TRADE Focus

04/01/2009

If any questions, comments, observations or more importantly any answers, please feel free to contact us at : 1 800 321-5810 ; email cbands@cbandsbrokerage.com

Both the Trade Focus commentary and the market analysis were prepared during the course of the trading day on Wednesday, April 1st.

The economic news that has been released since last week was mixed and once again possibly overshadowed by other political/economic events. GDP, although at minus 6.3 pct was not as bad as expected. Consumer confidence and both the New York and Chicago PMI (Purchasing Managers Index) were worse than expected while construction spending and the ISM index were better than what was expected. Another item of note is that pending home sales gained 2.1 pct and we believe that to be the 3 rd housing statistic in a row to come out as a better than expected surprise. The recent stock market rally off the March lows took a breather but has found what appears at this point a good ability to be supported on weakness. What may also be of greater significance to the market other than the economic reports is the decision from the administration on GM and Chrysler, the G-20 meeting in London and the FASB vote on mark to market accounting. It seems to us a serious approach the President and his team has taken with the US auto makers. Especially after having committed a large amount of bailout money. But it forces the issue with these companies. Perhaps this approach should have been taken at the outset, although we realize we do not know all the facts surrounding the situation. It does, though create a sense of urgency. We believe we understood the President to also expect that there is cooperation at all levels, which would include union management and employees, along with corporate management and his administration to do what is necessary to construct a viable plan to succeed. We hope this is the case and that it resolves positively. The G-20 is of interest because, if nothing else and despite what their concluding statement may read, the fact is they are coming together and facing the issue and may in so doing create a working framework whether unanimous or not; transparent or behind the scenes. There's no question all participating nations are affected by the global economic crisis and we believe it's better for them all to work together than to stubbornly take a "what's best for me" attitude. The FASB vote on amending mark to market rules could quickly and dramatically enhance the ability of financial and corporate institutions to conduct business. We don't always agree with a stroke of the pen as being a cure for such ills but regardless of our feelings we understand the effects can be impactful. Looking just ahead there is the monthly unemployment report for March due out on Friday. The sneak preview was not pretty as ADP reported a loss of 742,00 jobs. Next week begins another earnings season. It's hard to imagine much to be optimistic about with this round of reports.

Facing trading markets involves facing bombardment by an assortment of outside forces. These all serve to weigh on the emotions of the participants whether positive or negative, making it nearly impossible to remain objective. Markets are not the foe nor are they friend either. They are the trader's universe and take their own shape as they are in a constant state of change. Remaining objective, focused and maintaining perspective in the ever changing trading environment is not simply helpful but more so essential to achieving any sort of success. Trading is a business and a professional business approach is necessary. We often say to manage each trade as if it is its own business. If it isn't producing, get rid of it. If a businessman owns a chain of restaurants, for example, he doesn't keep the ones that are losing money for him. He sells them and keeps those that are profitable. This is a basic principle in the business of trading, but one that so many find so difficult to follow. It's hard to admit being wrong but it is so necessary and essential in this business of trading. It is true both in the macro and micro sense. Maintaining a professional business attitude toward a trading strategy, changing with it as it needs to change, as well as following each position objectively and changing with it as its pattern "morphs" along its path. Jack Welch comes to mind as an example of someone in the business world who demonstrated that keen ability to remain objective, focused and maintaining perspective while overseeing a vast array of businesses. A pro's pro. The overall plan was for each business to be at the top of its respective industry. If it wasn't there were changes made whether to managers or ultimately the removal of that business from his stable. There was no picking and choosing of favorites and stubbornly maintaining an allegiance to something that was not performing. Non-performing assets were eliminated. Mr. Welch may not have been able to control the environment outside of his realm but he could do something about those within his control affected by outside influences. The true point here is that emotions did not enter into any final decision. When we talk about emotions entering into trading decisions it seems most common to think of the effects that so-called bad days have on the ability to remain objective and business focused. But we find that it is not only just as likely but even more common that the good days have greater likelihood of getting traders out of their trading perspective. We often refer to this as giddiness. Those times when things are going very well seem to be the times a trader is most vulnerable to letting his guard down and to allow mistakes to be made. Mistakes in thinking and in execution of the trading plan. So incredibly often the giddiness created by a sudden gain in equity turns the other way just as suddenly and often more sharply. It is therefore, equally important to employ the management tools and skills dictated by the trading plan in both good times and bad. Every day is the same. It is just a day and requires its daily maintenance. So we can say even when it is a bad day that it is a good day. Every day is a good day.

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