Bull vs Bear, recessions, depressions, and other definitions

There isn't anything in this post that is new. If you already know what a recession is (or are aware of the art of google-fu), this will bore you.

Bull Market - The general economy and stock market are doing well. To feel bullish, is to have optimism that something is going to perform well, be it individual stocks or the broader economy as a whole. Bull markets experience good growth, easily above inflation.

Bear Market - The general economy and stock market are not doing well. To feel bearish, is to have a belief that something will not perform well, be it individual stocks or the broader economy as a whole. Bear markets experience poor growth. The key indexes will often trend downward or sideways (stagnate). A bear market does not equal negative economy growth though. An economy can still be growing, but not well enough for stock prices to rise.

Recession - Negative growth in the economy. This is often measured by the growth of our gross domestic product (GDP). If the GDP growth is negative, that is a recession. Your economy is receding as it were. A recession is usually about a couple of quarters long.

Depression - There is not a clear line between a depression and a recession. In general a depression is a prolonged recession. So a recession that continues for 6 quarters of negative growth would likely be called a depression. The percentage drop of in the GDP would also indicate a depression instead of a recession. A 10% drop in the GDP would likely be considered a depression.

We've been in a bear market since October of 2007. That sucks! We've all been losing money in our mutual funds ever since. Let's cut the crap, find the bottom, and get on with making money again. Oh and a good way of getting to the bottom, is in a recession. We could fight off a recession for a long time, if the government keeps being stupid. We could find ourselves in a stagnated bear market indefinately (which might then also be defined as a depression), in the vain attempt to avoid a recession.

Market behaving normally

There is going to be a lot of panic induced fear mongering about the stock market and the economy.

I don't remember where I was or who I was talking with (if you know me very well, you know it was more like "who I was talking at"), but several months ago I telling someone that we needed to see the DOW drop below 11,000. Remember that back then it was only a housing problem, and not a credit problem/economy crisis. I went so far as to say that I would feel better if the market dropped all they way down past 10,000.

Well, today I got my wish!

I know that some would like to have everyone terrified right now. "Worst financial crisis, since the great depression!" and that kind of stuff. Fact is, this isn't anything at all like the great depression. We haven't even hit a recession yet, let alone a bad one, and we probably won't really see anything more than a couple of quarters of a recession.

As far as a society goes a depression would be good for us (we're not going to get one). A depression would mold this country. It would really force people to man up and take some responsibility for themselves. Maybe make us the kind of people our grandparents, (great-grandparents) that truly are great people, would be proud of. The no-account layabouts that just want everything now, and wanted it on a silver platter, would die of starvation, or learn to get up and go to work.

What we really have is a market correction. The weak have been culled from the stock market. They have made way for those with testicular fortitude to jump in and make some real money...in time.

I regret that the awesome money making bull market that will follow the current pull-back will be weakened by a spineless government that will buy up worthless securities (with your money by the way), weakening the power of the uptrend, but you voted for them (Republican or Democrat), so it's your fault.

EDIT: Another good sign for the economy is how many economic experts have become pessimistic. The economy likes to do the opposite of the general feeling. We've lately had some of the most well known hard core bulls turn bearish. That's great news! When someone like Jim Cramer is telling everyone to sell everything, and go to cash, you know the time is soon at hand to begin buying all of the lowballed stocks out there.

Find the bottom

Lucky for us the $700 billion bailout did not pass. Had it passed you would have seen a rally in the market. Stocks would have risen for a few months. Following that they would have then plummeted hard and fast.

You see injecting $700 billion into the stock market, buying up the very most worthless securities to be found would artificially inflate all stocks by a large amount. But it will all be fake. It would just be another bubble. This one 100% manufactured.

Now, with the gov't out of the way (if they'll stay out), we are finally clear to find the bottom of the market. From now on, when a rally starts, with a good follow-through day, you can have much more confidence in the market going up. We now have a chance of getting back into a strong market much earlier than if the fed had meddled...more.

EDIT: If you have any interest in the economy at all, you need to be reading what this guy says.

Shortsell the big guys

After today's big rally. haha. I am totally going to shortsell the big movers.
So, in my fake account I think I'll short sell at least 1 share of: Apple, Amazon, Google, and RIMM.

If I were a real bettin' man and already had a real account somewhere, I'd sell the heck out of those 4 tomorrow morning.

Oh, by the way, I don't really know the details of when and who to short like I do longs. Don't do this with real money...OK, I would, but you shouldn't.

UPDATE (02/01/2008): If you had followed my advice this morning, you would already be a very happy person, and it isn't even noon yet. HA! Those 4 stocks are leaders. They led the way up...now they'll lead the way down.

Stocks: Game On

It has been since March that I mentioned anything about stocks. At that time I had gotten worked over pretty good. My account was down about $500 from my initial $5000 starting point. I was thinking that maybe the stock market just isn't the place for me. Maybe it is a system of patterns that I just won't be able to get my head around.

VDSI was the last stock I traded at that point, stupidly riding it up, then back down. Near the end of April I decided to try again with some HDNG and VDSI. Within a few days HDNG dropped 10% so I dumped it. That hurt pretty good, but VDSI decided to start treating me nicely. I tried some DLB, quickly throwing away about $150, but VDSI was still going up. By July 30 the market as a whole was looking flakey again, but finally selling VDSI got me over $400 almost erasing all the bad decisions I'd made so far.

I finally feel like I'm getting the hang of it. July 31 I picked up GME (GameStop hehe) as it bounced off it's 50 dma for $40.72, it's over $55.00 as of today. I've been eyeing NTDOY.PK (nintendo duh) for a while, and a big volume bounce off it's 50 dma on August 10 tells me to pick it up on the 13th, so I did for $55.00 (In reality buying this stock is probably not that easy, since it is on a forign exchange). Nintendo is up above $60 these days.

Lastly, ONXX is the most beautiful chart pattern I've dealt with so far. From June 5 to Aug 9 is a very good, long, tight cup pattern. Aug 9 to Aug 24 is a very good handle. Aug 10 it breaks out on 4x average volume. I bought on Aug 30 at $38.50, and look at it go today.

Staying Out

I never followed up the market correction issue with what I did about VDSI. It trended downward a few days in a row so I decided to sell it at the same place I bought it at. On March 1 at $17.05 I dumped it.

What I should have done was gotten rid of it at the same time as everything else. In a correction the market was against me. Me hanging on with the market down wasn't me being strong in the face of fear, but it stupid.

BHCO says there was a follow through day on either March 21st or 22nd. I'm not sure because I don't know what a follow through day looks like. Both of those days are up, and follow previous days that are up and experienced above average volume. Good indicators for sure.

I won't be trading again yet though. I don't feel bullish (I don't think I'm bearish either) on what's going on yet. Lots of down days on high volume. Lately the down days have been on lower volume. I don't know what's going on, so I'm staying out of it.

Market Correction Underway

On February 27th China's markets fell heavily causing a major sell-off in the US. The market is in a correction, which means, don't buy anything. In time there will be a new bear market and then we'll be in for some great gains. This correction isn't something that suddenly happened because of China. I'd like to point out a few days in the last month that were clearly telling us that we have reached the top. Look at the Dow Jones Index. Jan. 9th, we had a drop on higher volume. Jan. 25th we had a drop on higher volume. Feb. 8th and 9th we had drops on increasingly higher volume. Feb. 23rd and 26th we had drops on increasingly higher volume.

Feb. 27th shouldn't have been a huge surprise, and is why you should have a stop-loss in place, especially if you enter the market years into a bear market.

ANGN dropped below my stop-loss of $15.25, so I sold that on the 27th.
CMI dropped on big volume and is heading lower, so I sold that at $135.20 this morning.

The only position I still hold is in VASCO Data Security International Inc. (VDSI). Feb. 20th VDSI was in the IBD top 5 movers. It showed good fundamentals so I took a gander at the chart. It had been in a flat accumulation period for 5 weeks and had flown past it's buy point of $15.60. So, I bought it when it hovered around $17 that morning at $17.05. VDSI actually weathered the sell-off pretty well, which is encouraging. Plus it looks like some things are bouncing back today (that is not permanent), so with VDSI not dropping much, it may continue on it's upward course for a while yet.

My poor decisions so far of entering a bear market real real late, and buying ANGN at the wrong time have landed my account at $4832.00 as of this writing.

CMI

IBD, even for free, provides some information on their website about stocks that are moving for the day. You'll see a list of the top five stocks that have the most volume change (by % I think) and are moving up for the day.

On Feb. 20th SPAR was in the top 5 movers in the morning. IBD is kind enough to provide company evaluations on any stock in the top 5 movers. I looked up SPAR and it's fundamentals were OK, but the price was so far off it's 50 day, that it was too late to get in on that one. The group as a whole is rated pretty high, and the leader of the group was Cummins Inc. (CMI), so I checked out their chart. Whooo boy is that an expensive stock for only having $5k capital...wrong, you get what you pay for you know. Starting Oct 18th 2006 CMI headed into a cup pattern, pulling back to a drop of 19% on Jan. 10th 2007 (A base of more than 10 weeks). A high handle formed on Feb. 17th for only a week when it shot back up past $140.

I liked what I saw, but can't really buy into a stock very much with such a high price. So, I bought what I think is called an "odd lot" (not even multiple of 100) of 10 shares at a price it drifted along at for the rest of the day, $143.00 on Feb. 20th.

A "cup with high handle" isn't a great thing, but good fundamentals, a good group, and high price make me hopeful (I guess they call that bearish in the stock world).

Buying ANGN at the wrong time.

How I first came across Angeion Corp. (ANGN) last week I don't remember. I don't have an IBD subscription yet, so I don't know if it's ranked very well in it's group. The little I know of it's fundamentals are that they've had good growth. So basically if ANGN follows CAN SLIM I don't know. What really interested me was the chart. I think all I was looking for was a stock above $15 that had decent growth. There are tons of those, but I liked the pull back on Jan. 25th from a high of $18.50 to an average of $16.00 for 2 weeks. I thought that is the beginning of a flat base. On Feb. 15th (Thursday) it headed to it's 50 day MA, at which point I decided that if it bounced off the following day on above average volume that I would buy it (remember this is all imaginary money). Well it bounced all right (Friaday Feb. 16th), but on only 50% of the average volume. Then I noticed that Monday was presidents day (market will be closed) and that the whole market volume was down to about 1/4 average volume, which made ANGN about double the average...in my head. So, Tuesday I bought 100 shares at $16.40, because it didn't go above that until an hour and 45 minutes into trading, which surely would be enough time for a broker to finish a market order from the night before.

My mistakes:
1. Basically ignored everything about CAN SLIM. I don't know any of the fundamentals. I need to treat this like it were real money from now on instead of like a silly experiment.

2. A drop from $18.50 to $14.01 on Jan 30th is more than the 15% of a flat base. A drop of 24% might not be enough to be forming a cup, I'm not really sure. If it turns out to be a flat base it still needs at least 3 more weeks of being flat and I jumped the gun...a lot. If it turns out to be a cup, it has even longer and boy am I a fool.

3. I completely ignored what I know about volume rules.

4. The buy point is $.10 above the $18.50 high. The stock needs to make a new high and show that it's going to keep on going. I jumped in too early, and it could be weeks before it crosses that pivot point.

As of right now it's sitting around 16.80 making for more than 2% gain after commissions. The stock may very well just hang out, even dropping below my purchase price, for weeks. Unless it drops to a loss of 7% ($15.25) or I find something much more promising, I'll just keep my position and see what happens.

Working on an early retirement

First, note the disclaimer at the top of this page. It's new and shiney and stuff. A year ago I knew little to nothing about investing. I have a 401K with a little more than $1000 in it. At this rate retirement is going to be rough. However, a few months ago I stumbled upon some things that prompted me to do some learnin' 'bout stocks.

At the top of this site you'll see a link that says "Next Blog". I don't recommend clicking on it for the most part, but one day I was bored and I did. I was taken to a blog about investing in stocks. It was October and this new investing blog had just begun at the beginning of that month. That blog has since moved and is now found here. Basically, he writes everyday about decisions made in a virtual account that started at $100,000. He has since added a smaller virtual account that started at a more manageable $10,000.

BHCO mentions a guy named Josh (aka Maui Trader), who is good at making money in the stock market and also sells consulting services on the investor paradise website. Once the site was no longer free I stopped reading it, but what I got before then has been useful. BHCO and Josh use a system called CAN SLIM, which was created by William J. O'Neil. Josh also recommends a number of books to read of which I've read 2 now, Reminiscenses of a Stock Operator (Edwin Lefevre), and How to Make Money in Stocks (William J. O'Neil). O'Neil created a newspaper and now a website that provides gobs and gobs of information. With all of that I thought to myself, "self, I could maybe make some money in that mysterious old stock market."

So on Yahoo's finance site I created an account to watch stocks I think I would choose. I also created a virtual portfolio that tracks what happens with imaginary stock trades I do. I decided my fake account should more closely resemble reality, so it starts with only $5000 cash (I swear I really could save that much if I just concentrated on it...honest). To be realistic I'm including a commission of $7 for each trade which is reasonable because Scottrade offers that.

I won't be posting very often about it, because there really won't be that many trades made when you don't have much capital. I will explain why I chose the companies I did and the timing of buying and selling decisions that I make. In the end if I can do this for a while and not lose money, then I might open a real account.

ps. I think the ordeal with Verizon is finally over, so I'll finish that story.