I’ve been asked to comment on the Facebook IPO and the issues with the Nasdaq.  I’ll have a market update below.

First of all, the Facebook IPO was released in a very bearish market environment.  The market moves based on liquidity.  When the market is going down, money is coming out of the market.  Thta being the case, there generally isn’t enough demand to fuel stocks, nevertheless new IPOs.

Second, The IPO was loaded with stock.  This wasn’t LinkedIn, which issued only a small amount of its float.  Facebook has even more shares coming on the market at the 3 and 6 month point where it will have 2.2B shares outstanding…

I’d avoid Facebook for 6 months.

As for Nasdaq, they are not liable for trading losses.  If you bought FB and it went lower, welcome to the stock market.  This is a scenario I discuss in my trading courses and it happens all the time.

However, if you bought facebook, but Nasdaq didn’t facilitate the order entering your account for several hours after you made the trade – and ONCE you became aware of the price you entered at, and the price it was trading at – AND you sold your position, you may have a chance.  But as soon as the loss manifests to you, and YOU make the decision to hold the position (which most people will do because that’s simply how our brains are wired) then you accept responsibility for the loss.

It reminds me of Enron – although not as severe – a stock that went to zero and holders (all the way down) complained they never had a chance to get out.  Well, that’s not true at all.  They had numerous chances to get out.  It was their human nature that kept them long the stock.  All the way down to zero.  It’s the way we’re wired.

So if you’re upset that you bought FaceBook (FB) and you’re holding a losing position, welcome to the stock market.  However, if you bought, but never received confirmation or received confirmation so late that it caused you losses, then by all means – make a claim with the Nasdaq.

As for a market update, we’ve recently issued 50 options recommendations, 5 stock recommendations and a major call on the market.  To see our recommendations, click here.

Why is it important  that the Facebook FB options begin trading today?

Options are bets on price movement.  They represent a sophisticated sentiment survey on the opinion of the future direction of a stock.

For example, there are 2 sentiment survey’s that are popular for investors to follow.  One being the Investor’s Intelligence bull bear survey.  And the other being conducted by the Americal Association of individual investors.  The former is a group of newsletter writers (like me) and the other is a group of individual investors (members of the AAII).

Both of these move similarly, but at different rates.  The AAII is more of a short term volatile indicator, whereas the II survey is slower.  Each has their advantages and disadvantages from us computer trading folks.

But the best survey on the market is from options activity.  Options activity is so powerful in the market, i can create floors and ceilings in price, and pinning of price action ahead of options expiration.

Generally on a stock there are more call options than put options, because people like to sell call options to generate revenue for their holdings.  But these signals, and the correponding implied volatility, can be very telling when it reaches an extreme.  Extremes in either direction can and often signal a reverse.

Point is, if people load up on Put Options on FB to protect their position, this can result in a large upward price move – as the crowd (no matter how sophisticated) gets it wrong more often that right…

The market moves on liquidity and sentiment there are many measures of this.  If you’re interested in learning more, click here to sign up and access all our wealth research.

Regards,

Stock Barometer

Investment Research Group, Inc.

Here are My Thoughts On The Stock Market And Facebook IPO:

As the stock market comes to a close this Friday, we are looking at our 5th day of sideways movement, in fact, the past 3 days have drawn the exact same price action on the futures, remaining in a range.

Normally this action would be very bearish, but here’s a bit of data that might make you think otherwise.

This is a chart I’ve been sharing with my clients.  As most are expecting the markets to fall off a fiscal cliff here, I’m in the other camp.  The above shows that MANY are betting on a decline – and historically, whenever that happens, markets tend to travel upward.

Throw in the fact that the markets have had every excuse to sell off this week, a rising bond, a rising dollar, scary news in Europe, and the markets held up.

Now we have the Facebook IPO coming out next Friday.  I’m advising my clients that the markets are more likely to rise into next Friday, than they are to move lower.

That doesn’t mean I’m overly bullish.  The fed actually controls the strings on the market here.  Not saying I believe in market manipulation, but the fed will stop buying bonds in June.  And when bonds go down, stocks will go up.  Generally speaking.  So whatever damage the markets face in the short term, I do see longer term, they have tremendous energy to rally.  All controlled by the fed.   So when the fed says they have tools, trust me, they still do.

And I have the research to prove it. CLICK HERE and you can sign up here and access my market research for only $1, for one month.  Make smarter financial decisions.  Enjoy more of your money.  While the government is still printing it.