mutual funds (no-load) by contacting the fund companies directly. Other funds are sold through brokers, banks, financial planners, or insurance agents. If you buy through a third party there is a good chance they'll hit you with a sales charge (load).

    That being said, more and more funds can be purchased through no-transaction fee programs that offer funds of many companies. Sometimes referred to as a "fund supermarket," this service lets you consolidate your holdings and record keeping, and it still allows you to buy funds without sales charges from many different companies. Popular examples are Schwab's OneSource, Vanguard's FundAccess, and Fidelity's FundsNetwork. Many large brokerages have similar offerings.

    Selling a fund is as easy as purchasing one. All mutual funds will redeem (buy back) your shares on any business day. In the United States, companies must send you the payment within seven days.

    The Value of Your Fund
    Net asset value (NAV), which is a fund's assets minus liabilities, is the value of a mutual fund. NAV per share is the value of one share in the mutual fund, and it is the number that is quoted in newspapers. You can basically just think of NAV per share as the price of a mutual fund. It fluctuates everyday as fund holdings and shares outstanding change.
    When you buy shares, you pay the current NAV per share plus any sales front-end load. When you sell your shares, the fund will pay you NAV less any back-end load.

    Finding Funds
    The Mutual Fund Education Alliance™ is the not-for-profit trade association of the no-load mutual fund industry. They have a tool for searching for no-load funds at
    READ MORE - Mutual Funds: Picking A Mutual Fund

    About the Karachi Stock Exchange

    Karachi Stock Exchange (KSE) is the biggest and most liquid exchange in Pakistan with the average daily turnover of 525.15 million shares and market capitalization of US $ 54.28 billion. The international magazine 'Business Week' announced the KSE as the best performing world stock market in 2002. Since then the KSE continuously maintains the reputation as one of the best performing markets in the world. Since 1991, foreign investors have an equal opportunity together with local investors to operate in the secondary capital market on the Karachi Stock Exchange. The establishment of the new policy for foreign investors and initiated privatization in Pakistan has accelerated the development of the KSE, which had even 663 companies listed in 2006. In addition, companies have a choice to be listed on one of the two markets - the ready market and the over-the-counter (OTC) market, which has lesser listing requirements. While the ready market requires listing companies to have minimum paid up capital of Rs 200 million (about UK ? 1.8 m), the companies with minimum of Rs 100 million can be listed on the OTC market. The Karachi Stock Exchange trades the KSE-100 Index. It is a highly-diversified index of 100 largest capitalization companies' stocks from all sectors of Pakistan economy. A constantly revised index is a good indicator of the overall Exchange performance over a period of time. In 2005, 88% of the KSE total market capitalization was represented by the KSE-100 Index. The membership in the Karachi Stock Exchange is limited. Only 200 individual and corporate entities can register as members in the KSE. In 2005, 162 members traded actively on the Exchange. In addition, foreign corporate entities may also become the members of the KSE with the condition that the nominee member of the company is a citizen of Pakistan.
    READ MORE - About the Karachi Stock Exchange

    About the Dubai Stock Exchange :

    The Dubai International Financial Exchange (DIFX) owned by the sole shareholder Dubai International Financial Centre Authority (DIFC), launched Dubai securities trading market in September 2005. As the DIFX is situated in the newly established financial free zone DIFC, all the operations of the Exchange together with all other financial activities in the DIFC are regulated by the Dubai Financial Services Authority (DFSA). The DIFX is a fast-growing company seeking high goals. Although it started operating with four members on the board, the Exchange already has 13 member banks. It is expecting to have up to 40 members by the 2006 year-end. Also the governance of the DIFX is seeking to list 10 to 15 IPOs and to gain the market capitalization of minimum US$ 50 million by the end of 2006. The Dubai Stock Exchange provides its members with one-stop solution to trading, clearing, and settlement through the fully electronic AtosEuronext Market Solutions NSC system. The Exchange does not require members to use a specific trading terminal, as a technical connection is offered. The trading on the DIFX is operated through an anonymous hybrid system that combines order-driven systems with market making. Each member trading on the Dubai International Financial Exchange platform must either be a Clearing member of the DIFX or have relationship with a DIFX Clearing Member firm. It is the first exchange in its region that has been created to list securities from many different countries. The Dubai Stock Exchange provides an opportunity for international investors to invest in the Middle East, North and South Africa, Turkey, Central Asia, and the Indian sub continent. To attract foreign investment, the DIFX's preferred trading currency is US dollar. In addition, the Dubai International Financial Exchange also has the capability to trade in Euros and Sterling on request. Unlike other independent exchanges in the region, the DIFX does not have limits on foreign ownership. The Dubai International Financial Exchange intends to bridge the gap between the Middle East markets and the markets in London, Singapore and Hong Kong.
    READ MORE - About the Dubai Stock Exchange :

    About the Tokyo Stock Exchange

    The Tokyo Stock exchange is one of the more important world exchanges, trading an average of 1,540 million shares per day. It is one of five exchanges in Japan, but with 2,276 companies listed, the Tokyo Stock Exchange is by far the largest. Most of the TSE's listings are domestic, although it also trades shares for 30 international companies.

    The Tokyo Stock Exchange uses an electronic, continuous auction system of trading. This means that brokers place orders online and when a buy and sell price match, the trade is automatically executed. Deals are made directly between buyer and seller, rather than through a market maker. The TSE uses price controls so that the price of a stock cannot rise or fall below a certain point throughout the day. These controls are used to prevent dramatic swings in prices that may lead to market uncertainty or stock crashes. If a major swing in price occurs, the exchange can stop trading on that stock for a specified period of time.

    Stocks listed on the TSE are assigned to one of three markets: the First Section, Second Section, or Mothers (market of the high-growth and emerging stocks). The highest listing criteria must be met for the First Section and all newly listed stocks begin on the Second Section, with less strict requirements. Stocks for high growth, emerging companies are listed on the Mothers market. The exchange undergoes a review at the end of each year, where the decision of whether any stocks will be moved either up or down is made. The First Section currently has the most companies, with 1,595 listings.

    The Tokyo Stock Exchange also has a significant market for derivatives, which has been operating for twenty years. The TSE lists futures and options in indexes, equities, and Japanese government bonds.
    READ MORE - About the Tokyo Stock Exchange

    Hong Kong Stock Exchange

    Although the trade of securities began in the middle of the 19th c., Hong Kong Stock Exchange was established at the end of the century. Today with its total securities market capitalization of a record sum of HK$ 8,260.3 billion (US$ 1,063.9 trillion), the HKSE ranks 8th place by market capitalization in the world.

    The HKSE has 4338 stocks listed on the exchange with the market turnover of HK$4,520.4 billion (US$ 0,582.2 trillion) in 2005. The turnover increased by 14% from the previous year. Local institutional and retail investors are the main contributors of market turnover (56%). The exchange also has a leading derivatives market in the Asia-Pacific region with the daily turnover of 103.332 contracts per day that has increased by even 30% from 2004.

    In 2000, the Stock Exchange of Hong Kong Limited, Hong Kong Futures Exchange Limited together with Hong Kong Securities Clearing Company Limited merged under a single exchange HKEx. HKEx listed its shares on the stock exchange in June 2000.

    The trading system of the Exchange is an order-driven system. HKEx securities market operates on two trading platforms - the Main Board and the Growth Enterprise Market (GEM). Each trading platform has a different set of requirements. The Main Board is the market for capital growth by established companies that meet profit requirements. Meanwhile, the Growth Enterprise Market provides a fund raising venue for 'high growth, high risk' companies. It promotes the development of technology industries and venture capital investments.

    In October 2000, HKEx developed a trading system AMS/3 consisting of four components - Trading Terminal, Multi-Workstation System ('MWS'), Broker Supplied System ('BSS'), and Order Routing System ('ORS') that investors can choose among. The ORS allows investors to place requests electronically. In addition to trading through terminals in the Trading Hall, exchange participants are enabled to trade from their offices through installed off-floor terminals.

    The HKSE has the leading index the Hang Seng for shares traded on the Hong Kong Stock Exchange that was introduced in 1969. The Hang Seng index consisting of the 33 largest companies traded on the exchange represent around 70% of the value of all stocks traded on the HKSE.
    READ MORE - Hong Kong Stock Exchange

    About the NASDAQ

    The NASDAQ, an acronym for National Association of Securities Dealers Automated Quotations, is an electronic stock exchange with 3,300 company listings. It currently has a greater trading volume than any other U.S. exchange, making approximately 1.8 billion trades per day. The NYSE is still considered the biggest exchange because its market capitalisation far exceeds that of the NASDAQ. The NASDAQ trades shares in a variety of companies, but is well known for being a high-tech exchange, trading many new, high growth, and volatile stocks. This is partially due to the fact that the listing fees on the NASDAQ are significantly lower than those for the NYSE, with the maximum price only $150,000. The NASDAQ is a publicly owned company, trading its shares on its own exchange under the ticker symbol NDAQ.

    The NASDAQ, as an electronic exchange, has no physical trading floor, but makes all its trades through a computer and telecommunications system. The exchange is a dealers' market, meaning brokers buy and sell stocks through a market maker rather than from each other. A market maker deals in a particular stock and holds a certain number of stocks on his own books so that when a broker wants to purchase shares, he can purchase them directly from the market maker.

    Since there is no trading floor where the NASDAQ operates, the stock exchange built the NASDAQ MarketSite in New York's Times Square to create a physical presence. The tower has a large outdoor electronic display, giving current financial information 24 hours a day. The company also has a studio here where it broadcasts financial market updates.

    For a stock to be listed on the NASDAQ National Market, the company must meet certain strict financial criteria. For example, they must maintain a stock price of at least $1, and the total value of outstanding stocks must be at least $1.1 million. However the NASDAQ also has a market for smaller companies unable to meet these and other requirements, called the NASDAQ Small Caps Market. NASDAQ will move companies from one market to the other as their eligibility changes.
    READ MORE - About the NASDAQ

    Community Bankers Mutual Fund

    Granted, money market funds have rarely crossed the "buck" threshold. Since their 1970 induction, money market funds have seen only two dips below $1 per share.

    The first instance occurred in 1994, when a fund designed for bankers (not retail investors) slid to 96 cents per share. The fund, Community Bankers Mutual Fund, was liquidated with $82 million in assets. Since most of the fund's shares were owned by banks in the Midwestern United States, the consumer impact was low.

    After an investigation by the Securities and Exchange Commission (SEC), the Denver-based fund was found to have broken SEC rules by putting more than 25% of its holdings in risky investments. (For more on investment risk, see How Risky Is Your Portfolio?)

    According to law, money funds must keep their holdings in short-term investments, defined as the ability to receive the full principal and interest from the investment within 397 days. The average investment for a fund must not exceed 90 days.

    A fund must also avoid:

    * Investments that are tied to high credit risk
    * Investments that are, or are comparable to, high-risk equities

    The Community Bankers Mutual Fund fell victim to the derivatives meltdown of 1994, when they socked away nearly a quarter of their holdings in interest-rates packages. Derivatives gave the fund's advisors the chance to increase leverage in order to gain hefty rewards. Of course, like many institutions in 1994, the market turned against them and millions were lost. (For more on derivatives, see The Barnyard Basics Of Derivatives.)

    On January 11, five years after the fund initially broke the buck, the SEC fined the fund's directors $5,000 apiece and imposed a $10,000 fine on fund president John Backlund. Backlund was also suspended from associating with any mutual fund or fund advisor for one year.
    READ MORE - Community Bankers Mutual Fund

    Question: What are Capital Markets?

    Capital Market Resources
    A capital market is simply any market where a government or a company (usually a corporation) can raise money (capital) to fund their operations and long term investment. Selling bonds and selling stock are two ways to generate capital, thus bond markets and stock markets (such as the Dow Jones) are considered capital markets. Introduction to Capital Markets
    Capital ResourcesMore Economics Q&A
    READ MORE - Question: What are Capital Markets?