Can AIG survive the turbulence?

The current market turmoil has claimed a number of high profile casualties. A lot of people will be wondering what’s going to happen next. Who’s going to be the next casualty? How many “patients” are waiting on the sidelines for their number to come up? I’m sure there are still a few more to go. There are still a lot of companies that are week both technically and fundamentally, and there are also a lot of companies that will have no option than to go under if they cannot get access to additional funding.

If Wall Street giants are finding it difficult to get access to funds, imagine what much more difficult if will get for the average person to gain access to loans.

The American Insurance Group (AIG) is another company that is currently struggling. Will AIG survive? The charts look ugly. It looks like time is running out for the insurance giant. However, miracles happen. Who knows what the future holds for AIG? It looks like there are still shorting opportunities on the stock, however, this is not one you would want to buy. Not now.

All the best.

How are the mighty fallen

No disrespect to the fallen investment banks, but I can’t help saying to myself, “how are the mighty fallen”. What happened to the big guys? How could the geniuses get it wrong? These are companies that wouldn’t employ graduates with less than a second class upper. You had to go to certain schools, or business schools to qualify working for them. A few months ago Bear Sterns had to be bailed out. Over the weekend Merrill Lynch was acquired by Bank of America, while Lehman Brothers filed for Bankruptcy. The unimaginable happened to these guys. These companies were casualties of the subprime mess and the subsequent credit crunch, however their greatest undoing was their irresponsible risk taking. I call it irresponsible because it was excessive and was fed by greed. Nemesis caught up. Goldman Sachs, one of the big investments banks that are still standing had a more conservative policy on risk. They might not have looked like the “shining stars” when other investments banks were taking on the big risk and declaring big profits and bonuses, but the fact that they are still standing, and that there are no doubts about their future is evidence that their responsible risk management is paying off.

The same applies to retail investors. Pigs get slaughtered. It is the one that manage risk properly that stay around for a long time. Time might be a time that we all have to review our risk management practises so we can ensure we stay around for a long time. It’s not the person that makes a £1000 pounds overnight that is the winner, but the person that makes smaller and steadier profits, accompanied with good risk management.

The attached charts show the decline of Merrill Lynch’s share price from $95 to just over $17 and Lehman’s from around $85 to $3.65 before it applied for bankruptcy.





Three down, will there any more?

All the best

£3.5bn a year lost to scams

I saw this in the paper today. I find it very amazing that people actually fall for scams like these. The paper suggests that around 3 million British people fall for theses scams each year. It’s likely that with the current credit crunch, the number of victims is likely to increase.

This report shows the desire of the average person to accumulate riches without working for it. It shows the greedy nature of human beings and how intelligent but scrupulous people take advantage of this weakness.

I guess the best way to reduce the number of victims for by educating people whenever we have the opportunity. That’s a job for everyone. You and me.

All the best

Is this a timely intervention by the government?

The stock market across the world rallied on Monday because the United States government bailed out 2 of the biggest mortgage lenders in the US. The bail out offered a relief to the investors across the world because if these 2 companies had been allowed to go under it would have had a devastating effect on the US and consequently the world economy.

The bail out came at a time that the bears were getting ready to push the market lower.

Remember I said the Dow will test the 11200 level and then try to test 11000. Well it tested and touched the 11200 level but pulled back around 11100. On Friday the Dow formed a hammer, giving indication that the market might reverse to the upside. At that point even the swing trader bears would know that all shorts on the Dow index are off, even if temporarily. Note that individual shares and sectors can paint a different picture as some shares rise when the overall market is falling and some fall when the overall market is rising.

My current stance on the Dow is that it is in a sideways range, it has to either break through resistance or below support to confirm the next up or down trend.

I’m not a fan of trading the index, I’ll rather trader movements in stocks mainly because I don’t sit in front of the computer screen all day and I haven’t got the stomach for large swings associated with index trading. Whatever you decide to trade or follow, remember to pay attention to the details.

All the best

Why the market might be heading for another fall..

The Dow index closed on Tuesday with a shooting star candlestick. A shooting star is usually an indication that the market (or an instrument) may have topped and is ready for a reversal. If you look at the Dow chart, you'll see that the index was unable to break through resistance at 11800. This level was a previous support before it became resistance, which makes the level something that a lot of technical traders would be looking out for. If you are currently long on any stock, now might be a good time to make sure that you have your stop losses in place and to protect any profits that you might have. It's most likely that the market would now test the 11200 level and then the 11000. If it should successfully break below 11000 then there might be another free fall in the market (notice that I said if) .

Keep your eyes on the charts.

Good luck

It’s a new month

A new month started yesterday. The new month gives another opportunity to start doing things write with regards to our trading. A disciplined trader doesn’t just trade for the kicks or excitement, but treats trading as a business. If you treat your trading as a business then you should keep records of all your trades. Records should include the reasons you took the trade, your entry point, your predetermined exit points, and also your profit and loss. At the end of each month you should be able to produce a summary of the trades you opened and closed during the month. If you haven’t been doing this, why don’t you try it in September and you’ll see how big a difference it will make in your results.


Looking forward, what does the month hold for the markets?

Rather than just add my comments/views on this, I’ll just post the charts and let everyone review and comment on it themselves. Note your comments on paper and you can review it later in the month to see whether you are right or wrong.

All the best