This video shows why the Dow Jones, S&P500 and Nasdaq etc. stock market indexes have topped out at current price levels and are almost certainly set to resume the bear market collapse as before.
I personally have always been very skeptical of this entire rally since March of 2009. Let us not forget (if we ever knew in the first place!) that in the Stock Market Crash of 1929, there was a very strong rally following the initial collapse that induced many investors to reinvest in the market, much to their cost as they were then wiped out completely in subsequent years as the index lost 95% of its value!
In this technical analysis of the stock market indices, you will see explicit reasons from a price as well as a time perspective as to why the market has topped out here, and why it looks set to collapse as before.
The other night, I had finished up my shopping at the local supermarket and was heading homeward in my car. The main lights in the car park were off, which definitely distracted me somewhat as I had to fumble around to get into the car, and then really strain to see the keyhole to turn the ignition.
So, now I was on the main road just outside the supermarket, heading back, when suddenly a silver car pulled out from a side road and almost slammed into me side on. He braked suddenly and pulled back into the side street. He also had the wretched nerve to honk his horn at me!
So I’m thinking stuff like, “You idiot! Why don’t you look the heck where you’re going? And then YOU honk at ME?!”
But I’m also thinking, how could this happen? It’s as if he didn’t even see me. Is he totally blind or am I invisible?
Then I noticed something very interesting. My gaze flicked to my dashboard. My headlights were completely off! Yes, I could see the road ahead just fine because there were streetlights. But I guess that nobody could see me coming so very well!
It was night and I was driving like a bullet in the dark, unseen.
Hmmm. So who’s the idiot now, I wonder?!…
I have to admit I felt more than a trifle guilty about it. There could have been a really bad accident if I had carried on much longer. Luckily, I had only just left the supermarket, and even more luckily, my attention had been immediately alerted to the problem by this incident.
So, what’s this story got to do with online trading, you might ask? Well, nothing and everything!
The fact is, it’s a very good life lesson. Many traders trade like this - absolutely certain that what they are doing is right, and MUST be right because it’s them doing it. And that’s totally irrespective of what the markets are plainly telling them!
We get negative feedback from the market, e.g. it moves against our position. So what happens? Instead of having a stop that gets hit and takes us out for minimal loss, we have no stop at all. Or worse still, we actually ADD to the position. That’s kind of like saying to the market, “You IDIOT!”
It’s just like when the guy nearly hit me and had “the cheek” to honk at ME. We carry on all the same, just swearing that we are RIGHT! Then one day, we crash and burn and scratch our heads and wonder why?
Is it any wonder that 95% of online traders crash and burn when it’s like they’re driving without their headlights on! They’re just asking to crash.
It’s a great analogy that I want you to think about for your life and especially for your Trading. What is your blind spot? What is it that you are just refusing to see in your method?
We can drive along in our lives, not examining what we are doing, not being as AWARE as we should be. Then one day, reality collides with our fantasy and we are left to pick up the pieces, and wonder what the heck happened. This happens ALL the time in Trading.
Rather than think “Idiot” about the other guy, I was left asking, “SO who’s the idiot now?” And that’s what we need to ask ourselves (in a constructive fashion of course, i.e. “What can I learn from this?”) when we get our noses bloodied in the markets.
In fact, the guy who nearly hit me was symbolic of all those people who warn us we are in danger when we take a wrong path, but who we filter out and ignore because we don’t want to hear what they have to say. Luckily for me, he appeared on the scene and awakened me to something I would not have seen otherwise until perhaps it was too late.
Maybe the lesson is, switch on your headlights BEFORE you have the crash! In Trading this means, examine what you are doing in full awareness and make sure that it is what you really want to be doing. Do you have a method and is it PROVEN to work?
Realize that what you do has financial consequences for your trading account. Every lapse, even momentary as mine was, can have enormous results.
So, make sure that when it comes to your Trading, you too are not a dark bullet in the night, heading for a certain crash and burn. Switch the lights on, and shine the bright light of Awareness onto your Trading and your life in general.
I just received a really nice comment today on one of my Dow Jones Stock Market Index YouTube videos. Here is what he said:
“Asoka Selvarajah You are a Legend.
You saved me tens of thousands in 2008.
Thank you so much. I saw your analysis in Jan 2008 and went to cash ” BandwagonJumper007
Now I have to admit that I am rather shocked when people take action on Trading videos that I intend primarily for education and information. And of course, they do so at their own risk. However, I am very gratified that it worked out so very well for him. In fact, what he did is precisely what I did myself shortly after making the videos he refers to. I sold out all my own stock market investments and also went to cash, 100%.
I wish I could say that I had participated on the entire stock markets rally from March. I DID participate in the first few weeks of it (in fact, I pretty well bought the very low of the Dow Jones at 6474 - actual low was 6470!). However, I was pretty skeptical of how long it would last, feeling that it was a bear market rally, and hence likely to falter. So the last 9 months caught me somewhat by surprise. Then again, after the Stock Market Crash of 1929, most people got sucked in by the subsequent rally only to get killed when the market tumbled slowly but relentlessly over the years that followed. So, let’s wait and see.
Here are those very videos for your interest. If nothing else, it proves to the skeptics that Technical Analysis really can work extraordinarily well at times…
I took off a losing Dow Jones stock index trade yesterday.
That’s not a big deal. After all, you win some, you lose some.
Maybe I should say, I FINALLY took off a losing trade. It’s one of those things. You learn something. You know it. You even teach it to others. And sometimes, you let your discipline slacken and don’t do it yourself!
We’re all prone to this which is why we must maintain our discipline when doing online trading. The financial markets are not forgiving.
So what did I do? Well, the market opened yesterday morning a little outside of my stop-loss level but it was just drifting (this was an options trade so it’s not so easy to enter the stop at the time of the trade). I told myself that I would let it drift a little more in my favour and then take the trade off.
But you know what? A stop is a stop. If you’re wrong, you’re wrong. And what you invariably find if you play this sort of game is that you lose more than you ever win.
So it was yesterday. When I finally took the trade off, the loss was substantially larger than it needed to be.
Now, it’s no big disaster because it was a really small trade size. However, it is the principle that counts. I don’t think we should ever tell ourselves that we can “afford” a trade, i.e. the present loss level. If you do, you find that all too often, it will get to a point when it really DOES hurt!
Besides, if you play this game, when ARE you ever wrong on a trade? After all, if the market were to then improve in my favour, and maybe even go all the way back to breakeven, isn’t that less reason to take the trade off?
No, the answer is always to know your stop, i.e. when you are definitely wrong, and exit once it is hit or passed.
I shall make sure that I never make this mistake again. How about you?…
I just wanted to pop in to wish you a very Happy New Year. May
your Trading success really skyrocket in 2010. I really wish
this for you, no matter how well or badly it has gone last year.
You know, the start of the year is a great time to review the past
year to be honest with yourself as to how well it really went. It
is also the time to take the big-picture view of what’s ahead.
I would suggest that you take some time out, if you haven’t
already, and really plan out 2010 in detail. Review your
strategies. Find out what has worked for you and what hasn’t.
If nothing worked last year, then sit down and start afresh to
brainstorm what is going wrong. What do you need to do? What
resources do you have to access? (Not just in Trading but in ALL
areas of your life - business and personal).
The fact is that you are DEFINITELY capable of being a good
trader. OK? The only question is, what is holding you back? Is it
your lack of self-belief? Is it lack of a winning strategy? Is it
that you over-trade and take too many poor opportunities?
This is a great time to really sit down and THINK. Take a blank
piece of paper and a pen… and just THINK. Plan. Strategize.
Plus to help you to do that, don’t forget that I am running an
extremely rare once-only teleseminar where I answer YOUR most
pressing Trading challenge or concern.
I’ve had some great questions already and it’s looking to be a
really good call. The only way you’re going to get your question
answered for sure is if you get it in before I’m overloaded.
If I have the answer, I want you to benefit from it. This could
make the difference between 2010 being your best Trading year, or
just another year of so-so performance.
So head over and let me know what you want me to help you with:
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