Charging thru the Bull Hunter
Wednesday, July 11th, 2007Hello Fellow Bullhunters
I hope you all got to read Seans post yesterday regarding the success of a couple of graduates of the 21st Century Academy homestudy. I personally know Maria and Pierre and I have to say that they are a great example of what you can achieve when you put yourself into action and go after your dreams. Congratulations again on your retirement from your day job and now making a living from trading.
The Bullhunter
I don’t know about you but I am certainly getting more out of The Bull Hunters Guide to the US Stock Market by breaking it down into small chunks and analysing it. It’s becoming clearer to me each time I write a post and bringing it all together. Let’s continue…
DJIA Financials
The Dow financials are cyclicals as well, but they don’t always follow the same cycle as the industrials. American Express is the most cyclical of this group. It performs best when the economy is strong and thus consumer spending is strong.
Citigroup and JP Morgan Chase are the most closely related of the stocks in this group as they are both money center banks. Banks do well when there is a positive disparity between short-term interest rates and long term interest rates, also known as a normal yield curve. When long-term rates are lower than short-term rates there is an inverted yield curve which is a nightmare for the banks. The factors influencing the movements of interest rates are beyond the scope of this book but suffice to say that the inverted yield curves are predictors of oncoming recession and therefore money center banks perform best when the economic future looks strong.
American International Group (AIG) is an insurance company. It benefits from a strong economy because it invests its assets in the financial markets. But it is the least predictable of the financials because major events like Hurricane Katrina can have a disproportionate impact on insurers.
Market Conditions
Market conditions are dependant on many variables so it is wise to determine the value of a stock and then follow your trading system making use of technical analysis to find your entry and exit points. Remember that a strong economy is when the financials perform the best. We cannot predict when natural disasters are going to happen or any disaster for that matter that will have an affect on the stock market at any given time. Writing put options is one way of protecting yourself if you happen to be new to trading and it’s always wise to start with paper trading until you are confident to put your real money into the market.
Yours in prosperity
Angela Recchia
Graduate Support
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