Wall Street Addict

Stocks fell moderately Tuesday as investors disappointed by a sharp drop in pending home sales decided to preserve some profits from the rally that sent the Dow Jones industrial average back into record territory. A decline in oil and gold prices also pulled the market lower.
Wall Street is eager for more evidence to support the case for further interest rate cuts, and got some when the National Association of Realtors said its seasonally adjusted index of pending sales for existing homes fell 6.5 percent in August from July and 21.5 percent from a year ago. The data suggest sales of existing homes will likely keep declining in the coming months.
But while investors hope the Federal Reserve makes borrowing cheaper by lowering rates again at its Oct. 30-31 meeting, they don't want economic readings to come in so weak that they portend a recession.
Source: Madlen Read, AP Business Writer

Labels: Dow Jones, Federal Reserve, Interest Rates, Investors, Pending Home Sales, Stocks, Wall Street

Sometimes it's best not to keep your cool.
In fact, hot-headed stock investors make better decisions, a study in the Academy of Management Journal showed.
Adding emotions to the decision-making process can enhance creativity, engagement and decision efficiency, Myeong-Gu Seo of the University of Maryland and Lisa Feldman Barrett of Boston College wrote in a study published in the August/September issue.
The greater the average intensity of an individual's feelings, the higher their investment returns, the professors found. The study monitored 101 stock investors in a simulated trading exercise spanning four weeks.
"Contrary to the popular belief that the cooler head prevails, people with hot heads -- those who experienced their feelings with greater intensity during decision-making -- achieved higher decision-making performance," they wrote.
The conventional wisdom that emotions can make you irrational has less to do with how intense your feelings are than with how much you understand them, the study showed.
In other words, those investors who listened to their emotions were better able to regulate them.
But showing emotion on the trading floor is still a controversial subject.
"I'm no friend of emotion in trading," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey, who has been trading stocks for more than 25 years.
"It's much more important to be disciplined."
Published by Reuters

Labels: Investing, Stocks, Trading, Wall Street

Stocks soared Friday when the Federal Reserve did what Wall Street was clamoring for and cut its key discount rate a half percentage point.
The Dow Jones industrials, after six straight days of losses, rose more than 100 points.
The stock market's steep drop has been fueled by turmoil in the credit markets. The Fed poured $87.5 billion in liquidity into the banking system last week and $32 billion this week, but the rate cut was its most dramatic effort yet to alleviate fears about tightening credit and calm the global financial markets.
The Fed cut the discount rate to 5.75 percent from 6.25 percent, declaring that "downside risks" to the economy have increased appreciably.
"People were kind of baiting the Fed into doing something, and finally they did," said Philip Dow, managing director of equity trading at RBC Dain Rauscher. "The playground monitor finally showed up, and it showed someone cares and someone is bringing rationality into the market." For investors, the question is whether the discount rate cut is a signal that the Fed is seriously leaning toward lowering the fed funds rate, considered a more important benchmark, or whether the central bank is trying to offer Wall Street a compromise.
In late morning trading, the Dow Jones industrial average surged 110.06, or 0.86 percent, to 12,955.84. The Standard & Poor's 500 index rose 16.05, or 1.14 percent, to 1,427.32, and the Nasdaq composite index rose 27.41, or 1.12 percent, to 2,478.48.

Labels: Discount Rate, Dow Jones, Federal Reserve, Nasdaq, Stocks, Wall Street

Is this stock in a first-, second-, third- or fourth-stage base?
Knowing what stage a stock is in can save you a lot of frustration.
If you buy a breakout from an early- stage base, you could be in for a nice, long ride.
But be wary of buying late-stagers (fourth or beyond). These are more prone to failure because they've been in the market's spotlight for some time and have already had a substantial advance. There may be few buyers left to push it higher.
Each base or consolidation should be at least seven weeks long (a flat base can be as short as five weeks).
Breakouts from each base must result in a gain of at least 20%. If the advance is less than that, and the stock builds another base, that's called a base-on-base pattern and counts as a single base.
If a stock undercuts the low of a prior base, that resets the base count and wipes the slate clean.
With that said, take a look at the accompanied chart and identify in what stage it is.
Picture and Text Published by IBD

Labels: Bases, Charts, Stocks

Stocks pointed toward a lower opening Tuesday as Wall Street cautiously awaited data on the nation's service sector.
Investors will be examining the Institute for Supply Management's May index on non-manufacturing industries, scheduled to be released at 10 a.m. EDT. According to the median estimate of economists surveyed by Thomson Financial, the market expects the index to hold steady at 56.0, the same reading as in April.
A reading above 50 indicates expansion in the service sector, a diverse group of industries that represents about 80 percent of U.S. economic activity and includes retailing, banking, construction and agriculture. Investors are hoping the report will indicate that the service sector is still expanding. Growth that is too robust could stoke worries about the Federal Reserve raising interest rates later in the year, however. On Friday, the ISM's manufacturing index came in above expectations.
Meanwhile, Fed Chairman Ben Bernanke's speech by satellite to the International Monetary Fund in South Africa Tuesday gave investors little incentive to buy. He said in prepared comments that the economy will recover from its recent feeble performance, despite a housing slump that "appears likely to remain a drag on economic growth for somewhat longer than previously expected."
Bernanke's forecast of rebounding growth, as well as a reiteration that inflation remains "somewhat elevated," made it appear unlikely the Fed will lower rates anytime soon.
Source: AP

Labels: Ben Bernanke, Economy, Stocks, Wall Street