Friday, April 29, 2011

Position Sizing Money Risk Management Made Easy

JBL Risk Manager
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JBL Risk Manager Program Features

See JBL Risk Manager Software Screen Shots Below

Position Sizing or how many shares to trade, done automatically

Stop Placement calculated automatically - Stop Loss and Trailing Stop exit price

Integrates with your updated MetaStock data service daily

Share Trading Diary/Journal for each trade

Long and Short Trades allowed for with independent performance reporting

Technical Stop entry is available in place of the automatic Trailing / Profit Stop

Maximum % Risk per Trade correctly takes into account brokerage charges

Limits over trading by optimizing your Trading Capital and timing

Multiple portfolios, Currency entry & Exchanges

Pivot Points automatically calculated and updated daily, for short term analysis and trend bias

Portfolio/Trade Performance - Average $Win and $Loss updated daily

Portfolio/Trade %Win and %Loss Ratio updated daily

Easily view all your Open and/or print Closed Trades/Positions

Show Cumulative Profit/Loss and Available Cash

Average Trading period for each Portfolio and trading days of each trade

Average $Rate of Return - Trade Expectancy

Total Brokerage charges for all closed trades

Stock Split adjustment process, very simple when required

Compare Portfolio Performance against any Index or security, easily

Now included with kind permission from Dr Van Tharp International Institute of Trading Mastery

System Quality Number (SM) automatically calculated (how good is your system - Van Tharp)

R Multiple with Variance - reward to risk ratio automatically calculated for each closed trade

R Expectancy - ratio automatically calculated with Standard Deviation

Click the following image screen shots for a larger view.

JBL Risk Manager Position Sizing Money Risk Management Software

JBL Risk Manager Position Sizing Money Risk Management Software

JBL Risk Manager Position Sizing Money Risk Management Software

Components of a successful Share Trading Plan

Money Management tells you how many shares to trade and vital for share trading success. It's a defensive concept that keeps you in the game to play another day. Don’t confuse Money Management with Stop Placement. Stop placement does not answer the question, how much? Risk Management may also be the difference between success and failure when trading shares. It refers to Stop Placement to minimize any losses and protect your profits. Your Maximum % Risk per Trade should NEVER be more than 2% of your Core Trading Capital. Your recommended Initial Stop Loss price is calculated and displayed automatically before each trade. The maximum Trade Size of each trade should never be more than 20% (or 19%) of Core Trading Capital and our Position Sizing - Money Management program calculates this for you by optimizing your Capital, minimizing your risk and monitoring your performance.

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Thursday, April 28, 2011

Jim Rogers New Interview

Jim Rogers
Legendary investor and best selling author Jim Rogers discusses his new book with John Nyaradi Wall Street Sector Selector.


Jim Rogers A Gift to My Children

John Nyaradi: Hello, everyone, I’m John Nyaradi, publisher of Wall Street Sector Selector, a financial media site specializing in exchange traded funds and global markets and economic analysis. Today, I’m pleased to welcome our special guest, Jim Rogers, who is joining us by telephone from Singapore. Jim, welcome to Wall Street Sector Selector.

Jim Rogers: I am delighted to be here.

John Nyaradi: Thank you very much. As everyone knows, Jim is a legendary investor, author, and financial commentator. He has appeared on many major media sites, both print and television. He’s the bestselling author of A Gift to My Children: A Father’s Lessons for Life and Investing. So, Jim, today, I’d like to talk about your great book, A Gift to My Children.

Jim Rogers: I’ve made a few mistakes in my life. I had a few successes so I sort of wrote these things down because I wanted my children to learn these lessons. Next thing you knew, I had enough for a book. And so, even if they don’t understand some of the things now, hopefully, when they’re older, when they’re adults, then they might well read it and understand some of the things, or if I’m still alive, they’ll still ask me about them. So I hope it helps them and lots of other people, as well. I certainly made enough mistakes in my life, and maybe I can prevent some other people from making other mistakes.

John Nyaradi: I appreciate that a lot. You started your book by saying to swim your own races. Don’t let others do your thinking for you. Could talk about that for a moment?

Jim Rogers: Well yes. I learned early on that I have to do it my own way, whatever my own way is, and then, I’ll certainly be better doing it my way than trying to do it somebody else’s way, whatever it is, whether it’s swimming a race or taking a test or anything else.

So I learned that lesson early on, and I cited the example of Donna de Varona, who, you know, won a couple of gold medals in Olympics in 1964, so I’m not the only one who’s figured it out. It’s better to do things your way, and you’ll do it better that way in the end, and not worry about other people; do it your way and let them do it their way. You’ll probably be better in many cases.

John Nyaradi: Sure, that makes great sense. In Chapter 3, you talked about good habits for life and investing. What do you see as really good habits for both life and investing, both for your children and even for ourselves as adults?

Jim Rogers: Well, the first thing people have to understand is that you have to do your homework. You have to be prepared for everything, and part of that is being skeptical of everything you hear. Don’t believe anything you hear in the press or from politicians or anywhere else. Do your own homework. Come up with your own conclusions about everything, and do lots of homework. There’s no such thing as too much research no matter what you’re trying to do or accomplish, and then, after you’ve done your own homework and listened to all the other views, if you want to, but don’t even listen to them to see whether it might be wrong, then, then you might make a success at whatever you’re trying to do.

John Nyaradi: You talked about the value of education in your book. You know, we all agree that it’s important, but what I thought was really interesting was you take a real different stand on this subject. You know, we always hear about Math and Science. You talked about different things that constituted good education, and maybe you’d like to address this just a little bit.

Jim Rogers: Well, education is important for all of us. You have to learn to read and write and do arithmetic, if nothing else, but then beyond that, you have to learn how to think, and you have to learn what’s happened in the world before. I try to encourage students to study History because History would teach them that the world is always changing, and that whatever is going on, more or less has happened before, but it’s also changed. Whatever you think is correct today in 2011 is going to be very different in 2021, much less 2031.

John Nyaradi: Yes.

Jim Rogers: I also urge them to study Philosophy because that will teach them to think, and being able to think for yourself has always been extremely important and a guide to success. It certainly is these days, given the huge proliferation of TV and the internet and everything, you know. So many people follow the same ideas or the same thoughts, and that’s not going to lead to success. No one has ever been successful doing what everybody else does. So better to figure out the reality and then do it your way.

John Nyaradi: In your book you talked about looking into the future and that everyone would be a millionaire if you could read a newspaper from the future. What do you see in our future?

Jim Rogers: Well, I don’t know how you define “our,” but if you mean the US, the US is certainly, you know, the largest debtor nation, not just the largest debtor nation in the world, but the largest debtor nation in the history of the world. No nation has ever gotten itself in such a bind, and unfortunately, in Washington, they don’t seem to care. They seem to be making it worse, not better.

So the future of the US is going to be a lower standard of living for all of us who live here, for US citizens. The US is going to go into a relative decline….our standard of living has already declined compared to other people. I’m afraid that our standard of living is going to continue to decline.

Some people will do extremely well, of course. You know, even in the Great Depression, there were some people who did well and laid the foundations for great fortune. That will happen in the US again. You know, the UK was in decline for 70 years after the First World War, but there are plenty of people in the UK who made money, who had fun, who lived good lives, so even when nations or societies are in decline, it doesn’t mean everybody has to be in decline, and if you do your homework, chances are, you’ll come out fine.

John Nyaradi: We’re talking on an historic day today, when Standard and Poor’s changed their outlook regarding the United States from stable to negative. What’s your view on this whole topic?

Jim Rogers: I mean what took them so long? I just said US is the largest debtor nation in the history of the world. Other nations have already figured this out. Other banks and rating agencies have figured this out long ago. I’m sure you and your listeners have, too.

John Nyaradi: So starting here in April, looking ahead in the next few months, what do you see as the biggest dangers and the biggest opportunity for the average retail investor?

Jim Rogers: Well, nobody should invest in anything unless they know what they’re doing. Don’t listen to me or anybody else. Just stay with what you know. You’re going to go broke if you get your investment advice from newspapers and magazines or internet or TV. Stick with what you know. I have my own portfolio. For the most part, I’m long commodities. You know, there’s a big bull market underway in commodities that has been going on for 12 years or so. It’s got another I don’t know how many years, but it certainly has a few more years to go. If the world economy gets better, I’m going to make a lot of money in commodities because of shortages. If the world economy doesn’t get better, I’m going to make money in commodities because the government is going to print more money. Now that’s the wrong thing to do, but it’s all they know how to do, and so that’s what they will do.

I’m also long some currencies because I see more and more currency problems developing going forward, and I’m short emerging markets. I am short emerging markets and technology companies in the US. So that’s what I’m doing. I don’t know if I know what I’m doing and I hope I do, but in the meantime, for all other investors, I would urge them to learn about commodities and raw materials. If they don’t want to do that, they should just stick with what they know because that’s the only way you’re going to be successful in the long run, sticking with what you know.

John Nyaradi: We’ve been talking to Jim Rogers, bestselling author of A Gift to My Children: A Father’s Lessons for Life and Investing, and really in my view, this is great reading really for all of us as adults and for our children. To learn more about Jim’s book, A Gift to My Children: A Father’s Lessons for Life and Investing, just click on the link at the bottom of this interview.

Jim, it has been wonderful chatting with you, and thanks for joining us. And I know we’re looking forward to talking with you again soon.

Jim Rogers: Well, it was great fun. I’m sitting here on my exercise bike, so I did two things at once. Very good. Thanks very much.

Click here to learn more about “A Gift To My Children: A Father’s Lessons for Life and Investing,” by Jim Rogers

Wednesday, April 27, 2011

Pros and Cons of Williams %R Indicator

William %R Indicator
An In-depth Look at Williams %R’s Assets and Shortcomings Understanding The Williams %R Indicator

by Ken Long of the Van Tharp International Institute of Trading Mastery


Click here for Dr. Van Tharp's Trading Workshop Schedule

The Williams %R Indicator

Oscillators are technical analysis tools used to identify time periods when price can be considered to be in an overbought or oversold condition. Overbought and oversold conditions are found at extremes that vary based on how the oscillator is constructed. Some oscillators look exclusively at price with respect to the range of high and low in the look back period. Others incorporate some measures of statistical description. In most cases, the look back period is required in order to establish what may be considered normal and extreme for the price channel.

Depending on the market condition, your strategy could be one of channel trading in which case you expect price to reverse once it’s in this extreme condition or one of preparing for breakout trades in which case you expect price to continue explosively through this extreme moment and breakout of the channel.

The famous technical analyst, Larry Williams, created the Williams %R indicator as an index ranging from zero to -100 for the look back period. The highest high of the look back period earns an index score of zero and the lowest score earns a -100. Then, look back period is segmented into 100 equal sections and the oscillator value of the price is interpolated.

Readings between zero and -20 are considered to be overbought because they are in the top 20% of price, whereas readings between -80 and -100 are considered to be oversold because they are in the bottom 20% of price during the look back period. Readings between -20 and -80 are considered to be in the normal range of the channel.

Assets

Williams %R is my favorite oscillator because it is simple to understand and very visual.

I use Williams %R as a useful oscillator in determining if a particular instrument might be considered overbought or oversold based on the context of recent price action in a defined period. I like to use 10 days and one year for context.

I use the 10 days of look back to give me insights into short-term trader psychology and I use the one year look back period to give me insights into long-term trader psychology. In some of my systems I combine both of these measures to give me a consolidated, integrated look at market psychology.

There’s nothing magical about the use of these two specific time frames, nor do I believe that they have any predictive power. I simply find them useful to help me frame my trades and understand the market enough so that I can take action.

I have not exhaustively analyzed different time frames to see if there is an incremental advantage for adjusting the parameters. These two periods work well enough to get me into the ballpark for decent trading opportunities.

Recently, I have seen some trading systems with simple rule sets built exclusively from Williams %R that use a 30-period look back rather than the standard 10. I’ve only looked at the rule sets superficially: while the entries made sense, the exits looked clumsy and non-intuitive.

Shortcomings

Although I consider Williams %R an excellent technical indicator, it is by no means perfect. I dislike the scale because it seems counterintuitive to me. It goes from a high of zero to -100. I also don’t like that it uses today’s price action when calculating the index value. Normally, this is good enough; however, there are days when the price of the asset has makes a bold break out from the last 10 days trading range and this indicator doesn’t help me recognize the breakout.

If I were going to design this indicator from scratch, I would fix those two problems. First, I would make the scale read from 0 to 100 like a thermometer. Second, I would describe today’s price action on a normal scale of 0 to 100 that looked back 10 days starting from yesterday. For example, if today’s price exceeded the highest high of the last 10 days, the indicator would have a reading greater than 100. Conversely, if it had a lower low than the low of the last 10 days, it could have a negative reading. This change would allow you, by inspection, to identify breakout candidates in both directions as well as a relative magnitude of the breakout, depending on how far below 0 or how far above 100 the new reading stands.

Re-engineering An Indicator

To support my own trading I built such an indicator in Microsoft Excel and I use it for analyzing a large numbers of stocks and ETFs as part of my daily trading practice. I have found the modified indicator, which I call NDX (or “index”), does everything that Williams %R does and fixes its two shortcomings.

In my spreadsheet reports, I use the NDX(t), where “t” represents the look back timeframe. For example, NDX(10) would represent a 10-day look back period from yesterday to 11 days ago, with today being represented as the zero day.

If an instrument traded in a price range from $10 to $20 in the look back period, and closed today at a price of $10, it would have an index value of zero. If it closed today at $20, the index value would be 100. If the close today were $21, the index value would be 110, which would indicate a breakout of 10% greater than the previous trading range.

You can see how this information could be very useful scanning for breakout opportunities in a large population of stocks and ETFs. The normal 0 to 100 scale is also much more intuitive to me.

I use conditional formatting in Excel to highlight index values greater than 90 in green and less than 10 in red. I typically rank sets of symbols from highest to lowest or lowest to highest in order to find those at the most extreme condition compared to their peers. This is consistent with the use of oscillators in general, and I have found it very useful to focus on these extremes for short-term trading targets.

When I use a year-long look back timeframe, I write the column header as NDX(52w).

I still use Williams %R whenever I use commercial or public stock screeners. I use my NDX indicator on my spreadsheet reports.

These kinds of refinements come from a deep understanding and appreciation for the construction, use and limitations of conventional technical analysis. The refinements don’t seem important unless you understand a specific indicator at a deep level. Attention to detail will reward your practice of trading.

Click here to review more trading information and resources from the Van Tharp International Institute of Trading Mastery

Tuesday, April 26, 2011

Bernanke FOMC Rate Decision Excitement

Bernanke Trillion Dollar Bill
By John Nyaradi Wall Street Sector Selector


This will be an exciting week with Dr. Bernanke's first press conference following an FOMC meeting on Wednesday and the release of the 1Q GDP estimates on Thursday. Both have potential to be market movers, along with some signficiant economic and earnings reports during the week.

On My Radar

On a technical basis, we remain locked in the same trading range that we have seen since the beginning of the year, with the major indexes now back at the high end of that range.

SP500 Tick Chart

Above, the Point and Figure Chart shows us right at the upper level of resistance but still with a bearish price objective of 1160.Overhead resistance is at the 1330-1340 level with support at 1300 within the longer term uptrend that would take a decline down to 1070 to break.

It was a very choppy week with Standard and Poor's downgrade of their outlook on U.S. debt from stable to negative that was immediately offset by mostly positive earnings reports.

The big events for the week will be the press conference on Wednesday and the GDP estimate on Thursday which will likely set the tone going forward into spring and summer.

Seasonality is now working against the markets as we've entered the "sell in May and go away" period wherein the market historically moves in a sideways to downward fashion until about Halloween.

The View From 35,000 Feet

Volatility was the name of the game last week and we can probably expect more of the same this week.

Gold reached record highs (Disclosure: Wall Street Sector Selector holds a position in GLD) while the dollar continued declining towards lows last seen at the depths of the financial crisis in 2008.

The big news was the downgrade by Standard and Poor's and positive earnings from Apple and General Electric.

This week earnings continue in earnest with 180 reports from S&P 500 companies including bellwethers Amazon, Coca Cola on Monday, eBay and Starbucks on Tuesday, and Microsoft and Exxon on Wednesday.

Last week's economic reports were mixed, as they have been in recent weeks.

Positive:

April Housing Starts were up, although still at depressed levels

March Building Permits; up

March Existing Home Sales; UP

Initial jobless claims down from previous week but still above 400,000/week

Negative:

April Philadelphia Fed Report down big to 18.5 from previous 43.4

March Leading Indicators declined to 0.4 from 1.0

February Housing Prices declined -1.6% from previous -1.0%

What It All Means

We now see economic reports pointing to a slowdown ahead, with unemployment remaining stubbornly high and now manufacturing slowing down with this week's big drop in the Philly Fed report and housing in what surely looks like a double dip.

Offsetting the negatives, we have overall solid earnings, particularly in technology, largely driven by productivity and sales in the emerging world, and, of course, we have "Big Ben" and his friends with their printing press at the ready.

However, the Fed increasingly finds themselves between the old proverbial rock and a hard place as the deficit hawks and ratings agencies are starting to circle overhead and global inflationary pressures grow.

The Week Ahead

Major Issues/Themes: Wednesday and Thursday will be the big days with the Fed press conference and 1st Quarter GDP, along with the slew of earnings reports coming all week long.

Tuesday: February Case/Shiller Home Price Index, April Consumer Credit

Wednesday: March Durable Goods, FOMC announcement/press conference

Thursday: Initial Unemployment Claims, Continuing Claims, 1st Quarter GDP Estimate, March Pending Home Sales

Friday: March Personal Income, March Personal Spending, April Chicago PMI, April Michigan Sentiment

Sector Spotlight

Leaders: (NYSEArca: SLV) iShares Silver (NYSEArca: IEZ) Oil Services

Laggards: (NYSEArca: BAL) Cotton (NYSEArca: EGPT) Egypt

Click Here to Review the Wall Street Sector Selector ETF Picks

Click Here To Review More Exchange Traded Fund Information

Monday, April 25, 2011

Earnings Estimate Lag Short-Sell

Fifth Third Bancorp
Fifth Third Bancorp Lags Earnings Estimates


This week I’ve got a short-term short-sell momentum trade on Fifth Third Bancorp. According to Zacks Investment Research using their Earnings Estimate Revision Stock Picking Formula, Fifth Third Bancorp reported first quarter net income available to common shareholders of $88 million or 10 cents per share, significantly below the Zacks Consensus Estimate of 27 cents. The results also compared unfavorably with net income of $270 million or 33 cents per share in the prior quarter, but compared favorably with net loss of $72 million or 9 cents in the prior-year quarter.

The results were negatively affected by lower net interest income and non-interest income, partially offset by better-than-expected improvement in credit metrics and lower operating expenses.

Net income reduced by $153 million or 17 cents per share of discount accretion recorded in preferred dividends, which increased due to February repurchase of $3.4 billion in TARP.

Performance in Detail

Total revenue at Fifth Third was $1.5 billion in the first quarter, in line with the Zacks Consensus Estimate but down 6% sequentially. However, revenue was also in line with the prior-year quarter’s figure. The sequential decrease in revenues primarily reflects the significant drop in non-interest income.

Net interest income was down $33 million from the prior quarter to $884 million. Net interest margin inched down 4 basis points (bps) sequentially to 3.71%.The sequential decline in income and margin reflected full-quarter effect of the refinancing of FTPS, LLC loan, lower mortgage warehouse balances in loans held-for-sale and the effect of $1 billion fixed-rate debt issuance related to TARP repayment.

Income was down $17 million from the prior-year quarter due to lower average loan balances. However, net interest margin was up 8 bps year over year, driven by deposit growth and shift in mix from higher cost term deposits to lower cost deposit products.

Although average portfolio loan and lease balances inched up 2% sequentially and inched down 1% year over year, average core deposits increased both 1% sequentially and 2% year over year. The company reported growth across all transaction deposit account categories, which offset both sequential and year-over-year declines in consumer CDs.

On the flip side, Fifth Third’s non-interest income decreased 11% sequentially and 7% year over year to $584 million. The sequential decline reflected lower mortgage-related revenue, investment securities gains, and seasonally lower corporate banking revenue and deposit service charges, partially offset by lower credit-related costs realized in other noninterest income. The year-over-year decline was driven by lower mortgage-related revenue and deposit service charges based on the effect of August implementation of Regulation E.

Non-interest expense inched down 7% sequentially to $918 million. The figure includes $17 million of expenses associated with the termination of $1 billion in FHLB funding in the prior quarter.Excluding one-time items, Fifth Third’s non-interest expense came in at $935 million in the reported quarter. The remaining sequential decline reflected lower revenue-based compensation as well as lower credit-related expenses, partially offset by seasonal increase in FICA and unemployment costs.

Credit Quality

Credit metrics showed mixed trend in the reported quarter. Net charge-offs were $367 million or 192 bps of average loans and leases compared with $356 million or 186 bps of average loans and leases in the prior quarter. Provision for loans and leases increased 1% sequentially but plummeted 72% year over year to $168 million. Total nonperforming assets, including loans held-for-sale, were $2.3 billion, a decline of 5% from the prior quarter reflecting sale of assets from held-for-sale during the quarter and decreases in NPLs and OREO in the held-for-investment portfolio.

Capital Ratios

Capital ratios were strong during the quarter. On a sequential basis, the Tier 1 common equity ratio advanced 150 bps to 9.00%, while Tier 1 capital ratio decreased 173 bps to 12.21%. As of March 31, 2011, book value per share and tangible book value per share were $12.80 and $10.11 compared with $13.06 and $9.94 per share, respectively, reported in the prior quarter. Though book value and tangible book value per share increased due to higher retained earnings and the issuance of common stock at a premium, they were largely offset by the effect of the repurchase of the TARP warrant from the U.S. Treasury.

Return on assets (ROA) was 1.0% and return on average common equity (ROE) was 3.1%, down from 1.18% and 10.4%, respectively, in the prior quarter. Over the long term, ROE and ROA are expected to improve based on balance sheet growth, related efficiencies, lower credit costs, and overall economic environment.

Zacks Take

For Fifth Third, we are encouraged to see the credit management efforts and expect it to experience an improvement in credit quality in the upcoming quarters. Though challenging economic conditions along its footprint and the recent regulatory issues are expected to remain an overhang, going forward, we expect Fifth Third’s diverse revenue stream, opportunistic expansions and cost containment measures to support its earnings.

Fifth Third shares are maintaining a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation. Also, considering the fundamentals, we are maintaining a ‘Neutral’ rating on the stock.

My Take

With the support break of 13.40, I see more downside momentum to my price targets listed below. My price target don't have a huge amount of percentage return to them but 10% to 15% is possibly available, and maybe more if the broad market sells off. Tighten up the stop-loss if you like to make the reward risk ratio more favorable. I see the broad market running out of steam here and into major resistance currently, with the potential of for significant downside very possible. Then again, the bulls are still in the game so anything is possible.

Sell-Short Short-Term Fifth Third Bancorp – Ticker FITB

Sell Entry: 13.16 to 12.76

Stop-Loss: 14.22

Take Profit Areas: 12.02 to 11.94, 11.42 to 11.35

Fifth Third Bancorp Company Profile

Fifth Third Bancorp operates as a diversified financial services holding company. The companys Commercial Banking segment offers banking, cash management, and financial services; traditional lending and depository products and services; and other services, including foreign exchange and international trade finance, derivatives and capital markets services, asset-based lending, real estate finance, public finance, commercial leasing, and syndicated finance for business, government, and professional customers. Its Branch Banking segment provides deposit and loan, and lease products to individuals and corporations. Its products include checking and savings accounts, home equity loans and lines of credit, credit cards, and loans for automobile and personal financing needs. The companys Consumer Lending segment involves in mortgage and home equity lending activities, such as origination, retention, and servicing of mortgage and home equity loans; and other indirect lending activities, which include loans to consumers through mortgage brokers, automobile dealers, and federal and private student education loans. Its Investment Advisors segment offers investment alternatives for individuals, companies, and not-for-profit organizations. It offers retail brokerage services to individual clients, and broker dealer services to the institutional marketplace. This segment also provides asset management services; holistic strategies to affluent clients in wealth planning, investing, insurance, and wealth protection; and advisory services for institutional clients, as well as advises the companys proprietary family of mutual funds. As of December 31, 2009, the company operated 1,309 full-service banking centers, including 103 Bank Mart locations and 2,358 Jeanie ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, North Carolina, West Virginia, Pennsylvania, Missouri, and Georgia. The company was founded in 1862 and is headquartered in Cincinnati, Ohio.

Click here to review different investing trading software that scans analyzes stocks for different technical criteria, and low-risk high-reward trade pattern setups.

Click the Fifth Third Bancorp stock chart below for a larger view.

Thursday, April 21, 2011

Is Deflation Still A Real Threat?

Deflation Sprial
Click Here For A Free 90-Page "Deflation Survival Guide" That Gives the Answer


"Every excess causes a defect; every defect an excess. Every sweet hath its sour...The waves of the sea do not more speedily seek a level from their loftiest tossing, than the varieties of condition tend to equalize themselves."

This quote comes from Ralph Waldo Emerson's essay, "Compensation." He opens the essay with a poem which includes these two lines:

"Mountain tall and ocean deep Trembling balance duly keep."

Do Emerson's prose and poetry actually speak to the subject of deflation? Indeed they do.

Recent decades have seen the biggest credit inflation the world has ever known. So the question is: What will "duly keep" the "balance" of so great an "excess"? Well, a deflation of the same scale.

And the depth of deflation will be in proportion to the height of the credit build-up.

How high was the mountain of debt/credit? In 2008, it reached its zenith at $65 trillion. This chart from the January 2011 Elliott Wave Theorist shows what has happened since:

Debt Credit

In that same issue of the Theorist, EWI's Robert Prechter observes: "This decline in overall money and credit is the first on an annual basis since 1929-1933. It is a big deal."

And the $65 trillion is a conservative number. Prechter also states:

"It does not count derivatives, which are IOU-ifs representing an estimated risk of indebtedness of $600t., or the unfunded liabilities of the federal government, which by some estimates amount to $300t."

Does history shed light on vast excesses in debt/credit and deflation? Read the excerpt below from Conquer the Crash (2nd ed.), pp. 88-90:

"Deflation requires a precondition: a major societal buildup in the extension of credit (and its flip side, the assumption of debt)... Elliott wave expert Hamilton Bolton... summarized his observations this way:

'In reading a history of major depressions in the U.S. from 1830 on, I was impressed with the following:

(a) All were set off by a deflation of excess credit. This was the one factor in common.

(b) Sometimes the excess-of-credit situation seemed to last years before the bubble broke.

(c) Some outside event, such as a major failure, brought the thing to a head, but the signs were visible many months, and in some cases years, in advance.

(d) None was ever quite like the last, so that the public was always fooled thereby.

(e) Some panics occurred under great government surpluses of revenue (1837, for instance) and some under great government deficits.

(f) Credit is credit, whether non-self-liquidating or self-liquidating.

(g) Deflation of non-self-liquidating credit usually produces the greater slumps.'"

Note that we have had more than "a major societal buildup in the extension of credit." The chart above also shows that "a deflation of excess credit" has been underway since 2008. As Hamilton Bolton said, this is the one factor all major depressions have in common.

To help plan and prepare for your financial future, we suggest that you take a FREE look at our deflation survival guide titled, "The Guide to Understanding Deflation." It's an eBook of Robert Prechter's most important recent warnings and teachings about deflation, and it's free.

To start your free read, simply sign-up to become a Club EWI member (membership is also free). Becoming a member only takes moments after you click here.

This article was syndicated by Elliott Wave International and was originally published under the headline Does Deflation Remain a Threat?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Click Here For A Free 90-Page "Deflation Survival Guide" That Gives the Answer

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Wednesday, April 20, 2011

Stock Trading Is Going Mobile Part 3

Invest2Success.com Mobile Website
Stocks in Your Pocket or Purse: The Market Goes Mobile Part 2


By D.R. Barton, Jr. of the Dr. Van Tharp International Institute of Trading Mastery

Click here for Dr. Van Tharp's Trading Workshop Schedule

In the past couple of weeks, we’ve been looking at the fast growing field of mobile phone apps for the financial markets.

In the coming weeks, we will dig into the inner workings of half a dozen or more stock market apps that are available for the iPhone/iPad/iTouch. With a user base of over 100,000,000, the iPhone is the logical place to start our smart phone app review. We’ll cover the Android platform in a subsequent series of reviews.

In our last article, we looked at a breakthrough app that offers professional level stock analysis on a smart phone. The Chaikin Power Tools app doesn’t just monitor your portfolio or draw charts, it actually produces a buy, sell or hold conclusion by using a decision algorithm based on portfolio level testing. It passed rigorous third party testing to prove that it provides statistically significant outperformance of the market.

A Model that Works

While the Chaikin Power Tools app is visually appealing, when you look under the hood, you quickly find the beauty is more than skin deep. The app ranks almost any stock you enter on a five point scale:

• Very Bearish (lowest rating)
• Bearish
• Neutral (medium)
• Bullish
• Very Bullish (highest rating)

This rating is driven by a well-tested and well thought out analytical model. It is based on a 20-variable model that captures the best indicators from fundamental, technical and sentiment analysis.

The apps originator, Marc Chaikin, based the indicator set on 40 years of Wall Street experience and almost as impressively on exhaustive testing. While writing this article I spoke with Marc who said his team considered hundreds of characteristics but eliminated any indicator that didn’t add value. Marc said that many traditional Wall Street standards, like trailing 12 month earnings, didn’t test well.

After the rigorous examination, the framework that was left impressively outperformed the S&P 500 and the Russell 2000 in a statistically significant, proprietary analysis by a third-party .

The app breaks 20 variables into four rating areas and the strength of each area displays on main app page for any stock chosen. In the image below, you can see the overall ranking (Bullish or fourth higher on a scale of five) and the four categories for the underlying metrics: Financial Metrics, Earnings Performance, Price/Volume Activity and Expert Opinion.

By clicking on any one of the four categories listed above, you can see the five sub-factors that drive the rating in that area. Below is an example of Price/Volume Activity Rating, which is another way to say the technical analysis of the stock.


Download Free iPhone Stock Investing App and Research Reports from Chaikin Power Tools


Here you see the key factors for the technical picture of the stock. I have written previously about Chaikin Money Flow and the Chaikin Oscillator—common indicators in my tool kit and ubiquitous in almost any reputable charting package. If you’d like more information on this useful indicator, go to stockcharts.com and look under the Chart School tab. Stockcharts.com’s Chart School is another great no-cost resource!

The other three areas have the same level of detail and contain fundamental data and a section on sentiment analysis (dubbed Expert Opinions in the app).

Test Drive This App

As a reader of Tharp’s Thoughts, you can be one of the first to try out the app. As I said in the last article, this app is brand new. During the initial launch phase, it doesn’t cost anything. Get it for free while you can! If you have an iPhone, an iPad or an iTouch, go to the Apple App Store and search for “Chaikin”—you’ll find it there. The app has only been available for a couple of weeks, so you’ll be one of the first to give it a test drive. The app has already been featured in Barron’s “Electronic Investor” section and was the topic of a front-page article in the Philadelphia Inquirer business section this past Thursday. Now you too can be on the leading edge of apps for your phone!

I’m anxious to hear what you think about the app as an analysis tool. And knowing the quality of the researchers that read this newsletter, I’m sure you’ll be finding more ways to use this rich tool than I can imagine.

Disclosure

I’ve known Marc for over a decade and some time back, he asked me to look at an early prototype of the app. It simply blew me away. Even in preliminary testing, I was completely impressed with what it offered traders.

In full disclosure, I am an early and very minor investor in the project. To paraphrase famed Remington razor company owner Victor Kiam from his advertising, “I liked it so much I invested in the company.”

[Publishers Note: This tool has not been endorsed by Van Tharp or The Van Tharp Institute. The five point stock scale is unrelated to Van Tharp’s market types. Neither Van Tharp nor the Van Tharp Institute have any involvement, financial or otherwise, with Chaikin Power Tools or its publisher.]

Next week we’ll look at a couple of apps that have some very useful characteristics (like real time data and visually appealing charts).

Great Trading, D. R.

About the Author: 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 SmartMoney.com and Financial Advisor magazine. You may contact D.R. at the Dr Van Tharp International Institute of Trading Mastery.

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Tuesday, April 19, 2011

Standard & Poors Economic Pearl Harbor

Economic Pearl Harbor Warren Buffett
An Economic Pearl Harbor

From John Nyaradi Wall Street Sector Selector


No doubt there will be gallons upon gallons of ink spilled regarding today's action by Standard and Poors in which they took the historic step of downgrading the United States' long term credit outlook from stable to negative.

As far as I know, this is the first time in history that such an event has occurred, and the first time since the mid-1990s that any U.S. debt has received more than a hint of a "negative" rating that subsequently, never transpired.

However, today Standard and Poors suggested that there's a one in three chance of the U.S. credit rating being downgraded within the next two years, in effect starting a "ticking clock" for our country to get its fiscal house in order.

Across the financial press today one could read a wide range of opinions, covering the gamut from Armageddon at hand to the view that all is well and that S&P doesn't know what they're talking about and simply overacted.

Some say it doesn't matter. Others say it's the beginning of the end.

My view is that today's announcement was simply a reaffirmation of the obvious and that is that we've been spending beyond our means for more than 30 years and that now the bill is close to coming due.

As in personal family finances, you can only rob Peter to pay Paul for so long and there are only so many pockets you can pick until you run out of pockets.

Today, it appears that the United States might well have run out of pockets and this day, like Pearl Harbor, could be a national "economic wake up call" that the party is over and that it's time to get our house in order and dig ourselves out of the huge hole in which we have placed ourselves.

No one political party can be blamed. No one economic policy or Federal Reserve Chairman can be held responsible, although Presidents and political parties of all stripes and Fed Chairmen for the past decades certainly must share the "blame."

But the point of fact is that we all are accomplices in this unpleasant situation in which we now find ourselves.

Without regard to political affiliation, the road to today's shocker from Standard and Poors began with "Reaganomics" at which time we went from "tax and spend" to "borrow and spend," neither of which, of course, makes for a pleasant outcome. And since 1980, for more than 30 years now, we have been on this national drunken orgy of easy credit and easy money and today, the bill came due.

Although this isn't war time and there can be no justifiable comparison to a world war, today's situation is similar to the time before Pearl Harbor in that we have been asleep and today was our wake up call. Now the only question is will the American spirit rise and face the challenges of our day (as we always have) or will we slide into obscurity and insignificance like so many world powers have before us?

I submit that we can face this challenge and return ourselves to grandeur and glory...that is the American way.

We have the greatest universities in the world. We have an entrepreneurial and creative drive unmatched by any nation in the world. We still, in spite of our recent three decade drunken orgy, have by far the world's largest economy, and we have unquestionably been through much darker and more dangerous times. (think Adolph Hitler, the Great Depression, the Civil War that began on April 12, 1861, 150 years ago last week)

At dinner this evening, my wife and I and our son, a recent graduate of the University of Texas, (which, by the way, has the second largest academic investment fund in the country after Harvard and this week bought nearly a billion dollars of physical gold) enjoyed a very spirited discussion around this very subject. At 23, he's full of ambition and idealism, much as we all were at his age. He argued persuasively for a bright American future, and I would agree with the addition of one caveat of 60 years' experience on this good earth.

America's future is brightest at its darkest moments, as it was during Pearl Harbor, the Depression and 9/11, if we pull together, put our petty differences behind us and rise up as "one Nation." We have done it before. We can do it again. The road will be long and full of pain and sacrifice, but we still have all that is necessary to pass along the American Dream to our children as it was passed by our parents to us.

Have a good evening and we'll talk soon,

John Nyaradi Wall Street Sector Selector

Wall Street Sector Selector

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Monday, April 18, 2011

Lowest-Risk Lowest-Cost Defense Stock Buy

Raytheon SM-3 Missle Launch
Raytheon Defense Stock Buy Pick of the Week


My stock pick this week is Raytheon. Maybe the stock price will fly like a rocket. According to Zacks Investment Research, Raytheon recently received a contract, worth $42 million, for the initial concept development and program planning for the Standard Missile-3 (SM-3) Block IIB. The SM-3 Block IIB is the Missile Defense Agency's next-generation Aegis missile. Some of its main competitors are Boeing and Northrop Grumman. Raytheon’s current trailing PE ratio is about 10, and offers a 3.5% dividend. Its PEG ratio is 1.19, Price/Sale 0.69, and Price/Book 1.78.

New Missile Defense System

The SM-3 is being developed as part of the Missile Defense Agency's sea-based Aegis Ballistic Missile Defense System. It has successfully defeated 18 incoming ballistic missile threats in realistic test scenarios. Standard Missile technology has evolved to keep pace with ever more critical threats and grow into new missions. It was initially developed as a replacement for the Terrier, Talos and Tartar surface-to-air missiles.

Cost Effective Defense Contractor

Raytheon is the lowest-risk, lowest-cost, most-technically capable provider of missile defense solutions. As a part of its contract with the Missile Defense Agency, Raytheon has already delivered more than 130 SM-3s ahead of schedule.

Projected Future Growth

Raytheon enjoys strong order bookings and order backlog, an improving balance sheet, growing cash flow, and operational improvements. Future growth will be driven by its focus on Intelligence, Surveillance and Reconnaissance unmanned systems, training, cyber security, Standard Missile-6, Patriot, Zumwalt and THAAD programs.

Short-Term Buy / Long-Term Neutral

This is, however, offset by apprehensions over future growth of the U.S. defense budget, the fate of high-cost programs, risks related to key project executions and order cancellations. Thus in the absence of any positive triggers, we advise a long-term neutral rating. The company presently retains a short-term Zacks #2 Rank (Buy).

Buy Long Raytheon – Ticker RTN

Buy Entry: 47.52 to 49.04

Stop-Loss: 43.82

Take Profit Areas: 52.54 to 53.04, 53.57 to 54.07, 56.16 to 56.72

Raytheon Company Profile

Raytheon Company, together with its subsidiaries, provides electronics, mission systems integration, and other capabilities in the areas of sensing, effects, and command, control, communications, and intelligence systems, as well as mission support services in the United States and internationally. It operates in six segments: Integrated Defense Systems, Intelligence and Information Systems, Missile Systems, Network Centric Systems, Space and Airborne Systems, and Technical Services. The Integrated Defense Systems segment provides integrated naval, air, and missile defense and civil security response solutions. The Intelligence and Information Systems segment provides intelligence and information solutions specializing in ground processing, unmanned ground systems, cybersecurity solutions, homeland/civil security, and other markets. The Missile Systems segment develops and produces weapon systems, including missiles, smart munitions, close in weapons systems, projectiles, kinetic kill vehicles, and directed energy effectors for the armed forces of the U.S. and other allied nations. The Network Centric Systems segment provides net-centric mission solutions for the U.S. Army, Air Force, Navy and Marine Corps, and other government customers, as well as civil customers. The Space and Airborne Systems segment designs and develops integrated systems and solutions for missions, including intelligence, surveillance, and reconnaissance; precision engagement; unmanned aerial operations; and space. The Technical Services segment provides training, logistics, engineering, product support, and operational support services for the mission support, homeland security, space, civil aviation, counterproliferation, and counterterrorism markets. The company was founded in 1922 and is based in Waltham, Massachusetts.

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Click the Raytheon stock chart below for a larger view.

Raytheon Stock Chart

Friday, April 15, 2011

Stock Trading Is Going Mobile Part 2

Invest2Success.com Mobile Website
Stocks in Your Pocket or Purse: The Market Goes Mobile Part 2


By D.R. Barton, Jr. of the Dr. Van Tharp International Institute of Trading Mastery

Click here for Dr. Van Tharp's Trading Workshop Schedule

Last week, we took a stroll down memory lane and saw how market data availability for retail investors and traders has made huge leaps. Not so long ago, traders used pencil, paper, and day old prices. Today, we have real time data literally right at our fingertips wherever we are—in our pocket or purse on smart phones.

In the coming weeks, we will dig into the inner workings of half a dozen or more stock market apps that are available for the iPhone/iPad/iTouch. With a user base of over 100,000,000, the iPhone is the logical place to start our smart phone app review. We’ll cover the Android platform in a subsequent series of reviews.

Now that market data is generally available to everyone, everywhere, smart phone stock market apps have to raise the bar to grab our attention. It’s commonplace now for apps to provide market data for stocks, indexes and Exchanges Traded Funds (ETFs) and keep track of portfolios or a list of favorite stocks. Instead of merely finding new ways to present a stock’s current price and the relevant news on that stock, the next generation of apps will actually do something with the massive amounts of stock market data out there.

Over the next few weeks, we’ll look apps that offer a unique or useful twist to the standard quote list or portfolio tracking function. We’ll start our examination with a handful of apps that do much more than just keep stock quotes up to date.

Let’s jump right to what I believe is the first true breakthrough cell phone app: a “next generation” app that offers true professional-level analysis on a smart phone. Better than just raw data, this app actually provides a buy, sell or hold conclusion. And here’s the best part: since the app is brand new (it’s only been out 8 days), you can still get it for free, no strings attached.

Like Having a Hedge Fund in Your Pocket

Imagine having lunch with an old friend from school. She mentions that her broker recommended a stock (let’s say it was Amazon, symbol AMZN). You open an app on your phone and in literally less than 5 seconds, show her a 20-factor model rates that AMZN as “very bearish.” You say that it’s not the best time to get in. Then, you show her a visual gauge that quickly and easily shows the stock’s rating and the underlying reasons for the rating.

Chaikin Power Tools
Download Free iPhone Stock Investing App and Research Reports from Chaikin Power Tools


With a single tap you can drill down into each of the four rating areas shown above (Financial Metrics, Earnings Performance, Price/Volume Activity and Expert Opinion) and see the five sub-factors that drive the rating in each area.

Like all top-notch stock apps, you can instantly show your former classmate charts of the stock (which show Amazon underperforming the S&P 500, by the way) and relevant real-time news feeds. It also has a built in trading link—if you find an idea you’d like to act on, you can do so on the spot.

Clearly impressed, she asks where she can buy this app. You tell her that she can’t buy it, but she can download it for free from the iPhone App Store.

The App Revealed: Chaikin Power Tools

Essentially, all of the apps out there provide data: news feeds, price charts and snapshots of fundamentals. In researching this series, the biggest missing component on almost all of the apps that I looked at was any sort of analytical tools to complement raw data.

Standing alone as the positive exception to this paucity of analytics is a groundbreaking app called Chaikin Power Tools. In previous articles, I have written about Marc Chaikin whom I consider a genius in the field of technical analysis. He has developed well-known technical indicators like the Chaikin Money Flow and the Chaikin Oscillator.

What Marc and his team have done with this app is nothing short of remarkable. I’ve been gushing about this app. In the palm of your hand at any moment it provides a depth of real-time stock analysis that has been almost impossible to find at any price. This product is basically Marc’s magnum opus—his legacy from 40 years on Wall Street. The app uses a 20-factor model that Marc developed to provide real, actionable analysis for almost any individual stock. By actionable, I mean that the Chaikin Power Tools app rates almost any stock you enter on a five point scale:

* “Very Bearish” (lowest rating)

* “Bearish”

* “Neutral” (medium)

* “Bullish”

* “Very Bullish” (highest rating)

In a future article, we will research the 20-factor model. Studying this model is, in my opinion, the equivalent of taking a graduate level course in stock analysis. It is really that comprehensive. As I researched this article, it occurred to me that the Chaikin Power Tool app is like having a hedge fund in your pocket; the analytics are that strong.

Marc tested the app’s analytical model for statistical significance in outperforming the market and it has passed all tests with flying colors. I’ll discuss this testing effort more when we review the 20-factor model in detail in a subsequent article.

Again, since it is brand new, the app doesn’t cost anything during the initial launch phase. Get it for free while you can! If you have an iPhone, an iPad or an iTouch, go to the Apple App Store and search for “Chaikin.” The app has only been available for eight days, so you’ll be one of the first to try it out. The app was featured in Barron’s “Electronic Investor” section this past weekend so the readers of Tharp’s Thoughts are, as usual, on the leading edge of the trading world.

I’m anxious to hear what you think about the app as an analysis tool. Knowing the quality of the researchers that read this newsletter, I’m sure you’ll be finding more ways to use this rich tool than I can imagine.

For all of the app reviews over the next few weeks, I'll include a few comments about the apps’ business model because that affects what you see and how it’s paid for.

On Chaikin Power Tools, there are no banner ads or other advertisements, which make it clean visually. When you download the app and start it for the first time, it presents the option to sign up for “investment ideas, product updates and information on mobile trading.” However, this is completely optional and can be skipped. To this app’s credit, there are also no “nag screens” in the future. Secondly, the app has full trading functionality tied in as an option. Many people will find it very useful to be able to research a stock and trade it inside the same app. Currently the app integrates directly with one brokerage partner and others are sure to follow.

Disclosure

I’ve known Marc for over a decade and some time back, he asked me to look at an early prototype of the app. It simply blew me away. Even in preliminary testing, I was completely impressed with what it offered traders.

In full disclosure, I am an early and very minor investor in the project. To paraphrase famed Remington razor company owner Victor Kiam from his TV commercials, “I liked it so much I invested in the company.”

[Publishers Note: This tool has not been endorsed by Van Tharp or The Van Tharp Institute. The five point stock scale is unrelated to Van Tharp’s market types. Neither Van Tharp nor the Van Tharp Institute have any involvement, financial or otherwise, with Chaikin Power Tools or its publisher.]

I’d love to hear your thoughts and feedback on this article or about other stock market apps that you’ve found useful. Please email me at drbarton “at” iitm.com. Until next week…

Great Trading, D. R.

About the Author: 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 SmartMoney.com and Financial Advisor magazine. You may contact D.R. at the Dr Van Tharp International Institute of Trading Mastery.

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Thursday, April 14, 2011

Extreme Market Sentiment Levels Buy or Sell?

Sentiment
Click Here for the Free Report


Free Report: Buying Opportunity?

Find Out What Extreme Market Sentiment Levels Mean for Your Investments. Our friends at Elliott Wave International have just released a new report on the historical importance of extreme market sentiment levels. You can learn more about it below, or follow this link to download the free report now.

What exactly is market sentiment?

According to Wikipedia:

Market sentiment is the general prevailing attitude of investors as to anticipated price development in a market. This attitude is the accumulation of a variety of fundamental and technical factors, including price history, economic reports, seasonal factors, and national and world events.

For example, if investors expect upward price movement in the stock market, the sentiment is said to be bullish. On the contrary, if the market sentiment is bearish, most investors expect downward price movement.

So, if market sentiment is bullish, investors would expect prices to rise, and if it's bearish, they would expect prices to fall.

But, what if market sentiment is at extreme levels -- will this lead to major moves in the direction of the trend or major changes in market direction? More importantly, how will it affect your investments and what can you do about it?

Elliott Wave International has just released a FREE report with excerpts from the most recent issues of Bob Prechter's Elliott Wave Theorist and its sister publication The Elliott Wave Financial Forecast. It tackles these important questions head on by analyzing current market sentiment levels and comparing them to major stock market tops and bottoms dating back to the 1960s.

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Wednesday, April 13, 2011

Understanding the Federal Reserve Bank

Federal Reserve Bank
Understanding the Fed


What exactly is the function of the Fed? If it's to help the U.S. economy grow steadily, they how come in 2007-2009 we had the biggest stock market crash in decades followed by "the Great Recession" and a worldwide financial crisis?
For answers, let's turn to someone who has spent a considerable amount of time studying the Fed and its functions: EWI's president Robert Prechter.

This is an excerpt from a free Club EWI eBook, "Understanding the Fed." Enjoy -- and for details on how to read this important 32-page eBook in full, free, look below.

The Fed’s Presumed Inflation Since 2008 Is Mostly a Mirage

Excerpted from Prechter's December 2009 Elliott Wave Theorist

We all know that the Fed created $1.4 trillion new dollars in 2008. It has told the world that it will inflate to save the monetary system. So that is the news that most people hear.

But the Fed’s dramatic money creation in 2008 only seems to force inflation because people focus on only one side of the Fed’s action. Even though the Fed created a lot of new money, it did not affect the total amount of money-plus-credit one bit... When the Fed buys a Treasury bond, net inflation occurs, because it simply monetizes the government’s brand-new IOU. But in 2008, in order for the Fed to add $1.4 trillion new dollars to the monetary system, it removed exactly the same value of IOU-dollars from the market. It has since retired some of this money, leaving a net of about $1.3 trillion.

So investors, who previously held $1.3t. worth of IOUs for dollars, now hold $1.3t. worth of dollars. They are no longer debt investors but money holders. The net change in the money-plus-credit supply is zero. The Fed simply retired (temporarily, it hopes) a certain amount of debt and replaced it with money.

Evidence for this case is in Figure 4. Even though the Fed has swapped over a trillion dollars of new money for old debt, the banks aren’t lending it. The money multiplier is back in negative territory, which means that there is more debt being retired than there is new money being created. In other words, deflation is winning.

New Money Old Debt

The bottom line is that the Fed hasn’t created much inflation over the past two years. The only reason that markets have been rallying recently is that the Elliott wave form required a rally. In other words, in March 2009 pessimism had reached a Primary-degree extreme, and it was time for a Primary-degree respite. The change in attitude from that time forward has, for a time, allowed credit to expand again.

But the Fed and the government didn’t force the change. They merely accommodated it, as they always have. They offered unlimited credit through the first quarter of 2009, and no one wanted it. In March, the social mood changed enough so that some people once again became willing to take these lenders up on their offer.

When credit collapses again during the wave 3 downtrend, we at Elliott Wave International will no longer have to keep “making the case” that the Fed is impotent. It will be clear once again, just as it was in 2008. (...continued)

Read the rest of this important 32-page eBook online now, free! All you need is to create a free Club EWI profile. Here's what it covers:

Chapter 1: Money, Credit and the Federal Reserve Banking System

Chapter 2: What Makes Deflation Likely Today?

Chapter 3: Can the Fed Stop Deflation?

Chapter 4: Jaguar Inflation

Chapter 5: Can’t Buy Enough . . . of That Junky Stuff, or, Why the Fed Will Not Stop Deflation

Chapter 6: The Fed’s “Uncle” Pint Is In View

Chapter 7: Government Thrashing

Chapter 8: The Coming Deflationary Pressure on the Government

Keep reading this free report now. Click here to create a free Club EWI profile.

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Tuesday, April 12, 2011

Stock Trading Is Going Mobile

Invest2Success.com Mobile Website
Stocks in Your Pocket or Purse: The Market Goes Mobile


By D.R. Barton, Jr. of the Dr. Van Tharp International Institute of Trading Mastery

Click here for Dr. Van Tharp's Trading Workshop Schedule

A Brief History of Charting and Market Data

In 1986, my love affair with the market took off. As a chemical engineer, I naturally gravitated toward technical analysis and charting. At that time, state of the art charting was a printed chart book.

Every Saturday I would receive my weekly chart book. Back then I had a very different version of end-of-day data. Monday mornings I had “off” but every Tuesday morning, I would read the Wall Street Journal before heading off to work. I would pull out a ruler and my trusty black Flair pen and draw in, by hand, the daily open-high-low-close bar on each chart from Monday’s data. I would repeat this process every morning until the end of the week!

I was not tech averse. Quite the opposite was true. I was a superstar programmer as a college engineering student, programming thermodynamics algorithms on the earliest PCs—floppy drive for data storage, and all of 32kB RAM under the hood.

Instead, the problem was that there were no commercial computer charting packages available. In fact, home PCs were still a luxury item.

Within a short time, though, that began to change. In 1988 I bought charting package from Bruce Babcock to use on a computer from work that had been declared obsolete. Back then, I had to buy a set of historical end-of-day data and, once again, use a data entry program to update data every day by hand using data from the Wall Street Journal! I became as fast using a keyboard for data entry as any good bookkeeper.

In 1994, I finally bought my own PC ($5,023, including shipping). That’s $7,000 in today’s dollars! It still took a couple of more years before I was finally able to get end-of-day data through the Internet—on a dial-up modem, of course.

One of the last steps in getting data before the Internet made everything a piece of cake was my first real-time data feed. Since I had cable television, in 1997 I was able to get real-time intraday futures data through a special cable signal converter. That service cost hundreds of dollars per month.

Finally, by 1999, the internet and its financial market data service providers were a part of the stock day trading explosion and real time data was finally becoming commonplace—even though I was still getting it through a dial-up modem at the time (56k…whoopee!).

Fast forward to today. An iPhone weighs 4.8 ounces. And, with 32GB of onboard storage, has one million times the storage space of that first IBM PC that I worked on in college, which, by the way, I could not put in my pocket.

In less than 25 years, retail stock market analysis has gone literally from pen and paper to a fully functional computer in your pocket. In the next few weeks we’re going to look at mobile phone apps designed for stock market analysis.

Mobile Phone Stock Market Apps: The Good, The Bad and the Ugly

For the next few weeks, I’d like to take you on a tour de force through the iPhone apps I’ve been reviewing. Why the iPhone? Three words: installed user base. Apple announced on March 2, 2011 that they have now sold 100,000,000 iPhones. In addition, iTouch and iPad devices can use iPhone apps, so this really is the biggest mobile market around. However, with the Android platform now growing faster (by many estimates) than even the iPhone, later this spring or summer, we’ll also take a look at apps available for Android phones.

After looking at more than a dozen stock market apps, here are a few general comments on the state of mobile app world:

* Almost all apps have a portfolio feature where you can track the movement of stock holdings. Profit and Loss tracking is clearly best done through an app that has a direct link to your broker or through an app that ties to a web site where buy and sell information can be entered. Therefore, portfolio management for a “general app” (as opposed to one linked to a brokerage) becomes a minimum requirement and not a distinguishing feature.

* Charting across the board is surprisingly readable. While you will not be doing your technical analysis on these charts, the high resolution screen does allow you to make sense of the charts. Almost all of the free apps that I’ve looked at are limited to line charts with volume indication. I will eventually look at a few of the paid apps that provide more charting options.

* Charting is also universally fast (at least it is with a Wi-Fi connection). The speed of chart drawing and switching on almost every app was one of the most surprising things I encountered in the preliminary screening.

* Many of the free apps had significant advertising banners. I don’t really count this against them (they are free, after all!), but it is a plus for the apps that don’t take up limited screen real estate with banner ads.

* A news feed is a key feature of many of the apps. Many have general market feeds plus specific chronological feeds for individual stocks.

I’ll be taking an in-depth look at a handful of the better apps over the next few weeks. Please send me the name of any apps that you have used with your comments on what you like and what could be improved, and whether I can use your name in upcoming articles.

I’d love to hear your thoughts and feedback on this article or about trading and investing in general at drbarton “at” iitm.com. Until next week…

Great Trading, D. R.

About the Author: 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 SmartMoney.com and Financial Advisor magazine. You may contact D.R. at the Dr Van Tharp International Institute of Trading Mastery.

Click Here To Review More Mobile Investing Trading with the Apple iPhone, Google's Android Phones, and Blackberry SmartPhones