IKEM/184/YELLEN OPENED HER MOUTH

At the testimony before the Congress and she assured the rate hike might not occur until the second half of the year. She indicated that it would likely come later rather than sooner. The markets rallied on her comments again yesterday and rose to new fresh records. The Dow Jones index hit its second record close of 2015 and the S&P 500 also delivered a record finish. Go home and here is the Martini time. The markets are in rally mood. Naysayers, doomsayers, short sellers are not in the market? Remember, last year everyone was scared about the end of QE, but Mr. Market just gets higher since that time.

Tuesday gauges:

• Dow 18,209 +0.51% 
• Nasdaq 4,968 + 0.14% 
• S&P 500 2,115 + 0.25% 

The Nasdaq is only 1.6% off its March 2000 peak. The tech benchmark index advanced for the 10th session in a row, scoring its longest winning streak since mid-2009.

European stock markets gained nicely too across the board. The Athens Composite Index GD, +9,81% surging. And the FTSE is in 15 years high. As we forecasted the bulls are stronger in Europe recently in the first quarter of 2015, especially in FTSE, IBEX and SUI30.

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The BFM Assets Team.

FRIDAY IS HISTORICALLY UP

That is an interesting theory and legend on the floor except it is not true statistically. And, on the other hand speculating daily basis or intraday is the best way to burn all your money as the paper tissue in the fire. Our strategy is looking for longer term and trying to identify the underlying trend for weeks. You can enjoy our managed account performance. http://bfmassets.com/managed-account.html

Yesterday gauges:

• Dow 17,986 -0.24% 
• Nasdaq 4,925 +0.38% 
• S&P 500 2,097 -0.13% 
• Russell +0%

Thursday and the whole week was fairly muted. Yesterday only Nasdaq was able to deliver some gains and closed higher for the seventh consecutive day and delivered its longest winning streak in 2015. Everyone is sitting and waiting to figure out what happens with Greece. The volatility, the watchword of 2015 has gone this week. In January the Dow swung by 1% or more during ten days, but so far in February, it has only done only three times.

Stocks tried to rally further, but were only able to hold around the record levels and doing a ranging pattern in a narrow band. Everything is sitting on new highs in Europe and in US just the Nikkei sets 15 years new high. When does it come the break out? My bet is for sure not today, but if somehow occurs any bigger moves today it wouldn’t mean break-out clearly. The break out in my view is a process not a moment, ordinarily takes 2-3 days.

In technical terms the indices still have room to head higher, especially FTSE, IBEX, SMI and AUS 200. On the IBEX chart there is a key resistance level at the current price of 10.900 and if it is taken the Spanish benchmark index could easily jump up to 11.150.

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The BFM Assets Team.

GREXIT AND UKRAINE REALLY SCARY?

I doubt that if you look at the charts. Mr. Market really ignores both effects and just delivered yesterday again a modest rally. Day by day we see a creeping rally without any big jumps, but the indices are climbing higher. We are also long recently in FTSE and AUS200, SUI 30 and IBEX and our managed account portfolio keeps delivering nice returns to our clients. http://bfmassets.com/managed-account.html

Market gauges Tuesday:

• Dow 18,048, +0.16% 
• Nasdaq 4,899, +0.11% 
• S&P 500 2,100, +0.14% 

After the closure of US markets on Monday for the President’s Day, Tuesday session started in negative territory, but later we were up across the board, all European and US indices closed higher. Stocks turned positive in early afternoon trade on the news, after earlier trading along the flat line just below multi-year highs despite the lack of resolution on Monday in the Greece-euro zone standoff. The S&P 500 closed at 2,100 at the first time in the history that is really remarkable. The DJIA is only 10 points from its record reached late December and closed again above 18,000. This year the watchword was so far the volatility, but Tuesday was much lower volatility what we have been seeing early on.

So far this year:

• DJIA +1,3%
• S&P 500 +2%
• Nasdaq +3,5%

In technical terms as we forecasted in January the SUI 30 index from Switzerland was a good bargain. After the SNB’s decision made a typical bottoming process. We bought it first at 8,100 and still holding. Its recent price now is 8,750 and we are watching it closely while our target is still at 9,260 at the previous top, at the next resistance band. By now we got back to the midrange. The recovery would take weeks, but the investing is not a horse race.

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The BFM Assets Team.

JE SUIS BULLISH

Because this is a bullish market, that’s simple is that, the bulls are buzzing around. As we forecasted last week the breakout of 2,060 at S&P will bring more gains up to 2,090 and it happened yesterday. In our managed account portfolio we delivered to our clients nice returns. http://bfmassets.com/managed-account.html

We are bullish and in this market it could be very expensive whoever sells it. US markets rallied yesterday again and delivered a sharp rise, pushing the S&P 500 to its highest close this year and within shouting distance of the record close reached on Dec 29. The Nasdaq rose to the highest level since 2000 and its gain was supported mostly by Apple. The Dow was up again with three digits.

Across the board all US indexes closed sharply higher and finished spectacular four days move. We got back to the record band areas and we also experienced much lower volatility than early on. The markets were fairly muted in this term. This week was about the great optimism. Of course this euphoria couldn’t go further day to day like that we should see some drop back next week.

• S&P 500 +0,96%
• DJIA +0,62%
• Nasdaq +1,18%

Technically the S&P 500 reached its upper side of the band at 2,090 so might come some rest for a while after four days rally. But if it goes out to new record we should buy further the index.

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The BFM Assets Team.

HIGHEST CLOSE OF S&P 500 IN 2015

The morning started again with some hesitation, but by the afternoon session US stocks are rallied yesterday and hit S&P500 finally the highest closing price in 2015 and turned green +0,5% for the year. So far, the markets year-to-date have been very volatile and not going anywhere, but by now the picture is changing slightly.

The DJIA gained in triple digit and it’s 26 stocks out of 30 gained as well and by now the index is flat for the year. Coca-Cola’s shares rose by 2.8%, helping lead the Dow higher, after the company reported 4th quarter profit and revenue that topped analyst expectations. The Nasdaq’s gain was supported mostly by Apple climbed by 1,9% and the first company in the history of US which capitalization is above 700$ billion.

Investor optimism was fueled by good news from Greece. The markets got a boost after news reports offered hope that the European Commission was considering a six-month debt extension. European stocks climbed on Tuesday France’s CAC 40 gained 1% and Germany’s DAX added 0.9%.

• S&P 500 +1,07%
• DJIA +0,79%
• Nasdaq +1,3%

Technically the S&P 500 closed above the 2,060 resistance level and therefore we are expecting more gains in the following days up to the next resistance of 2,090.

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The BFM Assets Team.

WOMEN ARE BETTER TRADERS

But they are not a lot in this business unfortunately. Only 15% of all traders are women at banks and at hedge funds only 6%. I have the same numbers only few female students have attended our trading classes and they are less probable being investor also to our managed account program. http://bfmassets.com/managed-account.html

That is a bit shame since they are far better trader than men. How is that possible? It is biology and their Testoren level significantly lower than in men and therefore they are not trained for risk taking, they are mostly risk avoiders. The men are taking more and higher risks.

The female traders lose less money than male traders. They are far more disciplined and tend to follow their own rules while men are breaking the rules more often which mostly causes the real damages.

Despite being less profitable than women, men placed bigger volume of trades than women and therefore generating higher brokerage fees and their exposure are much bigger. And, finally the women traded fewer times than the men so they able to downcrease the transaction costs.

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The BFM Assets Team.

BUY THE POPULAR OR THE UNPOPULAR STOCKS?

To be exact we are not trading any single stocks while in our methodology the volatility in single stocks is much higher and therefore too risky for us so we are only trading in our managed account programs indices http://bfmassets.com/managed-account.html

But the question is still accurate we should own popular stocks which are loved by the mass or ignore them and hold the most hated ones. Which class is the real overperformer in longer term? The reason for the popularity effect is that stocks are not like other goods. When they rise they have a tendency to increase, not decrease. A typical investor who hears that a friend or neighbour had made money out of that stock wants to jump on the bandwagon.

The popularity is comes from media, those stocks most likely are in the news, in TV and mostly recommended by analysts. This is called a Momentum-effect which helps the price get higher and continue to perform well in short term. But after a while this popularity push these stocks up to excessive valuations and they are going to lose the momentum for sure.

Since 1960 the statistics show the least popular stocks are outperforming the popular ones with around 7% per year. And, the popular ones have much higher volatilities if the market falling 5% they drop 10%.

The common mistake is owning popular stocks also between professional traders and brokers. They may want to show to their clients that they have been smart enough to buy the hottest stocks of the year. The money managers are likely to buy their favourite shares — by definition, those that have recently performed well. This is the momentum effect. This might explain why the average manager does not outperform the market.

All in all buy the pariah and lagging stocks and ignore and forget the trendy ones like facebook, google, apple, tesla…etc.

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The BFM Assets Team.

ONE BAD AND ONE GOOD NEWS

The bad one is the January-barometer effect. If the market closes in red January the history says that is not a good sign for the year. In 2015 the S&P 500 fell 3.1% this January. So we have to start worry? Really predicts its performance for the rest of the year? I am a bit sceptical, this January barometer historically proven is not more efficient than coin-flipping. Just take a look for last year when Dow plunged 3.6% and finally the year of 2014 was really nice.

The good news is that many investors think the market has been for 6 years bullish so it needs to come a bearish period this year. But the fact is that since 1920 the DJIA delivered five times a longer rally than 6 years. So, there is still a room for more gains.

The real good news is that if the market is in 6 years gain in raw there is a 70% chance to get higher in the 7th year further. Which is pretty fair and much better than coin-flipping or roulette 50% or less chances.

Start your investment with our profitable team of traders: http://www.bfmassets.com/managed-accounts

The BFM Assets Team.

DO YOU REMEMBER? YOU WERE SCARED ABOUT GREECE.

And, what has happened? Absolutely nothing. Nobody cared about the leftist party’s success in Greece. The European markets are gained further on the news of the anti-austerity Syriza won the Sunday elections. Mr. Market ignored totally this event and discounted fully. The funny thing was that the US indices suffered more than the European ones. US stocks ended Monday’s choppy trading session with small gains. Most of the people don’t get it why the Greek election should influence US market more and the Greek result had zero influence on European markets DAX +1,7%, IBEX +1,5.

The global markets were relatively calm and all indices in US closed marginally higher. After falling more than 100 points, the DJIA gained 6 points to 17,678.

• DJIA +0.03% 
• SP500 +0.26% 
• Nasdaq +0.29% 

Technically the S&P500 is still in the range since 21st of January of 2.060 and 2.030. To find a good long set-up you should wait for the breakout of 2.060, if that resistance is taken you can start buying the index.

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The BFM Assets Team.

DOGS OF THE DOW IN 2015

In theory, you should buy the 10 Dogs of the Dow each year and replace them with new Dogs every year. The more than twenty years old investment strategy says you have to buy the worst performing stock in the previous year out of Dow Jones index. Most probably you will beat and overperform the benchmark index itself. These stocks usually tend to beat the market because of the higher dividend and the contrarian approach. This system calculates with the madness of the crowd and tries to behave against that.

Since 2000 in nine years the "Dogs" have beaten the Dow index by an average of about 1%. In 2014, the DJIA delivered 11% total return, while the Dogs are up 12 percent.

The current Dogs for 2015:

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The BFM Assets Team.

HITLER AND THE SWISS FRANC

Super hilarious video. Must see!

https://www.youtube.com/watch?v=AFsnqmupCIc

"...I wish to remain alone with the account manager, the risk manager, the fundamental analyst, and the technical analyst... we were using only 20x leverage and you tell me it's all gone!!"

"I will never trust a central banker again in my life"

Start your investment with our profitable team of traders: http://www.bfmassets.com/managed-accounts

The BFM Assets Team.

VOLATILITY IS A DOUBLE-EDGED SWORD

Thursday everything was about the ECB’s new 60 billion euro new large-scale bond purchasing program and previously the announcement the Dow was falling 71 points and later was jumping 286 points and finally rose 1,5%. The index rallied in four consecutive days. The index’s volatility was extreme again yesterday. So far, the DJIA has seen a trading range of 200 points or more every day in 2015. We have to live with that as a new pattern.

The volatility is a healthy thing for the markets. Some days are lower and for some periods are bigger. Most of the investors are freaked out by the volatility and they usually lose money, they see only the risk of this pattern. The volatile market doesn’t come from the devil. The volatility on the other hand is a great opportunity to make money because the volatility creates more buying options and create great bargain hunting deals.

We are expecting more roller-coaster moves in US indices further in the following weeks, this might be staying with us till the FED starts to increase the interest rate, which could be possibly this spring. All in all, the market is in a very-very bullish momentum, yesterday the S&P 500 closed its highest level in 2015 and the European indices are at their historical records or close to them. So, our advice is to buy the dips with small portion of positions, that is the only working method in this kind of volatile market conditions.

Here is the trading range of Dow yesterday (17.480-17.840)

Start your investment with our profitable team of traders: http://www.bfmassets.com/managed-accounts

The BFM Assets Team.

EUROPE AND US MARKETS ARE IN DIVERGENCE

The US indices gained for third day for true and delivered their longest win streak in 2015, but they are still in negative territory. European indices closed sharply higher Wednesday again. Europe performing much better in 2015 than US markets.

The Stoxx Europe 600 ended 0.6% up and hit seven-year high. Dax closed near its all-time high. France’s CAC 40 and London’s FTSE 100 both gained added 0.9% and 1.6%.

The U.S. stock markets ended Wednesday’s choppy trading day with modest gains, extending its winning streak to three sessions.

• DJIA +0,22%
• SP500 +0,47%
• Nasdaq 0,27%

But in the bigger picture seems the difference in the sentiment and the bullish momentum between the two continents. Take a look at the chart below, it tells more than 1000 words how strongly has been lagging the Dow Jones behind the DAX.

2015 Gauges:

• DAX: +5,19%
• DJIA: -1,51%

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The BFM Assets Team.

WHAT IS THE PIVOTAL POINT?

Yesterday I have received some questions and comments about the yesterday blog http://www.bfmassets.com/2015/01/break-out.html what is it exactly the pivotal point and how to use that pattern.

Good question since this is a key tool for trading and almost unknown by the traders, but frankly without this is hard trade the falling markets. The funny thing is its unpopularity between traders, while that pivotal point theory is more than 90 years old and invented by Jesse Livermore by the greatest investor ever. http://en.wikipedia.org/wiki/Jesse_Lauriston_Livermore He wrote about the pivotal point in his book of "How to trade in stocks", 1940, http://www.r-5.org/files/books/trading/speculation/Jesse_Livermore-How_To_Trade_In_Stocks_%281940_original%29-EN.pdf

To understand it, it is practical and easier if I take some current examples. Recently the stock markets are in bullish and long trend, but there are many periods were we experienced some severe corrections like in last October the S&P 500 dropped closely 10% and in the last 10 days the index fell roughly 4%. In these tumbling periods we never know where the lowest point is, but with the pivotal point strategy we could indicate the first point when we have to start to buy the dips. The plain „buy the dip” strategy is too risky and not objective at all, we have to wait for the clear break out signs. Livermore stated if you are greedy and open positions too early without any pivotal point you will lose and burn out shortly, but if you have patience and wait for the pivotal point you are going to survive.

Here are two examples from the last couple of weeks:

• Between 20th September and 17th October 2014 was a huge correction in the DAX. We were just watching and waiting for the pivotal point, for the first break-out. We didn’t want to catch the falling knife. We first started to buy on 17th of October at the second red arrow because that top closed above the previous top – which is a pivotal point. The price clearly closed above the previous top. 
• Recently – precisely today we have another pivotal point in DAX. The yesterday closing price did draw a pivotal point at 9.820 because it has closed above the previous top.

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The BFM Assets Team.

BREAK OUT?

Another V shaped recovery after the five days free fall? We will see, for sure we have experienced a nice rebound on Wednesday in all markets, and the S&P 500 recorded its first gain in 2015 and snapping a five-day losing streak. The headwind of the falling oil is moderated yesterday and the sentiment turned into more positive between the investors.

• S&P 500 +1.16%
• DJIA +1.23%
• Nasdaq +1.26%

This is not yet a break-out or pivotal point for S&P500. Its resistance key level is at 2.047, 7 points far from the recent point. So at this index we still have to wait for more technical confirmation, it is still too early to start to buy here.

But some European indices and the Australian index show clear pivotal points, so we should start to buy today FTSE, ASX200 and CAC40. Namely the FTSE has closed above its pivotal point at 6.400 and delivered a break-out pattern, so it is a perfect set-up point to buy the dip.

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The BFM Assets Team.

5 WHOLE DAYS? OMG THE WORLD IS COMING TO AN END

Not really, this is not a perfect storm or end of the world. Of course everybody expected some nicer year start for stocks, but the S&P 500 has dropped for five straight sessions. U.S. indexes have had their worst start to a year since the financial crisis year of 2008. U.S. stocks fell on Tuesday further and S&P 500 was marking its longest losing streak in more than a year. The S&P 500 is off more than 4% from its peak reached on Dec 29, 2014. That was the fifth-straight decline for the index, the most consecutive losses since December 2013.

The last 5 days data:

• Dow - 3.40% 
• Nasdaq - 3.86% 
• S&P 500 -3.72% 

Yesterday was another day of lows: stocks, oil, euro dollar, and low bond yields. German bund yields fell 15 percent to 0.44%. Investors are rotating into more defensive assets. There is a risk-off mood and appetite for fixed income assets because of the anxiety of investors.

Technically the Dow Jones index is in a falling knife mood and we have to be cautious and wait for bounce back and clear sign of break out or pivotal point. Below the 17.750 key resistance level we have to wait and do nothing. Without this break out it is only a guessing to open any new position since the market easily could fall further down.

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The BFM Assets Team.

JANUARY EFFECT

This barometer tells you that if stocks are up this month, then the rest of the year should be good for stocks. It’s a rule of thumb that has proved remarkably accurate since 1945. If the market was up in January, 84% of the time it continued rallying through the end of the year. Since 1979, the average gain in the S&P 500 for January has been 1.14%.

But this year seems special. Against the conventional definition that the first days of the year are more often positive, yesterday US markets suffered its largest loss in 3 months. This is not the start to 2015 that investors were hoping for. Three factors drove the free fall the strong dollar, low oil price and the huge volatility. Oil plunged below $50 for the first time since April 2009 and the dollar rose as the euro traded below 1.20.

• SP500 -1.81%
• Dow -1.86%
• Nasdaq -1.56%

The losses were truly breathtaking. The S&P 500 is down 3.4 percent over the past five sessions, the longest losing streak in 13 months. It is negative for the Santa Claus rally period for the first time since 2007.

What is going to happen now? We have to be more cautious, these types of anxiety don’t go away overnight. We'll have to see. The big question is do you buy dips or not yet?

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The BFM Assets Team.

I HAVE NO IDEA YET WHICH DIRECTION THE MARKETS WILL TAKE IN 2015,

since I don’t have a crystal ball or holy grail. Therefore, I don’t like to forecast from the first two days on the year. I have read many forecasts so far by gurus and analysts about their expectations in 2015, but they are merely hopes not facts, I guess those are pretty early to say anything about the current year. We don’t see anything yet. After couple of weeks we could maybe see some trends for this year, but forecasting is always is so hard and almost impossible task.

US indices, the three main ones closed Friday flat and went on to erase the bulk of their losses in the last half-hour of trading Friday, but ended down for the holiday-shortened week and snapped two-week winning streaks. Trading was relatively light on Friday traders had hangovers and woke up late.

• SP500 -0.03%
• DJIA +0.06%
• Nasdaq -0.2%

The final 2014 results:

• SP500 +11.4%
• DJIA +7.5%
• Nasdaq +13.4%

In technical terms the Dow Jones had been tumbling last week and the index’s first resistance level is at 17.960. Firstly, it needs to close over this level to get back again to the bullish momentum.

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The BFM Assets Team.

DON’T FORECAST, JUST FLIP THE COIN

Why? Because we are unable to forecast the markets as a human being. So the best predictor is right in your pocket. When we try to figure it out what the future holds, our statistics are worse than 50% so why we are not counting on the coins if it has 50% efficiency.

The typical retail investor is always underperforming the markets and indices while they think they are better and smarter, but that is not true. This chart below explains this phenomenon clearly.

Yes, true there are other several reasons why retail investors are losing, but the biggest factor that they are doing fundamental analysis or technical forecasts with colourful indicators. Honestly they don’t need to do that, just flip the coin. So, you have to give up the search and study and use this super easy blindfolded trick to buy or sell something. Statistically proven there is not any technical indicator which hit rate is better than 50% but the traders still use them, personally I don’t get it.

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The BFM Assets Team.