Learn Technical Stock Market Analysis

Almost everything I know about technical stock market analysis I learned from Stan Weinstein's "Secrets For Profiting in Bull and Bear Markets." Although it is a bit dated, it's simple, well written style makes this book a must for every investor's library.

It's a great introduction to technical stock market analysis. I invite you to check it out at Amazon.com where you can read what others have said about this book and preview the table of contents, index, and several pages of the first chapter. Here's what the late, great Louis Rukeyser had to say…

Stan Weinstein is one of the best market technicians operating today. One of the things I admire is his combination of a scholarly approach and the total clarity of his recommendations.

Amazon.com: Secrets For Profiting in Bull and Bear Markets

The Worst That Can Happen

I'm not a market or economic prognosticator. I tend to invest based on established trends - I don't call market tops or bottoms. I'm willing to give up a little on the ends to maintain a safe and conservative portfolio.

That said, Big Jake at Seeking Alpha has ten very dire predictions for the future - here's three to get you started.

Prediction One: The twenty-five-year equities bubble pops in 2009.
Prediction Two: Public pensions and 401k holders wiped out.
Prediction Three: Millions of retirees will be left virtually penniless.

I'm definitely not as negative as Jake, but I still found this an interesting article and one every conservative investor should read. It could happen. Hell, anything could happen.

Read More: The Worst Case Scenario
Related: Investing in a Depression

Investing in a Depression

What should you invest in during a depression?... Hats!

I stole this joke (and picture) from a comment at Free Republic.

Stock Market Forecast For 2009

By Jim Jubak - MSN Money

I'm not a big fan of Jim Jubak, I think he's a rotten stock picker; however, I think his latest article at MSN Money hits the nail pretty much on the head. So instead of writing my own fearless stock market forecast for the next 12 months (I'm a little lazy around the edges), here you go...

If you're too lazy to click the link and read the entire article here are the bullet points...

1. In the next month or so, a big stock market rally.
2. The stock market rally fails in early 2009.
3. In the middle of 2009, stock market pessimism deepens.
4. In late 2009 and early 2010, the stock market bottoms.
5. The stock market recovers after 2010.

Thanks Jim. You're a much better writer than I am. I would like to add that I think the recovery may take longer than a couple of years. I can imagine a scenario where we enter a period of sub-par market performance that can last as long as five years.

Shorting The DOW

I'm not just going to let the DOG out, I'm going to let the double dog out. I'm buying DXD.

DXD – ProShares UltraShort DOW 30

With the death cross remaining, the Dow tried, but failed to penetrate much above 13,000 and it's 200 day moving average in May and has now dropped below important support at 12,000. This might get ugly.

The Death Cross

The Holiday Rally that Wasn't - and Worse.

As recently posted, I took a large position in DIA (Dow Jones Industrial Average Index ETF) on 11-26-07. I sold half of that position on 12-14-07 for a 5% gain and the other half on 1-9-08 for a 3% loss. There was no holiday rally, and it gets worse.

The Dow's 50 day moving average has dropped below its 200 day moving average creating what's known among market technicians as the death cross. The Dow has also dropped below support at 13,000. I think we are in the beginnings of a bear market that may last for 6-9 months or longer.

I use 20% of my retirement portfolio for trading; I like to take advantage of inconsistencies and trends in the market. That portion of my portfolio is in cash and it may stay there for a while. I have not let the DOG (Proshares Short DOW 30) out, but I may.

Proshares UltraShort Oil & Gas ETF

With oil hitting over $92 a barrel as I write this I find myself wanting a way to hedge my energy portfolio from the inevitable pull back, without selling off positions that have taken a lot of time to accumulate. Here's a solution...

DUG - Proshares UltraShort Oil & Gas ETF

Remember "Ultra" means that for every 1% loss in the oil and gas index, DUG will gain 2%, and vice-versa. I have not placed a trade yet, but I'm watching and ready. More on Proshares UltraShort ETFs.

Bear Market Trades

ProShares offers several Exchange Traded Funds that short sell their respective index by a 2:1 ratio.

QID - Proshares UltraShort QQQQ
SDS - Proshares UltraShort S&P 500
DOG - Proshares UltraShort DOW

For every 1% the QQQQ (Nasdaq 100 Trust) loses the QID should gain 2%. I use them as a simple and effective why to hedge my portfolio during extended down drafts and I plan on using them for the next bear market.

I like these funds because they allow me to hold on to the more aggressive positons in my portfolio. I can hedge with one simple buy order instead of selling multiple positions that have often taken quite a bit of time to accumulate. Remember, because of the 2:1 ratio a little goes a long way.