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PreMarket Prep Recap: Overnight Reversal, Technical Analysis For Dummies

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PreMarket Prep Recap: Overnight Reversal, Technical Analysis For Dummies

Macro headlines dominated the top of Tuesday's PreMarket Prep show. And for good reason, as the news indicated that the end of the trade war with China is nowhere in sight — as well as European markets in shambles and a Brexit that may never happen.

It's not the kind of news that's a recipe for a rally.

The triple dose of bad news turned the index futures from firmly in the green to deep into the red, which has continued in the regular session. 

Technical Analysis Debunked

Many traders and investors swear by technical analysis and trade solely on the basis of the charts. And they employ a variety of techniques that can be conflicting and complicated.

PreMarket Prep co-host Dennis Dick reviewed his "KISS" technique — keep it simple, stupid — and revealed how imortant the simplification of technical analysis has been to his probftablity over the last 20 years.

As seen with the price action in the index futures in Tuesday's premarket session, technical analysis is of little or no value when fundamental news, true or not, hits the markets.

The Pitfalls Of High PE Stocks 

On Tuesday's show, there was a brief discussion about fundamental analysis and how the hosts employ it with their long-term investing.

The main point: they do not put high PE stocks in long-term portfolios. They may be fine for day or swing trading, but in the long-run, owning high PE stocks is fine and dandy — until the growth stalls or slows.

A great example would be the investor who bought Cisco Systems, Inc. (NASDAQ: CSCO) when it peaked at $82 in March 2001 and sported an extremely high valuation. Although the company makes a lot more money now that it did then, its share price is just over half its peak value in the tech bubble.

Exceptions to the rule always exist, like Amazon.com, Inc. (NASDAQ: AMZN), but in the long run, high PE stocks can be a losing strategy for long-term investing, according to the PreMarket Prep hosts. 

Polcari Joins Wednesday 

Midway through the show, Nic Chahine, author of "Create Income With Spreads," joined the broadcast. Nic shared several charts and identified potential entry and exit points in several issues.

Kenny Polcari of Kace Capital Advisors LLC will join show Wednesday and provide his short and long-term insights on the markets.

PreMarket Prep is a daily trading show hosted by prop trader Dennis Dick and former floor trader Joel Elconin. You can watch PreMarket Prep live every day from 8-9 a.m. ET here. The replay can be found on Benzinga's YouTube channel, and the podcast is on iTunesGoogle PlaySoundcloudStitcher and Tunein.

Related Links: 

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Posted-In: Kace Capital Advisors Kenny Polcari Nic Chahine PreMarket PrepNews Trading Ideas Best of Benzinga

 

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