Monday, November 30, 2009

Weekly Stock Pick

Buy Sell Hold
The Markets Last Week

US stocks commodities dropped last week as bonds and the dollar gained over the Dubai debt crisis. Mohammed El-Erian of Pimco says the Dubai problem is a “correction” while Dennis Gartman says the Dubai problem has “legs” for further downside. Our take, it could be a setup for a much larger decline moving forward. We do think Asia is in the best position currently to weather further global economic storms with its decent to robust growth and other factors, but global financial contagion can infect the rest or the world very easily. The decoupling effect of global financial markets is a nice theory, and I would even like to believe in it, but I have yet to see it clear evidence of that yet, although it could very well be in the works as I’m writing this. The keyword here is pay attention and be ready to move into or out of positions to protect yourself.

The Markets This Week

Dubai is the big story currently. The stock market this week could be more volatile with Dubai trying to reschedule its billions in debt now. The November USA jobs report will be of key interest to see if the economic recovery is sustainable or not. Australia and European Union interest rates decisions are of key importance also.

Important Global Economic Reports This Week

Monday: Canada Gross Domestic Product, and Australia Manufacturing Index.

Tuesday: Australia Interest Rate Decision & RBA Commodity Index. Switzerland Gross Domestic Product. German Unemployment Change. USA ISM Manufacturing.

Thursday: European Central Bank Interest Rate Decision and Euro-Zone Gross Domestic Product.

Friday: Canada Unemployment Change

My Stock Pick This Week

Is a buy long position on a satellite TV operator. The chart is positive with the trend up in a 3rd wave advance which is the longest wave of the 5 waves in the Elliott Wave count. Fundamentally it’s a rearview mirror mixed picture with their third-quarter net income increased marginally to $366 million and earnings per share climbed 12% to 37 cents, boosted by a lower share count. Revenue grew 10% to $5.5 billion. DirecTV's gross margin declined from 50% to 49%, but its operating margin remained steady at 13%. A quick ratio of 1.1 demonstrates adequate liquidity. The stock has rallied 40% this year already. Short interest has risen 14.2 percent to 136,331,890 shares. The stock trades at a price-to-earnings ratio of about 25, a premium to the market and cable and satellite peers currently. They do not pay any dividends. This stock currently presents a nice low-risk high-reward opportunity in my opinion. In case the price heads lower, stick to stop-loss.

Buy Long DirecTV – Ticker DTV

Buy Entry: 28.58 to 32.30

Stop-Loss: 27.98

Take Profit Areas: 35.81 to 36.50, 39.40 to 40.16

DirecTV Company Profile

The DIRECTV Group, Inc. provides digital television entertainment in the United States and Latin America. It operates in two segments, DIRECTV U.S. and DIRECTV Latin America. The DIRECTV U.S. segment provides direct-to-home (DTH) digital television services, as well as multi-channel video programming distribution services in the United States. As of June 30, 2009, the segment had approximately 18.3 million subscribers with access to channels of digital-quality video pictures and CD-quality audio programming. It distributes approximately 2,000 digital video and audio channels, including basic entertainment and music channels, premium movie channels, regional and specialty sports networks, Spanish and other foreign language special interest channels, pay-per-view movie and event choices, and national high-definition television channels. This segment also provides premium professional and collegiate sports programming, such as the NFL SUNDAY TICKET package, which allows subscribers to view the NFL games. The DIRECTV Latin America segment provides DTH digital television services in Latin America and the Caribbean, including Puerto Rico. As of June 30, 2009, PanAmericana and Sky Brazil had approximately 4.17 million subscribers and Sky Mexico had approximately 1.79 million subscribers. The DIRECTV Group, Inc. has a strategic partnership agreement with Qwest Communications International Inc. to offer DIRECTV services to residential customers. The company was founded in 1977 and is based in El Segundo, California.

Click here to review and trial the Trading Software we used in determining our buy long position on DTV.

Click the DirecTV Stock Chart for a larger view.

DirecTV Stock Chart

Thursday, November 26, 2009

Virtual Stock Market Games

Fantasy Stock Trading Competitions
Virtual Stock Market Games for Fun or Real Money

First Happy Thanksgiving!

UMOO Virtual Stock Market Games

Invest trade stocks for fun or real money.

Register for free, and trade stocksin real-time for fun or real cash prizes.

Practice investing trading stocks in live markets conditions.

Start for fun, hone test your trading skills, and or play for real cash money prizes later on.

UMOO is the world’s leading online stock exchange game offering thrill and profit opportunity of the financial markets in a fun and competitive format. Here, you can experience the excitement of virtual trading where the risk is minimal and the opportunity to win is real! On UMOO, you’ll compete in virtual investment games using real-time market data, and play against other traders instead of the market to win! Using virtual money, you’ll manage a stock portfolio simulation based on real stock market data. The objective is to make the highest return on your portfolio – just like in real life. When the tournament ends, you’ll be benchmarked against the performance of other players and the winners are those with the highest relative returns. Everyone has a real opportunity to win on UMOO. Learn more here.

What's UMOO?

UMOO is a fantasy stock game. It's the breakthrough concept in internet-based, Financial Entertainment that targets the rapidly growing virtual stock game. We combine the finest in online gaming with the real world excitement of the stock markets. Players enjoy the thrill of managing virtual portfolios using real time quotes from the S&P500 stock market for the price of a movie ticket!

UMOO is a one-of-a-kind, easy-to-use virtual stock market trading platform operating exciting trading tournaments that generate substantial cash prizes. We allow users to build and cultivate stock portfolios with ease, reflecting the real time stock movement of leading listed companies while winning substantial cash prizes along the way.

UMOO democratizes the complex, frustrating and often intimidating nature of the world's financial markets - especially for those with no former investment experience. UMOO delivers the inherent adrenaline and reward potential of the world's financial trading floors packaged in an exciting, friendly and highly accessible gaming format.

We call it "Tournament Trading TM"

Why the name UMOO?

Market On Open (known as MoO) is a financial term that refers to the price of a stock at the beginning of the trading day; it is a starting gate, a moment in time when all things are equal, and anyone can enter the ring and take a stab at success on a level playing field.

U is the space in this environment of excitement, promise and opportunity that is occupied by you.

Click here to review more information about UMOO and Free Registration

Wednesday, November 25, 2009

U.S. Dollar: Feelings vs. Reality

Currency Forecasts - Intraday Daily Weekly Monthly

Glance at the recent news headlines, and it might feel like the world is ending for the U.S. dollar. Take a look at this sample line-up:

* US investors abandon the falling dollar to buy stocks (The Times)

* Dollar Slump Persisting as Top Analysts See No Bottom (Bloomberg)

* WORLD FOREX: Dollar Declines As Investors Embrace Risk (Wall Street Journal)

But "feels" is one thing -- and the reality of the situation is quite another. If you haven't recently seen a chart of the EUR/USD, the world's most watched (and traded) exchange rate, take a look at this November 23 chart from EWI's intensive Curency Specialty Service:

Despite the near-panicky headlines, you can see that for most of November the EUR/USD has gone sideways! Yes, big swings up and down -- but almost zero net progress, so far. In the words of EWI's president Bob Prechter,

"The headlines this month are all about the weak dollar, but they should be about how the dollar is hardly falling any more despite ubiquitous bearish opinion about it." (November Elliott Wave Theorist; online now.)

To find out what this sideways price action implies for the dollar short-term, read the latest EUR/USD intraday and daily forecasts inside Currency Specialty Service now.

Click here for the Currency Specialty Service

Tuesday, November 24, 2009

Free Fibonacci Trading eBook

Free 42-Page eBook: Find Trading Opportunities With Fibonacci

Elliott Wave International has just released a free 42-Page eBook, How You Can Identify Turning Points Using Fibonacci. Created from the $129 two-volume set of the same name, it’s available free until November 30, 2009. Learn more.

You may be missing trading opportunities staring you in the face. The charts you look at every day could reveal high-confidence trade setups and market turning points. You can learn how, today.

Elliott Wave International (EWI), the world’s largest market forecasting firm, has just released a free eBook, How You Can Identify Turning Points Using Fibonacci.

It features 42 chart-filled pages of actionable Fibonacci techniques that you can add to your trading arsenal right away. You’ll never look at charts the same way again!

Created from the $129 two-volume set of the same name, this valuable eBook is offered free until November 30, 2009

Don’t miss out on this rare opportunity to change the way you trade forever.

Go here to download your free eBook.

Monday, November 23, 2009

Weekly Stock Pick

Buy Sell Hold
The Market Week Ahead

First Happy Thanksgiving! Be thankful for everything you have now and everything you want for the future. Amen

Second, this Friday is the USA Canada, and Germany Unemployment Reports, along with Australia and European Union Central Bank Interest Rate decisions are coming in. Thanksgiving week historically has been strong. Even with the important data reports coming in this week, but with the shortened trading week, it could be somewhat relatively calm with big players starting the holiday early. The dollar is still the big issue right now. Forex traders might be watching the stock market, and stock traders might be watching the forex market for direction clues. The tide could possibly be turning here for a reversal, and possibly a major one at that for the dollar and stocks for the time being. I’m looking for a dollar rebound and stock selloff this month or next. Let’s watch and be ready to move it does.

Important Economic Data Reports This Thanksgiving Week

Monday: Canada GDP Report. Australia Manufacturing Index Report

Tuesday: Australia Central Bank Interest Rate Decision, and Commodity Index Report. Switzerland GDP Report. German Unemployment Report. USA ISM Manufacturing Report.

Thursday: European Central Bank Interest Rate Decision. Euro-Zone GDP Report

Friday: USA & Canada Unemployment Rate Reports

My Stock Pick This Week

Is sell short on a USA Coal producer. Even with commodities strong right now, I believe we will be seeing lower demand and prices sometime soon. This company is capitalized at $1.3B with 68% owned by insiders, with an 8% dividend. The dividend is a plus, and possibly the insiders large holdings is a plus, but watch if the insiders start selling big. Between February, 2008, and September 2008, insiders were all sellers between 27 and 24 prices. They sold before the biggest down-leg of the market started in October 2008, so I would suggest to watch the insiders like a hawk. Long term this company products are a buy, but look for lower prices to buy in longer term. Right now, I see a low-risk high-reward sell-short trade setup on it. Stick to stop-loss in case the price keeps going up.

Sell Short Alliance Holdings – Ticker AHGP

Sell Entry: 23.64 to 23.00

Stop-Loss: 25.62

Take Profit Areas: 22.36 to 21.08, 18.68 to 18.11, 17.59 to 17.05

Alliance Holdings Company Profile

Alliance Holdings GP, L.P., through its subsidiaries, produces and markets coal primarily to utilities and industrial users in the United States. It produces a range of steam coal with varying sulfur and heat contents. As of December 31, 2008, the company operated 8 coal mining complexes in Illinois, Indiana, Kentucky, Maryland, and West Virginia, as well as operated a coal loading terminal on the Ohio River at Mt. Vernon, Indiana. It also had approximately 686.3 million tons of coal reserves in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia. In addition, the company leases land and operates a coal loading terminal, with a capacity of 8.0 million tons with ground storage of approximately 60,000 to 70,000 tons, on the Ohio River at Mt. Vernon, Indiana. Further, it engages in trading of coal, as well as offers services, including ash and scrubber sludge removal, coal yard maintenance, and arranging alternate transportation services. Alliance GP, LLC, serves as the general partner of Alliance Holdings GP, L.P. The company is based in Tulsa, Oklahoma.

Click here to review and trial the Trading Software we used in determining our sell short position on AHGP.

Click the Alliance Holdings Stock Chart for a larger view.

Alliance Holdings Stock Chart

Friday, November 20, 2009

China's Bull: Don't Rest On Its Economic Laurels

Bull In China Jim Rogers
Click here to review Jim Rogers book.

From Wall Street to Guangdong Road, one hot-button issue is taking the financial airwaves by storm: The bull in China's economic "shop." And, according to the mainstream majority, the recent slew of positive data suggests this horned beast is here to stay. Off the top are these third-quarter 2009 stats: A 16.1% leap in China's industrial production, a 16.2% increase in retail sales, and a strong rise in GDP to 8.9%. In the words of one November 11 CNBC report:

"The underlying growth story is a real one. China is now experiencing what the United States did during the Industrial Revolution. It's like the only successful story in the global economy. It's like the locomotive pulling the globe..."

Does that sound familiar? It should.

Two years ago, in the third quarter of 2007, China's industrial production also stood high: at 18%. During the same period, China saw a powerful 16.4% rise in retail sales (a five-year high), and 11.5% GDP (a 13-year high).

Then, as now, the usual experts hitched their bull market bandwagon to the positive "stars" in China's economic galaxy. Here is a statement from a major Chinese official published in an October 25, 2007 New York Times: "The macroeconomic controls this time around have not only effectively prevented the economy from transitioning from speedy growth to overheating... but at the same time have not resulted in a sharp downturn."

Yet -- do you remember what happened to the Shanghai Composite Index then? The chart below vividly illustrates what started that very month. In short: "a sharp downturn" (higlighted in red).

Shanghai Composite
The market plunged 70% into the two-year low in November 2008.

A First-Hand Look at China's Bull Market: The latest Asian-Pacific Financial Forecast includes a special, in-depth 4-page essay on China's long-term growth prospects.

Click here to get the exclusive report today, risk-free.

Clearly, China's robust "fundamentals" did not save Chinese stocks two years ago. So what? Who cares? -- say many officials today. This isn't 2007. Things in China are different. Well, they're absolutely right. This isn't 2007. It is different. Two years ago, the main fear of China's monetary officials was that the easy lending environment would cause an unsustainable asset bubble. Their concern was justified, as new loans in China stood near their highest level in four years.

Flash ahead to 2009: New loans in China exploded off the charts to their highest level ever. See for yourself, as the November 2009 Asian Pacific Financial Forecast captures the credit-crazed scenario with this compelling picture (Elliott wave labels erased for this article):

Shanghai Composite

And, as the November Asian-Pacific Financial Forecast reveals: In the first five months of 2009, one-fifth of the new loans issued in China went to stock market investment.

Now that's something to think about.

Subscribe now to get the full story today, absolutely risk-free.

Thursday, November 19, 2009

Is Your Bank Safe? Find Out Here

Is Your Bank Safe? Click Here for This Free Complimentary 10-Page Report

Is Your Bank Safe?

More than 130 banks will have failed by the end of 2009. What if your bank fails? Did you know you could be left in the lurch for days, weeks, even months before you get your money back from the FDIC? What happens if the FDIC can't cover your funds? How do you find a safe bank to protect your deposits right now? Find answers to these questions and more in the original "Safe Banks" report from Elliott Wave International. Learn more and download your free report now..

Please read the following Bloomberg news item carefully. It has a direct impact on the safety of your money.

Sept. 24 (Bloomberg) -- In May, the FDIC said it was projecting $70 billion of losses during the next five years due to bank failures. The agency said it expects most of those collapses to occur in 2009 and 2010.

The FDIC’s problem is that it didn’t collect enough revenue over the years to cover today’s losses. The blame lies partly with Congress. Until the law was changed in 2006, the FDIC was barred from charging premiums to banks that it classified as well-capitalized and well-managed. Consequently, the vast majority of banks weren’t paying anything for deposit insurance.

Of course, we now know it means nothing when the FDIC or any other regulator labels a bank “well-capitalized.” Most banks that failed during this crisis were considered well-capitalized just before their failure.

By the end of 2009, more than 130 banks will have failed. Most depositors will have little clue their bank was even at risk. Worse yet, the string-pullers in Washington are doing everything in their power to hide information about the safety of your bank from you.

So far, the FDIC has had enough money to cover insured depositors. But that money is quickly running out.

Just last week, the FDIC voted to mandate early payment of insurance premiums to help cover at-risk banks. Here's what the Associated Press reported on Thursday, Nov. 12:

WASHINGTON (AP) -- U.S. banks will prepay about $45 billion in premiums to replenish a federal deposit insurance fund now in the red, under a plan adopted Thursday by federal regulators.

The Federal Deposit Insurance Corp. board voted to mandate the early payments of premiums for 2010 through 2012. Amid the struggling economy and rising loan defaults, 120 banks have failed so far this year, costing the insurance fund more than $28 billion.

Worse yet, three more banks failed the very next day, Friday, Nov. 13.

This is a very real problem and a direct threat to your money. It's more important now than ever to personally ensure the safety of your bank. The free 10-page "Safe Banks" report from our friends at Elliott Wave International can help.

Inside EWI's revealing free report, you'll discover:

* The 100 Safest U.S. Banks (2 for each state)

* Where your money goes after you make a deposit

* How your fractional-reserve bank works

* What risks you might be taking by relying on the FDIC's guarantee

Please protect your money. Download the free 10-page "Safe Banks" report now.

Learn more and click here to download the "Safe Banks" report.

Wednesday, November 18, 2009

U.S. Dollar "Flies": A Blip or Start of Something Big?

Flying Dollar
"World stocks in modest pullback as dollar flies"

LONDON — World stocks fell modestly Tuesday . . . while the dollar rallied after the heads of the U.S. Federal Reserve and the European Central Bank attempted to talk the currency up.

That was the opening paragraph of an Associated Press article posted on Tuesday morning (Nov. 17). The U.S. dollar gained strongly on Tuesday; by lunchtime, the EUR/USD (the exchange rate between the dollar and the euro; the most widely traded forex pair) moved lower by some 150 points (or pips).

The central bankers themselves appeared to confirm the news story: The Fed's chairman Bernanke said on Monday they were watching currencies markets to "help ensure that the dollar is strong"; the ECB's Trichet said that Bernanke's statement was "very important."

Apparently, forex traders interpreted both comments as bullish for the dollar... but if you've been watching the EUR/USD's Elliott wave patterns, you didn't have to wait for the morning news to tell you that.

The day before the U.S. dollar took the upper hand, Elliott Wave International's Intensive Currency Specialty Service posted the following daily forecast for subscribers:

Update For: Tuesday
Posted On: Mon, 16 Nov 2009 21:49:51 GMT
EURUSD Last Price: 1.4974
[Rolling over] Key Levels: 1.5051. If the decline from 1.5051 is impulsive, ending in a failed fifth wave, the rebound from Friday is a deep correction. The proximity to the prior peak a means the risk associated with a bearish view is minimal. A decline below 1.4880 would bolster the bearish outlook...

If you're new to Elliott, here's what that means. Wave patterns subdivide into two major categories: impulses and corrections. Impulses are 5-wave moves that indicate the direction of the larger trend. Corrections are 3-wave affairs that go against the trend. As the chart above shows, the decline in the EUR/USD from the $1.5051 looks impulsive, and the rally off $1.4823 -- corrective. So what should have come next was the resumption of the larger trend -- in this case, down.

And that's exactly what we saw in the 150-pip drop on Tuesday. To find out if this is just a temporary blip or a start of something big for the dollar, click here to read the latest Currency Specialty Service forecasts online now.

Tuesday, November 17, 2009

If Stocks Tank, Shouldn't Gold Soar?

Gold Ounce Bars
The following article is provided courtesy of Elliott Wave International (EWI). For more insights that challenge conventional financial wisdom, download EWI’s Free 118-page Independent Investor eBook.

Large banks and more recently pension funds have suddenly become infatuated with gold. They chant the mantras that gold bugs have known for years: gold is a store of value; owning gold is financial insurance; an ounce of gold will always buy a good suit. The idea is that if the economy continues to weaken and share prices decline, a strategic allocation of the precious metal will hedge and offset some of the losses in the financial sector.

On the surface it seems to make sense and it’s hard to argue with the logic. Even so, logic can sometimes get twisted, whereas facts cannot. The evidence is found in the chart we describe as “All the Same Market.” Gold, stocks, currencies (versus the dollar), oil, grains, meats, softs, all decline in a deflationary environment. As liquidity dries up and credit contracts, people, businesses, and institutions sell everything to get dollars. Cash is once again king. This is bearish for gold.

Looked at another way: as the dollar advances from its lows, things denominated in dollars lose value against the dollar. As long as the dollar remains the global senior currency, assets will depreciate: not just stocks and commodities but residential and commercial property, works of art, collectible cars, pretty much everything. Of course, this outlook presumes a deflationary environment and that’s been our view for quite some time. But that’s another conversation. The topic here is stocks down/gold up - or not.

The long-time editor of the Elliott Wave Financial Forecast Short Term Update, Steven Hochberg summed it up succinctly in a recent issue:

“The other important aspect to a dollar bottom is the implication to all the other markets that have been moving opposite to this senior currency. The start of a major dollar rally should roughly coincide with a turn down in stocks, commodities, oil and the precious metals. So there are likely to be important trend reversals across nearly all major markets.”

Don’t fall into the trap of group-think. If investing was that easy we’d all have (insert your own private fantasy).

For more information, download Robert Prechter’s Free Independent Investor eBook. The 118-page resource teaches investors to think independently by challenging conventional financial market assumptions.

Monday, November 16, 2009

Weekly Stock Pick

Buy Sell Hold
The Market Week Ahead

Options expiration is coming up next week, and still many of not most traders are short the Dollar currently. If those Dollar shorts start to cover and or reverse for whatever reason, there should be more volatility coming into all the markets.

Most Important Economic Data Reports this Week

Monday: USA Advance Retail Sales

Wednesday: Bank of England Meeting Minutes, USA Consumer Price Index

Friday: Bank of Japan Interest Rate Decision

My Stock Pick This Week

Is a buy long position in the biggest producer of agriculture products in the world. Agriculture is one of my favorite sectors long term. I’m torn right now on making this buy long call on this stock, as I think that stocks and commodities are headed lower near term before going much higher long term. Nonetheless, this company has a lot of positives going for it fundamentally that I think might propel it higher at least long term, and hopefully near term. In case not, stick to stop-loss, and buy back in it later at lower prices.

Buy Long Potash – Ticker POT

Buy Entry: On Breakout of 104.85 to 107.67

Stop-Loss: 102.30

Take Profit Areas: 118.04 to 121.22, Hold Longer Term with Trailing Take Profit Stop-Loss

Potash Company Profile

Potash Corporation of Saskatchewan Inc. engages in the production and sale of fertilizers, and related industrial and feed products in North America. The company manufactures and sells solid and liquid phosphate fertilizers; animal feed supplements; and industrial acid, which is used in food products and industrial processes. It also produces nitrogen fertilizers, as well as nitrogen feed and industrial products, including ammonia, urea, nitrogen solutions, ammonium nitrate, and nitric acid. Potash Corporation’s primary customers for fertilizer products include retailers, dealers, cooperatives, distributors, and other fertilizer producers. In addition, the company produces potash from six mines in Saskatchewan and one mine in New Brunswick. It sells purified phosphoric acid directly to consumers of the product. The company was founded in 1953 and is based in Saskatoon, Canada.

Click here to review and trial the Trading Software we used in determining our buy long position on POT.

Click the Potash Stock Chart for a larger view.

Friday, November 13, 2009

Hyperinflation Worries Laid to Rest

Hyperinflation Worries Laid to Rest, Part I

Many pundits have attributed equity rallies off the March lows to global "fiscal stimulus" packages and “massive, swift action” on the part of central banks, the Federal Reserve first and foremost. Taking it a step further, many people who correctly forecasted the real estate and credit bust say that deficit spending, the Fed’s money printing and U.S. dollar weakness will create hyperinflation in the U.S.

Elliott Wave International's president Robert Prechter carefully laid out his case for deflation as a threat that would likely come before inflation as early as 2002 in his prescient Conquer the Crash (now in second edition). Still, the inflation/deflation argument rages on, and a reader asked recently me to discuss why we aren't worried about hyperinflation.

Let's go back to the June issue of EWI’s Global Market Perspective, where we showed how the situation in the U.S. situation is different from bouts with hyperinflation in Argentina, Mexico and Brazil. Although we continue to look for another deflationary collapse, it also seems reasonable to examine hyperinflation in another nation -- Zimbabwe -- in order to answer a few questions:

1. What really caused the hyperinflationary currency crisis in Zimbabwe?
2. What are the differences between Zimbabwe and the U.S.?
3. Can it happen in the U.S., and if so, what are the signs of its onset?

Zimbabwe’s involvement in the Second Congo War, which began in 1998 and killed 5.4 million people, caused its government to spend billions. Its problems began to spiral out of control shortly thereafter. Following the confiscation and redistribution of land, agricultural output declined by 51% from 2000-2007, which contributed to a rise in unemployment (recently at an unbelievably high 94%).

To undermine the internationally unpopular President, Robert Mugabe, the U.S. passed the "Zimbabwe Democracy and Economic Recovery Act of 2001." This law imposed sanctions and eventually led the International Monetary Fund and financial institutions to abandon Zimbabwe. That loss of the ability to borrow money was the main catalyst of the out-of-control money printing in Zimbabwe. After its 2001 default on IMF loans and suspension of IMF voting rights, the government printed money in an attempt to repay these loans and regain its access to credit. This action failed to turn the tide.

In order to keep the military loyal, Mugabe raised their salaries -- and again, the only way to pay for it was via the printing press. Certainly, Mugabe’s government could have slowed government expenditures after the loss of external creditors, but he would have lost control of the government due to political unrest.

What conditions did Zimbabwe citizens have to deal with? In mid-November 2008, Zimbabwe’s inflation rate hit 79,600,000,000%, which is the equivalent of prices doubling every 24 hours (see the chart below for year-by-year currency values).

To help alleviate this unprecedented hyperinflationary problem, in January 2009, the government legalized commercial foreign currency transactions, formerly a black-market practice. This official “dollarization” of Zimbabwe's economy occurred as conditions improved. Oddly, though, many items are still ridiculously expensive -- for example, a three-bedroom house in Harare goes for $450,000 USD, or baked beans at 50% over the UK price. This situation, however, is due to a supply shortage created by price controls and employment rules that make it difficult to hire or fire workers.

Click here for more information on Currency and Interest Rates Specialty Services

Thursday, November 12, 2009

Intuition and Trading

Van Tharp Institute
By Van K. Tharp, Ph.D.

Click Here for Van Tharp Institute 2009 - 2010 Trading Workshops Schedule

I was recently asked to write the Foreword to Curtis Faith’s upcoming book, Trading from Your Gut, which is all about trading and intuition. This got me thinking about the different types of intuition that one can possess. Intuition is a concept with which I am quite familiar and which I believe is extremely important for trading success. Here’s a quick look at different types of intuition and how my trader coaching experience has proven to me why intuition is invaluable.

Despite all the advances in computers over the last 50 years, no computer comes close to a human brain. For example, I like to trade efficient stocks (i.e., stocks that trend with very little noise or random movement). A straight line going up at a forty-five degree angle would be a perfect example of an efficient stock; however, I’ve never see one that looks that good. Most trending stocks show a lot of whipsaws, which I define as representing the amount of noise in the movement. The graph below is a fairly good example of an efficient stock. It’s LQD, the long term bond ETF, since last March. It just keeps going up with very little noise.

No matter how hard I’ve tried, it’s been nearly impossible to program software that will give me a list of the most efficient stocks. The best I have been able to do is to compile a list of stocks to screen. I still have to look at the price chart of every stock to find the efficient ones. Anybody’s brain can easily pick out an efficient stock just by looking at it, whereas, a computer cannot. Trading such visual price patterns is often called discretionary trading and that’s the first form of intuition.

The second form of intuition helps us with lots of data. The amount of information our brains are exposed to just about doubles each year, especially since the advent of computers and the Internet. Your conscious mind, however, can only handle about seven chucks of information—plus or minus two chunks. To understand what that means, try this simple exercise. Have someone call out a long list of numbers while you have your hand raised. When you can no longer remember all of the numbers called out, lower your hand. You’ll find, unless you’ve mastered some advanced memory techniques, that you will probably only remember about five to nine numbers—right in the range of normal human capacity. But what happens when you are exposed to thousands or even millions of chunks of information? You develop some judgmental heuristics (i.e., mental shortcuts) to cope. There are many famous heuristics that have been documented by psychologists over the last 20 years.

A third form of intuition develops from thoroughly understanding a task and bringing lots of experience to it. Somehow, people with such experience do a superb job of sensing opportunity or danger quickly when no one else can imagine how they did it. Somehow traders who have developed this kind of intuition just know that the market is about to turn down and can get out quickly. Alternatively, some can sense when a massive opportunity is about to occur. John Templeton, for example used much of his fortune to short dotcoms at the beginning of 2000. Through the late 1990s, many were in agreement with Templeton basic logic: the dotcoms’ business models did not merit their lofty stock prices. Applying that logic and shorting the dotcoms six months earlier, however, meant those traders either had to cover their shorts at a loss or suffer through huge drawdowns. Templeton’s timing was impeccable. How did he know when to short the dotcoms? Intuition. Similar feats have been accomplished by others in 1929, 1987, and at other major market turning points. The timing was absolutely amazing, and the only explanation for these feats is intuition.

In a more personal example, I worked through some deep psychological processes with a retired engineering professor in 1994. As a result, he was able to connect with his internal guidance. Over the next 15 years that guidance directed him in many different directions including trading. In 1994, he already had a substantial trading account but by mid-2008, he had grown it by 5100%. And then his guidance told him to stop trading—right before the 2008 market meltdown.

I spent some time with him in mid-2008 and he showed me exactly how he traded. In fact, it was surprisingly similar to my preference for efficient stocks. It was sound, logical, and very simple. He looked at the top five industry groups for long stocks and the bottom five industry groups for short stocks. The first step involved intuition. He could generally look at a list of stocks and based upon volume, accumulation, and a few other variables, he could tell which charts from that group he needed to look at.

After his initial screen, he looked at stock charts in two different time frames: 1) a year’s worth of daily bars and 2) 30 days worth of hourly bars. His charts included two simple moving averages, momentum, plus DMI+ and DMI-. He couldn’t tell me exactly how he entered positions except to say that the price needed to be above both moving averages in both time frames. I had the impression that he often looked for a short term retracement in price to the short term moving averages and then a bounce back.

When did he exit the position? My impression was that he exited when the price reached the longer term moving average. When I asked him about his exits though, he totally flabbergasted me. He said, “I’ve done this so much that I can look at a chart and pretty much tell how long the stock will keep moving up—whether it’s going to be several months or just a few days.” “How?” I asked. He said, “I don’t know, I just can tell.”

So here was one of my better clients with whom I had worked to clear out enough psychological issues that he could plainly hear and follow his internal guidance. That guidance directed him toward this sort of trading. Then with experience following his guidance, he developed intuition in two additional ways. First, he could just tell when to enter into a position. Second, and more impressive, he could just look at the chart and have a pretty good idea of how long it was going to be moving in his favor. That is superb intuition, which helped him produce a 5100% return in 14 years. After trading for that period of time with those kinds of returns, he unquestioningly listened to his internal guidance in 2008 when it told him to stop trading. That is the power of intuition.

Unfortunately, developing your intuition and understanding the benefits for your trading psychology are the very kind of ideas that most traders want to pass over. They want facts and computerized methods that “work”. My experience of nearly 30 years as a trading coach, however, has clearly demonstrated that you cannot become a superb trader based purely upon mechanical trading methods. You must train your instinct to get the best results. Intuition is an integral component of the success for the best traders in the world.

About Van Tharp: Trading coach, and author, Dr. Van K. Tharp is widely recognized for his best-selling books and his outstanding Peak Performance Home Study program - a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Dr. Van Tharp at Van Tharp Institute

Wednesday, November 11, 2009

Trade All Markets - Open with $50

HY Markets
Trade Forex Oil Gas Metals Commodities Indices Stocks - Start with $50.00 Micro Account

HY Markets Company Info

HY Markets has its global headquarters in London and is authorized and regulated by the Financial Services Authority of the United Kingdom. The Group has over 30 years of operational history and is the trading platform of choice for investors seeking fast and direct access to the world's capital markets.

This long-standing expertise has enabled us to develop our revolutionary web-based Internet trading platform, which enables clients to invest in all major capital markets from one integrated account in an easy-to-use interface.

HY Markets is a division of the Henyep Group, a global diversified conglomerate with business in financial services, property, education, and charity spanning 3 continents and 20 countries worldwide. The Henyep Group of companies are registered and authorized in world-leading jurisdictions including London, Dubai, and Hong Kong. This provides clients with the comfort and security of a global institution.

HY Markets provides investors with efficient and direct access to all their trading needs. Start trading with the security of an FSA regulated company.

HY Markets Advantages

Advanced Online Trading Platforms

The heart of the HY Markets service is our state-of- the-art trading platform. We offer our clients with the choice of an easy-to-use web-based online trading platform, and advanced users Metatrader download platform with mobile phone trading integration. These cutting-edge multi-product platforms integrate live tradable prices, charting tools, real-time news and market commentary, and complete account information all in easy-to-use revolutionary interfaces.

Open Now: Start trading in less than 5 minutes
Low Minimum: Open an account with just US$50
Trade All Markets: Forex, oil, gas, commodities, metals, indices, and stocks
2 Trading Platforms: Web Based & Metatrader to suit your trading needs
Easy Funding Options: Visa, Mastercharge, PayPal, or Wire Transfer

Complete Product Offering

While many online trading companies only provide Forex trading, HY Markets clients are able to take advantage of our deep product offering including oil/gas, metals, commodities, stocks and more. All traded within a single integrated account. Such access to multiple markets gives our clients a competitive edge to trade all markets and diversify an investment portfolio.

Continuous Market Information

Live prices, Live Reuters news, market information, advanced charting systems, and technical analysis tools to give you a competitive edge.

Live Customer Support

HY Markets online trading platform is supported by 24 hrs. live dedicated customer support professionals via phone, email and chat.

Online Account Status

Technology driven back-office systems that let you check your open positions, equity and P&L online 24hrs a day.

HY Markets

Tuesday, November 10, 2009

How To Prepare Yourself for the Next Crash

Elliottwave International Robert Prechter
November 04, 2009 CNBC Bear Market Call Interview

How to Prepare Yourself for the 'Serious Event' Ahead

Critical junctures come in many forms, yet opportunity comes in only one: It allows you to anticipate and prepare for what's to come.

A timing strategy that dials in a precise turning point can earn you the greatest-possible gains (not to mention the respect of your peers). But pinning an otherwise winning strategy on the hopes of precise timing risks more than personal glory; it risks your entire opportunity.

[The week of Oct. 12, 2009], the Dow touched 10,000 and the S&P hit 1095, reaching the upper end of our range for a normal rally and fulfilling our original expectations from last March-April. With respect to targeting waves 1 and 2, the Wave Principle has been a consistent guide. An outsized rally, as EWT said in August, could run as high as Dow _____, which would mean about _____ in the S&P. … [Specific prices redacted for this publication.]

"Prediction is one thing, and taking prudent action is another. Trading strategy entails figuring out the best way to take advantage of the market’s probabilities." ~ Robert Prechter, October 2009 Theorist

The October 2009 Elliott Wave Theorist dives into the current juncture head first. It fully spells out our analysis of the critical juncture. It also delivers our recommendations for how to prepare your portfolio for what's to occur (before it happens).

Inside you'll discover:

* 14 eye-opening charts across 10 analysis-packed pages for today's most critical markets: U.S. stocks, gold and the U.S. dollar.

* One chart you will NOT see elsewhere: It depicts a beautiful -- and telling -- fractal form in the past two years of market action.

* Mounting evidence from trusted technical indicators: sentiment, advance/decline ratio and volume.

* A decennial pattern in U.S. stocks that's held true for 10 of the past 11 decades.

* An informative and useful section titled "Devising Trading Strategies."

* Two and a half pages of gold analysis -- why lessons from the past likely provide ironies for the future.

* Poignant analysis for the U.S. dollar.

* And much more, including a rare opportunity for a good cause: You can dine with Robert Prechter.

Subscribe Now, and you also get instant free access to Prechter's most recent, still-prescient Theorist issues.

How To Trade ZigZagsOn-Demand Online Trading CoursesHow To Trade Choppy Markets

Elliottwave On-Demand Trading Course Videos
View and review the trading course on demand at your pace. Download and print presentation slides and take notes as you view the trading course. Take the self-assessment quiz to help reinforce your understanding of the major points. Access the exclusive On-Demand Online Q&A Traders Forum. Submit your questions re: the trading course material to EWI's Trading Education Team anytime.

Elliottwave Trading Seminars

How To Trade In A Fast Moving Bear Market

Washington DC - Dec 4 - 5
Los Angeles - Dec 7 - 8
Vancouver Canada - Dec 11 - 12
Toronto Canada - Dec 14 - 15
London England - Jan 18 - 19, 2010
Paris France - Jan 21 - 22, 2010
Frankfurt Germany - Jan 25 - 26, 2010
Zurich Switzerland - Jan 28 - 29, 2010
Athens Greece - Feb 1 - 2, 2010

Monday, November 09, 2009

Weekly Stock Pick

Buy Sell Hold
The Market Last Week and Ahead

USA unemployment rate is now officially 10.2% and the Dollar looking to head higher. If unemployment continues to rise, that is not a good sign for GDP growth and stocks price increases. The stock market could be possibly topping out here along with precious metals, and commodities because of a possible continued global slowdown, so have a plan and exit strategies ready just in case the market starts going against you.

Major Economic Data Reports This Week

Tuesday: German Consumer Price Index

Wednesday: Bank of England Quarterly Inflation Report

Thursday: Australia Unemployment Report

Friday: Euro-Zone, German & French Gross Domestic Product

My Stock Pick This Week

It’s a short sell on a diversified Brazilian company. Long term I would be a buyer of this company, and just possibly a correction now as I speculate could happen, could provide a better buy-in price later. The NYSE & Nasdaq along with the rest of the global markets look to be possibly putting in a top right now. If this is the case and lower prices ensue for awhile, I suspect the Dollar to edge higher while stocks, precious metals, commodities could be heading lower with the anticipation of slowing global growth, and continued job layoffs. I’ve got a tight stop-loss on this because this stock could keep heading up considering all the positives it has going for it. Consider this sell recommendation as a buy at lower prices if you don’t want to short it now. So either, sell it now, cover, and reverse if you’re a trader, or wait for lower prices or buy in on the breakout as it’s very near its 52 week high.

Sell Short Companhia Vale do Rio Doce Brazil – Ticker VALE

Sell Entry: 28.88 to 27.03

Stop-Loss: 29.23

Take Profit Areas: 26.22 to 25.20, 24.30 to 23.89, 23.50 to 23.10, 21.59 to 21.23, 17.71 to 17.41

Company Profile

Companhia Vale do Rio Doce, through its subsidiaries, operates as a diversified metals and mining company worldwide. The company produces iron ore and iron ore pellets, nickel, manganese ore, ferroalloys, and kaolin. It also engages in producing bauxite, alumina, aluminum, copper, metallurgical and thermal coal, metallurgical coke and methanol, cobalt, potash, and other non-ferrous minerals, as well as precious metals, including platinum-group metals, gold, and silver. In addition, the company operates logistics systems in Brazil, including railroads, maritime terminals, and a port. Further, it engages in hydroelectric power generation and steel production. The company was founded in 1942 and is headquartered in Rio de Janeiro, Brazil.

Click here to review and trial the Trading Software we used in determining our short sell position on VALE.

Click the Companhia Vale do Rio Doce Stock Chart for a larger view.

Companhia Vale do Rio Doce Stock Chart

Friday, November 06, 2009

They're Already Talking about Bubbles Again

Financial Bubbles
By D.R. Barton, Jr. of Van Tharp Institute

Click Here for Van Tharp Institute 2009 - 2010 Trading Workshops Schedule

It’s been just a year since the credit / real estate bubble burst, and there is already serious discussion about another one.

In the current political and economic climate, the global response to the crisis was infusion of trillions of dollars of capital to attempt to reduce the impact of the bursting bubble. With that much extra liquidity chasing the same amount of goods and services (or really a lesser amount, given the global economic contraction), the price of something eventually has to go up.

The game is already afoot.

In places where the economies are a tad more nimble than in the U.S., Europe and Japan, the capital infusion has made a quicker and bigger impact. The manufacturing industries in Asia have recovered much faster than their western counterparts (you didn’t think Americans were going to stop buying big screen TVs, now did you?). Add that to the extra liquidity in the global markets and extremely low worldwide interest rates and you have cash chasing assets again, especially in Asia including Australia. As a case in point, Australia’s central bank has already begun raising interest rates to try to cool off inflationary pressures there.

A cover story in the Wall Street Journal trumpets “fear of a new bubble,” citing some compelling statistics. Included are run-away real estate prices in Hong Kong, Singapore, South Korea and Australia. And perhaps most telling is the fact that risk premium spread—the difference between junk bonds and highly rated bonds—is at its lowest level since February 2008 (before the investment banks Lehman Brothers and Bear Stearns collapsed).

So What?

Financial bubbles at their most basic occur when asset price levels far exceed any reasonable fundamental valuation. And the story always ends the same way. If Asian assets suffered through a bubble-collapse cycle, the ramifications would be felt (and felt strongly) in the rest of the world.

As with all bubbles, the support of the tangential financial markets is necessary. And the equities markets are certainly lending their support. Let’s take a look at an insightful chart from the folks over at Chart of the Day.

The fact there were 6 distinct rallies of greater than 15% during the bear market of the Depression is well known among market followers. This chart shows where the current rally from the March lows fits in with those of the past era.

Bear Market Rally Chart
Bulls could make a reasonable case that this might show that the current action isn’t a bear market rally, but has now escalated to full-fledged recovery. A more cautious view would be that the markets haven’t had time to digest the credit contraction from last fall and that the huge cash injection has merely given the market a “sugar high” and will delay meaningful recovery as it works through the system.

In either case, make sure your profit-taking and stop-loss exit plans are in place. And do take into account the fact that volatility is starting to creep back into the market.

Great Trading!
D. R.

About D.R. Barton, Jr.: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena. He is a regularly featured guest on both Report on Business TV, and WTOP News Radio in Washington, D.C., and has been a guest on Bloomberg Radio. His articles have appeared on and Financial Advisor magazine. You may contact D.R. at the Van Tharp Institute

Wednesday, November 04, 2009

Free Market Forecasts For One Week

Get a FreeWeek of Robert Prechter's Forecasts (7 Days, 4+ Letters, 100+ pages)

Exciting News: Our friends over at Elliott Wave International are offering Robert Prechter's latest monthly market letter, The Elliott Wave Theorist, for free along with the firm's most popular U.S. analysis and forecasting publications. You can now download, print and read dozens of chart-filled pages of current analysis for U.S. stocks, the economy, precious metals, bonds, U.S. dollar and more -- and it's all free for one week only. This opportunity ends Nov. 11.

Click here to learn more about FreeWeek, and get your free market reports and forecasts.

Eight months ago, the stock market began a very large rally -- the gains exceeded 60% in the S&P 500. Everyone knows this. But here's a fact that has gone virtually unreported: The vast majority of those gains (about 90%) were from March through August. By comparison, September and October were sluggish.

Yet the past two months have been the very time when the financial press has been the loudest about "green shoots," "recovery" and "new bull market." So the question is WHY -- why so much enthusiasm, even as the evidence literally fades away?

No one asks questions like this, never mind provides the answers. The one exception is Bob Prechter. And if most investors suddenly DID learn the details of his answer... well, the information would buckle their knees.

Prechter does of course provide a detailed answer in his current Elliott Wave Theorist. The latest Elliott Wave Financial Forecast expands on that answer.

You can read both award-winning monthly market letters right now for free!

But let me be clear: The answer is in fact a forecast. What Prechter says is bigger and more important than these two publications. It could prove to be the most important forecast he has offered since the financial debacle began.

This moment -- today -- is the time to put yourself on the path to safety. You can now download Prechter's latest monthly market letter, The Elliott Wave Theorist, and its sister publication, The Elliott Wave Financial Forecast -- for free. Together, they provide critical analysis for the Dow, Nasdaq, S&P, gold, silver, bonds, U.S. dollar, the economy and more.

This amazing opportunity runs for a full week. It ends Wednesday, Nov. 11.

Click here to learn more about FreeWeek, and get your free market reports and forecasts.

Here's a sneak peak inside these two timely issues.

October 2009 Theorist | What's Inside?

* 14 eye-opening charts across 10 analysis-packed pages for today's most critical markets: U.S. stocks, gold and the U.S. dollar.

* One chart you will NOT see elsewhere: It depicts a beautiful -- and telling -- fractal form in the past two years of market action.

* Mounting evidence from trusted technical indicators: sentiment, advance/decline ratio and volume.

* A decennial pattern in U.S. stocks that's held true for 10 of the past 11 decades.

* An informative and useful section titled "Devising Trading Strategies."

* Two and a half pages of gold analysis -- why lessons from the past likely provide ironies for the future.

* Poignant analysis for the U.S. dollar.

November 2009 Financial Forecast | What's Inside?

Special Section: The November Financial Forecast includes an eye-opening special section on Goldman Sachs. These new insights about one of Wall Street's most storied firms have broad implications for Wall Street as a whole. You will see a picture of Goldman's history plotted along a 100-year chart of the Dow. You will also learn how the same sentiment driving the market today will drive the course of mega-deal makers in the future. This is a can't-miss special section.
Plus, you will get:

* A thorough Elliott wave perspective on the stock market today -- what does Elliott tell us about the current juncture?

* A telling bar pattern candlestick aficionados will recognize.

* Valuable momentum considerations, including powerful evidence from a technical analysis method that tracks the distribution of stock from strong hands to weak.

* A chart of dollar trading volume vs. GDP and the important analysis about it that you should see now.

* And much more.

What's more, these are just two of the incredible free resources you get during this week only. You will also have completely free access to the most recent Theorist and Financial Forecast archives (September and October issues for each publication are currently available.) as well as the tri-weekly Short Term Update, which is designed to keep EWI's subscribers up to date between the monthly issues above.

Please don't delay. This special, limited-time offer from EWI is one of the most valuable free offers we've ever written to you about. It expires Nov. 11. Please follow the link below; sign up to join FreeWeek for free; print out your free reports; read them at your leisure. Do not miss this exciting opportunity.

Click here to learn more about FreeWeek, and get your free market reports and forecasts.

About the Publisher, Elliott Wave International

Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private around the world.

Monday, November 02, 2009

Secular Bear Market: Are We Still in One?

Van Tharp Institute
By Van K. Tharp, Ph.D. of Van Tharp Institute

Click Here for Van Tharp Institute 2009 - 2010 Trading Workshops Schedule

Since my book Safe Strategies . . . came out, I have been saying that we are in a secular bear market. Most of my beliefs about this come from the wonderful work of Ed Easterling (Unexpected Returns: Understanding Secular Stock Market Cycles) and Michael Alexander (Stock Cycles: Why Stocks Won’t Beat Money Markets Over the Next Twenty Years). Alexander’s book was published at the end of the secular bull market in 2000. Easterling’s web site had predicted a bear market starting in 2000, even though the book wasn’t published until 2005.

Secular Markets

A lot of people try to define a secular market by the health of the economy; however, this is inaccurate. There are periods in bear markets when the economy does quite well, and there are periods in a bull market when the economy can be doing poorly. The following table shows the bull and bear secular markets since 1900. Both types of markets had periods of economic expansions and contractions to various degrees within them.

Primary Bull Bear Markets Since 1900
Secular markets relate to the cycles of corporate valuations based on the price earnings (PE) ratio. During a secular bull market, PE ratios go up. During a bear phase, the PE ratios go down. This has nothing to do with any underlying economic conditions, although bear phases do seem to correspond to inflationary or deflationary periods.

So what’s been happening to the PE ratio since 2000? Robert Schiller’s version (which is based upon a smoothing function) looks pretty much as expected. The PE has dropped dramatically since 2000.

S&P500 PE Ratios
You can see the end of the secular bull market and start of the secular bear market in 2000 quite clearly drawn with this data. PE ratios have had two small upswings since 2000, but the ratio is definitely on a downward spiral. Now look at the next chart, which shows the PE ratios based on real earnings. Can you believe it?

S&P500 PE Ratio Peak Record Highs Chart
It shows a distinct 2000 peak and initial drop as in the Schiller chart, but then it shows something very abnormal happening now. Based on real earnings, the S&P 500 PE ratio is more than 3 times higher than its 2000 high. All I can say is “Wow!” Incidentally, I don’t look at this data (usually) more than once each year. A fund manager in our Blueprint class two weeks ago was kind enough to point out this occurrence to me.

Did we suddenly begin a secular bull market? Did the last secular bull never end? What is going on?

What’s going on is a statistical fluke. First, the PE ratio is based upon real earning, including one time write offs. The 2008-9 period saw a massive drop in S&P earnings. Look at the magnitude of the recent earnings drop.

S&P500 Earnings Chart
The PE ratio has spiked up simply because earnings have fallen so much farther and so much faster than equity prices have fallen. That’s what is happening.

What Would You Do?

Now let’s go back to the very beginning of this year. Suppose you are the incoming administration (whether you are a Democrat or a Republican president is irrelevant), when corporate earnings were flagging and it was in your best interest to get the economy booming. The situation is pretty dire because debt levels are way up and countries are losing trust in the dollar, but you have to do something. You could manipulate the statistics fed to the public such as the CPI, but that’s already been done as much as possible. So what do you do to stimulate things?

* Lower interest rates to nearly zero.

* Stimulate the ailing car industry by creating Cash for Clunkers—a program that loses its effect as soon as the program ends.

* Stimulate the housing industry by giving a rebate to first time homebuyers. (Such a program qualifies poor people for buying a declining asset and could cause the potential for many more mortgage defaults in the future. One of my houses in Memphis was purchased by a lady who had to borrow most of her deposit from her 401K. She also required that I pay most of her closing costs so that she could afford to buy the house from me. On a national level, doesn’t this sound like another housing disaster waiting to happen?)

* Use your banking friends—like Goldman Sachs—to manipulate the market. (More on this below.)

Wouldn’t taking all of these steps get the economy booming? You would probably think so given where the Dow and S&P indexes are today. The following chart of the S&P 500 shows a 50% plus rise since early March.

S&P500 Index Chart
How to Manipulate a Market

A fund manager from the USVI at the Peak 101 Workshop two weeks ago mentioned that trading for him is especially difficult right now because so many formerly reliable market factors and relationships simply don’t work anymore. The current S&P PE ratio “imbalance” mentioned earlier is but one example. In large part, I believe these effects arise from the government pouring money into the stock market through big money players, especially Goldman Sachs.

In a July feature article in Rolling Stone, Matt Taibbi suggested that Goldman Sachs has manipulated and profited handsomely from eight market bubbles since the Great Depression. These include the energy bubble of 2007-8 and the bailout bubble of 2008-9.

Reported elsewhere in July, a former programmer was accused of stealing some valuable software from Goldman Sachs. Interestingly, the Assistant U.S. Attorney on the case said, “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.” (emphasis mine).

Here, though, is the best part according to the assistant U.S. Attorney: The proprietary code lets the firm do “sophisticated, high-speed and high-volume trades on various stock and commodities markets,” prosecutors said in court papers. The trades generate “many millions of dollars” each year. (A Bloomberg article on the theft noted that in 2008 Goldman earned $2.3B. In millions, that would be two thousand, three hundred millions.)


From a technical standpoint, notice what happened on that last price chart of the S&P when the index hit its 200 day moving average (i.e., the thin red line) at the beginning of June. It tracked the MA down for about five weeks and then took off again. Also, notice that the entire index price increase since early March has been on decreasing volume.

From a fundamental standpoint, companies are actually much weaker now than they have been in several quarters—earnings are atrocious compared with recent years.

Yet, the market has been going up strongly for over six months now. Why? Draw your own conclusions, but I hope you don’t truly think that the economic picture is anywhere near as rosy as the market’s current level might have you believe.

About Van Tharp: Trading coach, and author, Dr. Van K. Tharp is widely recognized for his best-selling books and his outstanding Peak Performance Home Study Program - a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Van Tharp at Van Tharp Institute

Weekly Stock Pick

Buy Sell Hold
The Market Last Week and Ahead

First, the most important date report in the financial universe, the US Non-Farm Payroll Report is Friday. Last Friday authorities seized nine US banks. If people continue to carry trade the dollar and if they start to unwind those trades more traders and investors will have to cover their dollar shorts. That could possibly lead to a domino effect and that could possibly lead to a bit more of a correction. If it was a domino effect, it could be suddenly sharp.

Major Data Reports This Week

Tuesday: Australia Central Bank Interest Rate Decision

Wednesday: Australia Building Approvals, Euro-Zone Producer Price Index

Thursday: UK & Euro-Zone Central Bank Interest Rate Decisions

Friday: Australia Quarterly Monetary Policy Statement, Japan Concident Index, Australia Foreign Reserves, Canada Net Change in Employment, US Non-Farm Payrolls.

My Stock Pick This Week

Is a short-sell on a contract clinical development services company in the biotech industry. Fundamentally its current income is okay with its balance sheet holding about 60% debt to equity which is a negative in this cash is king time we are in currently, their cashflow stinks, and the stock-chart looks like it could provide a good low-risk high-reward short opportunity, especially if the broad market continues to sell off.

Sell Short Kendle International – Ticker KNDL

Sell Entry: 17.60 to 16.59

Stop-Loss: 18.66 or Higher

Take Profit Areas: 15.58, 14.57 to 13.56, 12.65 to 11.14

Kendle International Company Profile

Kendle International Inc., a clinical research organization, provides clinical development services on a contract basis to the biopharmaceutical industry worldwide. The company’s clinical development services include clinical trial management, clinical data management, statistical analysis, medical writing, regulatory consulting and organizational meeting management, and publications services. It operates through two segments, Early Stage and Late Stage. The Early Stage segment focuses on its Phase I operations. The Late Stage segment comprises clinical development services related to Phase II through III clinical trials; late phase clinical development services related to Phase IIIB and IV clinical trials. It also provides regulatory expertise and consulting services at various stages of drug and device development; designs clinical programs and clinical trial protocols, reviews programs, and provides gap analysis; offers consulting services for nonclinical development for small molecules, biologicals, vaccines, and devices; assists in the U.S. Food and Drug Administration application process; and involves in collection, analysis, and reporting of drug safety data. In addition, this segment offers customized clinical data management with the ability to connect into and utilize a customer’s own data systems. Kendle International operates in North America, Europe, Asia/Pacific, Latin America, and Africa. The company was founded in 1981 and is based in Cincinnati, Ohio.

Click here to review and trial the Trading Software we used in determining our buy long position on KNDL.

Click the Kendle International Stock Chart for a larger view.