Tag: Trading Tips & Techniques

The practice of short selling has been blamed for the collapse of several major companies’ shares during the financial crisis. What is short selling? You will learn all you need to know about naked short selling in this video from Senior Editor Paddy Hirsch.

We thought that this was one of the most informative videos on how naked short selling works.

Enjoy,

Adam Hewison

No matter what anyone says or does, watch the market action. Only the market action tells you the true trend.

There is so much confusion in regards to the $700 billion bailout. Remember, that it's not written in granite just yet.

Looking at the market action... I have to say that this market is still not healthy and looks as though it will continue to erode the equity markets.

Gold continues to consolidate and appears as though it wants to move higher in the near-term.

What always amazes me, and it shouldn't amaze me anymore as I have seen enough screw-ups in the market, is the government's inability to act before a major financial disaster takes place. This latest rescue plan is a perfect example. Everyone in the industry, and even people not involved in the investment industry knew all about the "garbage" that was going on. Everyone knew except Washington, and in classic Washington style the regulators buried their heads in the sand and just wanted it to go away.

I'm sure you knew folks in your own neighborhood who suddenly became mortgage brokers as that was the thing to do to make some fast money. I wonder what the qualifications were for that job?

I don't want to be too cynical, even though this post will probably put me in that camp, but the facts are the facts... we had incredibly inexpensive money for several years thanks to Alan Greenspan. Interest rates were at 40 year lows and it was so inexpensive to borrow money and basically speculate in housing and stocks. Many uneducated people were sucked into speculating in stocks and real-estate based on cheap money. Imagine buying a house with no money down and no verifiable income. It defies commonsense and logic, yet this was common practice at the height of the market.

Wall Street dug itself into this disaster because of greed. The CDO's and SIV's were the brainchild of someone who had no clue as to what they were creating. These two non-exchange traded and non transparent investments could only spell disaster for the US in the long run. In the market there is no free lunch, and I think that this $700 billion lunch bill is the perfect example that will be taught in financial classes for the next five decades.

I am sure that after things settle down, Washington will once again hold their famous hearings about who did what, when, and who is to blame. While the blame has to go in my opinion, squarely on the SEC and the FED due to their lack of leadership and lack of rule enforcement. I would still love to know who pulled the strings to remove the uptick rule in 2007. I would also like to know why the 1-20 leverage rule was removed in 1999 under the Clinton administration. All these SEC rules were put in place to protect the public and to avoid bear raids on stocks.

Hopefully we can make some sense out of this and get back on our feet as a country and start building products and making things again to make America strong.

Okay, enough preaching... let's look at a recent event in the marketplace.

We received a lot of e-mails yesterday based on the sharp run-up in October crude oil. The reason for this run up was a classic squeeze on the shorts.

We have always advocated you should not be trading in the lead month of any futures market, and certainly you should not be trading on the last trading day for any futures contract. This should be left to the professional institutions, who are either making delivery or taking delivery. This, the biggest one day move on crude oil, was a classic case of a tug and war between these institutions. Today's pullback just shows you the true picture as to what's really going on. I am sure the headlines on the crude oil today will not read ... crude oil down $24 for the day.

Once again, if you are a speculator in futures, do not go into the lead month with a position. It just does not make sense, and the chances of you losing money are very high.

Thanks for taking the time to read this blog posting.

Every success in the future,

Adam Hewison

President, INO.com Co-creator, MarketClub

We are the government, we're here to help.

I believe the only help the government gave us last week was pushing gold prices higher. During last week's massive bailout and intervention in the credit markets one of the few markets to close higher for the week was gold. This tells you a tremendous amount about how traders are thinking about the future.

Watch my new gold video here.

These are extraordinary times we are living in, and we have to take advantage of what the markets are offering us at the moment. The fact that there was no follow-through today in the equity markets tells me that there's so many questions about this bailout that are yet to be ironed out. That in turn creates more uneasiness in the marketplace.

I still believe that stocks are in a bear market and that we can see a trade down to the 10,000 level basis the DOW. Having said that, I would be trading gold from the long side until our "Trade Triangle" Technology points to a change in trend direction. With the technicals all in place, and the fundamentals certainly pointing to higher gold prices, I think traders should be looking at this market from the long side. Some of our cyclic work indicates that gold could be strong until February or March of 2009.

Enjoy the video. It's short and it's available now with our compliments.

Every success trading,

Adam Hewison
President, INO.com
Co Creator, MarketClub.com