With that being said, the calendar this week is full of some important reports that could set the tone for the early part of next year.

On Tuesday, the Building Permits report for November is released, and is anticipated to show only a slight decline of around 8k units. I am not sure if this is simply due to the seasonal slowdown of building in northern climates, or if perhaps builders have finally found an equilibrium point with the market, but I view it as a positive sign if the number holds close to expectations.

The same can be said about the November Housing Starts report that comes out at the same time. A decline is expected, but again, it could just be do to seasonal issues (you can’t build in northern climates when the ground is frozen) rather than a worsening housing sector.

The big reports of the week are the November CPI and Core CPI figures.  Much like last week’s PPI and Core PPI reports, the Core CPI figure is expected to show a slight increase while the CPI figure will likely show a continued drop. Energy costs (oil) continue to drop, and this will be reflected in the CPI figure.

The Philly Fed report comes out Thursday morning, and it looks like reality has set in again. As I reported last month, expectations for the November report were for a rather large improvement versus October. Well not only did that not come true, but the report was actually worse than October. This month, expectations are for a slight decline.

The attention grabber this week is the FOMC Policy Statement on Tuesday. As it stands, expectations are for a huge rate cut. Currently the Fed Funds rate is 1.00%, and the probability chart shows a 65 percent chance of a cut down to 0.25%. This is especially shocking for two reasons. One is the shear size of the cut, which would be three-quarters of a percent. The second aspect is that if the cut is down to 0.25%, it leaves only one more bullet left in the gun for the Fed to cut rates.

Source: FOMC Statement Highlights The Week … Will The Fed Be Left With One Bullet?

The first reason is because they simply don’t know that it’s part of investing successfully. Learning about stop-losses and risk management simply isn’t as sexy as learning about how to make triple-digit gains. So the subject is often avoided.

Second, it’s a matter of emotions. You see no one in the world – not me, not you, or anybody else – enjoys selling stocks at a loss. It’s a pain that nobody wants to inflict on themselves. So as long as they don’t sell at a loss, they never end up ‘inflicting’ the pain.

Then there’s the prospect of selling at a loss and then looking at the stock a few weeks later, only to find that you could’ve sold it for a gain. Now, the investor might feel embarrassed or foolish. Nobody wants that. So emotionally, it makes sense why a lot of investors don’t follow through with an exit strategy. But logically, an exit strategy is IMPERATIVE to making money in the stock market.

If people didn’t take their losses, then they’d never free up capital to pursue better opportunities. Heck, if people didn’t take their losses they’d eventually have no capital at all.

This is a situation you don’t want to put yourself into. So before you get into a trade, MAKE SURE to have an exit strategy planned. And you should do this for every single trade.

If that means selling your position once you lose ten or fifteen percent, then follow through with it! If your exit strategy is simply to sell if the fundamentals of your buy change, then make sure to follow through with it!

Either way, just remember to ALWAYS have an exit strategy before you invest. And more importantly, FOLLOW THROUGH WITH IT!

Good trading,

Charles

The loss is larger than expected, but a higher-than-expected top-line earnings number has given traders reason to celebrate, apparently. Ticker C rocketed up over 8% in premarket trading. Our best guess: A known loss is better than the great abyss. And there are still plenty of folks willing to time the bottom in any one of these behemoth Wall Street banks.

Au contraire, counters Dan Amoss. “I expect financials to keep trending down. Banks and brokers still have plenty of losses to report in 2008 and 2009, even if they can go to the Fed window and temporarily swap their illiquid, impaired mortgage-backed securities for Treasuries.””

Wachovia, one of the largest banks in the US, reported a $.20 per share loss in the first quarter, versus forecasted gains of $.40 share… Quite a reverse of fortunes…

Andrew Snyder says, “You do not think the credit crisis is over just like that? A few weeks of ups and downs, some presses releases, and some rule changes and the economy is fixed. Get real. This mess is just getting started.

For proof, just take a look at one of the nation’s strongest bellwethers, General Electric. To say its earnings announcement this morning was disappointing is an understatement. It is a disaster. When a company with as much economic breadth as GE takes such a surprising hit, it becomes obvious this crisis is impacting more than a handful of banks with shoddy loan practices… The worst is yet to come.”