Stock Market Timing

A lot of money can be made in the stock market if you learn how to time your trades with a high degree of accuracy.  Unfortunately, good timing involves more than knowing how to read the charts.  For example, we currently have a paradigm shift in oil supply.  We are getting millions of barrels of oil from the Bakken area of North Dakota now as well as new oil in Texas.  The Energy Information Administration has been reporting excess inventories of oil that never used to happen.  This resulted in the price of oil dropping below $80 per barrel in the last part of June 2012.  Moreover, the leveraged oil bear ETF called ERY rose significantly in June.  So, the fundamentals are clearly in place for lower oil prices in the future.  Don't buy ERY today based on the fundamentals, though, because the stock chart shows a clear downtrend in July.  You will be buying at the wrong time.

Then, on top of tricky timing issues that can usually be resolved by due diligence, we have some situations that are beyond are our control.  For example, last week, the president of the ECB, Mario Draghi, declared that he would do whatever was necessary to preserve the euro.  This caused a tremendous stock market rally including a rise in the price of oil in spite of excessive oil inventories.  The oil price rises every time a central banker talks about more money to stimulate an ailing economy because it means that people will have more money to pay for oil.  Thus, if you had been long on the oil bear stock, ERY, last week you would have lost money due to conditions beyond your control.  The only solution here is to buy ERY at the lowest price on the chart, and be prepared to wait until the political empty promises get broken in the future.