If you haven't heard of the technical indicator with the stock market symbol VIX it is now time to pay some attention to it. When the number is running low, as it is now, around 15 to 18 it means everyone is happy and thinks the stock market is going to continue up or at least continue on its current path and there is no need to sell anything. This is a measure of complacency. When the number goes above 35 it means everyone is very nervous and thinks the market is going to fall. It is considered a contrarian indicator.
Wall Street calls this the Volatility Index which disguises its real underlying meaning. What it really should be called is the FEAR and GREED Index.
The average investor buys with a greed motive when the VIX is low and sells only after fear sets in when the number is high because he is afraid of further loss. These are emotional moments and the market is an emotional animal. The truly smart investor has a planned exit strategy before he buys anything; he knows when to sell even before he buys.
Notice that the higher and smoother the movement of the market the more complacent the investors become. The investor becomes overconfident that his stocks will always go up. It is a truism that investors buy with only thoughts of how much they will make and never consider that it is possible to lose. When I was a broker and a member of the exchange I would only keep customers who would place stop-loss orders as soon as they bought something. I always stressed protection of capital.
When you are a serious and reasoning investor you must always think about loss first. If what you buy goes up you don't have to worry. Winning takes care of itself. Losses don't.
As of March 26, 2004 the VIX can now be traded like a stock. If the VIX is currently 18.5 the value of the contract is $18,500 and trades in $10 increments. It can be very volatile; a move from 18 to 38 can make (or lose if you are short) $20,000. This is not for the feint of heart and should be left to the professional speculators.
When you look at the historical charts and run a comparison of both the VIX and the S&P500 Index you will see the inverse correlation. As the S&P goes up the VIX goes down and visa versa.
There are many technical indicators that are used to determine market direction and this is just one of the many. It can be part of your analysis if you are a technician along with moving averages, various ratios and other stratagems.
Whatever you do do NOT become complacent about the money you have invested in your 401K or any other stock market investment. Protection of your capital is always your first consideration.
Al Thomas' book, "If It Doesn't Go Up, Don't BuyIt!" has helped thousands of people make moneyand keep their profits with his simple 2-stepmethod. Read the first chapter athttp://www.mutualfundmagic.com and discover why he's the man that Wall Streetdoes not want you to know.
Trading For A Living
How many times have you said to yourself, "I'd like to quit this job and just make a living trading in the stock market"? Well, maybe you can, BUT...
Stops Make Money
During the day I watch CNBC-TV, the stock market channel. Fortunately, I keep the sound muted or I would be hollering at the dumb "experts" being interviewed. The experts seem to know all about the market except they don't know how to protect their capital.
Every broker and financial planner will tell you that you cannot time the stock market. I saw John Bogle, the great seer of Vanguard, on CNBC saying it can't be done. Of course, it is easy to understand why he and every other mutual fund manager would say that as they would have a problem managing huge inflows and outflows of money and he was buying and holding during the 18-year bull from 1982 to 2000.
Advisory News Letters
Several times each month I am solicited by various market touts who have a newsletter service, faxes or emails they are willing to send me to make me rich. That sure is nice of them.
How To Buy And Hold
One of the most believed bits of conventional wisdom from Wall Street is to Buy and Hold. Any stock or mutual fund should be put away for eternity and never sold. This is total hogwash and is guaranteed to reduce your investment income.
The Inside Scoop on Mutual Fund Rip Offs
The bear market that showed up at the end of 2000 has every brokerage house-as well as the entire mutual fund industry-scrambling to find creative ways to boost both their image and bottom line. Unfortunately, this is often at the investors' expense.
Dont Lose All Your Money
That sounds like good advice doesn't it? Don't lose all your money.
My Neighbor Got A New Car
I don't know what kind it is, but I saw iton TV running full speed along the shore (I don'tlive near the shore) throwing up spray or maybeit was that one climbing up the steep mountaintrail thru the mud, rocks and snow. Veryexciting. (I don't live near the mountainseither.) WOW! Just what I need.
If you have been watching the stock market at all you are probably very confused. You are not alone. One day is a hundred points up for the DOW and the next a hundred down. What is going on? There are many stocks that are going up and unless you are in the right ones you will be left behind.
Why Buy and Hold?
Since I can remember, and that's a long time ago, the Wall Street brokerage companies, mavens and mutual fund managers have been exhorting the mantra of Buy and Hold for all your investments. There have been erudite studies published that this is the only way to go.
Maximizing a Stock Market Investment
Maximizing a stock market investment
Forces that Move Stock Prices
Among the largest forces that affect stock prices are inflation, interest rates, bonds, commodities and currencies. At times the stock market suddenly reverses itself followed typically by published explanations phrased to suggest that the writer's keen observation allowed him to predict the market turn. Such circumstances leave investors somewhat awed and amazed at the infinite amount of continuing factual input and infallible interpretation needed to avoid going against the market. While there are continuing sources of input that one needs in order to invest successfully in the stock market, they are finite. If you contact me at my web site, I'll be glad to share some with you. What is more important though is to have a robust model for interpreting any new information that comes along. The model should take into account human nature, as well as, major market forces. The following is a personal working cyclical model that is neither perfect nor comprehensive. It is simply a lens through which sector rotation, industry behavior and changing market sentiment can be viewed.
Buy and Hold Investment Philosophy
Wall Street has been preaching the doctrine of Buy and Hold forever. The worst part about it is the small investor (and some big ones) actually believe it. Brokers and financial planners believe it, but when you show them they can get a better return by timing the market they just say, "It can't be done". They are either lazy or stupid.
What Can Model Airplanes Teach You About Trading?
I was devastated!
How Commodity Trading Differs from Stock Trading
There are major differences between trading stocks and trading futures. While stories of fortunes made or lost overnight on the futures markets are largely untrue, the futures trader, if using a sound trading system, can usually make more money on the futures market and make it much faster. However, if that trading system is not sound the trader can have greater losses.
Trading Stocks ?Never Forget About A Past Trade
We all know that emotions control every decision that an investor makes in any type of money related vehicle. Whether is be the stock market, real estate, art work or antiques, emotions ultimately set the final price on both sides of the transaction. Some investors have greater control over their emotions while other investors are destroyed by their emotional reactions to certain events.
Why Change Funds?
On November 17 I bought 7 different mutual funds and went to a 100% invested position. One of the funds I bought was Robertson Stevens Information Age (RSIFX) and it has made money as have the other six.
There are so many kinds of work that needs to be done and you are doing one of those jobs right now ? unless you are one of those two and a half million that have been laid off during the past 3 years. The press continues to blame China and India for stealing away all these forms of employment, but they don't have it right.
Choosing a Stock Broker
If you were to find that you had some severe illness that required surgery, would you attempt to perform that surgery upon yourself? What if your car broke down and needed a valve job? Would you get out the Craftsman tool set you got for Christmas three years ago and start tinkering under the hood even though you know absolutely nothing about engines? Of course you wouldn't do either of these things because there are times in life when we know we must seek the assistance of a professional. So why is it that so many people try to make their own investment decisions without consulting a professional stock broker?
I receive emails from Morningstar. This company provides statistics and analysis of just about every publicly traded stock company you can think of as well as voluminous information on mutual funds around the world.
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