Lange Financial Services Market Update. Definitely A Valuable Read. Bullish. Trading Guideposts Included.
LANGE FINANCIAL SERVICES: MARKET UPDATE SUPER BOWL SUNDAY 2012. 3:00PM
Despite the well known negatives especially the European financial crisis, we turned very bullish in early October. Prior, we were positive though recommending taking profits during the fourth quarter for 2011 in mid January, and at the end of the first and second quarters. The summer period was very difficult, reflecting the US downgrade and the extensive confrontation, uncertainties, and threats over the Federal budget. These conditions set up the September-October bottom. Technically, the bottom was perfect – bearishness was high with selling pressure very light. We have maintained our bullish posture ever since. Stocks recommended were generally viewed as aggressive growing companies.
The Dow has now rallied over 2400 points in the subsequent period. Notwithstanding some correction, higher prices seem likely. Our target over the past 18-24 months has been the all time high in the Dow or 14,200 reaqched in October 2007 or the S&P 500 of about 1550.. Most investors are:
1. Positioned conservatively.
2. Waiting for a substantial decline.
3. Generally negative.
At times profit taking becomes an important part of the investment process. Given the current conservative investment strategies being employed and the need to be more aggressive, we would remain alert to nail down some profits during market excesses in the next several weeks. Dow 13,000 now seems within reach with 14,000 a realistic target later in the year.. Do not get carried away by the rising tide of bullishness though we still believe that the secular bull market is far from over. There have been and will be countless money making opportunities in the months ahead.
TRADING THOUGHTS For those who are trading oriented, we strongly recommend reading the Trading Guideposts presented below to formulate your own investment/trading policy to capitalize on the positive market environment that we continue to envision. To enhance a rate of return, some trading seems appropriate in a market that will again become more volatile in the weeks/months ahead. For trading purposes, we would look to buy/accumulate several strongly growing companies that you know well during periods of weakness and selling gradually during periods of strength. Trading can be an exciting and profitable endeavor if executed with a high degree of discipline. Do not be afraid to take a loss. Do not be hesitant to take a profit. If this pursuit does not fit you emotionally, do not do it or perhaps only on a small scale. Read TRADING GUIDEPOSTS below and develop your own trading/investment philosophy.
TRADING GUIDEPOSTS By: Fred W. Lange November, 1968
â€œPresented below are some TRADING GUIDEPOSTS which we believe can be useful by investors who persist in the pursuit of shorter term profits. Remember that short-term market activity to be successful requires an extremely high degree of self-discipline, flexibility and sophistication. While the rationale behind each of the GUIDEPOSTS listed can be expanded upon, the point made in each case should be readily understandable. However, despite the apparent benefits that can be achieved by short term trading, we remain of the opinion that capital enhancement is best accomplished by making commitments in a cross-section of growth-oriented companies taking an intermediate to longer term viewpoint.
1. Buy only stocks that either the investor or the RESEARCH DEPARTMENT know thoroughly and where up-to-date information and opinions are readily accessible.
2. Do not take extreme positions.
3. Buy stocks only when the technical pattern confirms fundamental judgment.
4. Sell quickly if the stock does not act as anticipated.
5. Do not be afraid to buy back quickly if the stock continues to act exceptionally strong even if it is higher.
6. Do not ever become overly enthusiastic despite what current trends appear to be (lose objectivity).
7. Do not ever become overly pessimistic despite what current trends appear to be (lose objectivity)
8. Do not over-trade.
9. Act according to your convictions â€“ learn to trust your doubts as well as your expectations.
10. Seek to buy strong stocks on weakness.
11. Seek to sell strong stocks on strength.
12. Anticipate at least 10% to 15% after commissions.
13. Trade evenly â€“ doubling up on a new position to offset a prior loss may create additional problems.
14. Be patient.
15. Try to trade with the market trend and not against it.
16. Do not attempt to squeeze out the last point(s) on either the buy or the sell side.
17. Tentatively know where the market can run into supply or possibly meet support.
18. Tentatively know where the stock can run into supply or attract support.
19. Let profits run â€“ limit losses to a predetermined price and/or percentage.
20. Determine what industries and issues are the current market leaders â€“ often invaluable since a basic understanding of general market conditions can be quite beneficial in anticipating market trends and reversals.
21. Remember the market may do the unexpected.
22. In an up market, the trend probably will at least continue into early the following day before any reversal.
23. In a down market, the trend probably will at least continue into early the following day before any reversal.
24. Commissions are a small price to pay for preservation of capital.
25. Do not overstay trading positions â€“ greed is a traderâ€™s constant and greatest enemy.
26. Do not trade on tips.
27. Do not short stocks that are heavily shorted unless perhaps the downtrend is well defined and preferably in a down market.
28. Hedge strong stocks by selling a portion on strength and buying back on weakness particularly in an up market.
29. Do not fight the tape.
30. Do not let interpretations of market movements by the writers of leading financial publications distort your thinking.
31. For the minority to make money on the shorter term, the majority has to be wrong.
32. Do not become excessively keyed to the fluctuations in the popular averages; concentrate on the trends of individual issues.
33. Lighten commitments in a down market or in a market that appears â€œtoppyâ€ after an extended or rapid advance; it is important to preserve capital during uncertain periods.
34. Learn by mistakes.
35. Do not look back (in a wishful manner) â€“ can easily distort current and future judgments.
36. Study your own weaknesses.