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!

Tuesday, January 10, 2006

Let the Stock Predictions Begin

...The “Talking Heads” are at it again as the DOW topped the psychological level of 11,000 yesterday. I read several articles and heard several analysts predict that this year will be great due to the action over the past five days. One analyst predicted a new all-time high with the DOW topping 12,000 at some point. Now, this isn’t a stretch but I still don’t understand how these “so-called” experts haven’t learned their lesson in the past by trying to predict what the market will do over a twelve month period of time. They have been wrong so many times in the past; you think they would learn from their mistakes. We currently know the market is trending higher and until further notice, we have a bullish outlook but I am not going to step out on a limb and predict a “great year” after one week of trading – that is pure ignorance.

In my opinion, only an amateur or a non-trader would say something like that (hence, the mainstream analysts). These guys don’t trade for themselves and we all know this because they must disclose if they are trading in a specific security that they have written about. If you look to the bottom of each article they write, it usually says “at this time, the author does not hold any of the securities mentioned above”. Of course not, they don’t trade, they BS the public. I don’t disclose every trade I make but I do talk about many of the moves I make and I have been wrong in front of this entire community (it happens – that’s life). Read what one analyst had to say yesterday:

"A strong close today is going to be suggestive of a strong year," said Joseph McAlinden, chief investment officer at Morgan Stanley Investment Management, on CNBC's "Street Signs." He expects the Dow to clear 12,000 this year, which would eclipse the Dow's all-time high close of 11,722.98 on Jan. 14, 2000.

So a strong close yesterday signals a strong year according to this analyst. Really, since when does one day of action predict an entire year of trading? That answer would be never!

Here is an insert form Investor’s Business Daily (today’s edition):

“There's no way to accurately predict what will happen the rest of the year based on five days of trading. The NASDAQ motored 7.5% in the first 3 1/2 weeks of 2004. It then dropped nearly 19% in the next 6 1/2 months...”

I guess the analyst has a short term memory or doesn’t have any true experience trading in the market; otherwise he wouldn’t make such a novice statement. I don’t to mean single out this one guy and I don’t know who he is but the quote is entirely unnecessary. If the market does rise this year, he will be considered a genius by his non-trading peers. If it goes down, they will blame it on outside conditions or uncontrollable factors while giving him a raise next year. The chance of him being right is 50/50, not bad odds when nothing is on the line (unless he plans to load up his portfolio based on his observation over the past five days).

Bottom line: be aware of who you take advice from and always do your own research and analysis. Also note that many of the market leaders made intraday reversals from their highs yesterday and both the DOW and NASDAQ moved higher on below average volume (two very minor red flags). The daily screens get into more depth about these topics and the strongest NH-NL ratio since last July.
Piranha

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