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.

Dividend ETF List .com

Dividend ETF List .com - Home- Dividend ETF List

The above link is a great website for getting information on dividend-paying ETFs.  The list includes the dividend amount as well as the history of the ETF.  There is also safety in holding these ETFs because they have multiple holdings.  Thus, one stock of their holdings that may be declining would be offset by stocks that are doing well.  It is also a great idea to hold dividend stocks in our uncertain stock market.  You can be paid while you wait.

Oil Has Found a Bottom at $83 Per Barrel

Unless we have a recession, oil has found a bottom at $83 per barrel.  Take a look at the chart on the Money Velocity page of Fibonacci-Stocks.com to see the recent flat bottom of oil's price in the $80 range.  The looming European embargo of oil from Iran has put a bottom under oil.

In this current scenario, ERX, a  leveraged oil ETF, is the best way to make money.  It is selling for $36 per share now, and it could go to more than $50 per share in the next couple of months.  That would be a gain of almost 50%.

Golden Timeline

Investing in the stock market can be very tricky.  If you make the wrong decisions on stocks, you not only lose money, but you also lose time.  It takes ten to fifteen years minimum to build up a good retirement.  If you lose three or four years here and there due to bad decisions or market downturns, it will be very hard to make up the lost time.  The solution is to designate 90% of your investment money to a portfolio that is designed to produce gains year after year.  In this way, you will preserve your capital and add to it.  Then, if you want to speculate, you could do that with the remaining 10% of your money without destroying your future.

Fibonacci Stocks.com has a great page showing a Golden Timeline plan where you can protect your principal while gaining a lot of money for your retirement.  50% of the portfolio is comprised of high dividend real estate investment trusts that will pay you dividends whether the stock market is up or down.  Then, the other 50% of the portfolio involves trading SSO, a leveraged ETF for the S&P 500.  SSO will only be bought when it is safe, and profits will be taken after a gain of 12-15%.  Then, the cash will sit safely on the sidelines until the next bull trend comes along.  You can't go broke if you are constantly protecting your profits.

Time To Own Dividend Stocks

Most investors have heard the story many times that the best time to own stocks is the six month period of November through April.  I agree with this historical pattern.  Another way to know when you should be invested is by comparing the charts of 7-10 year bonds (IEF) and SSO, the leveraged S&P 500 ETF.  As you can see in the chart below from Google Finance, SSO crossed over IEF in early January signaling a huge upside for the stock market.

Unfortunately, the best time of the year for owning growth stocks has now past.  There is still high interest in the stock market since 10 year treasury bonds are now selling for less than 2% yield.  Most people are going to put their money where it will earn the best return.  However, the good times for stocks will not last forever.  We are now entering the six month period of May through October when stocks are most volatile.  If you want to play it safe, you could own a couple of high dividend REIT stocks during this time.  AGNC is paying more than 16%, and ARR is paying more than 17%.

Stock Market Trading Range

Most of the gains for the stock market have already been made this year. It will probably be a see-saw battle between the bulls and the bears from April through the November election. Bad news will surface from time to time that will send the market down. Then, through continual inflows from 401K funds, the bulls will eventually restore order again for a while since the money will need to go somewhere.

In this type of environment, a trader can always make money based on whether or not there is volatility in the stock market. If the market is calm, then XIV, an inverse volatility fund can be bought at around $10, and it could be sold at $12 or $13. The profit will need to be taken quickly because it will not last.

Then, for the downside of stocks, TVIX, a leveraged volatility fund could be bought. You could buy it at $8 or lower and sell it when it gets to $9.50 or higher. Then, hang onto the cash until the stock market pulls back again several weeks later. In this way, you can most likely make double or triple digit returns over the rest of the year based on whether the market is acting like a bull or a bear.

Market Correction Is Here

After an unbelievable stock market run over the last several months, it looks like stocks will finally see some downside for a change. The depth of the downturn will probably depend on whether the economy will show more improvements. Selling has already started ahead of May this year because the stock market has experienced such a long uptrend. TVIX, the leveraged volatility exchange traded fund, will probably be profitable for a while as we move into the summer. Be certain to take profits when you are ahead, though.

Several market indicators point to a downturn in addition to the normal summer pullback. One of these indicators is the New York Stock Exchange summation index. The chart has been going down since February while the Dow 30 kept making new highs. This wide divergence between large caps and all other stocks could not last forever. The strong stocks can carry everybody else for a while, but eventually the large caps go down also. It looked like the Dow 30 finally started going down this past week. The million dollar question is how far the stock market will fall. Stay tuned and be careful about owning stocks for the next few months.