SOROS PREDICTING A BIG DECLINE?

http://www.moneynews.com/Outbrain/billionaires-dump-economist-stock/2012/08/29/id/450265?PROMO_CODE=FE8A-1

I am not sure if this link will work you might have to copy and paste it. It does not have any quotes from Soros about a direct prediction for a stock decline but it covers all the insider selling that is going on by billionaires including Soros and Douchefett. If there is a bigger hypocrite on earth than Douchefett I would like someone to point him or her out to me.

The gist of this article is the same as so many others at it's core. It predicts a huge inflation wave that will cause interest rates to sky rocket and then create a stock market melt down. Could this happen? Of course it could. Will it happen? I think the answer to that is at some point it might. Let me explain.

I covered this in one edition of the Newsletter so I can't give all that away, but the brief summary is as follows. In spite of all the "liquidity" that has been "created" most if not all of us still cannot go to a bank and get a loan. Why? The banks are hoarding the money. Inflation cannot happen until this money gets released and circulates with velocity, which will drive prices upward. At the time being we have the opposite, a deflationary environment. There are cycles to everything in life and this is no different. At some point it is likely the pendulum will swing to inflation from deflation, but it is not anywhere near happening yet. Keep in mind when you are selling millions of shares of things that has to be done when times are good. You don't want to be trying to sell a million shares of something on a day the market drops 200 points, you won't be able to get filled. If you are someone holding huge positions you have to try to front run market turns to be able to get decent prices.

There is something called VWAP which is talked about in many sites and I think the people mostly try to throw it out there to sound smart. VWAP stands for Volume Weighted Average Price, and it is basically used by large funds as a target to achieve during a day when they are buying a stock. On large up days it is almost impossible for a fund to get that average price on their purchases which is why at times you see price really get driven on big up days. Large buyers can't risk getting left out in the cold when they have to buy something. Further, they have to have certain stock names in their portfolios so when people peruse holdings, they have all the "right" stocks to attract investors. It really is a huge shell game in my opinion.

As this relates to these big players, they are almost like funds themselves, so they have to get out when the getting is good. Selling by these folks does not mean crash tomorrow. It means from a broader perspective they see a turn coming at some point in the future. For us as shorter term traders and investors we can be a bit more nimble and trail our exit orders upward, and let the market take us out without having to be concerned about liquidity on huge positions. Net net, it is a different decision than what these guys make.

The wall of worry is always built on stock rallies like this and this is why I urge people not to get too tied up in reading all these negative things all the time. My friend I talk about all the time is an example of what not to do in this regard. He follows a very well known trader who holds positions for weeks and months, and is a very prominent grain trader. He gets his Newsletter and winds up very opinionated about huge moves coming. He then goes on to try and trade them on a 60 minute chart! Keep in mind this trader might hold a Soybean short through a $1.00 rally if his big picture analysis says he should still be short. Can you imagine trying to short all the rallies that take place on a 60 minute chart during a $1.00 rally? Ughh! The point is do not mix your time frames. If you are a short term trader it does not matter if these billionaires are dead on balls accurate with these macro calls. If you are not trading the same time frame why does that matter to you?

Don't mix your time frames is the moral of this whole story. I don't know if these guys are right or wrong other than I think in the near term they are wrong. They are not attempting to be right in the near term, they trade a much longer time frame. However, I know I can react very quickly when I see a major market turn start and so you can you, so don't sweat this stuff every day as you make your trades.

Sorry no fancy pictures today

Good Trading