Market outlook for June 25, 2009

Well, the markets are headed lower again today. Several news items contributing to this. First Weekly Jobless Claims were up 15,000 to 627,000. The significance of this was that most expected a decrease in the number of claims and for the overall number to dip below 600,000. Secondly, Continuing Claims also rose an unexpected 29,000 to a total of 6.74 Million jobs.

El Erian, Co CEO of Pimco said this morning that he agreed with Warren Buffet, he was not seeing Green Shoots. He also said "it is too early to relax and it is pretty tricky out there right now."

Art Cashin on CNBC said this morning it looked like we are almost confirming a Dow Theory Sell signal and he expected several corrections each going lower over the next few months.

It looks like finally many are coming around to what I have been saying for over 2 months now. After the close yesterday on CNBC, a man from Lowry Research said we have had two Mondays where 90% of the trade for the day were all on the sell side. He said he expected us to return to the lows of 6,440 and may go below it. He based his reasoning on the fact that Volume has ben light on the rally up compared to the volume coming down to the lows in March and that not many bought into the rally as there is much cash on the sidelines. Most of these viewpoints I have posted here and is why I told many to stay with their ETF Ultra shorts, TZA and SDS and others they had and to buy more and average down the purchase price. It is why I said to sell Apple a week ago when it was near $140 and take the profits. We are headed lower and lower for a while now. Don't get sucked back in on a correction because while the market will go up some days, we are headed for a staircase pattern down for while to come.

Time to sit back and wait now to see when we go significantly lower and how much. But the signs are clearly negative now for the markets. It is not too late to buy some of these ETF Ultra shorts like DXD, SDS, TZA and others as the prices have been low for a while. TZA, for example is now about $25-$26/share but was $20/share recently.

Don't forget if you have not voted this month on my Mini poll to do so. It is on the right margin. Thanks!

UPDATE 9:10am PST

Well the market has thrown the analysts a curve ball, as the market now is up with the Dow up 150 points. Will it hold today? I have no clue!

May 30th Stock market report: Week's summary and the week ahead

It was another painful week for Shorts, including yours truly. But we are now back where we were on May 18th when the Dow closed at 8,504 and the S&P 500 closed at 910. Yesterday the Dow closed at 8,500 and the S&P 500 closed at 919. The Nasdaq has done better as it closed on May 18th at 1732 and yesterday closed at 1,774, for a 2.4% gain. My ETF Triple Short play, TZA back on May 18th closed at $26.65 while yesterday it closed at $24.84, or a 6.8% loss, even though it reached a high yesterday of $26.63. A close friend of mine has been going along for this ride and has SDS. His SDS on May 18th closed at $57.76 and yesterday closed at $55.81, about a $2/share drop or 3.5%. Sorry friend! With these ETF's they can explode in a more volatile market, but we have not had the volatility, in either direction, for that explosion.

The VIX Index, which measures Volatility, closed yesterday at 28.92. This is well below the highs of the upper 30's to the 50's this Index showed back in April. The Put to Call ratio closed the week at 0.77 and so that measure also is pretty stable as well.

The only thing worthy of notice was yesterdays last hour of trading. The Dow was at 8,400 an hour before the close but then accelerated to its peak at the close of 8,504. Looking at the charts for companies like IBM, symbol IBM, McDonald's Corp, symbol MCD, Wells Fargo Bank, symbol WFC, Bank of America, symbol BAC, and lastly Ford Motor, symbol F, all had huge purchases in the last 15 minutes before the close. I suggest you look at your stocks on a minute by minute basis for 2 days and look at the spike in the last few minutes. To me this spike looked like a climax, and I use the word here deliberately to signify change in trend. Even the VIX dropped precipitously in the last 30 minutes. Therefore, I believe we are at a key turning point for the market. I have put several of these charts at the beginning of this post so you can see what I am referring to. The charts are 2 days of time and one minute intervals for the selected stocks mentioned above. Notice Volume spikes as well corresponding price spikes in the last few minutes.

If we reached a climax yesterday, then something is going to be different next week. I can not say whether the markets will decisively move down or up at this point, because there are no "tells" out there that I watch giving me the necessary direction but here are some facts. Gold closed yesterday up $19/ounce to $979. (I said watch Gold and said it was going past $955 when it was $869.) Oil has climbed back to $64/barrel. Silver has climbed to $15.75/ounce. Either the economy is getting better or inflation worries are here big time. Silver is up 75% since its low of $9/ounce in November. Gold is up 35% since that same time. If this turns out to be a major Bull rally, I will concede I was wrong to go Short with TZA. However, I could be just as right and the market is set to go down from here. The old adage "Sell in May" became a noted slogan for a reason. That reason may come to fruition.

My major emphasis has been to preserve capital on this site for the past few months. I said the rally was for real back when it turned up and I stated at that time many will not believe it. Well, for the past few weeks it has stalled between the low of 8,200 on the Dow and 8,600. I expect we will have a breakout now from Friday's action in the last 1/2 hour. Remember for every purchase yesterday there was a seller. They got the price they wanted for those sales as the tick went up but the buyers could be on the wrong side of that trade. Besides does anyone really believe that Consumers are going to be spending even if Consumer Confidence rose in May to 68.7 from 65.1 in April? To me the bigger news was that Chicago Purchasing Manages index went down from 40.1 in April to 34.9 in May. Time will tell. Stay tuned.

Tomorrow is the end of the month of May so if you have not yet voted during May in my Mini Poll of how long the recession will last please do. But please no double voting.

Stock Market: Review of yesterday's action and Outlook for week of Feb. 23rd

It was a day of fear and hope yesterday culminating in a Double Witching expiration and gave the feeling of a roller-coaster ride. Much of the action was normal Options expiration but the added volatility magnified by comments coming from Robert Gibbs, Press Secretary for President Obama, when he took Nationalizing the Banks off the table for consideration. This followed a comment from Sen. Chris Dodd of CT, Chairman of the Senate Banking and Insurance Committee, where he said to the media that some banks might need to be Nationalized for a short time. When Dodd spoke, the market tanked to the lows of the day, and when Gibbs spoke, saying that President Obama was not in favor of nationalizing the banks, the market rallied, giving a clear signal of where Wall Street was on the matter.

I was very pleased about yesterday's action. We did go down below 7,300 but closed above it. We also did drop enough on the S&P 500 to come close enough to a retest of the November lows to say we had arrived and successfully passed the test, at least for yesterday. The S&P 500 closed at 775 after hitting a low for the day of 754. The November low was 741. The Dow closed at 7,366 after setting a new low of 7,266, breaking the previous Nov. low of 7,392.

Looking forward, I see this coming week showing a positive gain and possibly enough momentum going into the week of March 2nd to sustain a bit longer rally. On Friday I bought more shares of the ETF Ultra Pro shares of the S&P500, symbol SSO, at $18.48 and also bought more shares of the ETF Ultra Pro Small Cap Fund, symbol TNA for $17.48/share. I didn't hit the exact lows on each purchase but was very happy I did buy them. The low for the day for SSO was $18.25/share and for TNA the low for the day was at $17.19/share.

Reflecting on some previous call I had made, I was in error in my call on selling the ETF Ultra Shorts SDS and TZA back when I did. I had sold TZA back on Jan. 21st for $67.24 and yesterday TZA hit a high of $76.05/share. Clearly I could have kept the shares till yesterday and done better than I had back on Jan. 21st. I could have gotten at least another $5/share profit in hindsight. But I do feel good I made a good profit when I sold them. On SDS, I had also sold the shares on Jan. 21st at a price of $86.90/share. Yesterday SDS reached a high of $94.82/share so I left at least $6/share on the table for that one as well. Again, I made a good profit when I sold them both in the 25% to 35% range. The reason I am posting this all here is so you know I really do continually look at my decisions over time to reflect more on my decisions. If Bankers did that on the Sub Prime problem and realized what they were doing, we might not be in the mess we all find ourselves in as a country.

The moral of this analysis is several fold. First, Lesson #1, don't ever be sorry for selling a stock at a profit. Greed is your enemy as it makes you risk losing what you have. Secondly, Lesson #2, don't be afraid to look yourself in the eye and give a true assessment of you shortfalls and errors. It is the only way to improve your situation. And lastly, if you want to really learn lessons permanently, learn to admit your errors to others voluntarily. It can be very humbling and also very reinforcing of lessons 1 and 2. Hope this helps you today.

The Stock Market: Week ending 2/6/09

So the summary for the week is as follows: The Dow closed the week at 8,281, which was up 280 points or 3.5% from the previous week's close. The Nasdaq closed at 1,592, which was up 116 points or 7.9% from the previous week's close.

Here's a summary of the stocks I have bought and where they stand at week's end:

TNA was purchased on January 21st at a price of $23.36 and today it closed at $27.89 for a paper gain of 19.4%. SSO was also purchased on January 21st at a price of $21.57 and today it closed at $24.25 for a paper gain of 12.4%. I also sold TZA on January 21st as well as SDS. TZA has dropped 26.7% since my selling of the stock and SDS has dropped 15.9% since the selling of the stock. It seems the strategy of buying the ETF Ultra Longs near the bottom of the range of the Dow, S&P500 and Nasdaq Indexes, is paying off.

Additionally, my purchase of Apple stock, symbol AAPL, on January 7th for $86.50 and additional shares at $78/share on January 14th, has had a nice paper gain closing today at $99.72/share. That's a paper gain of 15.3% and 27.8%, depending on which dates the stock is purchased. My average purchase price is $83.50/share.

Disappointing has been my purchase of Ford Motor Co., symbol F, with an average price of $1.90/share back on January 24th and January 28th ($1.80/share and $2.03/share).

Much depends on what happens to the vote on the Stimulus package which looks like it will occur on Sunday. If there is a semblance of bipartisanship, it would be a good thing for the country. The The Unemployment report today was an eye opener. It showed unemployment at 7.6%, with 598,000 losing jobs this past month. This may have put the necessary fire under elected officials.

Watch my post on Sunday night and Monday morning pre-market to get a sense of the upcoming week.

Hope we can believe in.

As the day begins, there is more hope for reaching a bipartisan agreement on the stimulus package before the Senate today. I would estimate that a few days ago there was only a 35-40% confidence by the public, the media and the Congress that there would be a compromise within the Senate deliberations of the stimulus package. The needle has moved now to about a 55-60% confidence that there will be compromise and a good bill that most can live with.

The Unemployment rate (just announced) is 7.6%, as we had 598,000 jobs lost this past month. These two forces will result in some higher volatility in the market today (as measured by the VIX). Based upon the realities on the ground on the negotiations, I believe the Bulls have the edge over the Bears in this market. Being on the Short side right now is very dangerous as this market can snap up in a heartbeat. I do not have any Short positions nor do I currently have any ETF Ultra Short Funds like TZA, DXD or SDS and if I did have them I would sell them at the first opportunity today.

I did add to all of the shares I have mentioned here. Added yesterday to TNA, SSO, F, and AAPL and feeling very confident these will rise in the next 30 days. When the Stimulus package gets passed by the Senate today and a compromise worked out with the House of Representatives during the next week, hopefully President Obama will be signing the bill by Friday the 13th or more preferably by Feb. 12th, President Lincoln's birthday. And the President will be credited with bringing a different kind of politic to Washington, thereby increasing his popularity with the American people.

Market outlook for Feb 5th and 6th: Update 2

Took a good look at the charts for the past 3 weeks for the Dow and the S&P 500. Looks to me we formed that "W" pattern but the second leg of the "W" pattern is lower than the first leg. It suggests to me the markets most likely will go down now the next several days. How low we go depends on the results of the Jobs report tomorrow. If they are bad showing at least as bad as last month, we will drop and possibly retest the previous lows on the Dow of 7,392 and 750 on the S&P 500. If the results are better than expected we will have a short rally up. However the news that will determine where we are going is the Stimulus Bill and how it gets through the Senate. It is how the process is perceived and how the President manages the news about this and how he uses the Bully pulpit. Time will tell, but we should know by a week from now.

My choices are going to be these. First, if the market drops down to retest the lows, I will purchase additional shares of the ETF's TNA and SSO. I will add shares of Ford, symbol F, and also Apple, symbol AAPL, continuing to add shares. I will not try to gain a little on the drop by buying TZA nor SDS as we are at the low of the range for these Indexes and I can't time the next leg up.

UPDATE: 5:30am PST

Jobs data out shows an increase of 41,000 jobs lost last week bringing weekly claims to 626,000 jobs lost. Productivity is up 3.2% and Continuing Claims have now reached 4.78 Million jobs.

UPDATE #2 8:08am PST

I purchased additional shares of Ford at $1.90/share, more shares of TNA for $24.90/share and more shares of Apple at $93.99/share

Stocks to watch in the coming week

Another look back of the trade of the ETF Ultra Shorts, SDS and TZA, shows the day to sell it was Wednesday, as yesterday both stocks did not reach the Wednesday's highs nor my sell price. Yesterday, SDS reached a high of $86.18 and I had sold my shares at $86.65 and TZA reached a high yesterday of $66.88 and my sell price Wednesday was $67.24.

I am holding and accumulating shares of TNA as they drop and the same with SSO. I did not venture in for a day trade of TZA nor SDS.

I continue with my recommendation of Apple, symbol APPL. I am watching Ford Motor, symbol F, as it has dropped now to $1.80/share. I believe this stock will drop further and there will be a buying opportunity again at lower prices. I would stay away from GM as I see this stock dropping significantly more from the $3.49/share price. Given its current condition and even with a bailout, the chance to fail, this stock is overvalued and investors need to be wary. Ford is the better to invest in for the long term.

I had told a number of close friends and relatives that MGM Mirage, symbol MGM, was going to drop when it recently was at $14/share and I said it would have been a good one to short as I saw the price dropping below $10/share. Well this week it dropped as low as $8.80 once again. Reports I get from Vegas is that rooms are a plenty and gaming is not attracting the usual wealthy groups of Asians once a significant revenue stream for the Casinos. The next big event to try to draw crowds is the Super Bowl. Early estimates of group size may disappoint, resulting in another check on revenue for the Casinos.

TZA and SDS: Looking back to yesterday's decision to sell.

The day after my recommendation to sell TZA and SDS, the market dropped today going as low as 7,957 on the Dow, but then recovered to close at 8,123, down 105 points. The question now is should you have sold yesterday or not. I can't say for sure as we will need time to reflect back, but as far as today is concerned, the data on TZA is as follows, and then SDS.

TZA:
Closing price yesterday $56.71. High of the day was $67.93
My price sold $67.24
Closing price today $61.41. High of the day today was $64.31

SDS
Closing price yesterday $79.43. High of today was $87.09
My price sold $86.65
Closing price today $81.61. High of the today was $84.84

With the data we have today it is clear that yesterday was a better day to sell both of them. Tomorrow is yet another day.

Summary of a recommended roundtrip trade

Summarizing the trade roundtrip for the ETF Ultra Shorts, SDS and TZA, shows the following analysis. Starting with a recommended purchase of SDS was made on 2 dates and prices. The first was made on Dec. 6th at a price of $70.50 and the second was made on Jan. 5th at $65.70. The sell price today for me was at $86.90. My average price was $67.75 so I made a 28.3% profit on SDS and if you followed me yours is close depending on your average price per share. If you only made the initial purchase at $70.50 then your profit was 23% and if you made all your purchases at my second recommended price then you did even better with a profit of 32.3%. Not bad for a 6 week investment.

As for TZA, I recommended it also on Dec. 6th for $53.50/share and recommended another purchase on Jan. 6th when price was $42.86/share. I sold my shares today at $67.24/share. The profit on an average price of $53.50/share is 26% and if you added shares at the lower price of $42.86/share then your profit was 56.9% profit.

Today I started buying the ETF Ultra Pro fund, SSO for $21/share as I am expecting that after we retest the lows we will snap back to go to the top of the range again. On the Dow that would be going back to 9,300.

We are in a tight low range and may continue in that tight range for some time.

Recommend selling the ETF Ultra Shorts now

I am selling my SDS and TZA now as the testimony by Tim Geithner, nominee for Treasury Secretary, seems to have weathered the storm and in my view the markets will reverse the trend as we are near the low of the range of the Dow from 7,300 to 9,300 currently at 7,975. There is better than a 50/50 chance the market will reverse and go more towards the high end of the range again.

You might be able to see these rise ETF Ultra Short shares gain more if we break below 7,900 but that is being greedy in my view and you may be left hanging on too long.

Pre-market Wed. Jan. 21st, 2009. It's anyone's guess today

The market dropped significantly yesterday resulting in my two recommended ETF Ultra Shorts moving significantly. SDS closed yesterday at $86.88, up 10.3% and TZA closed at $66.60, up 20.3%. These were impressive gains and many most likely cashed in yesterday for a nice profit. Some are still holding on to these ETF's including me. I will be watching the action today closely and may sell myself, as now these 2 have had very respectable returns.

The Dow did break below 8,000 yesterday closing at 7,949 and just off the low of 7939 while the S&P500 closed at 805 within 0.5 points of the low of the day. Volume was not ahead of Friday's volume and both indexes did not make a Hammer Candlestick pattern, so my initial thoughts are we still may go lower than where we closed yesterday. We can still go back to the previous lows to 7,300 on the Dow and 750 on the S&P500.

Setting the record straight on my recent stock market predictions

So here I am looking back at my recommendations going back to December. I wrote the following post on Jan. 5th as I was looking at my ETF Ultra Short Fund recommendation of SDS and TZA. Here is what I said:

"So I am taking the heat over my recommendation to buy the ETF Ultra Short SDS. Since I recommended the purchase the ETF around Dec. 6th the price was $70.50 (adjusted for the $11.50/share payout). Today the ETF closed at $65.70. Yes, it is down about 7%. But we are near the top of the range of the highs of the market in the Dow and SP500 as well as the Nasdaq and there has not been a clear breakout on strong volume. So I am still holding those shares. I have added to them several times since the beginning of December. The same is true for TZA, except it has lost more, because of its tripling effect. I had bought my shares at $53.50 and it closed today at $42.86. That's a paper loss of 20%. But I am willing to hold both of these 2 ETF's which Short the market because I fundamentally do not believe we are over the worst. There has not been a believable breakout, as I review the charts, and it is more like a creep up than a step up. You need to do what's right for you. I am doing what I believe will still be a profitable trade. Time will tell."

Well, I was looking at the current price of SDS and TZA and here's where they are now to close the loop on this recommendation. SDS is currently at $80/share and TZA hovering around $60. If you sold SDS now you would still have made over a 10% gain and same with TZA. I am choosing to continue to hold my shares because I think I can do better, but my commitment to try to get you at least 10% profit has been fulfilled today if you sold or are selling.

On Jan/ 7th I wrote:
We closed yesterday at 9015 on the Dow, 934.70 on the S&P500 and 1652 on the Nasdaq Composite. I expect us to go lower over the coming days. Expect the Dow to go down at least another 500 points this week, from where we are now (8777). I expect the S&P500 to go down below 880. The Dow has gone down to 8200 and the S&P has gone down to 840 currently.

I had said I thought MGM was overbought at $14/share recently and said it would go back down to $9.95/share and guess what? It has hit $9.95/share today.

So stick with me and bring your friends here. You can check out my predictions very easily, as I post often and my predictions and recommendations are Public record now. My style is different, but I share one thing in common with Jim Cramer of CNBC, I desire to help you preserve capital and grow back your nest egg. I get nothing out of this but the sheer pleasure of helping others. All the best!

Market outlook Jan. 16 2009: Is this the Obama lift?

Is this the Obama lift we experienced yesterday and will it continue? It could be but news continues to be very dismal and for most investors it is very difficult to part with dollars right now and put them to work in the stock market and into an uncertain future. The psychology of Americans is still fear based and greed seems a long way off as survival reigns the day. This is true except when it has come to Banks benefiting from TARP funds from us, the taxpayer. Things look worse to me now than they did a month or two ago. The reason is that more information is now known that should give us pause.

For one thing, we now know that the first release of TARP funds didn't work to stabilize the banking system, because Bank of America and Citigroup are needing more money and are trying to restructure. Remember Citi was given a guaranteed 300 Billion in loans from the government and now they are still in trouble. Bank of America said they didn't need TARP money and now are asking for it and taking it. To me this all means that while Billions sounds like a lot of money, and it is, the magnitude of our financial problems must be in the Trillions and that is very scary, as WE MAY NOT HAVE ENOUGH MONEY TO SOLVE THIS PROBLEM AND STILL HAVE OUR CURRENCY HAVE ANY INTRINSIC VALUE. There are cracks in State governments financial well being and some are amassing huge debt. Pension funds aren't being funded like they used to be for employees and the Governments Insurance of Pensions is in trouble. Governor Douglas from Vermont says that it looks like there will be increased unemployment for at least 2 years and States need to plan for this. Did you read that correctly, 2 years minimum?! Yes, all the while many have said the recovery will happen in the second half of 2009. As the Godfather would say, "Forget about it!"

So even an Obama rally today or next week will inevitably give way to the reality of our current and expected future economic condition. It will be difficult to time the bottoms and tops of the markets but I am convinced we are in a long term trading range of 7,300 to 9,300 on the Dow and 750 to 950 on the S&P 500. So when we don't go near the extremes of these ranges don't fight the trend. To put it simply, the risks of market indexes going down are much greater than they are going up. If you are fortunate enough to catch the extreme of the bands in your trades, you will be rewarded with 25% gains on market rises and 21% on market drops. These are worth waiting for even if you must wait an entire year to complete the round trip of the trade. Worst case you will do a 10% trade in either direction if you get close enough. For the Dow, that would mean buying ETF Longs at 8,000 and selling them at 9,000 and buying ETF shorts at 9,000 and selling them at 8,000 on the Dow, For the S&P 500 it would mean buying ETF Longs at 825 like SSO and selling them when the S&P 500 hits 900.

Hope this helps you think about these trades in a little longer timeframe. I would love a rally for Obama so let's all celebrate the hope of our future with a man who has the right temperament, right mindset and is in good physical condition. We all need him to be successful so give hope a chance. Good luck Mr. President. We're pulling for you and your team and let's not let him down as citizens with our tend to be negative when we need to help turn this around.

Markets are closed Monday for the Martin Luther King holiday. See you back here soon.

Pre-market outlook Jan. 15th 2009: Market Indexes will drop again today

Lots of news this morning and I will try to state major items of interest affecting your portfolio. The net effect of the news is that today will be another down day for U.S. markets. Here's the summary:

- Jamie Dimon of JP Morgan says worst is yet to come in the financial crisis
- Microsoft is seriously considering layoffs
- Motorola is looking at more cost cuts in 2009 including cutting 4,000 jobs
- The Eu Central Bank has lowered interest rates 50 basis points to a rate of 2%
- Russia has devalued its currency for the 4th time in 5 days.
- Nissan to reduce US Mfg. Plants to a 4 day work week

You can do a search on any of these items today and get the detailed news story.

I looked for some good news today but couldn't find any. The effect on the stock market futures is predictable with Dow Futures dropping over the past hour and the Nasdaq Futures were hit by the Apple news as well as the fact that Microsoft considering layoffs.

I would still hold on to the ETF Ultra Shorts SDS and TZA but by tomorrow the market may be down enough that selling some of your shares from your positions could be warranted. Currently SDS is at $81.30 in pre-market and TZA is currently at $61.49. I am still thinking these shares will rise substantially. If they don't rise enough by tomorrow I will still hold all shares. The reasoning there is that on the day of Barack Obama's Inauguration the markets may rise from the optimism of a new President and it may linger some days next week. However when reality sets in we are headed down to retest the lows and that is where you will want to sell these two ETF's.

Depending on the severity of the drop in Apple stock, symbol AAPL, I may add to my position again in the coming days.

Market closing comments for the day Jan. 14th, 2009

The markets closed down today. The Dow closed down 249 to close at 8199 and the Nasdaq closed down to 1489. The ETF Ultra Shorts did well today. SDS closed at $80.30, up 6.7% and TZA closed at $60.24, up 13.1% and did not disappoint those who also own them.

Apple stock closed at $85.43, down 2.6% and I took advantage of the drop to add more shares at $85.42 today.

I see the markets continuing the decline tomorrow and Friday as well. The volume was light today so many may be awaiting other financial data updates the next 2 days. I can see the Dow going below 8,000 possibly this week.

Also earnings continue to be announced, as well as additional layoffs. Today, Pfizer announced about 800 research scientists being let go. Be a survivor, plan for the worst and feel good when it isn't as bad. Good luck.

Jan. 12th market closing action

Well the market closed down on all 3 indexes today as predicted. The Dow was down 125 closing at 8473 for the day. SDS did gain, closing at $75.35 and TZA closed at $55.50 today. Both were healthy gains from the close Friday. Remember, I still believe they were worth buying today as they are still going to go up as the market goes down.

Apple stock, symbol AAPL, dropped to a low of $87.55 and closed at $88.66/share. I expect tomorrow to also be down as earnings start to be reported. Alcoa reported an unexpected loss of $1.2 Billion for the quarter, reporting after the bell today. It has lost 68% of its stock value in the past year and they expect continuing decline in Aluminum prices. Alcoa is a Dow component. There is a real concern they may not be able to continue paying its dividends.

What to add to your portfolio on a market pullback?

I bought Apple Computer a few weeks ago, symbol AAPL, at $86.50 and the stock rose in anticipation of Mac World, to about $93 but has pulled back to $90/share on Friday. If the market drops again, as I anticipate it will, I would recommend either buying the stock or adding to your current position. I am looking to buy more shares anywhere around $86 or lower, if possible.

Hold on to the ETF Ultra Short of the S&P500, symbol SDS and TZA, the ETF Ultra Short of Small Caps. These shares should start to rise with a market pullback. SDS closed Friday at $71.95 and TZA closed at $51.25 and is up in pre-market futures this evening.

UPDATE: Jan. 12 5:00am PST

3 Month Libor rates are now at a new recent low of 1.16%. Hard to believe with numbers as low as this that there is still tight credit, but the fact still remains, either credit is tight or people aren't wanting to borrow and no amount of available funds is going to change that, until investors psychology turns from fear to greed.

European markets are also down in pre-market.

Market outlook for week of January 12th, 2009

We seemed to slowly climb to a high in major indexes this past week culminating Wednesday at its peak. We were closer to the high of the range of 7300 to 9300 on the Dow since September. According to a Raymond Meriman of StarIQ quote, in his Market Outlook for the week of January 12th, he states the following: the high of Wednesday was at least a major cycle crest (a major cycle crest is the one-third phase to the longer 18-week primary cycle). At the major cycle phase, a “normal” corrective decline is healthy in bull markets, and is the pause before the next surge up begins. In bear markets, however, the major cycle phase can be more than just a “normal” retracement. It can be the resumption of the bear market. So the extent of this decline is important in the determination of whether or not the recent rally was just a “bear trap” or that pause that refreshes the market before the next rally to new monthly highs.

So the question is, Where are we headed? I believe we will start a return to the Bear Market and this was the last major rally before the next storm. In part, it is why I have asked my readers to stick with SDS and TZA, the ETF Ultra Shorts, SDS on shorting the S&P and TZA shorting the Small Caps x 3. I agree with Meriman, that this is all occurring at the time President Obama is sworn in and there are signs the Republicans all of a sudden have religion about fiscal restraint and watching deficits. They must have been given new GOP Financial Bibles or something to read. Where have they been the last 8 years? Asleep at the wheel and complicit in everything which was wrong with the last 8 years, that's where, and by the way lest we forget, one additional reason they lost the election.

I have heard more layoffs are scheduled this month, adding to the unemployment numbers. Expect even more in February. This will ensure that the first week in February creates another blow to the psyche of the public, not only here but around the world. I spoke to an financial expert I can't name, who told me that "most people have no idea how bad things are going to get and that people in the 30's and 40's especially have no idea how to weather the coming storm." I said "coming?" He said "Yes, and 2008 was nothing compared to what the next few years will bring." That matches what I have feared and warned about here with just an intuitive sense fueled by observations and market trend analysis. I have also spoken to someone who travels in the high circle of the Executive Search firms and was told there are few if any senior positions available now, where there was always an abundance of openings and those wanting change. That has changed and things have gotten much tighter.

So how are you coming in putting together that financial plan I discussed in a previous post? Have you gotten more serious and active to give what I have recommended some chance to help you manage the storm? If not, still have those excuses you hold on to like a tight pair of shoes? I have given all here some very sound advice. For new readers I suggest reading the following Blog posts by just clicking on them.

Nov. 12, 2008 How can we turn the ship of this economic crisis?

Jan. 3, 2009 Trading strategies to weather the continuing and worsening financial storm.

and, in my view, my best one recently,

Jan. 9, 2009 When will you know the economy is getting better? A look at the psychology of the current financial storm.

Market Outlook Jan. 7th, 2009

Well, I guess those who have the ETF Ultra Shorts SDS and TZA are backing off of their complaints. Today SDS has gained back about 5.7% and TZA has gained back 10.5% today. I would not sell either of these as we are headed down. We closed yesterday at 9015 on the Dow, 934.70 on the S&P500 and 1652 on the Nasdaq Composite. I expect us to go lower over the coming days. Expect the Dow to go down at least another 500 points this week, from where we are now (8777). I expect the S&P500 to go down below 880 and we may test the lows at the bottom of all indexes in the next few weeks. For the S&P 500 that would be 750 at the lows. On the Dow that would be 7300. When these Indexes go much lower, look to start selling SDS if it hits 95 or above. I calculated that sell price by looking back at the charts and subtracting the $11.50/share (pay-out they made to shareholders in the past few weeks) and looked at a reasonable return from the previous highs of $130/share when the market bottomed. I don't know what your average price per share is and so assuming it is about $75 for some of you, if you could sell at $95 that would be a 27% return. If you added to your shares it will be even lower in price due to averaging your costs down, it will an even larger rate of return.

TZA is similar in that the profit potential is even greater. If your average price is about $60 you would consider selling this ETF at about $85. That would yield a 42% gain minimum. Today the share price has gone from its close yesterday of $42.86 to currently at $47.82 at 11:45am PST. for a gain today of 11%.

I purchased Apple Computer stock when it was $86.50 and while it has gone up to $93.02 at the close yesterday, I will be adding more shares if it goes back down to my initial purchase price or lower.

Good fortune and keep checking back, as I try to update daily.

Taking the heat.

So I am taking the heat over my recommendation to buy the ETF Ultra Short SDS. Since I recommended the purchase the ETF around Dec. 6th the price was $70.50 (adjusted for the $11.50/share payout). Today the ETF closed at $65.70. Yes, it is down about 7%. But we are near the top of the range of the highs of the market in the Dow and SP500 as well as the Nasdaq and there has not been a clear breakout on strong volume. So I am still holding those shares. I have added to them several times since the beginning of December. The same is true for TZA, except it has lost more, because of its tripling effect. I had bought my shares at $53.50 and it closed today at $42.86. That's a paper loss of 20%. But I am willing to hold both of these 2 ETF's which Short the market because I fundamentally do not believe we are over the worst. There has not been a believable breakout, as I review the charts, and it is more like a creep up than a step up. You need to do what's right for you. I am doing what I believe will still be a profitable trade. Time will tell.