The people that are behind RebelTraders

I started RebelTraders on May 24th 2007 to provide an objective view of the stock markets. An objective view means that I perform various analysis techniques to locate stocks that can be considered good swing trades. And I select the stocks without any disingenuous motives involved, I never accept any financial compensation for selecting a company or stock, I will never recommend a stock for my own financial benefit, and I maintain a very high ethical regard for my own actions.

To be objective and fair is the only way I want RebelTraders to be. The RebelTraders name came about after deciding it was time for breaking away from the pack. To separate our service from the rest in that we think with an open mind, we are objective thinkers, and we view the markets with a wide angle lens, not just a chart. While technical analysis is what I specialize in you can not be a successful investor or trader without seeing the whole picture. There are many good web sites and blogs for stock market 'picks', but we are establishing ourselves as the one that will view the market from all angles before making a stock recommendation. Just like a hawk who flies over his prey before striking the hawk sees the 'setup' from all angles before swooping down. The successful traders are the ones who see the whole picture. So Lisa and I are committed to always be fair, objective, provide stock trading ideas based on technical analysis in conjunction with the big picture.

Lisa and I are also committed to the concept of providing trading, investing tips, and education. It is one thing for a web site, stock picking service, or blog to simply tell you to buy a certain stock but we go beyond that. We teach how to properly manage your trading capital, to know when the reward is greater than the risk, to know how to cut a bad trade before it eats away at your capital, and to give tips on separating emotion from logic. In the stock market emotions get in the way of making informed and smart trading decisions. To win you must be disciplined and savvy. That is what Lisa and I are here for, to help you become a smart trader and investor.

Over time RebelTraders is going to grow again. There are plans on the table which Lisa and I are discussing to bring even more content and benefits to our subscribers in the future. And no matter how much the RebelTrader family grows we will always remain firmly committed to our core values of providing objective, informative market analysis, and stock trading ideas..

I want to wish the RebelTrader readers a happy and safe Labor Day Weekend..

Market Brief from NewsWires

Market Update

Now that FOMC Bernanke has spoken and President Bush has spoken the volume in the markets has essentially dried up. There is a directionless intermission here as the news is digested.

I would like to point out however that as the morning has progressed the movement of money back into bonds for safety has resumed. A bull market can not take place until there is a substantial movement out of bonds. Until that happens any advances in the markets are prone to failure. Market advances require volume in order to hold. This can not be stressed enough.

Two things are missing today to make the advance convincing. Volume, there is none. And money in bonds is still holding firm there. Until we have substantial volume (conviction of the moves) and a sign that money is leaving the bonds and moving into stocks then any movement is at risk of failing.

If you are sitting in any long positions today and are showing a profit then you should take your profits and close out the position. Next week will be an unknown and you should not put your gains at jeopardy of turning into a loss. There is not enough volume today to warrant that this advance will hold.

Pre Market - August 31st 2007

Emotions running at fever pitch

Economic data and reports from Bloomberg overnight on what President Bush will do to address the people who may lose their homes caught up in the credit crisis have emotions running at record levels this morning.

Futures are up on the psychological boost in traders minds that the FOMC has what it needs now to cut overnight lending rates. In addition to that what is raising the futures is the financial sector on the news that President Bush will initiate policy which would rescue homeowners who face foreclosure on their homes and fit within a certain criteria. That has some pressure being lifted off of the mortgage sector and the mortgage companies are being bid higher in pre market.

A risk taker who likes placing bets on the tables at Vegas would jump on board this morning and join the anxiety driven moves this morning. A disciplined trader will continue to wait for logic to take over and set a direction, not anxiety.

Has the world changed overnight, absolutely not. The only thing which has changed overnight is the levels of anxiety and actually the 'will they/won't they" questions on if the FOMC will cut the Fed Funds rate has actually increased now. So with that much uncertainty we will wait for clear direction, not perceived direction.

The Day that Was - August 30th 2007

Winners don't get excited and emotional. They get rich.

Each day the mood of the market keeps changing. One day it is down huge, the next day up huge. And then today it is clueless again. How do you trade that kind of move? You can't.

In a normal bull market a 240 point gain in the DOW would be a healthy indication of a rally. In our market it is nothing more than a sign of confusion. Normally a large gain would be followed with increased money flow into the markets as it would have signaled a sign of growing strength. But today we had no strength, instead we had more confusion and emotionally driven moves. When emotion overtakes reason in the market then there is no safe place to be except on the sidelines. You can not swing trade in a market that does not know from day to day where it is going. Swing trading in this can lead to financial suicide. There is no shame in waiting on the sidelines for the best reward to risk profile to present itself.

Some people are by nature risk takers. Some people thrive on excitement and the prospects of 'making a kill'. And that is fine, in some aspects being adventurous is a healthy aspect because it means you are not one to just let other people control your life or your finances. You desire to be in control of your own destiny and that is a good trait. But that same enthusiasm and desire to control ones own destiny has to be balanced with reason and logic in order for that enthusiasm to be profitable.

The reason for creating RebelTraders was to share the concept of taking control of ones own financial future. To differentiate ourselves from the 'institutional' ways of thinking and to provide stock market trading ideas based on a combination of analysis techniques. Additionally, RebelTraders sets forth a winning attitude by educating our readers about such things as market direction, preservation of capital, risk to reward profiles, chart analysis, etc.. It is only through the combination of ALL of these aspects of the markets can you win on a consistent basis. If you use your drive and ambition to control your own destiny without balancing it with logic and reason then you will fail. It is that simple. The headline of this post says it all and it says it loudly. The ones that make good money investing and trading in the markets year after year are the ones that control their emotions and let logic dictate their actions.

We did not take any swing trades today because logic says that it is not the right time. Why take on a swing trade when there may be significant market moving news tomorrow from Ben Bernanke which could create another sell off. Unless your related to Ben and you know what he will say tomorrow then why take the chance. Your risk is higher than your reward. A smart (and profitable) trader knows when the odds are in his or her favor. To jump into a trade for the sake of just taking a chance may provide you a win, and it may provide you a loss. But if you do this time and time again your end result will be a net loss.

RebelTraders is here to provide you stock trading ideas but we are also here to keep your money in YOUR wallet and not in the markets wallet. Being a financial winner is much more than just finding the right stock from time to time, it is also knowing when to NOT trade. We will not tell you to take on swing trades when the risk outweighs the reward potential. Anyone that tells you to swing trade in this directionless market is being reckless with YOUR money. We won't do that. RebelTraders wants you to win in the long term, not just for one day here and there.

Pre Market - August 30th 2007

Unemployment data came in and it is showing a continued decline in the employment situation. This figure would be bullish for those counting on the FOMC to do a rate cut. The GDP number came in and it was "as expected" with no major surprises, this is bearish for those wanting a rate cut.

So the market remains very confused this morning. Futures are down, The Yen is up again, The 10 year T-Note yield is heading in the direction of "flight to safety" again. So what to do?

Now you can see why we are not providing daily swing trades. It is pointless to be trying to swing trade in this mess. As Lisa said last night the "smart money" is also unsure of what to do. Lisa makes a very good point and that is the smart money moves our markets, if they don't know what direction to move it then how are we to profit on a daily basis when they themselves are being carried off the playing field on stretchers.

Never be to anxious to jump into the market. You are NOT missing out on big profits.. What you are missing is the anxiety, emotion, and hair pulling market which is taking out the best of them. Yesterday the markets went up big on the thought that the Feds would cut based on a letter that Ben Bernanke issued. And in that letter traders read between the lines and saw a rate cut coming. Now this morning there is mixed signals (again) as to will they or won't day. So we have a market that is set to open lower at this moment.

Again, this is why we are not advising our readers to be swing trading right now. The risk is higher than the reward. The risk of substantial losses outweighs the risk of making consistent money. Remember that people who have been trying to get into the pits (the market) and trying to trade are getting hit, bumped, slammed, whipsawed, and downright beaten up. And as on the football field the medics are having to keep rushing onto the field to pull out another player who lost. Don't be the next victim to be carried out on a stretcher, have patience.

Index Charts

Ben Bernanke speaks..

The market bounced this morning which was not a surprise and I mentioned that it may happen in the pre market report. But what turned this reaction bounce from just that into an emotional orgy was a letter that was released by Ben Bernanke and in that letter he basically said that the FOMC would do whatever is needed. And as the markets always do they read between the lines and are now thinking that the FOMC will cut the Fed Funds rate. This guy Ben Bernanke goes from hot to cold and back again.

Is the letter that Ben Bernanke released today the equivalent to nothing more than "a lap dance" at a nude bar or does he mean business? In the commentary last night I said that the big drop yesterday was fueled by speculation that the FOMC did not understand the scope of the problems and that made traders think there would be no cut. Then today he makes people believe that he will. Again I say, is it a tease or will they restore order to the markets?

I stand firm in my commentary last night that there are more problems coming down the road which have not been fully absorbed by the markets yet and the rate cut may only be a temporary fix for the markets. It depends on how forceful a rate cut (if they actually do one) and the statement that goes along with it. Yesterday the market was in depression as the facts of the economy and the fear there would be no rate cut sunk in and today it was party in the streets thinking that "there is a Santa Clause" (ie: letter form Ben Bernanke).

What we don't know is if this emotional lift will translate into a logical lift. What that means is on one hand there was excitement which ran the market up in the afternoon. Will that excitement fade back to reality and we come back down again? Or will the perception of a rate cut bring large money back into stocks?

On one day we are down huge, the next day we are up huge.. this is why we can't swing trade in this emotion driven market.. We need a market that is driven on at least some logic, and not all emotion.

What did today's moves do as far as support/resistance.. well think of it this way. We are in a S/R sandwich. We still stuck in between greed on one side and fear on the other. And it is like peanut butter and until we can move decisively out of the S/R sandwich then we are going to continue this up and down swings.

More later..

Pre Market - August 29th 2007

Not much has changed overnight so the advance in the futures may be an advance which could be quickly sold down today. We can't say with certainty if this is short covering only (which I suspect) or some bargain hunters who want to try some risky trading on a possible bounce. The Asian markets dropped overnight as expected following our market sell off yesterday.

One note of interest is that in Germany their equivalent to our consumer confidence figures dropped substantially. Declining consumer confidence is not just an American issue.

I don't anticipate any swing trades today. Risk is higher than the reward still. A bounce this morning could be turned around later by those still bailing out of the stock market.

The Day that Was - August 28th 2007

We started out the day with the Japanese Yen showing strength overnight. That rise in the Yen sent our market futures down in pre market. Then we had the consumer confidence data and it was low, actually the lowest since this time last year and on a plot is declining steadily. Remember that consumer spending makes up almost 70% of the US economy. When consumers are cutting back so does the economy. When other factors such as a banking crisis, credit crunch, financial companies facing substantial losses from notes they can't unload, and hedge funds facing liquidity problems then you have some ingredients for a "perfect storm".

Another bit of news today that goes in the category of consumer confidence or should I say their ability to spend is a report issued today that credit card holders are defaulting on their accounts at a sharply higher rate compared to last year. Moreover, late payments are also up and credit card companies have written off 30% more payments during the first half of this year than a year ago. These are not small numbers. This is a substantial barometer of the US consumer. The cost of living has increased with rising fuel costs and other goods to the point that middle America is stretched, regardless of what economists want you to believe. If you want to know the real feeling of the US consumer go to a shopping mall near you and ask people questions. If you can get past the ones who will look at you funny I'm sure you will hear that things are not rosy.

So what else happened today.. well the Standard & Poor's US National Home Price Index showed home prices in the largest 20 US markets had their worst decline in 20 years during the second quarter. You must keep in mind that this data does not reflect the latest financial crisis and credit crunch. So one can expect that this data will deteriorate further.

And then today Merril Lynch downgraded 3 top financial companies citing their exposure to the debt markets. Citigroup, Lehman Bros., and Bear Stearns were hit hard today as was the entire financial sector. But it does not stop there. Reports from some economists are calculating that other large financial institutions will be forced to write off hundred of millions of dollars due to notes that can not be unloaded and also loans to other companies will not be able to be paid back as they too were tied to the credit collapse which this is turning into.

Then if that was not enough already the minutes from the August 7th FOMC meeting were released. Generally this is a non event as on the day of the FOMC meeting when they release their press release statement it generally covers the headlines. The minutes is just a formality. But what the minutes showed today was an even larger disconnect between the Government and reality. The statement in the minutes which just burned the back sides of the markets today was "Members judged that the risk that inflation would fail to moderate as expected continued to outweigh other policy concerns". It was this statement along with the context of the entire minutes which sent the market in a nose dive as the feeling came back in full force that the FOMC does not grasp the situation.

Throughout the day today I monitored the 10 year T-note yield. And as expected it showed stronger flight to safety as more and more money is leaving the equities markets and moving into long term bonds. Remember the chart I showed over the weekend comparing the recent advance in the markets (previous 6 days) to the 10 year T-note yield.. I showed you how while the market was advancing on that flimsy low volume the money was still going into the bonds. Technical analysis goes beyond just looking at a stock chart, it includes doing charts on the indices and other aspects of inter market relationships. Last night I said that the recent advance was akin to building a house of cards but the lack of volume showed the foundation was weak and it would tumble down. This is why I was not recommending any swing trades. It was better to sit in cash as the signs of another collapse were building. And today it did.

Some were claiming that we had hit bottom on August 16th. I would not say that as there has been and still is too much going on in our economy and markets that when all put together are forming the ingredients of the "perfect storm". Today's sell off has brought the indices back below some significant support levels. And when a support level is breached (again) it then becomes stronger resistance. And the next time it will be harder to overcome that resistance. So with the action today we are now more likely then ever to retest that August 16th low. If we spend the next couple of months continuously testing and retesting support and resistance levels then we are setting up for a major break downward, past the August 16th low. Many things are still coming together but the clouds are dark and a storm may be brewing.

Now comes the FOMC. What if they do a surprise Fed Funds rate cut? Then the market will be shocked with the proverbial paddles you see paramedics use. Will the rate cut be enough? Will they have to raise the voltage and do it again and again before they get a heartbeat? Or will their attempts just result in a flat line? There are many opinions on what a rate cut would do. One thing however that is widely believed is that a rate cut will lower the value of the US dollar. And that in itself will create new problems down the road and could come back to just reinforce the economic slowdown (or worse yet a recession). If the economy is indeed going to go into a recession it may be too late to pull it out of the hole, even with a rate cut. That remains to be seen. In 1998 the FOMC cut the Fed Funds rate 3 times. And for a while the markets did great, but it was unable to prevent the bear market that followed in mid 2000. The rate cuts kept the heartbeat going on the economy and the markets but it only lasted for so long before the market topped and we had our 2000 bubble burst and then a bear market which brought down many companies.

If the FOMC were to cut the Fed Funds rate (now, tomorrow, or at their next meeting) there will be a knee jerk reaction in the markets in which case I have recommended positions for you to take. But will there be a selling on an advance by people who are still looking much further out in time and see recession? If that happens then the markets will pullback yet again in time. A vicious cycle it can be.

A comment received today regarding taking swing trades on the short side was raised. The reason I have been leaning on cash as opposed to swing trading long or short is that the FOMC could issue a statement at any time. It would catch short trades and murder them. The risk is not worth it. If we knew for a fact that the FOMC was NOT going to cut the rates anytime soon then yes we could go short on some key indices and ride them down. But the volatility and wild swings has long or short swing trades a dangerous play. It is a different story for day traders however, if you are experienced and know how to day trade there are good plays in this volatility. But I can't recommend to you swing trades (remember that swing trading is for the stock trader who wants to capitalize on large moves in a stock during a short period of time, typically days to weeks in duration). The market we are in now has so many large swings from day to day it can wipe out a swing trade in no time. And those kinds of losses I don't want my readers and subscribers to experience. When stability and direction come to the markets we will be swinging like monkeys in a tree.. till then we hunker down and wait for the right time to strike. A note of caution if I may please.. day trading can be very profitable and yet very risky. If you are in this market currently doing day trades then I urge you to exercise extreme caution and furthermore if you are new to the stock market then don't even try it. I want you here for the long term to make money with us. Don't get caught up in the excitement of the market moves and think you have to be in there. Day trading is dangerous and you must be experienced at it. Over time and with the move to the RebelTraders full web site you will learn many aspects of the markets, and you will from time to time get guidance and education that you can carry with you into day trading if that is a path you wish to pursue at some point. But first you have to master the markets and just survive without losing money.

Even long term buy and hold type investors need to learn how to survive the markets. The fallacy of 'buy and hold' and I will be forever fine is just that, a fallacy. Buy and Hold investors can actually do more harm to their long term growth potential by not paying attention to charts and learning the importance of major trends. For those that fail to heed the charts will be the ones with substantial losses. Had they paid attention to the markets and the charts they would know when it is time to bank the profits on long term stocks and sit on the profit until the time was right to reinvest. Once a stock breaks a major trend line it becomes very difficult for that stock to ever come back to the levels it was once at. And never put your faith in an investment advisor, do your own homework and manage your own accounts. It is your money so don't hand over your wallet to someone who is not as vested in it as you are!

After the markets closed today Dilliard's, a retail department store chain reported earnings and they were terrible. They missed earnings by a substantial amount. Is this one more indication of a slowing economy? Could be...

Before I show some charts tonight I want to now take a moment to introduce you to the newest member of the RebelTrader team. Lisa Doby of Texas is now a Rebel and she will be contributing to this site over time. She has been granted rights to this site and will be able to post her own thoughts, ideas, observations, or whatever she has on her mind that she wants to share with the RebelTrader readers. I first got to know Lisa on another trading board and she and I have kept in contact over time. I had the opportunity to meet Lisa recently on a recent trip she made which brought her to the east coast where I am located. We met and I was very impressed with her market insight, intuition, and understanding of the financial markets. I asked Lisa if she would consider becoming a member of the RebelTrader family and she accepted. Lisa has a good head on her shoulders and she is smart and has a very good investment philosophy. She is bright and intelligent and I'm sure you will enjoy her posts when she begins contributing to the site over time. Please welcome her to the Rebel family!

Now one last thing before the charts. Last night I did a study of which sectors reacted well when the FOMC cut the Fed Funds rate. In that study I found one surprise. Technology stocks did not react as well as other sectors. My plays for a FOMC rate cut are:

• Buy UYG (ETF for the financial sector)


• Buy URE (ETF for the real estate market)


• Buy UKW (ETF for the Russell MidCap index)


• Buy SAA (ETF for the small Cap 600 index)


• Buy QLD (ETF for the Nasdaq 100)


• Buy DDM (ETF for the DOW30)


• Buy GLD (Trust that tracks the performance of Gold prices, hedge against a declining dollar)

Now all of these are buys if the market likes the rate cut. What I mean by that is for example lets say the FOMC does cut the rate but they only cut by a small amount. The market may not like that and it trades flat or even falls. The FOMC action must be strong and decisive to make the markets react positively. Only then do you take swing trades in each of these positions. Do not buy before.

DOW, S&P 500, and 10 year T-Note charts:

Market Recap

Market Update

The house of cards came crashing down today as I stated it was likely to do. When the markets advance (like they did last week) on terrible volume then it is just asking for trouble. Today a swift breeze (consumer confidence) came along and blew the cards down. This is why I was not taking any long positions and not recommending them to you.

Pre Market - August 28th 2007

Japanese Yen is moving up again and this is bringing our futures down. Watch for the consumer confidence numbers at 10:00 am, will move the markets.

In the first few minutes of trading the markets are selling off on some strong volume. Can't tell yet if this early selling will level off or will reverse. The consumer confidence numbers will provide a catalyst, one way or another.

The Day that Was - August 27th 2007

Another day with even lower volume again. The markets have absolutely NO conviction to go one way or the other. I can't emphasize enough that this is why I am not providing you a lot of swing trade ideas. They are too risky here. My goal at RebelTraders is to help you make money in the markets. And part of that education is knowing when it is more prudent to wait for a market to stabilize. I will not give you swing trades when I myself will not take them because I see a weak market.

This morning we were given some more bad economic news. The existing home sales came in and they were below expectations. The housing crisis is far from over. No bottom in sight from my view with regard to the problems in the housing sectors. I am surprised to see some web sites refer to last week as a rally. You don't have a rally if most of the people are sitting on the sidelines watching as evidenced by the low volume in the markets. When you build a house of cards you want a lot of cards on the lower levels in order to provide strength the higher you go. If you build up that house and you have only a few cards at the bottom then your asking for trouble and it is likely to fall. That is the point I was trying to make in my commentary last night. Why try getting to heavy in swing trades when the volume propping the markets up is weak. It is prone to fall with a poor foundation.

Someone left a comment yesterday asking what about the volume back in February and June. My answer is that you must take into account the down volume vs the up volume. Go back and examine the volume on those pullbacks and compare that to the selling volume we have just experienced over the past weeks. When you have very heavy sell volume and the bounce that follows is light volume then there are more sellers out there that are not coming back into the market yet. They are sitting on the bleachers while they watch a football game with only a few players on the field. I would rather place my swing trades with a full playing field of players, not just a few. I want the best odds in my favor.

Today all of the indices declined and the very low volume is just one more piece of proof that the money movers are waiting for a clear sign that the markets (and the economy) is worth of them getting back into the game. Yet again today the 10 year T-note yield went down (signalling more money going into bonds as apposed to going into the stock market).

Picking stocks is more involved than just looking at a chart for some company like RIMM, or AAPL, or whatever your favorite is. You can look at a chart and say that it looks good or that you like the company and their fundamentals but before you pull the trigger to buy something you also need to place that stock chart within the broader charts of the market. Is the broad market near resistance? is the broad market showing signs of weakness?, is the sector that your stock in going up or is it going down? These are important questions to answer before you just buy something. A person who just picks stocks and does not educate you on the important aspects of technical analysis of the sectors, broad market indicators, etc. is not doing you any favors. They are taking chances. You may get lucky. You may get a winner here and there without looking at any of the other charts or broad market indicators. But for me I want to be more than just "lucky", I want to be consistent and methodical. Have a plan... and trade your plan! With the broad markets rising on pitiful volume levels that tells me "this is not the time to make good trades" because the risk is higher than the reward. Remember the old saying "A rising tide lifts all boats". So if you decide to buy a stock and the tide of the ocean is about to go out then your swing trade stands a higher chance of failing.

When the tide is rolling in (with strength, and not just a few ripples of waves) then swing trades will be in force again. Do not feel the need to be trading all of the time. For if you do then your chasing every opportunity and forsaking reason and logic just for the excitement of the trade.

Winners don't get excited and emotional. They get rich.

Now some other notes about Rebeltraders. At this time I have a tentative time table established for the progression of the RebelTraders web site and members area.

This site will remain as it is now until the end of this year. Beginning on January 1, 2008 a RebelTraders Web Site with live chat area, message board, stock picks, education resources, etc. will become operational. That web site will be free and open to all. On April 1st 2008 the site will be closed to "members only" and will be a subscription based service. The price will be lower than most typical web sites offering similar services.

After April 1st 2008 this current web site will still be in operation for general market commentary but all stock charts, sector analysis, stock trading ideas, etc will be closed to the subscribers.

And as I previously stated those who are current subscribers with me now will be included into the members only site free for the life of the service. A thank you to my charter subscribers who have been signing up here on m=this web site during it's growth stages.

Have a wonderful evening Rebels.. Tomorrow is another day and in the morning we will get a feel for what may be in store for us then.

Cheers !

Credit Crunch Cereal

Have you had your breakfast yet? If not you might want to try some 'credit crunch'..

Pre Market - August 27th 2007

Good Morning Rebels,

Quiet morning (so far). The upcoming week will have much that the markets will be looking at for signs of where to go.

• Monday - Existing home sales (10:00 am)
• Tuesday - Consumer confidence (10:00 am), FOMC minutes (2:00 pm)
• Wednesday - MBA Applications (7:00 am), crude inventories (10:30 am)
• Thursday - GDP (8:30 am), Initial Claims (8:30 am), natural gas inventories (10:30 am)
• Friday - Personal income & spending (8:30 am), Core PCE inflation (8:30 am), Chicago PMI (9:45 am), factory orders (10:00 am)

Also on Friday Fed Chairman Ben Bernanke will be speaking on the sub prime issue.

Sunday - August 26th 2007

Good Evening Rebels,

I apologize that this weekend will be abbreviated in that my usual newsletter must wait until next weekend. Throughout the weekend I had some personal situations arise that took my time and I have not been able complete my newsletter this week.

But I am still going to tell you where we are at. First lets start with the week that just ended. Some would call the week we just completed as a huge win for the markets, the major indices were up and the media is beginning to talk bullish instead of doom and gloom. Media is always a lagging indicator, they don't tell us anything before it happens. They have been simply reporters any more discussing the current situations.

But for those that take more time then to just turn on CNBC in the morning and do some reading, studying of charts, and keeping an open mind will see a clearer picture of the markets. You have to be your own private investigator these days as you can't trust the TV talking heads. Some would say that doing all that reading and studying is too time consuming. Well if you want to make money in the markets you need to keep an open mind and allow contrary opinion to the mainstream media weigh in on your investment decisions. A balanced opinion of where the market is going (and where it has been) is always key to moving forward with risk management.

I have to tell you that some of the things I have read in various internet discussion boards today made me feel like I was reading a penny stock 'pump and dump' scam. Everywhere I turned I was reading such postings like:

• Don't listen to the bears, they just want you to be afraid so they will profit from their shorts


• This market is going to blast off and you better get in quick


• The index charts all say up,up,up we go!


• Put all your money in now or you will regret when we go to DOW 18000.


• People who read the charts and tell us that problems are still looming are idiots.. invest heavily now!

Look at a sampling of comments being posted all over the internet. Do they sound objective to you? This is the kind of stuff one would expect to see when people get excited over some penny stock, not the major markets. These people are obviously bullish on the market and that is fine, but their reasoning leaves something to be desired. Their emotions are getting the better of them and they are letting their emotions dictate their investment strategy. So when someone says "be careful" they get angry because someone wants to deflate their balloon (or their ego). There is nothing wrong with being bullish or bearish, just have rationale for it and not just the 'excitement of the moment'. When the market made the big down moves over the past 6 weeks and there was a reaction bounce people were getting excited thinking everything was over and that this was going to be a huge money making opportunity by going long heavily and forgoing their risk management. People who let go of their rational and common sense and let emotions and greed take over will be the first ones to be on the losing end of the trades.

Emotions can get in the way of seeing reality. Over the past 6 trading days the markets have advanced on lower and lower volume. In any other time this would tell the savvy trader that something is not right, but when emotions get in the way they ignore the facts and go with the excitement.

Now, if we step back from emotions and greed and look at what has been going on we still have a market that is unsure of where to go. The low volume on the recent advance is typically a sign of trouble. And that needs to be taking into account. Some of the best traders in the world are traders who have lost big money in the markets. Why, because until you have lost you do not fully understand the implications of what not practicing risk management can do to you. Holding on to a stock just because you like the company and it decreases in value until your left with nothing only because you are too stubborn to get out when danger signs were put up, or buying a stock on pure greed and ignoring the important aspects of the company and/or chart get you into trouble also. Traders and investors who have gone through this type of behavior will either learn from it and know to never do that again or they never learn and will in the end lose everything.

The seasoned investor and trader who does learn from the past knows just how important risk management and discipline are. And they know from mistakes to not repeat them! Those people who post messages on stock forums saying things such as "I'm holding because I'm in this for the long run so I know it will come back someday" are those that have not learned the lessons of what it is like to have big losses, or they have and they never learned so they are destined to make the same mistakes over and over. So we had a big market drop, and everybody got excited when it hit a support level and bounced. Now we have amateurs (those that have not learned from the past) screaming that everything is good and were going to be rich, load the boat as they say. Unfortunately those are the ones who will sink first if the markets don't go blast off as their emotions hope it will.

Why am I saying this tonight? I say all of this because one of the reasons I created RebelTraders is to provide education. To provide some guidance to be a disciplined trader and not a risk taker. To separate your emotions and hope from reality. If you truly believe that this market drop and the financial credit situation has provided you a huge money making opportunity to start buying all the beaten down stocks thinking you got a bargain and your loading the boat then you are forsaking reason with emotion. Do you really think you can't make good money in a healthy market and you need chaos to make the big bucks? If you thrive on this current market and it's volatile and still unknown direction then you are thriving on greed and fear instead of being disciplined and waiting for the correct time to get in.

Ok, I'll get off my soapbox. I am simply trying to teach here, not be a preacher. Even the most seasoned and veteran traders have been losing large sums of money by trying to get in this market now. Don't be a part of those giving to the markets, we wait so we are takers. If you have made some swing trades and made a profit. I do hope you are taking profits quickly and are not getting too greedy and wanting to hold them in there too long. Some of my readers have sent me emails and complained that I am not active enough in this market right now. To those I can only say that it is because of my discipline that I have been able to survive this game and keep my money. I don't throw my money into just any old trade just for the sake of getting in the market and "hoping" it will go up.

Let's look at a few charts, shall we?

The first couple charts show something that I want to thank John Murphy for pointing out last week. For new traders or investors who don't know this there is another market out there and that is the bond market. The bond market is considered as the "place of safety" in times of trouble. When you have a healthy stock market the bond market suffers and vice verse. Typically when the market smells fear the disciplined traders and investors will move money to higher ground "bonds" until the storms have passed. Typically they will move into the shorter term bonds when they see the fear being only a short term issue. But when the fear is more systemic in nature and the signs of the economy may weaken then those moving money to higher ground will go as far away as Mount Everest (longer term bonds) to find safety for their money. So what I am getting at here is that over the past 6 trading session the markets have advanced upward while the signs of money going into longer term bonds has been increasing as well. There is a lot of money sitting in the bonds still that is not convinced the market is healthy and they are planning for a long cold winter by having buried their prize nuts away for safe keeping. One thing you never want to do is be caught out in a bear market in the cold of winter with your nuts exposed. This is why bonds are always the first place people move money for safe keeping.

In this first chart I show our current market and the relationship between the S&P 500 and the 10 year note ($TNX). Notice on the right hand side that as the S&P 500 has been advancing the bonds have not followed with the same confidence yet. (when the bond yield rises that indicates money leaving the bonds and then is free to go back into the stocks). I realize that it is early and the money may start flowing back into the stocks but I don't play the "what if'" and take the chance it does not. I play the confirmation that it is. This also gives extra reason into why the volume on the past 6 trading sessions has been dropping, no confidence yet. And possibly setting up for another fall.

The next chart is the same as above but I went back in time to show what happened at the market top in 2000 and the beginning of the bear market. Notice that there are similarities. This is why I am waiting it out. My money is too valuable to me to start "loading the boat" as others would have you do.

Where is the volume??? That is what seasoned traders are asking. The smart ones watch the volume. The emotional traders only see price. But stop for a minute and ask yourself if the market is so good now then where is the money (volume)? For those that are old enough to remember (like me) the old Wendy's TV commercial "Wheres the Beef" well then you know why I said "Where the Volume". The lack of volume is still concerning. And until it returns with confidence I will continue to be patient and wait for the green light to get in. I want to hold on to my money, don't you?

I want to leave you with an excellent article I was given this weekend by a loyal RebelTrader member and a great person. I strongly encourage you to read this article at the following link:

http://www.financialsense.com/Market/daily/friday.htm

and one more good article on the credit situation can be found in Barrons:

http://online.barrons.com/article/SB118800131265608409.html?mod=mktw

And finally for those that are too young to remember the Wendy's commercial here it is for your Sunday night viewing pleasure..

The Weekly Commentary

Some events over the weekend have prevented me from getting everything wrapped up. But check back tonight for the weekly wrap and where we are likely to be heading next week..