Monday, May 31, 2010

Stock market outlook: Volatility will abate somewhat this week.

I wanted to summarize the data for Friday and where we were last in preparation for tomorrow. I checked on Friday's Put to Call ratio at the open on Friday and it was at an amazing 2.10 within a half hour of the open. It closed on Friday at 1.21 and while that is much better the day sets up a rally for Tuesday or Wednesday. Those are extraordinary levels and the 2.10 extreme and a buying signal.

The VIX closed at 32.07, up 2.39 or 7.5% with the high on Friday at 33.30. I am waiting for a rally on all Indexes with the Dow going to 10,500 to 10,600, before it reverses and the market goes down again significantly. I expect volume to drop somewhat as the market rises and then to pick up on selloffs.

I still like TZA Options to trade and plan to over the coming days and weeks.

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Sunday, May 30, 2010

BP to contain the spill. This was much too late!

Have they been reading the suggestion posted here to contain the spill. Finally after over 40 days of continuous leaking between 12,000 and 19,000 barrels a day, they decided to contain the oil. What incompetent engineers. Here's the news on the topic:

BP Reverts to Containing Oil Spill After Plugging Effort Fails

By Jim Polson and David Wethe

May 30 (Bloomberg) -- BP Plc began outlining its plan to contain oil leaking from its Gulf of Mexico oil well after the company and U.S. government officials abandoned a three-day effort to plug the hole.

In a two-step process, underwater robots will shear away sections of damaged pipe, according to a BP illustration posted today on the spill command’s web site. That should permit BP to install a “snug seal” to a new pipe that would carry “a great majority of the oil” to a drill ship on the surface, Doug Suttles, the BP executive in charge of the spill response, said yesterday in a press conference. The job will take four to seven days, he said.

I can't believe they didn't consider this 40 days ago, as it is a lot more difficult to clean up the oil mess if it is dispersed.

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Thursday, May 27, 2010

May 28th market action going into long weekend (Final Update)

I have posted 2 charts going into Friday's market. Both are of the Dow and are of 2 month durations. I have drawn a Blue line to show you how I came up with a top of this latest rally at 10,500 to 10,600. One chart is of Candlestick patterns and as you can see now the close on WEdnesday was a reversal Hammer pattern indicating today should go up, which it did mightily gaining 284 points to close at 10,258. Investors may take some profit on Friday as we go into the long Memorial day weekend. But I do not see giving back all the gains made today. We only have about another 250 points before we head down again.

My TZA Puts gained today. I bought many of these two days ago for $0.90 each and today the Bid closed at $1.15 and the Ask at $1.25. Some shares sold today for $1.21, which is a paper gain of 34%.

When I sell these as we approach the comparable high for the Russell 2000, which should be around 680-700, I will also buy TZA Calls again. They should be cheaper than my last sale price of $2.25 each. Today they closed at $1.30 with a Bid at $1.15 and an Ask of $1.28. So they have dropped already to a reasonable level to buy them again, as this was a 42% drop.

The last chart I am posting below is the one I posted back last Friday when I said the market was going to drop and the pattern which was to develop. This should now close that prediction.

UPDATE: 6:00am PST.

Personal Income rose 0.4%, according to data released this morning. That is good news. The bad news is that Personal Spending dropped to 0.0%. The Consumer is saving their money, not spending it. This is confirmed by the Savings rate data which was at 3.6%. Futures point up this morning but it is going to be a back and forth struggle for this market going into the Memorial Day weekend.

Art Cashin of UBS Warburg stated on CNBC confirmed my prediction that the market is forming the right Shoulder of a Head and Shoulder pattern or what I have called the "W" pattern. He expects that if the market can hold most of yesterday's gains that in the next week or two we will go up. He too believes that we will not go back up to the highs, so my forecast of Dow 10.500-10,600 range might in fact be his thinking too. Stay tuned!

UPDATE: 6:55am PST
Data out on Chicago PMI (Purchasing Managers Index) for May was at 59.7 versus 63.8 in April. This is another piece of negative data. Dow, S&P 500 and Nasdaq are negative now. The University of Michigan Consumer Confidence went up to 73.6 in May from 72.2 in April .

UPDATE: 11:00am PST
I have posted below the Intraday chart of the Dow and have drawn Red lines to show the trend expected after each "W" pattern. The first "W" pattern, while going up initially after the "W" did finally come to a lower level. The signal now is a rise in the trend even though the Dow has gone lower at this point. Hopefully there will be a little rally to stop it from going much lower than down 150 points. The Vix has also gone up over 11% so far today to 33.30 as the market hits the ows of the day.

UPDATE: 1:20 pm PST
The market has closed and I have added the final Intraday chart of the Dow below, to prove my methods to you. Notice that even after the last Update above, it looked as though we were going lower than the 150 point drop, that I said the "W" pattern had pointed up and that we would go up. Well we did. As a matter of fact, even the folks on CNBC thought we might actually go up at the end of the day, until the market sold off again. But, it you were trading today, interpreting charts can give you the edge and, as I have shown, it is not difficult if I can do it.

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May 27th Intraday Dow chart analysis (Update after close)

As you can see from the chart above, we are at the highs of the session. However the Slanted "W" pattern indicates we will go below the lowest leg of the "W" in the time left today. I will update this again late before the market closes.

Ok, here is the chart below for the full day. I drew 2 red lines. The first is the line I drew above except I have drawn a second one to show the move up. You will notice that while we did not go lower as the slanted down "W" pattern suggested, we did go up a while and then down to the exact same level of the "W" as signified with the arrow. This stuff works if you are patient.

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The power of advertising works both ways. AT&T beware!

Has anyone else noticed that the current AT&T commercial looks like the Gulf Oil spill. Let me refresh your memory of the ad. It shows people running on the beach towards the ocean edge carrying a huge orange banner. It looks to me just like the Oil washing up on the beaches now. They should pull the ad before they are associated indirectly with the Oil spill. The power of advertising can go both ways! To see the ad click on this link.

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Market outlook May 27th: Rally in the face of a Bear market

Yesterday's close had all the makings of a Hammer Candlestick pattern, as the market closed very close to the bottom of the day's trading. This set up the following comment from on the S&P 500 Candlestick pattern for the past 2 days of market action:

The last two candlesticks formed a Bearish Dark Cloud Cover Pattern. This is a bearish reversal pattern that marks a potential change in trend. Though it is highly reliable confirmation is still recommended.

The Futures are up significantly and we are about to pop on the latest good news on the Initial Claims number, which was down 14,000 to 460,000. Also out this morning was initial GDP for Q1 which is estimated at 3.0%, down from an earlier estimate of 3.2%. Dow and S&P 500 Futures dropped a bit but the way seems clear for a rally today.

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Wednesday, May 26, 2010

Dow analysis of chart pattern for May 26th intraday.

I thought many of you who follow my Blog might have been confused by today's chart pattern of the Intraday of the Dow. The market is closed but I wanted to give an update to what the tea leaves are saying. Notice in the chart above I have drawn 2 Red lines under the base of these 2 "W" patterns. The first red line is most telling, as the slant was down but after it the Dow Index went up. Even though it went up, that first downward sloping "W" pattern had to go lower so even after the rise, it did go lower than the previous low, fulfilling the prediction. It proves also that patience is important as is following these simple observations. You will be more right than wrong if you use this guide to look at the charts going forward. The second red line under the 2nd "W" pattern was fulfilled by the Dow Index going higher before reversing.

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Suggestion for Gulf Oil spill containment

Ok, I decided to throw my suggestion up on the web. It isn;t a pretty picture above but you get the idea. The only other addition I would make to this suggestion is that the plastic or heavy canvas needs to be anchored to the Ocean floor and the top of it needs to be connected by those yellow booms they are using now to surround the oil on the surface of the ocean. Add any ideas you have here in the comment link below or comment about mine.

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Market rally now looks obvious, but be aware it is only temporary.

Yesterday's reversal and return to an almost unchanged level sets up today the rally back up to about 10,500-10,600 range over the next week or so. The final leg of the last "W" pattern is being formed if you look carefully at the chart. There is no way to know for sure its length or duration, but one thing is for sure, after this leg up we are headed down to retest this support line and I believe it will fail to hold. The chart above shows 2 other things. First it shows a reason why the market didn't go lower yet. It was at a significant support level that if and when it is broken will result in a significant market drop all the way to about 7,800-8,000 level as the first major plateau of this return to a Bear Market.

The market should be heading down with the news this morning that Durable Goods Orders for April fell, compared to March's rise. Nondefense capital goods, excluding aircraft, often called core durable-goods orders, fell 2.4% in April after a 6.5% gain in March. This would be bad news and if news really drove the market, as many claim it does, then we should have been in negative territory in the Futures market, but the Dow is up 93 points and the Nasdaq is up 22 in pre-market. I hope you now get it that the news or any news does not drive the market. It is human patterns that drive the market.

The other thing it shows is that while the markets were dropping Volume increased much beyond the previous leg up of the market. Compare the volume in the last phase down, shown within the Blue arrow, and that of the previous period of March 1st to the end of April. You will also notice that the period of February the volume was also higher in the small declining period that month. This gives additional validity to the argument we are in a Bear Market Rally.

I will ride this rally up and be prepared to sell, when the market reaches my target. I will repurchase TZA Call Options simultaneously, as we approach that target.

Yesterday, I purchased TZA Put Options for October expiration for $0.90 each share. I plan to gain on these as the market rises also on the Russell 2000, along with the S&P 500. All indexes have a similar pattern with their own Support levels if you look at 1 year chart patterns of the daily closing prices. Good luck on this next leg up. But keep in mind we are about to have a significant market crash this Fall.

Click on the chart to enlarge it for better viewing.

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Tuesday, May 25, 2010

What would China do?

So here is the question of the day: What would China do if it encountered the same OIl spill we have in the Gulf? We in the US tend to think about China, as inferior when it comes to Environmental issues. But when the Chinese have a crisis, they surely know how to mobilize their people, and they have plenty of them, to react to a natural disaster. Any man-made disaster would meet equal force. So I ask you to think creatively here and ask yourself what would China do if they had this Oil mess? They changed the course of the Yangtze River, they built the Great Wall and they gave us all a treat of perfection in the opening ceremony of the Olympics. Why can't we be that good? And why aren't we doing better? Is it beyond us to ask for help from others who might have equipment to deal with this Oil spill or are we too proud as a country to even consider asking others for help? Who are we anyway?

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Market outlook: Higher volatility days ahead.

Scary day today for the markets. If you pay attention today, your blood pressure will surly rise as will the VIX. The Nikkei dropped almost 300 points in overnight trading for a 3% loss as did the Topix and currently European markets are also down anywhere between 2% to almost 3%. World jitters are said to blame and certainly we have enough of them. For example, concerns over the North Koreans starting up the war again with the South Koreans and drawing in China and the US. Then there's the catastrophic Oil spill in the Gulf which has been going on for a month and most likely will continue for another 2-3 months before the well is sealed. Then add to the mix the concerns in the Euro zone about the recent debt problems of Greece and now of Spain, not to mention our own debt problems, and you have a vessel holding a lot of world issues in it.

However, everyone seems to discount the fact that the charts of the markets, which are produced by trades of our collective human minds and the software, which has been used to create formulas which can execute those trades in micro seconds, have been telling us this market drop was coming over a year ago. But we wanted to believe that we were missing out on the rally if we weren't in this rising market. Well watch how you react when the market now reverses. It's the old greed and fear paradigm at play. This creates volatility in markets. So watch the VIX index rise today.

Dow Futures point today for the Dow to drop as low as the 9700-9800 range and the other Indexes point to a similar move. If you are new to this Blog, you might want to read back issues of this Blog ofr the past 6 months or so, sampling the various warnings I had posted. I will summarize the message here as follows: We are headed eventually here to testing the previous market low of 6,440 and it will not hold ultimately. Prepare your portfolio for this and your psyche. It will not happen all at once but rather will play out over the next year or so. But it will play out!

If you haven't noticed lately, 3 Month Libor rates have doubled over the past few months. The rates, which are what banks charge each other for lending to each other, has gone from a low of 0.21% to now 0.54%. All in preparation of a tightening of lending even more than previously. Hmmm, you think they knew tis trouble was coming? Hmmm, Oil has gone down significantly as well. Today it is down over $2.29/barrel to $67.84. One would have thought with as large an Oil spill that the prices would have gone up. This is deflationary.

I thought we might get a relief rally back to 10,500 to 10,600 but we may not as well. I might be forced to part with the TZA OPtions I bought yesterday but it was not a large bet, so that's OK too. I still have 1/2 of my October Call Options as well as owning many TZA shares outright as well as FAZ, both of which are ETF Ultra Shorts. TZA is up to $8.20 in pre-market for a move of 7.5% after hitting a high of $8.38/share earlier.

Watch 1044 on the S&P 500 as that is where support is. If we can hold that, we can then get a rally in the next few days. If we can't we are heading lower and breaking that support level. And it's a long way down from there before another support level will stop the drop. On the Dow, that level is at 9850 and on the Russell 2000, that level is at 580.

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Monday, May 24, 2010

Update: TZA trade

Today I purchased the Oct. Expiration Put at a Strike Price of $6.00 for $1.12 average price. That was the same price as the closing price on Friday. I may add to my position if the market drops again tomorrow and I will try to get more cheaper, hopefully at $1.08.

I plan to sell these when the Dow returns to 10,600 more or less. I still retain 1/2 of my Call Options for Oct. expiration. They went up in price today.

If you look at the Intraday chart of the Dow below, you can see just before the final drop, a "W pattern formed with a slant to the downside. You can also see where I underlined the first "W" pattern and that the slope pointed up. That is why the Dow went up and then after the second "W" pattern went down near the close. Tomorrow is another day.

The VIX closed at 38.32, down 4.4% after being as low as 35.57, or down 9% today. So if the VIX is an indicator of tomorrow, the market should go up tomorrow. Increased Volatility would suggest a more pronounced drop, but I am betting that we will have a short relief rally over any spec of good news. Watch for it on the TV shows. They like to attribute something to when the market goes up, even if they are pulling stories with a positive spin out of their butt.

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Sunday, May 23, 2010

Senate and Congress on Financial reforms: They sold out!

First the headlines and the subscript: New financial rules might not prevent next crisis! The most sweeping changes to financial rules since the Great Depression might not prevent another crisis.

The article was written by AP Business Writers Daniel Wagner and Stevenson Jacobs and posted on It lays out in very concise language the problem, the solution and why the solution might not work. For example, remember the Financial reform Bill passed by the Senate and the Congress was supposed to solve Too-big-to-fail institutions. Here's the excerpt on that particular topic:

The problem:
After bad bets on housing and other risky investments caused the collapse of Lehman Brothers, the government pumped billions into the largest banks to keep the system afloat.

The solution: The overhaul would let regulators close banks whose collapse could threaten the system.

Why it might not work:

The Senate bill lets regulators decide whether to protect the creditors of failed banks. Creditors might take a too-rosy view of a banks' finances if they feel they have nothing to lose in a failure. They might still lend to weak banks and raise the cost of eventually closing them down.
The bill does little to prevent big banks from getting bigger, meaning taxpayers might have to intervene again. A Democratic amendment to limit the size of banks was rejected amid opposition from banks such as Goldman Sachs.

The Bill passed by the Senate last week must be reconciled with the House version of th Bill. Interested persons should call their Congressmen and tell them to fix these gaps and close those loopholes!

To read the full article (and it is worth reading), click here.

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TZA as a quick trade: My strategy for this week

I was looking this morning at the Options for TZA. As many know here I had purchased Call Options for TZA for October 16th Expiration with a Strike Price of $9.00 for $0.58 and sold over 1/2 of them for a 236% profit last week. I still have 1/2 and their current closing value is $1.76. I expect the market to rise this week and I am looking at purchasing Oct. Put Options at a Strike price of $5.00 for $0.65 or cheaper, depending if on Monday if the Russell 2000 index drops. I may at that moment sell the other 1/2 of my Call Options and simultaneously buy the Puts.

I am also looking at the $6.00 Put Options for $1.12. I will keep these only until the Russell 2000 goes to about 700-710 in the week ahead. It closed at 649. A lot depends on the price action and the volatility in the market this week.

The thing I like about Options trades is that they settle in one day. The ones I sold on Thursday settled Friday so I can use the same money on Monday to buy more Options. Stocks on the other hand take 3 days to settle and when you want to use the same money you must buy on margin if the trade hasn't yet settled, or add new money in the form of cash, not check as there also is a delay in the use of the funds by at least a day or so. Of course if you have enough cash in your account you don't have to worry about those small nuisances. :)

Stay tuned.

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Saturday, May 22, 2010

Complete market analysis from 6 months to 30 years

To help others see how trends are formed, I will use the same analysis method that I used yesterday on the Dow Intraday Charts. I used these charts to predict the trend to follow. Let's look back at various timeframes, from as little as 6 months, to as long as 30 years. This context should help others understand why I have been sounding the alarm to be cautious now, as we are about to witness a crisis of confidence unparalleled in our generation. But let's not get too much ahead of ourselves. I will start with a 6 month chart of the Dow as the Index for comparison. First the chart, then the discussion will follow each chart. Look for the "W" patterns underlined in Red and notice the slant of the red line and what trend followed immediately after the last leg of the "W" pattern.

As you can see above for each "W" pattern, a Red Line under the 2 bottom points identifies the "W". It shows the direction of the trend to follow. In this case for the 6 month chart, the last "W" pattern formed shows we are indeed going to go down much lower after the next leg goes up. This is based on the steepness of the last pattern. So now at least short term, we know we are going down lower after the next leg goes up. I will show you in a different chart that the next leg up should go to about Dow 10.500 to 10,600 max.

Above is a 1 year chart of the Dow, where I have drawn several red lines at the "W" patterns, showing the slant and following trend. You will notice that there was a slant down of the pattern in the February timeframe, followed by a small drop after that. Then the pattern reversed, and the Dow continued its uptrend until the beginning of May.

This 5 year chart of the Dow above, shows that the Dow had 2 "W" patterns pointing down, and that it was headed lower, which resulted in the lows of March 2009. However, after that, a reversal drove the market back up to the highs in April 2010. Not much you didn't know here, but it is revealing to see that the charts showed where we were headed in advance .

And last, but more importantly than all the rest of the charts, this Dow 30 year chart shows where we are headed, and it is lower! The second leg of the "W" pattern was at 6,440, if you remember those lows. It was a very scary time. This chart indicates we are headed lower than that. And if you have been reading my earlier posts, you know many indicators have been sounding alarm bells for a while. I refer specifically to the 30 year chart posted on May 7th (based upon Elliott Wave Theory and Fibonacci numbers), and to the previous warnings on April 10th and April 14th (using Put to Call ratio data and VIX (Volatility) Index data.) It was only in April that the crescendo got so loud that it would be foolish to ignore it .

I hope I have given you a sound basis for believing what is about to happen. The last thing in the world I want to say is "I told you so!" So please evaluate this and plan for the future. Most of you reading this work very hard to make money; you need to work just as hard to keep what those long hours have produced. One last word: The market is set to recover a bit in the following days and maybe weeks, as we go back up to 10,600 or so. This is about where the drop down should begin.

So you have more time to regain some of the losses these past few weeks, and to prepare yourself for surviving the crash. Cash is a real good place to keep your sales of stocks until things get better. I do not believe Gold is going to be the currency of choice. People aren't going to bring their Gold to the grocery store to buy milk and bread. Nor will they use Silver to do that.

Currency will still be around and even more precious, as many will have lost plenty of it, and will be selling whatever they can to raise cash. That is why prices will drop in everything, as they did in the last big housing drop. Cash will be King, as they said during the Great Depression. Those who had it survived. This world market drop will cause businesses to cut more costs, and that means people. So the unemployment rate will surely rise again. Here is one last chart to show the Global nature of this impending crash. I have a chart below of the Nikkei 225 Index. It shows their index is also heading below 7,000. The Nikkei closed on Friday below 10,000 to 9,774, down 246 points, and it hit an intraday low of 9696.

Good luck to all who read this. I love to hear from you, so if you have a comment, please leave it. Let me know if this is useful, interesting and/or educational. Oh, and don't forget to take my Mini Poll survey on the right side of this page. Thanks in advance!

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Friday, May 21, 2010


The Volume of Dow stocks traded equalled 140 Million shares in the first 5 minutes of the market open with the Dow going down 140 points breaking below 10,000 to 9918.

More updates will be added here during the day today as Options expire for May today.

Update 7:00am PST
The Dow has clawed back to positive territory in the last minute or so at 7:00am PST, 10:00am EST. Volume now 177 Million shares traded on the Dow. It is going to be a roller-coaster ride today. The Put to Call ratio is now 1.37, down from 1.53 at the close last night. The VIX hit a high earlier of 47.20 before backing off to 43.70, the low now for the day.

Update 7:20am PST
Volume hits 200 Million shares for the Dow with Dow down only 12 points.

Update: 7:40am PST
The Put to Call ratio has dropped to 1.27 now and looks as though it will continue to decline during the day. The Candlestick pattern for the first hour is a W pattern except this one has the lower right bottom point of the W higher than the left side. This usually indicates that the trend will be up during the day. Volume now is only 215 million shares.

Update: 8:00am PST
Put to Call ratio dropped again to 1.23 now. Also, Volume currently totals 231 Million shares. market is up as prdicted at 7:40am Update 28 points to 10,096.

Update 8:38am PST
As you can see from the chart below of the Intraday of the Dow, a "W" pattern formed in the first hour of trading. Notice the slope of that first W formation was up as the Red line indicates. This meant that the Dow was going to go up, which it did following the completion of the "W". These intraday charts as as important as longer term charts. But the principle is the same and why when I showed the 2 month chart prediction a few days ago I made a W pattern prediction based upon the previous data points. Volume is 252 Million shares. But remember this move up, which took several hours did not equal the Volume of the first 5 minutes of trading.

Update: 10:30am PST
The Volume just hit 300 Million shares traded today. The Put to Call ratio seems steady in the 1.25 area while the VIX has retreated to 40.80 at this time. I would expect that the volume will surge within the last 15 minutes of trading today and today's Volume could reach 500 million shares traded on the Dow.

Update: 10:53am

Below find an updated Intraday chart and notice this time I have drawn a 2nd red line showing we are headed lower according to the W slanted pattern. Watch this unfold over time.

Update: 11:10am
Volume is now at 310 Million shares. The Put to Call ratio is now at 1.28 so creep in this indicator supports the Dow dropping from this level of being up 76 points or 10147. We should be starting to head back down shortly.

Update: 11:45am
Put to Call ratio increasing and now is at 1.32. Volume now 324 Million shares. Dow now at 10098, up 29 points. So it has dropped as projected from the 11:10am Update.

Update: 11:53am PST
I have updated the chart to show the drop which I had projected the Dow going down. It is not that difficult to predict if you have the time and can look at these charts when trading. It adds to your chances of making a good decision and that's what we are all trying to do. The same principles here apply to any longer term charts. The Volume is 330 Million shares traded on the Dow.

Update: 12:20pm PST
I was asked moments ago what if anything I would be buying right now. My answer is nothing. I expect that next week we will start a rally up to about 10,600 before we make another reverse turn. Around those levels I would byt TZA Call Options again for October expiration. I like the $9.00 Strike Price but more popular are $10.00 Strike price if you look at how many positions have been made. If you want to take a risk, you might consider buying TNA Options, TNA is the opposite ETF of TZA. That's for a short move. Why I don't like it is that I believe the longer trend now is down and these are more risky than TZA. If you buy TZA and the market goes up short term you can just buy more in anticipation of the drop coming. Hope this is useful. Volume now 346 Million shares.

Update 4:00pm PST
Sorry I wasn't here for a while but work called me and I just returned. I see the Dow closed up 125 points to 10,193. I have downloaded the Intraday chart of the Dow below and as you can see from the last red line I drew that the market was going to go up approaching the last part of the day. And while the Dow went as low as 10050 near the end of the day, it formed the last W pattern with a slant to the upside, as I have drawn, signaling a reversal upward. The Volume closed at 438 million, close to my prediction of 500 million shares. The Put to Call ratio closed at 1.32 for the day.

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Thursday, May 20, 2010

Market summary for May 20th, 2010

Well, as shown in the charts above, it was a heck of a volatile day. I had said I thought the VIX Index was going to hit 40 again in my May Blog post. Today we blew past 40 and went as high as 46.37 before closing at 45.79, an increase of 30% from the previous day's close. The Dow closed near the low's of the day closing at 10,068, which is a loss of 376 points. Also, the candlestick pattern had a lower shadow meaning that this is not the low and tomorrow the markets should go at least lower, most likely testing the 10,000 level again.

The Put to Call ratio hit extreme levels intraday today of 1.64 at 10:30am EST and closing at a high of 1.53, which we haven't seen since October 6th, 2008, as shown in the chart above. Also, on April 14th, I posted the Put to Call ratio as being the lowest in years and it could be a sell signal. On April 15th I again stated I believed we were headed now for the long awaited correction and advised that this was the time to hedge. Since this 1.53 level is at such an extreme, we may see a rally tomorrow going into the close and the weekend. Tomorrow is Options Expiration for May but I think most of the volatility has occurred today and tomorrow should be calmer with less volatility. The candlestick pattern of today does not mark a reversal. Watch tomorrow's pattern for that indicator. Looking at the 2 year Dow chart, you can see the extreme reading of 1.51 was the beginning of the drop of the Dow to the very lows. While I see some small rallies within the Dow over a day or two as normal market movement, I do see we are now headed to retest the lows of the Dow of 6,440 and I believe we will fail to hold there. Strategies of buying Put Options, or ETF's that are Ultra Shorts, can help make you some money. But you just can't beat having a large cash position, sitting this drop out and then buying when the market reverses. If you are not skilled in these tools, you might just better be in cash and wait it out. Talk to your Financial advisor.

Note: If you can't read the charts, trying enlarging them. Also try clicking on any one to enlarge.

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Serious accusations against North Korea could reignite a war.

While the stock market had its own problems so far this day, this from Yahoo! news:

North Korea, accused of waging the deadliest attack on the South Korean military since the Korean War, flatly denied sinking a warship Thursday and warned that retaliation would mean "all-out war."
Evidence presented Thursday to prove North Korea fired a torpedo that sank a South Korean ship was fabricated by Seoul, North Korean naval spokesman Col. Pak In Ho told broadcaster APTN in an exclusive interview in Pyongyang.

He warned that any move to sanction or strike North Korea would be met with force.
"If (South Korea) tries to deal any retaliation or punishment, or if they try sanctions or a strike on us .... we will answer to this with all-out war," he told APTN.

An international team of civilian and military investigators declared earlier in Seoul that a North Korean submarine fired a homing torpedo at the Cheonan on March 26, ripping the 1,200-ton ship in two.

Fifty-eight sailors were rescued, but 46 died — South Korea's worst military disaster since a truce ended the three-year Korean War in 1953. President Lee Myung-bak vowed to take "resolute countermeasures" and called an emergency security meeting for Friday.

This is very scary stuff and should be on more news outlets than it currently is. But this could affect markets already nervous over the European Unions troubles with debt and the Euro.

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Where is the market headed?

The markets have behaved much as I expected. Many are now getting a bit nervous, frustrated and a tad of panic. The 2 Month charts of the Dow above are worth looking at again. One chart is current of the market right now at 7:00am PST. The other was my prediction back over the weekend of what was about to transpire and so I drew Blue lines on the chart as I expected things to play out. So far, spot on! So what does it mean? Well, if you haven't sold any stock yet and are sitting there like a deer in your headlights, you will have another chance to sell before the big drop off happens. When we form the next leg up of the "W" pattern, that is the time to sell into the strength. We may not get over 10,500 so you will need to sell as we are between 10,400 and 10,500 because that's as high as this market is going for a very long time. They say you can't time things. Well this one you can. Good luck on the protection of any profits you have.

This 3rd chart below shows where I think the Dow is ultimately going and it's not a pretty picture. I posted this before on May 7th and was warning about this drop back on April 10th to 14th. Check out those posts too.

It will get real ugly going forward from this next rise up, so play defensive. Consider some longer term Put Options as the market rises on this last leg up. I don't think you will regret it. Talk to your financial advisor and ask him how you can protect and preserve your assets in a major downturn you think might happen and have no tolerance for. Cash is always an option.

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Wednesday, May 19, 2010

May 19, 2010 Dow Chart pattern: Continuing Head and Shoulder pattern

I thought I would put up the latest chart of the Dow with my lines drawn to show the Head and Shoulder or "W" pattern formation so you know how far we are in completing the pattern and what is to be expected in the days ahead. The Blue lines on the chart are what has transpired up to today except that to the right of yesterday's data is how the "W" pattern could be completed. Understand the shape and timing of the rest of the pattern is unknown, but the shape of a "W" is clearly visible.

Today is starting out as a down day, as Futures point to a lower open but also, European country markets are all down at this time by more than 2.0%. Asian markets were down as well by 0.5% by the Nikkei to as much as 2.5% in Singapore Straits Times. For a clearer picture of market direction the next few days, watch the volume today to see if it is equal or greater than yesterday's Volume and how the price action goes, up or down. My bet is market will continue to go down this week and then rally up the beginning of next week before a bigger selloff in early June.

The VIX closed at 33 yesterday but I expect a spike between today and Friday of up to 40 again. The Put to Call ratio during the day yesterday stayed between the range of 0.87 and 1.02, which is not at the extremes of recent daily movement. I would expect this ratio to spike at the time of the reversal of the current drop. Without this spike, I wouldn't believe the move up in the market as the Bulls are wishing for, would be real. It would be more likely a pause in the down trend and not a return to the Bull rally of the past year.

New data out this morning for CPI was not good for Gold investors as the Core CPI for April was -0.1%, making this the 4th consecutive month of either zero or a negative number. This indicator clearly shows we are in a deflationary period. There is no real inflation and in my view this means no real recovery. Inflation will come in due time, but until the economy truly recovers, don't look for inflation. This makes the Gold trade look stupid right now as it is very speculative that inflation is about to rear its ugly head. I don't know how long the current Gold hype will continue but as soon as many recognize we are in a deflationary period, we will have a major selloff in Gold.

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Tuesday, May 18, 2010

Market summary for May 18th: Continuation of the decline.

The Dow wiped out an early gain of 90 points from this morning to close down 115 points. The VIX (Volatility Index) rose again 8% today, closing at 33.31. As I look at the candlestick pattern at the close today, the Dow did not close at the lows of 10,482 and therefore it is possible that tomorrow could be another down day. Why do I say that? Well, it's because I believe we are in the process of forming a "W" pattern, often referred to a head and shoulder pattern. And since I believe we are in the completion of Wave B and forming Wave C now, as part of a Super Grand Cycle going back 30 years, I expect this leg down of the "W" pattern to be lower than the 10,400 previous low close thus setting up a slanted down "W" pattern and more down pressure to come. The chart above is from Investopdia and they are a great source of information and reference material. It is not a current chart of any market Index but rather posted to show what a pattern looks like. On another point, the Volume today was higher than yesterday's, making the drop more real.

I was asked today if I see, as many analysts on TV proclaim, that the economy is doing great and this is the time to buy the stocks cheaper as there is more upside to come in this market before a correction. I do not agree with that position. When I listen to their advocacy of that position they say things like, "I can feel it in my gut". They don't present any rationale other than this week's action and last are because Options Expiration is Friday. You can't argue with that. It is a fact Options will expire for May on Friday, but just because Options are expiring doesn't mean the market could just as easily be pushing up to newer highs from the recovery. The arguments are weak for that viewpoint.

On the other side of the argument, there are valid models such as Elliott Wave Theory, that put all the data into perspective and are predictive. And one needs to look at every claim in light of the smell test for reality. Yes, the economy is better than it was a year ago, but not by much. Unemployment rates have stayed pretty constant the past 6 months or so, at very high levels. If the market drops significantly and scares business leaders again, they will downsize their employees again.

If you know where things might go, you are more prepared than keeping your head in the sand. I offer several critical pieces of data to show you habits are changing for Americans. The first piece of data is of the U.S. Savings rate amongst Americans. If things are going so well, why are so many paying off debt and increasing savings if they believe everything is getting better. It was the American Consumer who kept this economy going and contributed 70% of the economy. They are changing habits as is evidenced in the chart above, which shows Americans Saving vs. Japan's. Americans have started to change the trend of spending and are now starting to save. This chart covers the period of 1980 to 2008 where in 2008 the Savings rate was about 4.8%. In 2009, the Savings Rate hit a high of 5.0%. This is a good thing. Unfortunately, it now stands at a little over 3%, as Americans become complacent and believe they hype by both the Fed's Bernanke and Administration officials. They're not. It reminds me of that movie "A Few Good Men" where Tom Cruise character was questioning Jack Nicholson's character and Nicholson yells, "You can't handle the truth!" That's what's going on here. They don't believe we can handle the truth and are hoping if they can just convince us everything is Hunky dory.

My friends, you must be tired of me saying this but I do because I get new readers every day and many of them. For my repeat visitors I apologize. It's just someone has to shout Fire once in a while when they see smoke and know the flames are right behind it.

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A philosophical view of the stock market and commentary.

Yesterday's market action was a function of fluctuations in currency movement and the same could happen today, according to Art Cashin of UBS Warburg on CNBC this morning. I don't know if that was the cause but there was a surge of the dollar at the open yesterday and, within an hour of the close, the Dollar dropped. Theses fluctuations are expected to continue as Europeans settle in on what they think about the Euro now in light of the 1 Trillion bailout of EU zone countries.

Having said that, we continue to be in a negative frame of mind in US markets. Today the PPI number for April came in at -0.1%, which is deflationary in itself. That continues to plague our economy as we have had negative CPI or zero CPI with all the money and stimulus the Fed has been actively creating. Even with this major effort, there appears to be deflation worries continuing and so far the Fed has not managed to abate this concern. Inflation watchers, rightfully so, keep looking for inflation to rear its ugly head. It has in effect with the rise in Gold and other precious metals, but not enough to turn the tide in the direction of inflation. There is contention on this topic in most Cable programs based upon commentary by their guests.

You would think this would be the most ideal time to pay down Federal Debt with nearly zero interest rates, but it appears for political reasons we prefer to pay the debt down when interest rates rise and the pain is greater. I just don't understand the shortsightedness of Americans. I do understand the politics of the situation, as we are a democracy where politicians are working to get re-elected immediately after winning an election and pain means sure defeat at the polls. Which is why the pain caused by our lack of backbone in dealing with these issues at a logical time is not great enough to make us move into action. That is why we had a Great Depression and why we are destined to repeat history again, unfortunately. This is why I favor the view the markets will drop significantly and shake us to the core as the excesses of the 80's to the first part of the 21st Century will shape a new generation of true fiscal conservatives. We need a cleansing and we are going to have one. That is why the markets do follow Elliott wave Theory and are based on Fibonacci numbers. It is based upon the very nature of man (and woman).

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Saturday, May 15, 2010

Market Summary and projections for the weeks ahead.

What do you think you should have learned from this week's market action? Or are you going to keep your head in the sand and hope everything is all fine now? In the charts above there are some very interesting revelations if you know how to read chart patterns and Candlestick patterns. First, in the Dow 6 month chart, you will notice that we have recovered 2/3rds of the recent drop. To be exact, the market has recovered 61.8% of the drop. What's so special about that? 61.8% is a Fibonacci number. So one thing it should tell you is that the last Elliott Wave up, is finished! That is why Friday was a down day and why most likely Monday will be so too.

What else do the charts tell us? The second chart is of the Dow for 1 month, so you can easily see the candlestick pattern for yesterday. Why is this at all important? Because it gives a signal of a Hammer pattern. A Hanging Man candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during a decline, then it is called a Hammer. That is what yesterday's pattern ended up as. Another point of yesterday's action was to look at the Volume chart. Friday's usually have less Volume than Thursdays. But yesterday the Volume was higher than Thursday. As a matter of fact, if you look at an intraday chart of Volume you would notice that over 20% of the volume yesterday happened in the last 15 minutes. Over 50 Million shares were traded in that time and it got the Dow off its lows to close down only 162.8 points. Hmmm, there that Fibonacci number again.

There is no way for certain to predict the future, but candlestick patterns give one a better than 50% chance. However, knowing this, there are patterns within a day as well and while it points to a lower low on Monday than today, it could just open that way and climb somewhat higher. However, it will not go over the recovery high in place last week. It should stay below that and my guess is that the market will go lower next week. Why do I say that? Because this market move needs to be looked at in a much larger context, say 30 years!. I have posted a 30 year Dow chart in the past month and shown that we are in a Super Grand Cycle where we now are ready for a major move to the downside unlike anything we have experienced in our lifetime. Exactly how and more precisely when this will happen is unknown. But it is coming.

Gold this week rallied to new highs confirming the lack of confidence in world currencies and fear that the only real safe place is in Gold. I do not believe this will last during this Super Grand Cycle, as Gold will eventually drop below $900/ounce and go as low as $600/ounce if we humans behave as we have in the past. But enough of the speculation for now. The point is that all the signs point to a major, seismic, drop like a rock. I have been warning about this the past 3 months. I have been using language like "Fair Warning" which is a term used by auctioneers that the impending sale is about complete. I don't know what else I can do to warn people, as it is we little pople who will be hurt, not the Wall Street tycoons. Fair Warning!

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Friday, May 14, 2010

Fair Warning: Markets about to turn down significantly!

The stock market may make another drop down today as I look at the Futures market. If it closes down on the Dow between 100 and 200 points, it will set the downtrend line as is shown in the Dow chart. This could be the turn down which accelerates and causes panic in the days and weeks ahead.

Savvy readers of this Blog used the opportunity yesterday morning or Wednesday to load up more on the TZA Calls for October 16th expiration for Strike prices of either $9.00 or $10.00/share, as they are in perfect position to rise significantly again. The second chart is of the Russell 2000 Index, symbol $RUT. You will notice from the 3 month chart that the Russell dropped over 12% in that recent dip. This has huge implications for the ETF's of this Index.

Remember TZA is an Ultra Short ETF of the Russell Index. It moves up, when the Russell Index is down and down when the Russell goes up. It moves double the move of its counterpart, TNA. So, if TNA moves down 1%, look for TZA to move up 2%. In recent market action TNA have been moving down 4%-5% causing TZA to move up 8-10%. Then if you have Call Options on TZA, as I do, these moves up can be as much as 100-200%.

I have warned many of my belief that we are headed down in all markets by a scary amount. I dare repeat that again, for having many dismiss this. Enough to say, many will be really scared when the market drops, because the bottom will seem to never come. Why not be prepared for this by taking your profits and sleeping better at night. Gold is flashing warning signs daily, as it hits new highs, even today, as it is at $1247/ounce, up another $11.00 an ounce today.

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Wednesday, May 12, 2010

What's happening in politics this year? One word, shakeup!

The political parties are scrambling for change, at least that is what is happening in the Republican Party. It is being split apart with the Tea Party movement. It is difficult to tell at this moment if these changes in the long run will be beneficial. However, when people start to get involved and taking the phrase "power of the people" to new heights, it is indeed good for democracy. So those who believe on the right that true Conservatism was abandoned by the Bush Administration are correct, as more money was spent that we didn't have, than in any other presidency as far back as you can go. It seems Fiscal Conservatism is coming back in vogue by the efforts of the Tea party and proposed and articulated by Republican Rep. Ron Paul, who is a Libertarian in philosophy. I think we can all agree that irresponsible spending hurts our country more than even terrorism. We have amassed so much debt, we are not much better off than many countries in Europe like Greece, Spain, Portugal, Ireland and Great Britain. This was the cause of the ousting of Gordon Brown as Prime Minister. Living within one's means is what is required of us all. So I think this is all for the good as I see it within the Republican sphere.

So now let me look at the Democrats. There has not been any such movement on the left in the Democratic Party. I would have thought that there are social liberals but fiscal Conservatives out there who would push the Democrats more, and unfortunately, none have shown up to date. One way in which we could have more bipartisanship as was demonstrated yesterday, when Sen. Bernie Sanders of Vermont was able to get a Bill passed to have a one time AUDIT of the Federal Reserve from the years 2007 to 2010. The Bill passed 96-0, which is unheard of since President Obama got elected. Republicans and Democrats can work together as long as both Parties use the common language and philosophy of Fiscal Conservatism to rule the country. The Party's can fight over social issues but come together for the good of all on Fiscal issues such as reducing the National Debt and using PAYGO to approve any spending Bills. There is common ground here if Progressives seize the moment to work cooperatively with Tea Party advocates, and Libertarians, to get us back on track as a country, from the spending of this and previous administrations. I show 2 charts tonight. Oner is of the National Debt increase since Reagan. and the other is a chart of Debt versus GDP by Country. This last graph may be difficult to see so blow it up as it is worth it.

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Market update: Market up but Volume declines for consecutive days

As you can see in the chart above, the Dow 6 month chart shows that while prices have been going up, the Volume has steadily declined for each of the past 4 days. While I know that a market going up is some comfort to those who were scared last week, it is important to realize that a rising market on lower volume is a very bearish sign.

The second chart is a 1 year chart of the Dow and it shows that we remain below the previous support level and therefore the bearish setback is still present. I am using the rise to buy more TZA Call Options and to sell some stocks to raise cash.

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Monday, May 10, 2010

How one Option moved over this volatile period.

I wanted to show you how the value of the TZA Options I purchased on the morning of May 1st, moved over time and the effect of the market turmoil last week on the price and gains. (I have also included 2 charts. One is for the period of 1 week and the other is for the past Month.)

Call Options on TZA for October 16th expiration taken at various dates.
Last Bid Ask Tot. Vol. Strike Price

TZA 1.87 1.74 1.88 1,987 4.00 Strike Price
TZA 1.32 1.21 1.29 1,107 5.00 Strike Price
TZA 0.97 0.91 1.04 4,455 6.00 Strike Price
TZA 0.89 0.72 0.78 3,443 7.00 Strike Price
TZA 0.75 0.58 0.69 498 8.00 Strike Price
TZA 0.64 0.50 0.58 1,408 9.00 Strike Price Purchased my contracts at $0.58
TZA 0.49 0.43 0.50 4,610 10.00 Strike Price
TZA 0.52 0.38 0.46 164 11.00 Strike Price
TZA 0.47 0.34 0.41 178 12.00 Strike Price
TZA 0.45 0.30 0.37 48 13.00 Strike Price
TZA 0.38 0.27 0.34 629 14.00 Strike Price

Last Bid Ask Tot. Vol. Strike Price Percent gain from 4/30/10
TZA 3.80 3.60 3.85 1,968 4.00 Strike Price 103%
TZA 3.10 2.96 3.25 1,204 5.00 Strike Price 135%
TZA 2.51 2.51 2.74 4,877 6.00 Strike Price 159%
TZA 2.22 2.16 2.30 3,449 7.00 Strike Price 149%
TZA 1.95 1.90 2.01 565 8.00 Strike Price 160%
TZA 1.74 1.68 1.79 1,549 9.00 Strike Price 172%. My gain was 190% because of lower purchase.
TZA 1.56 1.55 1.61 5,476 10.00 Strike Price 218%
TZA 1.25 1.36 1.47 340 11.00 Strike Price 140%
TZA 1.27 1.21 1.37 200 12.00 Strike Price 170%
TZA 1.13 1.15 1.26 43 13.00 Strike Price 151%
TZA 1.05 1.04 1.18 829 14.00 Strike Price 176%

As of the close today, most all were down between 12% and 38% with the one with a Strike Price of $11.00 had no change. I expect these to regain the losses that happened today as it is a long time between now and October expiration. The Strike Price of $10.00 for October seems to be attracting the largest trading volume. I would say the $9.00 Strike Price gave the second best return of these so far.

So the minimum gains are still over 80% for these and as high as 157%. I will look for any further rise as an opportunity to add to my Call Option positions on TZA.

I have been asked if this trend down is complete now and if we are starting a new trend up. My belief is that we may go up again a bit tomorrow, but this downtrend line, which started about a week ago will continue. We will zig and zag, up and down, but the pattern should become clearer in a week, when May Options expire on May. 22nd.

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Time to buy Options with market soaring!

It's a great time this morning, with the market up so much to buy those Options for October for those who believe this move up is only temporary. The Dow is up already over 450 points to 10830 and the S&P 500 is up 52 points to 1162. Check my earlier Blog to see what I had bought. I bought TZA and MGM Options.

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Saturday, May 08, 2010

Stock market outlook: Thunderstorms with Tornado winds

I feel like I have been crying in the wilderness saying this correction is coming for quite a while. And most recently I have been saying so in a feverish pitch if you go back to my March 23rd posting. But it is now here and it will unfold slowly but consistently. The 3 charts today show that we have broken below support of the Dow. Oh, and all the Indexes are similar so it's not necessary to post all of them here.

We will be breaking below the 200 day Moving average shortly for most of the Indexes as we are closer as of Friday's close. The chart above, on the VIX (Volatility Index), shows that we hit a low and a high all within weeks. When we hit the multi year low I wrote here that it was a signal that the long awaited drop was near. Well it only took 2 weeks or so and here it is.

Also note the Put to Call ratio chart above, which shows we had hit the multi year low of 15.23 only weeks before this major rise up. It was a signal that there was too much optimism in the markets and it helped fuel the drop. All 3 charts are of a 1 year timeframe so you can se various moves and look at what happened in the Dow.

Now I know many of you think the worst is over from yesterday's market action. Heck, I heard on CNBC that the markets had "recovered" from the previous day's major selloff, which they still say they don't know what happened and it must have been a system glitch. In my view they will find no system glitch. This was a panic selling moment. More will come. Everyone knows the meteoric rise of the Dow since the lows had to come to an end. Those folks feel a 10% correction was inevitable. And so we have had almost a 1000 point correction from 11,400 on the Dow to 10,400, but, unfortunately, this is just the beginning of the big step down in all major markets. Elliott wave Theorists have been saying it is coming for a while as well. I posted a 30 year chart yesterday. I suggest you look at it and ask yourself this question. What do I do if this really does happen? Am I positioned to weather this kind of a drop? And lastly, Uf not, what can I do in the coming days and weeks to get more secure and less vulnerable to a major historic Bear market collapse like happened in the Great Depression.

I have many Short positions and Options currently, so that is my bias. I listen to myself and ask myself the same questions. I still see much upside movement in them. Here are two recent purchases and their status. On Monday I mentioned I had purchased a Call Option on the Ultra Short ETF, TZA, for $0.58/share with a Strike price of $9.00/share and an Expiration of October 16th. It closed yesterday at $1.74, after hitting $2.03 earlier in the day. So that one is up currently 200%. My other one was on MGM. It was a Put Option for a Strike Price of $12.00 for September for $1.15/share. It closed yesterday at $2.08/share. This one is up currently 81%. The underlying stock has closed at $13.12 and for a brief moment this week actually went to $12.52, well within the reach of a $12.00 Strike Price. And much can happen between now and September on this one as well as the TZA Call Option. I also have shares of TZA which I have held on to. I also own some FAZ, which is an Ultra Short ETF of the Financial sector. It has moved this week from about $11.50 to $15.00 for a move of 30%.

So there are other vehicles available to you if you need protection. Talk to your financial advisor. Don't put all your eggs in one basket. Consider cash a part of every portfolio. But don't do like many folks out there do. Don't look at your holdings only when a crisis appears. It's too late. You worked hard to make your fortune or are still working. Don't be a slave to events. Take some accountability for your future and manage it, rather than letting external events manage you. Best of luck. We will be visiting this issue as the days and weeks unfold the market direction more clearly to you. I have my crystal ball. I hope you do too and that you're not looking at yours through rose colored glasses.

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Friday, May 07, 2010

Nonfarm Payroll numbers put into perspective

From Chart of the Day today:

Chart of the Day
Today, the Labor Department reported that nonfarm payrolls (jobs) increased by 290,000 in April -- the largest increase in four years. Today's chart puts the latest data into perspective by comparing job losses following the beginning of the current economic recession (solid red line) to that of the last recession (dashed gold line) and the average recession from 1950-1999 (dashed blue line). As today's chart illustrates, the current job market has suffered losses that are more than triple as much as what occurs at the lows of the average recession/job loss cycle. However, today's relatively positive jobs report provides an early indication that the current job market is moving into a phase of expansion.

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What's next for the stock market?

What if the stock market does what I hope it doesn't, go down below 4,000 on the Dow. But that is what the charts indicate using Elliott Wave theory. Experts on CNBC are pumping up the fact that they see the economy is growing, even though the Unemployment rate went up to 9.9% in April, up from 9.7% in March. Well the chart above is very scary and I show it for one reason, to give the reader a caution about how much of their wealth is tied up in the market. As yesterday proved, markets can be very irrational and they do not move on news. Many things are pointing to a rebound in the Futures market but watch for people selling into the move up as Volume will increase. Watch the Volatility Index VIX during the day. And if you get a chance go back in time and read some of my market posts.

The chart above points out the Elliott Wave cycles I have counted and where it says we are headed when all is said and done. This will not happen in an exact straight line and will be jagged, going up after some drop and then going lower again. FAIR WARNING!

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Thursday, May 06, 2010

Stock market drop: I told you so! UPDATE

Let's first focus on the first 2 charts of the SP500 and the Dow for a year. Those of you that read my Blog regularly know I have been warning people of the market drop. I even said in one of my recent Blogs "FAIR WARNING!" So the fact you're here means you want to know if we are going to go back up? We could go up a bit, but I believe we are eventually going way down as I have said many times recently. Go back and look at charts (March 23rd) where I predicted how far the markets are going to go down.

The Dow closed down to 10,520, down 347 points, while the S&P closed at 1128, down 38 points. The VIX (Volatility Index) closed at 32.80, up 7.89. The third chart is of the VIX and you can see that it zoomed to a 1 year high today.

I told a few friends on Monday I had purchased several Options. I bought Call Options for TZA (the ETF Ultra Short of the Russell) at a Strike Price of $9.00/share for Oct. 16th, for $0.58/share. Today, those shares closed at $1.20/share, in effect doubling my money. And I also bought Put Options on MGM for a Strike Price of $12.00 for September for $1.15/share. Those shares closed today at $2.03/share yielding a 77% gain. I still own those Options as I truly believe we are heading down, down down. Good luck out there.

UPDATE: 6:00pm PST

The Nikkei is dropping at the open and so far has dropped 433 points in 45 minutes after the open. Yesterday the Nikkei dropped over 350 points and so it appears there is more downside coming even tomorrow, unless the Nikkei recovers. I would watch to see before our market opens tomorrow as to whether the European markets are also down significantly and then choose a strategy that is right for you and your own situation.

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Tuesday, May 04, 2010

Wellpoint and United Healthcare: Stock price since Healthcare Bill passed.

First, a little history. If you remember I have written about these 2 companies many times during the healthcare debate. I had said if you want to know if the healthcare Bill is good for average Americans, watch the price of their stocks.If the stock price goes up and stays up, it is bad for the average American. If it goes down, it is good for the average American. On Dec. 5th the markets opened to the news the Public Option was going to be eliminated from the final Bill. Both company stocks surged after that. Then about a month or so ago the Bill go passed after reconciliation made it a better Bill. Well, there has been enough time passed since the Healthcare Bill got passed, so let's look above at the price of these stocks above. Both charts are a 1 year look at the stock price of both companies. I think we can safely say that shareholders didn't think it was that good, as we are now back to December levels in price and the steepness of the drop is noticeable.

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