psychology behind investing and trading plus a closer look at the surge in gold demand it's all right here on today's first business. thursday, august 26, 2010 you're watching first business: financial news, analysis and today's investment ideas. good morning everyone thank you for watching it is thursday august 26th 2010. we have the dow fighting to stay above that 10,000 mark just ahead of important jobless claims numbers out before the opening bell that can really still shake up the market's angie. how about some apple tv? apple will have a big announcement coming up on september 4th and it involves watching more tv on ipods. everybody has their eye on apple these days and traders have their eye on the oil market as well. oil prices are close to $73 a barrel and they say if oil actually drops below 70 that will really drag down stocks. it could be another big day in the market let's head over to

the cme group and join patrick assalone / trading advantage. do you think the jobless claims out before the bell can be a market mover like has been in the past? i think the market will take off one way or the other. essentially i'm looking for if it's a bad number for the market to test one thousand two. if it's a good number we are looking up to 1100. you are talking about the s&p 500 right now we are stuck in a range but are you expecting to break out sometime? we have been in the huge balance area since about may 5th or may 6th. that range has been 1100 to 1002. so yes absolutely with a high volume areas up and down the whole way. we are approaching september and october the two most bearish months how do you approach that? i take what the market gives me. i look for a real news generated event to break through some of these levels of support and resistance and i take the market from

there. so you'll not take a really firm stance until we break out of this zone? this is a fantastic trading opportunity. sell the highs and buy the lows. we have been in this trading area since may and there's a fantastic profit to be made on both sides of the market. thank you very much patrick assalone / trading advantage. men and women fighting for our country face the uphill battle of getting hired when they return home. which is why the small business administration is stepping up its efforts to help military people become entrepreneurs. that includes calling on past veterans of war. a good motto meantime small business loan programs in some states are reportedly getting closer to going broke. congress is not expected to take up a $40 billion dollar small business (rescue) or (support) bill until next month.

by a vote of 3 to 2 the sec approved a new controversial measure to make it easier for shareholders to nominate their own candidates to a company's board of directors. the new rule applies to long term shareholders only - they must own 3% of a company's outstanding shares for 3 or more years.the total number of nominees cannot be greater than 25% of the board on a typical board it would be no more than two candidates nominated.the new rules are set to take effect next year smaller companies will be exempt for 3 years.the vote to give shareholders more access went

along party lines with 3 democrats voting in favor and two republicans voting against. credit card debt hasn't been this low in more than eight years that's according to credit reporting agency transunion.average debt for credit cards like mastercard and visa fell to 4-thousand nine hundred dollars in the second quarter .not since 2002 has credit card debt been this low for a three month period.the number of borrowers who are more than 3 months late on card payments also fell to less than 1%. surprisingly industry experts say forclosures may be what's behind the improvements in consumer credit because when people don't have mortgage payments they have more money to put towards credit card debt. still to come a psychologist joins us to talk about the best ways for investors to cope with this uncertain stock market. but first the demand for gold

continues to be strong how long will it last that's next.

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announcer: falls on tv can be entertaining. falling at home can be devastating. each year, 1 in 3 americans over 65 falls in their own home, breaking bones and shattering lives. for older people, any broken bone can be serious. a broken hip -- potentially lethal. to make your home as fall-safe and bone-friendly as it can be, visit orthoinfo.org/falls. a public service message from the american academy of orthopaedic surgeons, where staying on your feet is "doctor's orders." a new report says investment in gold will continue to be strong for the remainder of the year.george cocalis / index futures group joins us now. we know the world gold council who has a vested interest in higher gold prices is behind this report but as a gold trader do

you believe them when they say demand will continue to be strong? yes i do think it will still be strong especially coming off of the summer gold runs and into labor day and a traditionally strong september month. the demand will definitely be there especially with a lot of uncertainty in the equity market. let's take a look inside this report. does this mean gld and gold is mainly a retail play or is it both retail and big money behind gold? i think its retail and institutional. i believe the gld is 44% as you said. it is also a retail vehicle. it is the easy way to get involved in the gold market. the average investor does not have to worry about insurance or carry cost

or moving in and out of the gold market or reselling the actual commodity. so retail investors are not the only ones holding up gold at this point? that is correct. is the big money investing in gold through the futures market? the institutions definitely have a large hand in futures market. the futures market has a dynamic of leverage this is something that is beneficial for institutions. gold bars and coins are mainly bank based. let's look at what the prospectus says for g l d. given

these facts would you feel safe yourself personally investing in g l d? i think in a severe economic crisis you have to ask yourself do you feel comfortable owning an actual physical piece of gold in your own safety deposit box or even own home versus this storage facility based in london. global jewelry demand for gold has dropped only 5% from last year so still relatively strong. why is the demand for gold jewelry holding up in the face of worldwide economic uncertainty because gold jewelry is really considered a luxury not exactly a liquid investment. ? there is

a lot of disposable income with the emerging countries particularly india and china. more specifically the female actually has more disposable income in those countries. the they want to make a fashion statement and gold is actually an investment for them. that is one of the many reasons why jewelry demand will stay strong. let's talk about the demand for physical gold bars. it is up 29% in the second quarter compared to last year. does that mean gold is considered a real legitimate asset class at this point? it absolutely does. the key is a non correlation factor with other asset group's mainly

equities. i think a lot of uncertainty coming into this fourth quarter will be very prevalent and i think the average investor and the institution are finding ways of how to diversify their portfolio especially away from equities. and the equities have a zero correlation. we have to remember the downside risk for gold. that is it could take a huge hit if there was a large asset liquidation. that is absolutely true. there will be a point and time in the future when gold is overvalued and there will be possibly 50 to $100 moves in the future. that will be very dangerous for the average investor or retail investor sold the retail investor needs to be very very careful. your price target on gold is 13.25 a oz. in the fall.

and you are also trading long and short right now. that is correct. thank you george cocalis / index futures group.

these days, investing or trading in the stock markets can seem like a rollercoaster because of so much economic uncertainty affecting the markets during times like this, psychology plays a big role in whether you survive in the markets.earlier, we spoke with clinical psychologist dr. frank stanley for some insight. we are joined by dr. frank stanley / clinical psychologist. is there anything new as a result of the financial crisis we are currently in that you are teaching traders today? what i am teaching them is what

we know is fundamentally right as traders so it is not really knew but you have to reinforce it with them. one of the things we are teaching them is do not think about the past think about the present. financial crisis and down markets have happened do not let that influence you for the future because it will influence trading. how did you actually block that out of your mind? first of all whenever you think about the past or even the future you distract yourself from thinking about what you have to do in the moment right now. as a traitor you need to focus on what's going on right now. and if the market wanders you just accept it. if you are a traitor actually actively trading at that moment you find yourself doing that and you can't stop you get up and walk away and then come back later. one of the biggest challenge is anybody faces is the difficulty of dealing with a loss so how should to react to a loss in the beginning stages when it starts going against you? losses are part of trading and what you need is a plan to deal with

that loss. you are always thinking about risk and what you would do if something happens you have certain stops in place and certain types of hedges that you use so really there is no surprise you expect it can go up or down depending what your direction is and know how react based on the planning that you came up with. some people experience pitfalls when they move their stock just a little and it turns into a huge mistake. how do you prevent yourself from making these kind of errors? first of all focus on your plan second train yourself to focus on the numbers what the tape and what the market is telling you not what your emotions are. your emotions may be a sinking feeling but you do not react to that you say if my stop is here than that is what i follow and part of it is becoming a professional trader. been a professional trader has a discipline. but that does not

mean you will not react to a crisis. on a day-to-day ups and downs you have your plan and you focus on what it's telling you. blocking your emotions it seems like it's a skill that would take years to really get good at. it takes some practice but when you trade you should think of yourself as a professional trader so you have to behave like one. professional traders train themselves just like an athlete. if you were to hurt your ankle you would continue to focus on your game. it is the same with a professional trader. just like athletes we spend hours and hours practicing. before you get into a trade you should think about your risk first and then your reward second. yes risk is involved in every trade we tend to just focus on the profit but we should focus on the risk and never risk more than your

portfolio can afford. what is the most important thing that separates successful traders from those who fail? i think it is your plan you have to stick with it and learn how to focus on what the market is telling you be very very focused on the data. do not trade what you think trade what you see. thank you for the advice dr. frank stanley / clinical psychologist. still to come the market is moving up and down but is it really going anywhere? we'll talk about that next in chart talk.

we're joined now by matt cavanaugh/cmz trading to take a look at this bouncing market. what do you think about this market action? it is classic bear market trading we talked before about support in the 1040 range i think we have bounced off here four or five times. on wednesday in the face of bad durable goods number the market held at 1040. there were bargain hunters and it rallied again. you are seeing this in other stocks even apple. take a look at that chart it has been trading between $283 and 280 for weeks now. somebody and make money in this kind of

market? you try to play the ranges a little bit if the market or the stocks rally you may take a little risk off the table and if we come down you add some back in. you're really just try not to stick your neck out too far and play the ranges until something changes. what could cause a change? different sentiment the risk of a double- dip recession continued bad economic numbers. i think if we could see a close below 1040 in the s&p's i think it's a definite possibility we test a thousand or even lower. thank you for joining us matt cavanaugh/cmz trading. i can solve difficult problems

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