TIM GEITHNER EXEMPLIFIES AN AGE OLD WALL STREET ADAGE

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THE CROSSHAIRS TRADER makes trading decisions based on the psychology of the Market.  Part of this psychology is tried and true Wall Street adages such as Buy the Rumor. Sell the News.  THE CROSSHAIRS TRADER prefers Buy the Expectation. Sell the Reality. I guess you could say this happened yesterday when Treasury Secretary Tim “Tax Me” Geithner delivered his speech [READ FULL TEXT] on what was supposed to be the specifics of the financial rescue plan.  For the last several days the  Market has been in bear market rally mode in expectation of a detailed plan of action but instead was given a healthy dose of reality:  the government really knows little about how to solve our current financial crises.  So the bear market rally revealed itself by giving back five days of gain in one afternoon.    Hello Washington!  The Market wants clarity not confusion. But even if there was more clarity, the Market would most likely have sold off anyway.  This is the battlefield in which we find ourselves.

THE CROSSHAIRS TRADER lesson: Buy the Expectation. Sell the Reality.

THE CROSSHAIRS TRADER finds the following catalysts (future events) can act as strong expectations to be traded: 

1. MAJOR ECONOMIC ANNOUNCEMENTS (USUALLY MONTHLY):  Fed Meeting, Fed Minutes, Monthly Payroll Numbers, etc., and scheduled announcements such as the one delivered yesterday.
2. COMPANY EARNINGS (EVERY QUARTER):  a company’s stock becomes more active heading into earnings, especially the 2-3 weeks in front of the earnings date.
3. STOCK SPLIT DATES:   when a company announces a split, there is usually a date set for the split from one to three months out and this date provides an expectation.
4. ANALYST DAY MEETINGS:  most companies participate in scheduled conferences and/or analyst meetings to give updates on the health of their company in particular and the industry as a whole. Expectations can run high into these known events.
5. COMPANY SPECIFIC SCHEDULED EVENTS: the best example I can give is APPLE’S (AAPL) annual MACWORLD EVENT wherein new products are usually introduced. Every year there is a heightened expectation leading up to this event.

According to THE CROSSHAIRS TRADER, trading these events (along with others not mentioned here and ones you may have found in your own research), requires that you follow two simple rules:

1. Do not trade the expectation just because there is one.   Make sure your trade decision is based on the trade setup you look for.  In other words, trade according to your rules.  If your rules give you a signal AND there is a catalyst (a known event), then you are making a high probability trade that you can be confident in.
2. Do not trade through the event.  Remember: trade the expectation and then get out.  If you have won the battle, why stick around and lose the war?

Expectations can provide a great catalyst for sustainable stock movement and sustainable stock movement can make the disciplined trader money.

 TRADING IS WAR. PREPARE YOUR WEAPONS.

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