Market Talk with Piranha is currently moving to its new home at chrisperruna.com. The new site is up and running but many of the posts need editing as the images and stock charts did not transfer successfully (thanks blogger). I will post all new entries to both blogs – Thank you for your patience while I make this change!

Thursday, January 05, 2006

General Market Analysis

...I started the daily screen commentary last night with words of wisdom about past trades and I posted up a great quote from a great poker player. Why would I use a poker analogy with trading in the markets; because I believe they are very similar. For more on the similarities, you can visit my blog article on the subject:
http://www.marketstockwatch.com/2005/07/poker-and-stock-market.html

As for the quote, I will repeat it here for everyone:
Said by the Matt Damon character in the movie Rounders:
In "Confessions of a Winning Poker Player," Jack King said, "Few players recall big pots they have won, strange as it seems, but every player can remember with remarkable accuracy the outstanding tough beats of his career." It seems true to me, cause walking in here, I can hardly remember how I built my bankroll, but I can't stop thinking about the way I lost it.

The quote couldn’t be truer when I think back about my winners and losers over my trading career! I am not a high roller when it comes to poker but I do remember specific hands that I have lost when I calculated a win in my head (based on the odds I was betting).

If you had any tough beats in 2005 while trading in the markets, sit down and face those losses and don’t let them haunt you in 2006. Understand why the trade went bad and analyze how and why you reacted the way you did. Write down and think about how you can correct these past mistakes so you can try and avoid them in the future. It doesn’t matter how many years of trading experience you have because mistakes will always happen. The game of investing is not about winning and losing, it is about playing the odds and managing your money so you don’t get one of those bad “beats”. The same holds true for poker when playing over a long period of time.

Looking at the NASDAQ, we can see that it held support at the critical 2,200 support line and has raced ahead by 70 points at 2:00pm on Thursday. Volume will come in higher this week versus the past two weeks due to the holidays so it won’t play such a big role when looking down upon it as accumulation. The more important statistic that shows the market is gaining some strength this week is the number of stocks making new highs. Last night we just missed 500 new highs, a critical signal to let us know that the market is gaining strength. If the NASDAQ closes higher today, it will represent the third straight session with a gain as it approaches its 4 1/2 year high.

The DOW broke the support line of 10,750 last week but has managed to recover the line this week in nice fashion. After the big gains on Tuesday, the index is up over 150 points this afternoon as I write this analysis. The price relative to the S&P 500 is still at multi-year lows but that does not matter so much because the S&P 500 has been outperforming the DOW. A quick look at the yearly chart for the S&P 500 will show you that it has held its support line similar to the NASDAQ, hence the strong RS lines for these two indices.

Tonight I will cover the close of the indices today and will take a closer look at the handful of MSW Index stocks that are near major moving averages (buying points from the past two years).

See you tonight,
Piranha

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