Casualties From Swiss Shock Spread From New York to New Zealand

EuroVsSwissFrancHow it started

Pending announcement from European Central Bank (ECB) to launch a full-scale quantitative easing program (QE) on 22 Jan 2015, has lead to Swiss National Bank (SNB) to abandon the capping of franc at 1.20 to the euro, introduced since September 2011.

Besides they also have their key interest rate cut from -0.25% to -0.75%, raising the amount investors pay to hold Swiss deposits.

And such action have caused massive impact by trigger massive automatic and painful cut loss due to leverage call (If you look at the chart on the left). Watch out if you have fund in oversea trading house.

 

Article : Casualties From Swiss Shock Spread From New York to New Zealand

Losses mounted from the Swiss currency shock as the largest U.S. retail foreign-exchange brokerage said client debts threatened its compliance with capital rules and a New Zealand-based dealer went out of business.

FXCM Inc., which handled a record $1.4 trillion of trades by individuals last quarter, said clients owe $225 million on their accounts after the Swiss National Bank’s decision to abandon the franc’s cap against the euro roiled markets worldwide. Global Brokers NZ Ltd. said losses from the franc’s surge are forcing it to shut down. IG Group Holdings Plc estimated an impact of as much as 30 million British pounds ($45.5 million) and Swissquote Group Holdings SA set aside 25 million francs ($28.4 million).

“I would be astonished if we did not see more casualties,” Nick Parsons, the London-based head of research for the U.K. and Europe at National Australia Bank Ltd., said by phone from Sydney. “This was a 180-degree about turn by the SNB. People feel hurt and betrayed.”

The franc surged as much as 41 percent versus the euro on Thursday, the biggest gain on record, and climbed more than 15 percent against all of the more than 150 currencies tracked by Bloomberg. Dealers in London at banks including Deutsche Bank AG, UBS Group AG and Goldman Sachs Group Inc. battled to process orders yesterday when the SNB surprised markets with its announcement in Zurich.

Unprecedented Volatility

Market turmoil from the move extended into a second day as Asian shares dropped with U.S. index futures, while Japanese and Australian government bond yields plunged to records as investors sought haven assets.

“Clients experienced significant losses” after the franc’s surge, FXCM said in a statement dated Jan. 15. That “generated negative equity balances owed to FXCM of approximately $225 million.”

The brokerage dropped 15 percent in New York trading yesterday to an almost two-year low of $12.63, leaving the company valued at about $596 million. The shares were cut to sell from neutral by Citigroup Inc., which lowered its price target to $5 from $17.

Spokeswoman Jaclyn Klein didn’t immediately respond to calls to her mobile and office phones.

The U.S. Commodity Futures Trading Commission allows investors to put down as little as 2 percent of the value of their foreign-exchange bets. Brokers may get stuck with the balance of losses suffered by clients who used leverage, borrowed on credit cards, or did both to bet against the franc.

Leveraged Trades

Drew Niv, FXCM’s chief executive officer, said that individual currency traders are enticed by the chance to control large positions with little money down, in remarks that were published in Bloomberg Markets magazine’s December issue.

“Currencies don’t move that much,” he said. “So if you had no leverage, nobody would trade.”

The company warned investors in a regulatory filing last March that its risk controls were imperfect. FXCM had 230,579 retail customers on Dec. 31. They traded $439 billion of currency in December, with an average of 595,126 trades a day.

“Some of our methods for managing risk are discretionary by nature and are based on internally developed controls and observed historical market behavior,” the company said in the regulatory filing. “These methods may not adequately prevent losses, particularly as they relate to extreme market movements.”

Swiss Surprise

Most of FXCM’s retail clients lost money in 2014, according to the company’s disclosures mandated by the CFTC. The percentage of losing accounts climbed from 67 percent in the first and second quarters to 68 percent in the third quarter and 70 percent in the fourth quarter.

The SNB ended its three-year policy of capping the franc at 1.20 per euro a week before the European Central Bank meets to discuss government bond purchases to boost the euro-area economy. Such a policy, known as quantitative easing, could spur pressure on the franc to appreciate against the euro. The SNB spent billions defending the currency cap after introducing it in September 2011.

“Many clients were following the confirmed longstanding strategy from the SNB and were anticipating a weakening of the Swiss franc against the euro,” Swissquote said in its statement. The drop “left the clients with a negative balance and has prompted the bank to activate a provision of 25 million francs.”

Deutsche Bank was among dealers to suffer disruptions to electronic trading, with its Autobahn platform temporarily ceasing to provide quotes, according to a dealer from outside the bank. Auckland-based Global Brokers NZ said the market for francs was disrupted for hours.

HSBC Customers

“The majority of clients in a franc position were on the losing side and sustained losses amounting to far greater than their account equity,” Global Brokers NZ director David Johnson said in a statement dated Jan. 15 and posted on the website of affiliated company Excel Markets. All of the firm’s client funds are in segregated accounts and “100 percent of positive client equity or balance is safe and withdrawable immediately,” Johnson said.

HSBC Holdings Plc is investigating reports that customers in Hong Kong bought the Swiss franc below market rates when an online banking system failed to keep up with the currency’s gains after the removal of the cap.

Apple Daily and the Hong Kong Economic Journal cited unidentified bank customers as saying that they took advantage of the mistake yesterday evening. HSBC spokeswoman Maggie Cheung said in an e-mail that the lender was looking into the reports.

Fund Pain

IG Group shares fell 4.4 percent yesterday. The U.K. spread-betting firm said the financial impact from the surge in the Swiss franc was partially dependent on its ability to recover client debts.

The market turmoil turned the $1.9 billion John Hancock Absolute Return Currency Fund into the biggest loser among U.S. peers. It tumbled 8.7 percent yesterday, the steepest drop on record and the most among more than 2,000 U.S.-domiciled funds tracked by Bloomberg with at least $1 billion under management. The fund had its second-biggest short position in the franc at the end of November, according to the latest fact sheet on John Hancock’s website.

“When they pulled the rug under the market, the Swiss franc rallied against everything,” said Chris Weston, chief market strategist at IG Markets Ltd. in Melbourne. Many funds “would have been in a lot of pain last night,” Weston said.

 

Article from http://www.bloomberg.com/news/2015-01-15/new-zealand-currency-broker-closes-on-losses-after-swiss-shock.html

 

Fed Bubble Bursts in $550 Billion of Energy Debt: Credit Markets

The danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt. Read on for more detail. Article from http://www.bloomberg.com/news/2014-12-11/fed-bubble-bursts-in-550-billion-of-energy-debt-credit-markets.html

Tug-Of-War between the Bull and Bear, who will Win?

Recent weakness in Crude Oil have cause some dent in the Bull run in almost all Stock Market. Bad news from Crude Oil and plus Christmas Rally period have make this tug-of-war between the Bull and Bear much more interesting, especially for the trades.

Bad Crude Oil news may have been some smoke screen created by the money makers to accumulate before they conduct another rally, but whom know. Before you part with your beloved S & 1(combined both and you get $), watch out for Crude Oil news.
And i got this Crude Oil article from http://www.bloomberg.com/news/2014-12-11/fed-bubble-bursts-in-550-billion-of-energy-debt-credit-markets.html and happy reading and decide for yourself!

Article : Fed Bubble Bursts in $550 Billion of Energy Debt

The danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt.

Since early 2010, energy producers have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank AG. With oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations. Research firm CreditSights Inc. predicts the default rate for energy junk bonds will double to eight percent next year.

“Anything that becomes a mania — it ends badly,” said Tim Gramatovich, who helps manage more than $800 million as chief investment officer of Santa Barbara, California-based Peritus Asset Management. “And this is a mania.”

The Fed’s decision to keep benchmark interest rates at record lows for six years has encouraged investors to funnel cash into speculative-grade securities to generate returns, raising concern that risks were being overlooked. A report from Moody’s Investors Service this week found that investor protections in corporate debt are at an all-time low, while average yields on junk bonds were recently lower than what investment-grade companies were paying before the credit crisis.

Borrowing costs for energy companies have skyrocketed in the past six months as West Texas Intermediate crude, the U.S. benchmark, has dropped 44 percent to $60.46 a barrel since reaching this year’s peak of $107.26 in June.

Yields Surge

Yields on junk-rated energy bonds climbed to a more-than-five-year high of 9.5 percent this week from 5.7 percent in June, according to Bank of America Merrill Lynch index data. At least three energy-related borrowers, including C&J Energy Services Inc. (CJES), postponed financings this month as sentiment soured.

“It’s been super cheap” for energy companies to obtain financing over the past five years, said Brian Gibbons, a senior analyst for oil and gas at CreditSights in New York. Now, companies with ratings of B or below are “virtually shut out of the market” and will have to “rely on a combination of asset sales” and their credit lines, he said.

Companies rated Ba1 and lower by Moody’s and BB+ and below by Standard & Poor’s are considered speculative grade.

Stimulus Effect

The Fed’s three rounds of bond buying were a gift to small companies in the capital-intensive energy industry that needed cheap borrowing costs to thrive, according to Chris Lafakis, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

Quantitative easing “has been one of the keys to the fast, breakneck pace of the growth in U.S. oil production which requires abundant capital,” Lafakis said.

One of those to take advantage was Energy XXI Ltd. (EXXI), an oil and gas explorer, which has raised more than $2 billion in the bond market in the past four years.

The Houston-based company’s $750 million of 9.25 percent notes, issued in December 2010, have tumbled to 64 cents on the dollar from 106.3 cents in September, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. They yield 27.7 percent.

Energy XXI got its lenders in August to waive a potential violation of its credit agreement because its debt had risen relative to its earnings, according to a regulatory filing. In September, lenders agreed to increase the amount of leverage allowed.

Bubble Risk

“We think the sell-off has been a little over done,” said Greg Smith, a vice president in Energy XXI’s investor relations department. “People are trading us as though we’re distressed.”

The company has “plenty of liquidity,” Smith said. “Come January we’ll be free cash flow positive,” which is “a rarity in this business,” he said.

The debt rout is one of the latest examples of a boom and bust in U.S. markets as unprecedented Fed stimulus fuels a hunt for yield. The fallout has been limited so far, yet the longer the Fed holds its benchmark lending rate near zero, the greater the risk of more consequential bubbles, according to former Fed governor Jeremy Stein.

“To the extent that highly accommodative monetary policy courts risks to the economy further down the road, there is more of a live trade-off than there was at 8 percent unemployment” said Stein, now a Harvard University professor.

Joblessness of 5.8 percent in November was about half a percentage point away from the Fed’s estimate of full employment, or the lowest level of labor market slack the economy can sustain before companies bid up wages.

Job Creation

Employment in support services for oil and gas operations has surged 70 percent since the U.S. expansion began in June 2009, while oil and gas extraction payrolls have climbed 34 percent.

“There are distortions in multiple markets,” said Lawrence Goodman, president of the Center for Financial Stability, a monetary research group in New York. “It is like a Whac-A-Mole game: You don’t know where it is going to pop up next.”

Fed Chair Janet Yellen said in a July 2 speech in Washington that she saw “pockets of increased risk-taking,” including in the corporate debt markets.

Midstates Petroleum Co. (MPO) is spending about $1.15 drilling for every dollar earned selling oil and gas. Outspending cash flow is the norm for many companies in the U.S. shale boom.

Changing Environment

The Houston-based company’s $700 million of 9.25 percent notes due in June 2021 have plummeted to 53.5 cents from 108 cents at the beginning of September, according to Trace. The debt is rated Caa1 by Moody’s and B- by S&P.

Representatives of Midstates didn’t respond to phone calls and e-mails seeking comment.

Some borrowers are under pressure just a few months after selling new debt. Sanchez Energy Corp.’s $1.15 billion of 6.125 percent notes maturing in January 2023, issued this year, have tumbled to 77 cents from 101 cents in September, according to Trace. Proceeds from the bonds were partly used to fund a purchase of Eagle Ford shale assets from Royal Dutch Shell Plc. (RDSA)

“The company has planned for and is poised to rapidly adapt to a changing commodity price environment,” Tony Sanchez, III, chief executive officer of Sanchez Energy, said in a statement yesterday.

The Houston-based company expects to fully fund its 2015 capital program from operating cash flow and cash on hand without drawing on its revolving credit line, the statement said.

Magnum Hunter

Sanchez Energy has never had positive free cash flow. Michael Long, chief financial officer, didn’t return a call seeking comment.

“Oil companies that have high funding costs in the Eagle Ford and the Bakken shale plays are the ones that are most exposed right now due to lower crude prices,” Gary C. Evans, chief executive officer of Magnum Hunter Resources (MHR) Corp., said in a phone interview.

Magnum Hunter’s $600 million of 9.75 percent debt due in 2020 has tumbled to 84.5 cents from 109 cents in September, Trace data show. The notes are rated CCC by S&P and yield 13.9 percent.

Evans said Houston-based Magnum Hunter sold almost all of its oil properties over the last year and a half and is now predominantly a gas company.

Default Risk

“We’ve insulated ourselves,” Evans said. For other energy borrowers at risk, “the liquidity squeeze” will probably occur in March or April when banks re-calculate have much they may borrow under their credit lines based on the value of their oil reserves.

Deutsche Bank analysts predicted in a Dec. 8 report that about a third of companies rated B or CCC may be unable to meet their obligations should oil prices drop to $55 a barrel.

“If you keep oil prices low enough for long enough, there is a pretty good case that some of the weakest issuers in the high-yield space will run into cash-flow issues,” Oleg Melentyev, a New York-based credit strategist at Deutsche Bank, said in a telephone interview.

For Related News and Information: Junk Fervor Cools as Oil Rout Upends Energy Debt: Credit Markets Junk Backing Shale Boom Faces $11.6 Billion Loss: Credit Markets Shale Boom’s Allure to Wall Street Tested by Drop in Oil Prices Oil Slump Heaps Bond Losses in $50 Billion Glut: Credit Markets Drillers Piling Up More Debt Than Oil Hunting Fortunes in Shale

Develop Your Fundamental Trading Skill

Introduction

Google around for Trading Methods, and you can easily ton and ton of various methods. Among these, there are 4 timeless approaches to analysis of the market, namely

  • Elliott Wave Theory,
  • Gann’s Swing Trading,
  • Shabacker’s Chart Pattern and
  • Wyckoff Trading Methods

Each methods has their own pro and con, but if you will to ask me which methods i prefer or i train in? I’m will say I’m all in for Wyckoff. Most of my trading skill are based on his teaching and it is serving me good especially for my Index Trading.

Richard Demille Wyckoff, a stock market authority, founder and onetime editor of the Magazine of Wall Street, and editor of Stock Market Technique

Richard Demille Wyckoff, a stock market authority, founder and onetime editor of the Magazine of Wall Street, and editor of Stock Market Technique

 

 

 

 

 

Let us read on for more of his trading ideas! An extract of a great article from http://stockcharts.com/school/doku.php?id=chart_school:market_analysis:wyckoff_market_analy. Just remember that it is what you do to educate yourself during your free time to improve your current financial state. So let get start to develop your Trading Skill!

 

Wyckoff Market Analysis

Richard D. Wyckoff, a perpetual stock market student, was a great trader and a pioneer of technical analysis. Based on his theories, studies and real life experiences, Wyckoff developed a trading methodology that has stood the test of time. Wyckoff started with a broad market assessment and then drilled down to find stocks with the most profit potential. This article, the first of two, details Wyckoff’s approach to broad market analysis. It is important to understand the broad market trend and the position within this trend before selecting individual stocks. The second article shows how Wyckoff selected stocks to buy and sell. This second article will be posted by the end of February 2012.

About

Richard Wyckoff began his Wall Street career in 1888 as a runner scurrying back and forth between firms with documents. As with Jesse Livermore in the bucket shops, Wyckoff learned to trade by watching the action first hand. His first trade occurred in 1897 when he bought one share of St. Louis & San Francisco common stock. After successfully trading his own account several years, he opened a brokerage house and started publishing research in 1909. The Magazine of Wall Street was one of the first, and most successful, newsletters of the time. As an active trader and analyst in the early 1900s, his career coincided with other Wall Street greats including Jesse Livermore, Charles Dow and JP Morgan. May have called this the “golden age of technical analysis”. As his stature grew, Wyckoff published two books on his methodology: Studies in Tape Reading (1910) and How I Trade and Invest in Stocks and Bonds (1924). In 1931, Wyckoff published a correspondence course detailing the methodology he developed over his illustrious career.

Wyckoff

Two Rules

Wyckoff focused exclusively on price action. Earnings and other fundamental information were simply too esoteric and imprecise to be used effectively. Moreover, this information was usually already factored into the price by the time it became available to the average speculator. Before looking at the details, there are two rules to keep in mind. These rules come directly from the book, Charting the Stock Market: The Wyckoff Method, by Jack K. Hutson, David H. Weiss and Craig F. Schroeder.

Rule One: Don’t expect the market to behave exactly the same way twice. The market is an artist, not a computer. It has a repertoire of basic behavior patterns that it subtly modifies, combines and springs unexpectedly on its audience. A trading market is an entity with a mind of its own.

Rule Two: Today’s market behavior is significant only when it’s compared to what the market did yesterday, last week, last month, even last year. There are no predetermined, never-fail levels where the market always changes. Everything the market does today must be compared to what it did before.

Instead of steadfast rules, Wyckoff advocated broad guidelines when analyzing the stock market. Nothing in the stock market is definitive. After all, stock prices are driven by human emotions. We cannot expect the exact same patterns to repeat over time. There will, however, be similar patterns or behaviors that astute chartists can profit from. Chartists should keep the following guidelines in mind and then apply their own judgments to develop a trading strategy.

Broad Market Trend

By definition, vast majority of stocks move in harmony with the broader market. Chartists, therefore, should first understand the direction and position of the broad market trend. With this in mind, Wyckoff developed a “wave chart”, which was simply a composite average of five or more stocks. Note that Charles Dow developed the Dow Jones Industrial Average and Dow Jones Transportation Average around the same time. While the Dow Industrials is perhaps the most famous “wave chart”, chartists today can choose among several indices to analyze the broad market. These include the S&P 500, the S&P 100, the Nasdaq, the NY Composite and the Russell 2000.

Wyckoff used the daily high, low and close to create a series of price bars and construct a classic bar chart. The objective was to determine the underlying trend for the broader market and identify the position within this trend. Trend is important because it tells us the path of least resistance for the majority of stocks. Position is important because it tells us the current location within this trend. For example, trend position helps chartists determine if the market is overbought or oversold to time buy and sell decisions.

There are three possible trends in action: up, down or flat. There are also three different timeframes: short-term, medium-term and long-term. For the purposes of this article, daily charts are used for the medium-term trend. An uptrend is present when the composite index forms a series of rising peaks and rising troughs. Conversely, a downtrend is present when the index forms a series of falling peaks and troughs. A series of equal troughs and equal peaks forms a trading range. Chartists must then wait for a break from this range to determine trend direction.

Wyckoff

Wyckoff

The charts above show examples of an uptrend and downtrend. Within the trend, prices can be positioned at oversold levels, overbought levels or somewhere in the middle of the trend. Trend position is important to determine the risk-reward ratio of a new position. Ideally, chartists should look for long positions when the trend is up and the index is oversold. This means a pullback or correction has occurred. The risk-reward ratio is less attractive if buying in an uptrend when prices are overbought. Similarly, the risk-reward ratio is less attractive if selling in a downtrend when an index is in an oversold position. It is best to establish a new short position when the index is either overbought within a downtrend or in the middle of this downtrend.

Major Tops and Bottoms

In between trending periods, the broad market indices form major tops and bottoms that reverse existing trends. Wyckoff noted that tops and bottoms were different. Market tops were often long draw out affairs, while market bottoms were relatively short violent beasts. Wyckoff identified specific characteristics some 100 years ago and these characteristics can still be seen in today’s markets.

Bear markets often end with a selling climax or spring, which is a failed support break. First, the major stock index is in a downtrend because it has been moving lower for an extended period. Sentiment is quite negative and many investors are thoroughly discouraged with their mounting losses. At some point, discouraged investors finally throw in the towel and unload their stocks. Prices fall sharply and often break a key support level. Prices appear to be in a free fall at this stage, but the “smart” money is waiting in the wings. Smart money buying pressure suddenly reverses the free fall and prices surge to close well above their lows.

Wyckoff  -  Chart 1

Wyckoff used volume to confirm the validity of a reversal, breakout or trend. A selling climax or spring should be accompanied by an increase in volume to show expanding participation. It is important that big money (i.e. institutions) support a market move for it to have staying power. Low volume suggests limited participation and increases the chances of failure.

The example above shows a high volume selling climax and spring in early October 2011. Notice how the S&P 500 broke support as selling pressure pushed prices below 1100. Prices dipped below 1080 intraday, but buyers stepped in and pushed the index back above 1120 by the close. The support break did not hold and the selling climax occurred on high volume. This bullish signal was enough to carry the S&P 500 above its late August high by the end of October.

As noted above, market tops are different than market bottoms. Tops often form with an extended period of sideways price movement, which is a consolidation. This is known as a distribution period where the smart money (institutions) distributes shares to the dumb money (public). In other words, the smart money sells their shares to the dumb money just before the market breaks down.

On the price chart, the market top is often not clear until the second half of the pattern unfolds. This often involves a failed breakout or a failure at resistance. This is not so negative at the time, but prices then return all the way to support. Such a sharp decline reflects a marked increase in selling pressure. There is then some sort of bounce off support that forms a lower peak, which shows diminished buying pressure. At this point, the charts shows an increase in selling pressure on the support test and a decrease in buying pressure on the subsequent bounce. The reversal is completed with a final support break on increasing volume.

Wyckoff  -  Chart 2

The example above shows the Dow Industrials with a peak in 2007. Notice how prices moved sideways for around seven months. There are five points on this chart to define the topping process. The first point, which occurred in the second half of the pattern, shows the Dow failing to hold above its prior peak. There is nothing bearish about this failed breakout until prices decline all the way back to the August trough. This is the first sign that selling pressure (supply) is increasing. Prices bounce off support, but a lower peak forms in early December. This is the first signal that buying pressure (demand) is diminishing. An increase in selling pressure and decrease in buying pressure combine to mark an important top that is confirmed when prices break support with a sharp decline in January 2008. Wyckoff used volume to confirm price movements. Notice how volume on down days exceeded volume on up days in October and November as prices declined to support. This showed an increase in selling pressure that validated the support break.

Price Projections

Once a market top and bottom or bottom took shape, Wyckoff turned to figure charts to calculate price projections. Figure charts later evolved into Point & Figure charts. In general, Wyckoff based his price projections on the width of the pattern. The wider the pattern, the higher the ultimate price projection. In other words, a long base extending over ten P&F columns would project a relatively high target upon a breakout. Conversely, a narrow base covering just six columns would project a relatively low target. It is important to make sure the base is big enough and the breakout robust enough to assure a high enough price target. The converse is true for market tops. An extended top covering over ten P&F columns would project a much deeper decline than a narrow top extending less than ten columns.

Wyckoff

Wyckoff based his projections on the width of the entire topping pattern. As with most technical analysis, the width of the pattern can be subjective. Wyckoff like to look for the row with the most filled boxes and count the entire width of this row, including the empty boxes. Chartists can employ this method or simply measure the entire width from start to finish. First, start by finding the key support break. Once the support break is found, extend a support line across the chart. Chartists can then identify the column leading into the pattern (start) and the column leading out (end). These two define the entire pattern. The example above shows the S&P 500 top in 2007 with the column count extending from November 2007 (red B) to January 2008 (red 1). Note that February starts with the red 2 and O-Column breaks support before this red 2 is printed. This is a long and extended top covering 34 columns. At 10 points per box on a 3-box reversal, the estimated decline is around 1020 points (34 x 3 x 10 = 1050). This amount is subtracted from the pattern peak for a downside target in the 520 area (1570 – 1020 = 550). The ultimate low in the S&P 500 was around 666 in March 2009.

Wyckoff

The second chart shows the S&P 500 bottom in 2009 with two bottoming patterns. Notice that there are two breakouts: one in May (red 5) and another in July (red 7). Both patterns share the same low point (670). Based on the resistance break, the smaller pattern extends 20 columns, which is from the entry column to the exit column. Based on 10 points per box and a 3-box reversal setting, the projected advance would be 600 points (20 x 10 x 3 = 600) and the target would be around 1270 (670 + 600 = 1270). The second pattern is much bigger and extends some 42 columns for a projected advance of 1260 points (42 x 3 x 10). This targets a move to around 1930, which would be one heck of a bull market.

Even though Wyckoff used horizontal counts to make projections, he also cautioned against taking these projections too seriously. As noted above, nothing is definitive when it comes to the stock market and technical analysis. Chartists are given broad guidelines and must make their own judgments as price action unfolds. Some counts fall short of their targets, while some counts exceed their targets. You can read more on traditional P&F counting techniques in our ChartSchool.

Position in Trend

Before making a trading or investment decision, chartists need to know where the market is within its trend. Overbought markets are at risk of a pullback and positions taken with overbought conditions risks a significant drawdown. Similarly, the chances of a bounce are high when the market is oversold, even if the bigger trend is down. Selling short when market conditions are oversold can also result in a significant drawdown and adversely affect the risk-reward ratio.

Wyckoff notes that an uptrend starts with an accumulation phase and then enters a markup phase as prices move steadily higher. There are five possible buy points during the entire uptrend. First, aggressive players can buy on the spring or selling climax. This area offers the highest reward potential, but the risk of failure is above average because the downtrend has not yet reversed. The second buy point comes with the breakout above resistance, provided it is confirmed by expanding volume. Chartists missing the breakout buy point are sometimes given a second chance with a throwback to broken resistance, which turns into support.

Wyckoff

Once the markup stage is fully under way, chartists must then rely on corrections, which can form as consolidations or pullbacks. Wyckoff referred to a flat consolidation within an uptrend as a re-accumulation phase. A break above consolidation resistance signals a continuation of the markup phase. In contrast to a consolidation, a pullback is a corrective decline that retraces a portion of the prior move. Chartists should look for support levels using trend lines, prior resistance breaks or prior consolidations. Alternatively, Wyckoff also looked for support or reversal signs when the correction retraced 50% of the last up leg.

A downtrend starts with a distribution phase and then enters a markdown phase as prices move steadily lower. Note that Wyckoff did not shy away from shorting the market. He looked for opportunities to make money on the way up and on the way down. As with the accumulation and markup phase, there are five potential selling points during this extended downtrend. First, a lower peak within a distribution pattern offers a chance to short the market before the actual support break and trend change. Such aggressive tactics offer the highest reward potential, but also risk failure because the downtrend has not officially started. The breakdown point is the second level to short the market, provided the support break is validated with expanding volume. After a breakdown and oversold conditions, there is sometimes a throwback to broken support, which turns into resistance. This offers players a second chance to partake in the support break.

Wyckoff

Once the markdown phase begins in earnest, chartist should wait for flat consolidations or oversold bounces. Wyckoff referred to flat consolidations as re-distribution periods. A break below consolidation support signals a continuation of the markdown phase. In contrast to a consolidation, an oversold bounce is a corrective advance that retraces a portion of the prior decline. Chartists can look for resistance areas using trend lines, prior support levels or prior consolidations. Wyckoff also looked for resistance or reversal signs when the correction retraced 50% of the last down leg.

Conclusions

There are four key areas of the Wyckoff market method: trend identification, reversal patterns, price projections and trend position. Getting the trend correct is half the battle because the majority of stocks move in conjunction with the broad market trend. This trend continues until a major top or bottom pattern forms. Aggressive players can act before these reversal patterns are complete, but the existing trend does not officially reverse until price breaks a key support or resistance level on good volume. Once a top or bottom is complete, chartists can use a horizontal count method on P&F charts to project the length of the ensuing advance or decline. A trend is considered mature and ripe for a reversal once prices reach these target areas. Provided the trend has further room to run, chartists can then determine the position of prices within this trend to insure a healthy risk-reward ratio when taking positions. Chartists should avoid new long positions when the market is overbought and avoid new short positions when the market is oversold. As noted at the beginning, these are broad guidelines for interpreting market movements. The final judgment call is up to you.

 

And for those whom prefer picture with sound, do play on the following video.

 

3 Top Reasons Why I Prefer Index Trading Over Stock

indexMy Trading History

The first stock that i traded was “Singlun” and it was back in 2004. It was of an investment mode that i looked at Singlun, which into apparel manufacturing sector. It was a good dividend stock back then, until Vega Co privatised and de-list Sing Lun in 2008.

And this first trade lead me on, where i pursed my ever hungry for different trading methods, from fundamental analysis to technical analysis. Soon, i was into Penny Stock, where i got my fat pot of gold with my first penny trade – JapanLand. I would say my profit was more than my loss, but my day job didnt allow me to continue on, as trading penny require constant monitoring.

With that, it lead me to Options trading where i attained the infamous Dr Clement Chiang’s Options Trading course. I guess some of the reader will know his story, but for those that dont, follow this site.

Within the period from 2004 till now, i have try from Blue Chip to Penny Stock, and from Options to Index trading. Trading during these whiles, i get to know that this Stock Market is as cruel as the food chain hierarchy in animal kingdom! And it is full of manipulation!

Nevertheless, knowing that stock market is manipulative, it helps to improve the way of how i executed my trade.

 

Index Vs Stock Trading, and the 3 reasons why i like Index Trading are

Less Preparation Work

Firstly, stock trading requires you to be full prepared for your trade, depending you on which school of thought – FA or TA, you in. You will find yourself sourcing over a dozen of websites to get various key information like the NAV, EPS, TrendLine, Support and Resistant Lines, Insider trades, or some TIPS from friends. Some may just keep track from the Top 30, or based on the Top Gainer or losser or Volume Spike to generate a watchlist of stocks that have a high potential of profitable trades. And study the charts over and over again. I have went through it and i know it takes a lot of time and efforts.

On the another hand, Index Trading requires less effort as compare with Stock Trading. I just need to study and revise out the direction of the Index, with in reference of a long and short time view. And i ready to trade.

 

Flexible Time

There are a lot of Stock Markets out there, and since i based in Singapore, naturally i will trade Singapore Stocks. As i have my day job, i definitely will have tasks assigned and i cant juggle with all these day job’s activities with trading. Can you imagine this? That you are presenting to your Head of Department over some proposal and your Stock broker sms that some Stock Operator trying to sell down the stock that you have a “Long” position. That will be a unpleasant situation to be in.

For me, the best time for me to trade will be after work. And there are markets still available for me to carry over Index Trading. Like DAX and DOW. The best part about Index Trading will be, i traded with a Mobile Application during traveling back to my home. No time wasted.
More Personal/Family Time

With the 2 points as above, it frees up a lot time, that was previously occupied by either the preparation work or the monitoring portion. With the time make free from chosing Index over Stock Trading, i can have more quality time with my family, friends or with myself! And that definitely sometime which i enjoying at the moment. :)

 

My Index Trading Plan

My plan will be simple, with an objective to carry trades with overall profit of 10 dollars, less the losses. (I cant be winning all the times).

I decided to have a smaller objective, as that will allow me to be less greedy and be in a better control of my emotion.

In each month of 20 working days(estimated), my monthly income will be around $200($10 * 20 working days) and that will be another additional source of income.

 

DAX & DOW

DOW Daily Chart

DOW Daily Chart – Watch out for first support at 16532, with second support around 16296.

 

DAX Daily Chart

DAX Daily Chart – Look like Dax is hurt badly, oversold, but need to be nimble.

Dividend Stock as part of Your Investment Plan

dividend-stockIn this article, i shall discuss on my favorite type of stock which is dividend stock, and why i love to have these darling in my Investment Portfolio!

Type of Stocks

I will broadly classified stocks namely as the following:

-Capital Appreciation Stock (time frame of Mild to Long term holding)

Capital appreciation (CA) is the increase in the value of an investment/trading that you make. You will get CA when you get a profit of the difference between the purchase and sale price of the stock and less of the purchase and sale commission costs.

It may required a time frame from months to years of stock holding before you gain from a decent CA. And of course, it will required some commitment from you to get the education on certain skillset, experience and monetary strength in order to pick the winning stock.

-Dividend Stock (time frame of Mild to Long term holding)

Some corporate has the history to distribute their earnings to company shareholders in the form of Dividend. It could take place as Stock or Cash distribution form (Dividend yield). And do take note, that some company distribute Dividend on a regularly basis (quarterly), while some only take place once in every two years or longer. Please do your research on their distribution interval.

On general, such stock will required from months to years holding, since investor are focused on the regular Dividend.
-Penny Stock (time frame of Short to Mild term holding)

Penny Stocks are what we label as the Small-capitalization equity shares. There are plenty different way of how investor/trader classified penny stock. Some based on their total value of stock shares market capitalization whiles other just on their per share values. For me, i just take those that being trading below twenty cents as Penny Stock.

As Penny Stock being priced extremely low, it make relatively easy for individual to purchase large quantities of shares with the aim of quick profit, during rapid price movements. As a result, it make Penny Stock extremely volatility and considered to be highly speculative type of stock.

 

3 Top Reasons why i love Dividend Stocks to be in my Investment Portfolio.

After discussing briefly on the different type of stocks out there, readers out there should have a better understanding of them. If you still get confused, do invest some time and effort to educate yourself over it. It’s what you do during your free time to make yourself more wealthier.

-Dividend
Dividend stock as what it name implied; to distribute in the form either Stock or Cash reward to their royal company shareholder regularly. It always better to invest in such type of stock with a good Yield than to park all your money in Bank Account or Fixed Deposit with a low interest rate. And you can bet that you be feeling happy to receive statement showing regular decent payment into your investment plan, as you are building your Big Fat Pillar!

 

payout-Stable
As most of us will be busy with our Day Job and focusing our energy and time in our Career and Family and other commitment in Life, we may not have enough time to keep a lookout for our Investment Portfolio everyday, unless you got a reliable Personal Stock broker. Dividend stock will be the perfect solution for that. Reason being that those royal company shareholder tend to be long term investors, and you can expecting much lower volatility, lower stock price swing. Besides that, they tend to be more stable than other type of stocks especially when in time of uncertainly in stock market due to their dividend nature that cushion the fall.

 

CA-Capital Appreciation

Another main reason why i consider them as darling for any investor, there is a high probability  of Capital appreciation (CA) over the years during the Stock Market Bull period. History has proven it and it will just repeat again in the future.

 

 

 

Click here to know more about me or visit http://bigfatpillar.com for more articles!


Disclaimer
:

All analysis are based on my own personal point of view and experience and it should not be used as a decision to solicit buy/sell activity.

And purpose of this article is written in mind for main purpose of knowledge sharing & discussion, never to induce or promote any insider trading or manipulation activities.

The owner will not be liable for any errors or omissions in this information nor for the availability of this information.

The owner will not be liable for any losses, injuries, or damages from the display or use of this information.

History of Fiat Money.

History of Fiat Money.Money

I just thinking aloud if anyone of us ever wonder how money being created? And how does the system of money work? It’s important to understand how this money works, as it will be curial toward building your Big Fat Pillar.

Let us read on, and i shall explain it with illustration and video.

 

First of all, what is Fiat Money?

Money as we know it, something we use it everyday, but it has some hidden secret whom most of us are not aware of. One of the biggest secret of money is that almost all Currencies in the world belong to Fiat Money type. And what so special about this Fiat Money Currency, is that it not peg to any Commodities or Gold. Instead, it’s peg to the rating given to each country instead. Click here to find out more on the rating for each Currency!

 

Fiat Money created inflation.

Since Fiat Money is not peg to any Commodity or Gold, it is very easy to create money as to compare to create Money that is link to Commodities or Gold. In the system where Money being link to Commodities or Gold, it is highly restricted by the amount of Commodities or Gold that each country hold.

And in world of Fiat Money, you can expect more Fiat Money to be created each second, minutes, hours, day. You just need high quantity paper or printing material and sophisticated printing technique to print out the perfect looking Fiat Money. It get even worse in the era of Information Technology, where Fiat Money are stored in the electronic way. It just need more hard-disk space in the Database system!

With more Fiat Money flooding the market, of course, for the same item, it cost more Fiat Money in the future.

 

How Fiat Money being created.

In 1971 August 15, US President Nixon delink US Currency with Gold, and that spark off the start of Fiat Money System to be widely adopted by each Country’s Central Bank.

The below picture perfectly illustrated the creation of modern money, where Bank just need to keep 10% of each deposit amount and they are allowed to borrow out the remaining 90%. The cycle just going on. For more detail, go visit http://money.howstuffworks.com/personal-finance/banking/bank1.htm.

How Money being created.

How Money being created (http://money.howstuffworks.com/personal-finance/banking/bank1.htm)

 

For those whom still did not get it, i guess you get a better picture of Fiat Money by watching the following videos. Sit back and enjoy the show!

Video 1 – 47min

 

Video 2 – 1hr 16min

 

Video 3 – 1hr 2min

 

Click here to know more about me or here for more articles!

Important to have a good stock broker!

Important to have a good stock broker!

whatstockstobuy Often when you opening your first trading account, you’re most likely to be assigned to a general pool of brokers of the brokerage firm. I not meaning that their services are that great, but to them, you are just another ordinary investor out there. Unless you trade in million and let them earn a big fat commission or a close friend/client, you less likely to get good service or to hear from them. So it will worth your time to look around for a good broker, ask your friends for referral will be a good way to start the hunt!

Finding the suitable stock broker.

Finding a good personal broker, aside from the general pool, is a lot like getting a good life partner! First of all, your stock broker should be the one that you trusted and of course they should of a good character like trustworthy. A lot of what makes the team-up works will be the chemistry, and only you can decide whether it works or not.

Unfortunately, after the Lehman Brothers incident in 2008, stock brokers are “tied” with ton of read tape and it hinder their work in order to service you better.  They are bounded not to give advise of stock that you should invest in. So don’t blame them if they never advise you of good stock to trade. Unless, you have a good personal relationship with them, and they may drop some hint here and there, after they trusted you of not to spill the bean.

 

Stock broker as your personal pair of eyes and ears to Stock Market.

A good stock broker will be your personal pair of eyes and ears to monitor the stock market, giving your insight of some of the potential events to be take place for your group of invested interests or potential investments.They definable prefer you as their client to have a good profit, as that in return increase their payslip. Nevertheless, please do your due diligent to research on the investment before you parked your money in and don’t blame your broker if thing go wrong. They are not god!

Fortunately for me, i have a few good brokers in my inner circle of friends, which i appreciate their help and service in times to times. And make use of this chances to say “thanks bros!” and continue to give me good hints! :)

Note : For those interested to get started to have good broker, do feel free to email to me fredrick@bigfatpillar.com as for my trusted brokers list. By the way, i not getting any commission from them, i just helping them out for the good services they rendered!

Sheng Siong – a good dividend stock?

Sheng Siong – a good dividend stock?

I’m a great fan of dividend stock, especially those with sound business model and in the right industry( Example, with recurring business). Two weeks ago, i enter into this trade @ $0.62 and i re-enter Sheng Siong today @ $0.665, which i using Average Up method instead of Average Down. And i shall talk more about this Average up method in the future.

The uptrend of this stock still look promising with a support line @ $0.58, and a dividend yield of 3.910%(2013), 4.135%(2012), 2.662%(2011). The stock looks like it being consolidated for 6 months, and let see if it shall provided the boast for it to break $0.690 in the coming months to come.

shengsiong-150714

Company Background

The Company was incorporated in Singapore on 10 November 2010 under the name of Sheng Siong Group Pte Ltd. The Company changed its name to Sheng Siong Group Ltd on 4 July 2011 in connection with its conversion to a public company limited. The Group comprises the Company and its subsidiaries, SS Supermarket, CMM Marketing and SS Malaysia.

The Group is principally engaged in operating the Sheng Siong groceries chain. Its stores are primarily located in retail locations in the heartlands of Singapore, and designed to provide customers with both “wet and dry” shopping options, including a wide assortment of live, fresh and chilled produce, such as seafood, meat and vegetables, in addition to processed, packaged and/or preserved food products as well as general merchandise such as toiletries and essential household products. The Group has also developed a selection of housebrands to offer customers quality alternatives to national brands at substantial savings. To support its retail operations, the Group also has an extensive distribution network, food-processing facilities, and warehousing facilities. In May 2011, the Group completed construction of its new corporate headquarters and warehousing and distribution centre at Mandai Link.

(Data from http://www.shareinvestor.com)

 

Disclaimer:

All analysis are based on my own personal point of view and experience and it should not be used as a decision to solicit buy/sell activity.

And purpose of this article is written in mind for main purpose of knowledge sharing & discussion, never to induce or promote any insider trading or manipulation activities.

The owner will not be liable for any errors or omissions in this information nor for the availability of this information.

The owner will not be liable for any losses, injuries, or damages from the display or use of this information.