• Weekly Top 5: Why Listening To Price Is The Only Way To Go

    by  • December 21, 2012 7:00 am • Quick Hits, Weekly Top 5 • 0 Comments

    This is a new weekly feature I’ll be writing every Friday.  I’ll touch on the top five most interesting things I’ve read over the past week and give my opinion.  I’ll do my best not to just have major headlines stories, but something that might be more under the radar that is worthwhile to share.  I do a lot of reading over the course of a week and I might as well share some of my favorites.

    With that, here are the Top 5 reads of the week.

    • Vanguard is having their best year ever in terms of deposits into mutual funds and ETFs, with over $130 billion through November.
      • This is great news for Vanguard obviously.  But digging a little deeper, the majority of their inflows have been to bond funds.  We continue to see record inflows into bond funds and steady outflows from equity mutual funds.  If there is such thing as a crowded trade, it is probably bonds.  Doesn’t mean you shouldn’t own any bonds, just be very aware you aren’t the only one in a very crowded room.
      • This stat from the article is simply awesome.  Since the market bottomed in March 2009, equity mutual funds have experienced a cumulative net outflow of $242 billion, compared with a net inflow of $270 billion to equity ETFs, according to Birinyi Associates.
        • Again this hammers home one fact, no one trusts Wall Street.  Investors would rather do it themselves than have a mutual fund manager do it for them.  I’m all for investors taking charge of their own finances, but bigger picture this shows an amazing level of distrust still out there.  Then take a step back and we aren’t all that far away from new all-time highs in various major indexes.  From that contraian point of view, I continue to think this bodes very well for the now 3.5 year old bull market.



    • @Jfahmy on Twitter “If you listen to the news, you’ll hate this market.  If you pay attention to price action, you’ll love this market.”
      • Amen.  Joe just nails it here.  I fully agree with everything he said.  The news continues to be very negative, yet we have an SPX up about 15% for the year.  No way you’d ever know that if all you listened to was the news.  Lastly, I liked the quote so much I used it on Fox Business this week.  You can see it around the 90 second mark.


    • Laszlo Birinyi was interviewed in Barron’s last weekend.  I’m a big fan of his, as he was one of the first to turn bullish near the March ’09 lows and has been solidly in the bull camp since.  It is easy to see now, but trust me, not many have been as right as he has been.
      • He is still bullish and thinks we are in the late summer or early fall of a bull market.  Also touches on areas of sentiment, along with technicals in this article.  Even points out the flaws in using just price action as your only guide.


    • @MichaelSantoli on Twitter, “Serious question few ask: Why do we continue to measure volume in shares vs dollar value? Tradition, legacy of old regs/systems, not logic.”
      • Excellent question with no real answer.  We’ve touched on the whole ‘low volume is bearish’ argument a lot around here.  Is overall volume lower?  Yes.  But if you look at dollar volume (share price times daily volume), volume is actually higher during this bull market than the last one.  One potential reason is the most popular stocks are now very expensive.  So overall volume isn’t a true indicator like it once was.  Kind of ends the bearish argument that ‘lower volume’ is somehow bearish.




    • Darren Miller (goes by @Attitrade on Twitter) wrote maybe the best thing of the week.  Some quick background on Darren.  He has a PhD in counseling, has worked in a psych ward at a children’s hospital and counseled children and their families in private practice.  He has now morphed into a well known trader and does an amazing job blending psychology and trading.  After what happened in Connecticut last week, in this post, he touches on all his past life’s experiences and writes a very moving piece on what it means to love your kids.
      • I don’t have anything to add, other than read this immediately.




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