Past few days have been busy, so I didn't have any time to update the blog. It's been as busy as the stock exchange in a past two weeks.

Everything looks up and in the moment it's the middle-age of economy's rising cycle. I hope it continues for another 3 years, but the S&P 500* (blue line) is concerning me. It has already reached the level of the last two economic booms. What if the 'economic cycle acceleration' theory is true? Basically couple years ago I was wondering about a possibility that the period between economic crisis and booms might get shorter. That's because : 90% of the world's wealth is owned by 10% of the population. Also, what is hard to measure, but true is that 10% of the population have much greater financial intelligence than the rest. So what happens? The smart rich people gain a lot of money every crisis by buying from bottom and selling in top. Also they do short selling* which basically means betting on the stock to decrease. Some people start to understand these patterns, but even more
(the 90% of fools) give away money.
In case of market's fool, It's like an investment firm. You don't take out money from the account in case you really don't need it. Because from every disposal, the government takes taxes. How much? Depends on the country. In Estonia, 20%. It's better to trade with 1000€ rather than 800€. Assuming you're gonna gain of course.
That's why these cycles might happen more rapidly in the decades coming. For example, take a look at the history. Technology bubble 1990, internet bubble 2000, financial bubble 2008. What next? Aftershock bubble 2015 maybe? It's should be noticed that the periods have decreased. Last one was in 8 years from the previous one. According to this, next one could be 2016. Because It's amazing how fast people's psychology changes. Today, a young woman gave me back my one euro coin that I had dropped. She could've kept it easily. Now that shows that the greed is gone for a moment there. But when people hear about the money made at the stock market by the smart people, they want in. Then the greed emerges again.

• Now, about my next indicator for analyzing stocks. This is a chart from 1994 to now. On that chart, there's S&P 500 (blue line) and BAC (red line) aka Bank of America. Same time the other banks have been rising along with the S&P 500, BAC has not. Which gives me a reason to buy, because many stocks have already made their fast climb. Why shouldn't BAC. Also USA would never let a huge bank like this go declare bankruptcy. So that will be another indicator I'll be testing by purchasing BAC.

What is going on with my portfolio?

• First, my long-term stocks : 

C +1.3%
F +6.1%
PFE +2.5%
Average +3.3%

In comparison, S&P 500 has risen 4% in 6 weeks. That's the time I've been writing this blog.
Looks like I should be doing a lot better if I want to beat the market. Keep learning and keep trying.
Good quote for this:
"Give me guys who are poor, smart, hungry - and no feelings. When you feel, you lose a few, but you keep on fighting." That's what I'm trying here.

• My speculation stocks : 

ITMN +6.2% Just like I said, the growth stopped. Could've sold it, but I was interested what was going to happen.
L +3.2% I will sell, because there's nothing to expect. It has been fluctuating between 39pt and 43pt for 6 months.
SBUX +1.2% Though the increase is slow, at least it's steady and Starbucks is a francise based on the number of customers, which is in the moment, increasing for sure.
ALXA -6.8% I sell, but will wait for an opportune moment for buying again. Simply I like the fundamentals (I mean news) of the company and the stock's movement.
KIM +2.3% Most certainly i will dump it, because it has made me nothing comparing to the market.
Average +1.2%
Week's S&P 500 +0.8%

Conclusion - the long-term shares have been better, but one week shows nothing yet.


*S&P 500 - An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. 

*short selling - The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short.Selling short is the opposite of going long. That is, short sellers make money if the stock goes down in price.

Week 5

This time I'll tell you more about technical analysis, due to it being mostly left aside in my previous post. But first, I will talk about the announcement concerning the 'fiscal cliff'.

Here's the conclusion's simplest explanation of January 2nd announcement : 

http://www.forbes.com/sites/abrambrown/2013/01/02/fiscal-cliff-house-oks-compromise-deal-and-investors-can-briefly-rejoice/

• The market was absolutely bullish (positive) that day and has been bullish for the whole week, because for 98% of the Americans and small businesses don't have their taxes increased. Taxes only increase for the wealthiest families. All in all, the final result of the change is much less agile then the market projected (predicted). 

• Regarding this, I saw a great opportunity and bought shares of two stocks that I saw potential for growth and also, these two have been in my watch list for a week now : 

ITMN +6.1% which is a rapid increase for 2 days. had a triple bottom indicator and also a gentle growth trend that is not risky. Also shows an efficient MACD. Unfortunately It will change in a couple weeks. Why? Explanations are below the chart.

• The trend is trustworthy and not risky as long as it's below 45-degrees comparing to the horisontal. When the trend is getting too rapid and steep, there's a risk for the trend to change from bullish to bearish (from positive to negative). Examples : 

• The second reason the trend will change is MACD. As I explained in one of my precious posts, MACD works like this : when the blue MACD line is above the green signal line, it shows a bullish trend and vice versa. Now in case of  ITMN, there's a very small chance for the MACD line to stay above signal line for very long. Maybe 1-2 weeks. Then they cut into each other and when the MACD line moves below signal line, this is the sign for selling.

• The other stock I bought is SBUX (Starbucks) +3.8% in two days. The reason I bought it was also the 'fiscal cliff' positive outcome and second - rounding bottoms. The new indicator helps helps recognise the point where the trend changes. Though the SBUX changing looks much more fluctuating and bigger than in the example, it is not. Just look at the percentages (share price). Also It's important for the volume to grow simirarly to the example. 

• Let's get to my previous investments : 

ALXA +0.4 To be honest, I predicted at least 5% increase by now, but I think it still has potential and I'm holding it.

KIM +2.8% I've been holding it for a long time now and in case it won't reach 7% in a week, I'm dumping it. Frankly, there's a rally out there in the moment and in those moments it's important to search for a stock that keeps up with the rest of the market or that moves even faster then the rest of the market.

L +1.4% I will sell it next week because of the slow movement. The trend-change signal wasn't strong enough, either. Which means, there's a possibility for no change and no fast movements.

What will I do next ?

One of my blog's readers suggested a very good blog that helps you notice the stocks that are underrated my the market and that actually have very good fundamentals, which means a long-term growth. notablecalls.blogspot.com

• From that page, I found a retailer FRAN stock that certainly has strong fundamentals, also triple bottom indicator and good MACD. Moreover, it decreased 25%, because the market overreacted to the resignation of the CEO. Usually, when the hit is that huge, it is caused by weak results, but FRAN had good results.All in all, I'm buying and will hope a 10% increase in next two weeks, especially on bullish market.

What is the overreacting market ?
It means when first something bad or good happens to the company. For example, the quarters results are a disappointment or the news announce that a CEO resigns etc. Then secondly, the market takes it too seriously and start selling. The share price decreases too much. One way to analyse this, is to use P/E, which I introduced in my previous post. It shows, if the share price is too low or high for its results. For example, when the market overreacts because of little worse results than predicted and the price plummets, the P/E might be below 10. If you believe that this company's shares should cost more then the current price and it's just the market overreacting because of something that doesn't really affect  the results in the future, you should purchase it.


Now, I have been wanting to see, which way is better for investing - speculating* or long-term investments (over a year). In order to test that, I will make a long-term experiment. I will buy three stocks that are not very fluctuating and that are constantly decreasing/increasing. Same time I will continue to trade within couple weeks, which I have been doing here.
The three stocks are Ford, Citigroup and Pfizer. I'll keep you in the loop, how they are doing.
Guess, we'll see if the quote "The mother of all evil is speculation." is true.

*speculation - The act of trading in an asset, or conducting a financial transaction, that has a significant risk of losing most or all of the initial outlay, in expectation of a substantial gain. With speculation, the risk of loss is more than offset by the possibility of a huge gain; otherwise, there would be very little motivation to speculate.

Happy new year, I hope 2013 will be prosperous !