A Present...

As a Happy Holidays present Floyd, Terry, and Jenn would like to offer to all subscribers two bank stocks we think ready to soar over time in 2010.

Normally we would share this only with our Premium Blue Chip Subcribers, but here's our thinking:

We already own WFC (Wells Fargo and Co). Buy more. We don't own JPM (JP Morgan Chase and Co). Buy it now.

Take both positions, which we are buying at bottoms that could go lower and continue to buy to lows of 36.00 on JPM and 22.00 on WFC. When you've made buys if the market drops, or whether you have no need to, continue to add to these CORE positions, and have a 25% (or 20%) trailing stop loss, AFTER the second buy has been made.

These are great banks that will gain from TARP and come out fresh. Floyd's money is in them, and I'm ready to also begin playing puts and calls on both positions as 2010 begins.

Lastly, as an added bonus to all subscribers in "sharing", we're adding a new option recommendation. Coal is not doing well, and we think all bets are off on it. Being contrarian we'll play a long term Call on Arch Coal


Buy OSEAD ACI January 2011 20.00 Call. Pay under $5.00. Buy again at 3.00, range. Average costs and hold for at least 9 months. No stop loss

A Shortended Trading Week

This is a shortened trading week because of the Holidays. Trading will be lighter, and portfolios willl be adjusted, so we suspect the potential for two way trades.
We will have limited signals this week because of the low volume, and because our instructions for entry/exit are very specific.

Puts were profitable to 25% on Friday on the downturn, but losses on the call were averaged at 18%, and it was the only trade we could manage all week. That's how low volatility, and how tight the trade range has been.

Alert Update: This same alert holds for Monday through Wednesday, the real trading days of the market. We are closed 12/24 and 12/25 and there will be no alerts.
The alerts Tuesday and Wednesday, because of these market conditions, will merely keep up "updated" on our dual play.


Important Note: The Options Clearing Corporation (CC) has enacted an industry wide initiative known as the Options Symbology Initiative (OSI). The new options symbology will expand the current options series key, commonly referred to the as the OPRA symbol, from a 5 character (OEBLK, as an example) convention to a new key that accommodates up to 22 characters.
This will effect the "names" of the symbols we provide you, and is taking place throughout January, 2010. Please check with your brokerage to understand the new symbols.P

A New Initiative from the OCC

The Options Clearing Corporation (OCC) has enacted an industry wide initiative known as the Options Symbology Initiative (OSI). The new options symbology will expand the current options series key, commonly referred to the as the OPRA symbol, from a 5 character (OEBLK, as an example) convention to a new key that accommodates up to 22 characters.

This will affect the "names" of the symbols we provide you, and is taking place throughout January, 2010. Please check with your brokerage to understand the new symbols.


* 80% of your gains are with 20% of your stocks. It’s the size of the gain that matter. We thought we would share this as your fiscal year ends, and you review your holdings, as we are doing in our Blue Chip service.


Yesterday we saw futures show a 62 point decline prior to opening, at 8.37 a.m., and by 3 p.m. we had seen a drop to 10,269, right near our support lines.
XEKMT, our January put, was profitable finally 25 to 35%. We continue to hold the open call through today for stop loss, or break even. No entry was made to our new call trade yesterday, as movement was so light.

Here's the summary: DOLLAR REBOUND CONTINUES AS EURO BREAKS CHART SUPPORT -- US BOND YIELDS JUMP -- RISING DOLLAR THREATENS EMERGING MARKET LEADERSHIP -- S&P 500 MEETS LONG-TERM RESISTANCE NEAR 1120

A Hard Decision

It is obviously a hard decision. Is the economy really better, and can the market rise more, or is the FOMC being de-controlled, interest rates will rise, and a second stimulus needed? It was this that kept the market in a 50 point range again until 1.30 p.m, making it impossible to trade.

Yesterday we shared a tip on AOL, a stock we are buying in our Premium Blue Chip Option service (www.bluechipoptions.com), and today we'll share that we sold two positions, 1/3 of our holdings, in two Blue Chip holdings for 39% and 46.06%. The first trade I have worked with subscribers to trade in and out of 8 times profitably in 2009, and we still hold a sizable position for the long term.
The second stock we bought on break out, and it returned 46.-6% in 7 weeks, enough for me to take 1/3 of my profits.

We are "cleaning house" at Blue Chip Options, buying and selling to begin the year.

One of our most recent recommendations, and long term positions, is ExxonMobil. We've owned this for years, and just recommended it as a new buy. A day later XOM bought XTO Energy for 31 billion. There are two very positive situations here:

1. XOM is cash rich in investing in natural gas, and expansion.
2. Buffets recent purchase of 26 billion for a railroad, or Black and Decker, Comcast, Stanley Works: these are all mergers and acquisitions, and a flurry of activity always signals a return to busier days. If recent history is any guide, a rebound in M and A also is evidence the broader economy is going to heal. "Studies of the past two decades show deal making is largely a lagging indicator of economic growth, returning a few quarters after the economy bottoms, and slowly building as the stock market turns up and GDP and consumer spending return".

All good signs for economic growth long term.

Whether we have a Santa Claus Rally, or whether it's over, is yet to be seen. We'll recommend a new call trade tomorrow for a longer term hold, until volume and open interest return.



Important Personal Request from Floyd: In 2008 when our little service won the prestigious top 10 advisory services Readers Choice Award in prestigious Stocks and Commodities Magazine I was thrilled, and had reached a personal goal: to be better than the big guys and get rated.
Then, we won again in 2009. And here's where I need your help: I would love our company of Terry, Jenn, and Floyd to win again and we would appreciate your vote.

Head to : http://technical.traders.com/Products/ballot.asp. To vote you must be a subscriber to Stocks and Commodities Magazine, but any serious trader should be already.

Sign up and vote for us at one of the top 10 Advisory Services in the U..S., built out of self help and working with people off my home computer.
I'd be honored to have your vote.

To all OEX AND BCO Subscribers: Be sure to visit our blog spot today : http://www.bluechipoptions.com/ for several new stock tips

We Recommend a Buy to AOL

December quadruple witching the Dow has been up 18 of the last 26 years, with strong gains a number of years. It's sad, but this is the only "fact" we have to go on this week, watching the market simply freeze in a trade range as it approaches former resistance at 10,550. With market moves as light as we are seeing, both in volume, and in the "trade range itself" it makes option trading nigh to impossible.
So, rather than lose money, we'll keep our open signals, for those that have entered, and simply wait the market out.

In the meantime, here's two tips worth your subscription. The first takes time to think about:


To catch a tiger you must understand the behavior of goats.

The second is a stock tip we've recently given to our Premium Blue Chip Option subscribers, who pre-bought AOL. Buying under the symbol AOLWI (when in) traders were able to pre-trade the actual split off of this stock.
As a tip, and because the option market is so lousy to trade, here is our suggestion:

*Buy AOL at market in a speculative account. Set a 25% trailing stop loss, and buy the position again anytime it loses 15%. Hold it a minimum of one year.
This is a bit of complicated trading as when you re-buy you must average your cost and set your trailing stop accordingly.

We believe AOL showed fair value at opening. At 26.00 or less the stock is worth it's price, and the atrocities that have been committed by both AOL and Time Warner can long be past.
To think, the original brand of the internet for sale. This stock will become a company, a true name, or will be bought up. We think AOL may become speculative, and will begin watching it for day trading, and highly recommend a buy to AOL.

__________
By 3 pm the market had only moved 50 actual points. The moves started a bit more at that time, but not enough for sell off.

Personal Request...

December quadrulple witching week Dow has been up 22 of the last 24 years and 7 straight years recently. HIstory has proved a bit "not too useable" this past year, but it's likely for upside prior to the Christmas holidays.

We did not see that in yestedays trading. By 2 p.m.the market had held at 10,550 repeatedly, with mild whipsaws. Movements this light are too hard for option traders.
We are listing the put as open, and a new signal to the call, as it had no volume.
__________________________

44% of Americans say they would prefer President Bush over Barack Obama.
While scientists overwhelmingly say climate change is a threat, 1 in 3 Americans is not convinced of this.

________________________________

Important Note: The Options Clearing Corporation (OCC) has enacted an industry wide initiative known as the Options Symbology Initiative (OSI). The new options symbology will expand the current options series key, commonly referred to the as the OPRA symbol, from a 5 character (OEBLK, as an example) convention to a new key that accommodates up to 22 characters.

This will effect the "names" of the symbols we provide you, and is taking place throughout January, 2010. Please check with your brokerage to understand the new symbols.

For those traders truly wanting to understand the economy and how we have so much more to do, study page r7 in The Wall Street Journal, December 14th editition:

http://online.wsj.com/article/SB10001424052748704825504574586330960597134.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsTop


Important Personal Request from Floyd: In 2008 when our little service won the prestigious top 10 advisory services Readers Choice Award in prestigious Stocks and Commodities Magazine I was thrilled, and had reached a personal goal: to be better than the big guys and get rated.
Then, we won again in 2009. And here's where I need your help: I would love our company of Terry, Jenn, and Floyd to win again and we would appreciate your vote.

Light Whipsaw on Friday Again

Friday took the market, in light whipsaw again, to market highs of 10,524. 10,550 is a strong resistance line, and the market has not managed to hold past or beyond it.

Because of the whipsaw we've seen the count, or bell curve balance, is now again at 0, showing no bias, besides our seeing a market that is rising, and the talk of a Santa Claus Rally.
All calls were profitable, and puts were sold at stop loss, for a break even and hard week to trade, because of the moving whipsaw around a 100 point range. Friday is quadruple witching expiry.

We have new Dow projections today, but make note of the similarity to the range we've been suggesting, and hitting, for the past 20 days.



Weaving Straw Baskets-Fifty Steps to Understanding

1) People cannot take in more than 5 tasks/thoughts at one time. Learning to control input is key to knowing when you are at or “over your threshold.” We all have a threshold in which input overcomes us.

2) More could be done in business, and in politics, if simple playground rules “no cheating” were put in place before any “deal” and Cheaters had to pay by doing public service, but that is just a dream.

I want Tom Delay mowing that White House lawn.

3) Life is too short to do business with assholes.

4) Use your time. Have your goals around your values, but be armed to stop believing even what you believe.

5) Be open to the world. Trust no facts. Question authority.

News I've caught while overseas I find valuable:

*Congressmen win over banks and some banks will lower large payouts to employees. Here we are trying to control income, not understanding still how Wall Street works, and not yet addressing the regulatory issues.

The Central Banks plan "exit strategies"

*Obama's plan for job creation, outlined earlier this week, can accomplish "psychological relief" if the banks are given incentive (forced) to begin loaning to small business again.

And lastly, any market that has struggled as it has in the past two weeks, the length of time of our Dow projections, shows a market and an economy that has had such a euphoric run that there must soon be a "top," even short lived.

I'm back Monday and have provided a new signal IF the market hits new lows today, with futures up 33 points at 9:12 am

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Weaving Straw Baskets-Fifty Steps to Understanding

1) Much of what is smart repeats itself, and is never done.

2) All the religions really say the same thing, and sadly it will be religion that could divide the world.

3) There is no such thing as an absolute.

4) There is no real black and white.

5) We self sabotage often so that we do not “get something we want” as we want to punish ourselves for things we have done we feel guilty for.

6) It takes discipline to perform. Discipline is our way inside ourselves, as we become rather than think.

Tight Profits

Profits were tight on both the call and put, both only profitable to .50. With the lack of moment in the market we'll keep both signals open. The bias to 3 to the call is light. It is an anything goes market.


Weaving Straw Baskets-Fifty Steps to Understanding

1) We are fearful of our bodies. Of sex. This is true more in the U.S. than most nations, and is something to be studied. But in the meantime, have more sex.

2) The old funeral question has merit “What would they say for my epitaph, and who would come?” It goes well with a general personal and introspective look that we must do and only you can do, and that is to look inside and ask what you contribute, and if you are good.

3) Things are not as they appear. What we see is not what is, but only what we know so far.

4) Much of what is smart repeats itself, and is never done.

5) All the religions really say the same thing, and sadly it will be religion that could divide the world.

Breaking the Ice

The market yesterday finally broke the ice and the Dow hit bottoms of 10.209 by 10 a.m. OEBXT puts were profitable with low buys of 3.30, and high sells to 4.60 by early afternoon.
Astute traders watching by the minute, however, are the ones making those trades. Read our open and new signal instructions carefully.


The argument is: will it finally fall more, or has it hit a bottom, and we'll have a short December upswing? Stock shifting in funds takes place, and for tax reasons, and normally excites the market, and many believe in a "Santa Claus Rally."

Bernanke has already announced that he'll keep interest rates low. Obama is doing the circuit on ideas for creating jobs.
And....we are near a Fibonnaci top.


Weaving Straw Baskets-Fifty Steps to Understanding

1) There are simple ways to release unwanted stress.

2) There are ways to learn to relax and feel better physically.

3) There are ways to be happy.

4) Life is typically unfair and a series of negative events that are overshadowed in our memory by the positive events.

5) Few people enjoy their work, making most of their life TV, sleeping, or doing something they do not like. These people lose their strength and general well being as time progresses.

The Market is Frozen

It is this simple. The market is frozen. We hit highs of 10,483 by 3.00 p.m.,and lows during the same whipwsaw of 10,320. The 520 Calll was profitable for up to 1.00 per contract in extremely hard and tight trading. We'll keep it as an open signal because of this, with NO second buy, waiting for a what we think might be a final push to 10,550 and beyond.

But as we noted in our alert yesterday this was high risk, and today is. When no bias is clear it's any "anything goes market" around trigger points. We will additionally list a similar put, also high risk,for those that want the exposure to a double risk.

Floyd is not personally trading this market. It's too flat to make money.


Weaving Straw Baskets-Fifty Steps to Understanding

1) We are here to learn lessons and will struggle through until we learn them. They may be very simple lessons.

2) In all steps of the life experience, and the dramas, people tend to put love in the background, or it becomes part of the events.

3) Love is life.

4) If you repeat an action many times, it becomes a habit. If you continue, “using the habit” it must be something that you value, or the habit will become instead a self-destructive tendency.

5) Unrealistic expectations occur from being dishonest with you. If you expect success at something you must earn it, and few that are lucky last.

6) The question What Do I Want is the most important question you will ask yourself in your life. Your answer defines your happiness. The question is not to tell yourself what possessions and monetary dreams you wish to come true, but to answer, “What do I want”.


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Many traders write me personally and get to know me. It's part of this service. As students progress to Level 3 or Advanced Mentoring invariably they want to "replicate" what it is that I do.
So, here it is:

1. I trade only when I am sure.
2. When I am on a run of successes I trade more, and when I begin to lose I stop trading.
3. I take "fishing days" where I just watch the market.
4. All that matters in economic timing to me is the next two weeks, not the next two years.
5. Stocks must have a reason to go up in value besides performance or product, and I recognize this as I invest.
6. Rules are part of our system, and I follow them. There are times I vary, but only slightly, and not often.
7. Trading is pitting my mind against others than are trading the same signal. I must recognize this.
8. When I fail, I write down what went on. Was it me? Was it emotions? Or was it just the market with a sudden surprise?
9. When I overanalyze I stop.

What a Day

What a day Friday. The market moved right back up to 10.557 by 10.30 a.m. allowing traders to sell out at profits on the open Dec 520P, just in the nick of time.
Job data came in "moderately" good, and Obama has tried to clarify and explain the job situation is not as simple as we Americans think. Much like why we had to bail out banks, not because it's right or normal, but because the situations we've inherited are so severe that the solutions are ones that are not ideal. We as a nation seem to never understand detail.

The position hit the same top we've experienced time after time before beginning a dramatic fall, all before noon. The NASDAQ has now returned all the 40% 2008 losses.

For those that criticize Obama for everything, we neglect to discuss banks that are repaying TARP money, a stock market dramatically up, and corporations downsized that showed good balance sheets.

For those that have forgotten the Emperor Bush deficit, or that this financial debacle began long ago, not on Obama's watch, I have watched in awe as the neo right has used theater to influence the American people that we are becoming socialistic, simply for giving rights to those that have formerly never had rights.

When Glenn Beck, and Rush Limbaugh, and Sarah Palin are the spokespeople for many I know that much of our country is already lost in stupidity, and that more and more are buying guns to "protect themselves." (I'm 59, have traveled in over 79 countries, and have NEVER had a need to use a gun).


Weaving Straw Baskets-Fifty Steps to Understanding

1) Many of us live in a circle of pain, in which we repeat the same negatively dramatic action with a group of others, all interacting within a black comedy drama. And able to be resolved.

2) Most of us do not know really know ourselves. When I ask clients to “tell me about themselves” they tell me about their jobs, their possessions, and lastly their families. They never mention themselves.

3) Most that appears obvious is not. Most that does not appear obvious is.

4) We are all in therapy at every moment. Most of us just don’t admit it, or use it.

The Market is at a Stalemate

The market is at a stalemate. We hit highs of 10543 by noon, and lows of 10,380. We're making an adjustment to our Dow projections below.

Our new signal OEBLD DEC 2009 520.0000 CALL was available for .50 to 1.00 per contract profits, but it took true day trading to watch the market for the tight profits.

We will list this call as an open signal because of the difficulty in trading it, but not yet list a put. We see more odds of a new Dow projection high.

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"Gold's gyrations are the Dow Jones Index of Anxiety. When investors are scared about inflation, political turmoil, debt, financial breakdown-demand rises....
When things calm down demand and the price of Gold subside.
All that has changed with the advent of ETF's for Gold. In the past, if one wanted to buy gold, you had to really buy the raw material, the coin, the commodity, or invest in gold mining stocks, each fraught with their own risk. When the ETF Gold (GLD) and other versions came on the market the individual investor, and smaller emerging nations, were suddenly able to be investors.

For the past 38 years, since Nixon the idiot took us off the gold standard, the world has been engaged in the historical experiment of a single currency, the USD, that has no link to Gold.
Gold is the one currency that central banks, in any nation, can't print. It may take us a few more years for us to realize this, but the central banking system is fraught with error.

So to say this well: The Bank of India just bought 6.7 billion in Gold.

Weaving Straw Baskets-Fifty Steps to Understanding

1) Most things are manipulated by the few at the top of the capitalist pyramid that control the outcome, no matter what is done.

2) We only have what we remember.

3) In our reality our mission is really to give, love, flow and make and have memories.

4) Our perspectives can change in a minute. Values and goals can shift as fluid water. What we thought becomes not what we think.

5) Money must be understood. It is a “construed value” commodity, only worth the value that we put on it.

Gold Reached a Record

Futures were up 78 points at 6 a.m. and the line from Bloomberg says it all:

Stocks Rise Worldwide as Dubai Concern Wanes, China Expands; Dollar Drops Stocks rallied from London to Shanghai and the dollar fell as Dubai said half of its debts are “stable” and Chinese manufacturing grew at the fastest pace in five years. The yen fell the most in seven weeks against the dollar, while gold reached a record.

This is what happened in overnight trading, proving Floydian theory that the Dubai debt would be covered within days, and that the losses were all known. And the next piece of pre-market news:
√U.S. Stock-Index Futures Gain as Alcoa, Barrick, Exxon, Citigroup Advance U.S. stock-index futures advanced, indicating the Standard & Poor’s 500 Index may extend yesterday’s gain, as China’s manufacturing grew last month at the fastest pace in five years and commodities rallied.U.S. Stock-Index Futures Gain as Alcoa, Barrick, Exxon, Citigroup Advance U.S. stock-index futures advanced, indicating the Standard & Poor’s 500 Index may extend yesterday’s gain, as China’s manufacturing grew last month at the fastest pace in five years and commodities rallied.

It's with this kind of "bravo" pre-market that typically leads to reversal.

Weaving Straw Baskets-Fifty Steps to Understanding

1) The majority always leads, and always forgets history.

2) Everything is really okay.

3) Everyone wants to dance, many in different ways, many so they are never seen, many so they wish they could be seen, and many that are always seen.

4) Negotiation is the art of understanding FEAR and GREED.

5) The mood of the public is first trended by stock markets, which show levels of optimism, and supply and demand in the market place.
The market resurged dramatically and was up over 140 points by 2.30 p.m.

Only traders following futures and paying above prior day close were able to profit on our Dec 520 Call, profiting to 20% but most of our traders stayed out of the trade, waiting for bias.

We now have a bias, but think we are seriously approaching a market top.

America Loves War

For all the fear over Dubai and the default, the market opened without a bang in early trading, and promptly moved up over 31 points by 10.16 am. Like clockwork we were able to buy the December 500P for 5.80 on the first drop, and sell to 6.80 to 7.20 by midday for tight profits.
The Dow again reached 10,404 in early morning trading, and settled to lows of 10,223 before meandering around for hours. It's proof the bears believe the market will soon fall, but a 68% rise as we have seen typically takes 108 cycle days of downside, and it's unlikely to see a complete fall out.

America loves to kill and loves war, so how we react to Obama's "dithering" when he announces tomorrow night will also influence the market, just as the situation in Dubai has.


What many of us do not realize is that the world is only as we know it, and that does not mean it is as it is. We see only what we are able to see, and know only what we know.

This sounds so simple, and so obvious, yet remains the core of our issues as a a world people. It begins with "the world is flat" and now with electronic newsbites tells us that "two people crashed Obama's party" and we become interested in the security of the issue, or that they are "wanna be" reality TV show stars. This takes us from our real thinking as a human, which is to be better, help others, love, enjoy life, and perhaps learn more about ourselves, or the world.

When we trade options we are choosing a directional bias, and analyzing what "strike" point will be best to buy at a best price for us, from others, and how this "strike" will trade against the market and if we can get a premium price when we sell it. This is playing poker. Selling fruit. Buying and selling flowers.

Our goal is to take advantage of someone else. That is option trading. It is also an art of personal zen, as you are trying not to be taken advantage of. Even by yourself.

Over the next 10 days I'll be sharing with you "Weaving Straw Baskets," 50 rules of life I use in trading:

Weaving Straw Baskets-Fifty Steps to Understanding

1) A rock is not hard.

2) We only know what we know.

3) We do not know what we do not know.

4) There is no real such thing as “I”

5) There are people that do not read at all, and many people that do not read well.

The Shell Game of Finance

The world fears on Dubai banks and the "shell game of finance" being pulled hit the market hard last Friday, with theoretical Dow bottoms of 10,191 hit in early trading we may have had our consolidation. The market held and rebounded to our support area around 10,300. This puts the bias, believe it or not, as zero....enough gyrations in the market.

This coming week will better define Dubai's 60 billion of debt that they've asked for a 6 month extension on, and we believe the Dubai debacle MAY be the trigger that leads commercial real estate into the decline we have been projecting, and anticipating.

Study our new Dow projections carefully.

The first trading day in December the NASDAQ led the market up for 9 of 10 years through 2005, with back to back losses in 2006 and 2007. Over the Thanksgiving week we saw a market that held at higher highs, but struggled each time approaching the 10,550 resistance line. The argument goes that now the individual investor and more of the funds are going to move cash to the market, as they don't want to "miss out," and with more assurances that the economy is turning around (by the market again leading the public emotion).

We approach strong market tops, that show how fast we have returned 68% from our lowest low. 10,746 area is a strong testing ground.

In the prior 10 "recessions" the GDP dropped an average of 2.8. In this one it's been 3.8%.
In the prior 10 "recessions" unemployment dropped in total 1.8%. In this one it's been 5.1%.
In the prior 10 "recessions" increases to the public debt averaged 12.1 billion. In this one it's been 2.1 trillion
_________________________________

This is an interesting commentary, by an actor, yet as I read his blogs, there is sense to how he speaks, and what he says here, ....it's what happened to us:
http://www.huffingtonpost.com/alec-baldwin/the-republican-way-keepin_b_369123.html

A Nice Day for Experienced Day Traders

It was a nice day for an experienced trader yesterday. Just watching the mild whipsaw allowed moves to OEBLD DEC 2009 520.0000 CALL available as low as 5.30, sold to 6.30 same day,and hitting highs of 6.70 by 2.40 p.m. We'll keep this signal open and show it as a day trade also today and for traders that are watching the market Friday.

The market is closed tomorrow for Thanksgiving, and Friday is a shortened trading day.

Live peace and love in your Thanksgiving celebrations.

The FEDS publish minutes today, Tiffany and Deere report earnings before the market opens, and the U of M sentiment index is out.

6.25% share of U.S. Mortgage Loans that were 60 or more days past due at Sept 30th, a 58% increase from a year ago.

7.6% rise in delinquencies rate from the 2009 second quarter.

Bottom Line: The home are heading to foreclosure, and many are being foreclosed upon.

Retailers will very much watch Black Friday numbers for a sign of how much they will be discounting to gain holiday traffic.

There is less being built commercially, and there are far fewer construction projects. Less restaurants are opening. Most restaurants which historically do well in recessions are not, with the exception of MdDonalds, one of our core hodings :) in Blue Chip.

A Bit of Reality

The market finally hit a bit of reality, and by noon had bottomed at 10,206, allowing us a fair break even to 15% loss on our December 490P.

We saw enough drop off to show a true consolidation beginning, and there IS possibility of more downturn.
Traders watching futures, of course, took no entry to the call as the sell off began.

For those of you that study our S/R lines, we twitted mid morning and the market moved right to 10,259 re-calculation before beginning upside return.

Because market conditions lightened in afternoon trading we'll issue a trade to the put but very specific in definition, and hold out on new positions, unless market conditions so warrant.


These are the "things" we must watch out for:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aFKrK5AcBecQ&pos=1
http://www.bloomberg.com/apps/news?pid=20601109&sid=awHX2QPENKgQ

It is interesting to me that the very "technicians" who struggled that the Dow could even return to 10,000 now struggle with the more magic "unemployment at 10%." What is important here is NOT the facts that the Dow hit 10,000, or the fact that real unemployment is over 20%, but how those facts translate to the open market. We are seeing a generally improving economy.

News: Some think Gold will hit $1300.000 before any pullback, and $2000.00 by year end. Much depends here upon the dollar weakening, or not. But The Wall Street Journal reports that governments around the globe are stepping up efforts to stem the greenback's slide.

If Playboy sells to Iconix (Playboy one of our Blue Chip recommendations) one of the largest assets being sold for the $300 million price tag is the rabbit ear logo.

Here it is proven that something worth nothing is worth something and that what is not real has value.

A Stock Tip

Yesterday says that no one knows. We saw the same light whipsaw between a 10,472 top and a higher bottom at 10,320. The market is now poised to "make a decision," with the bias still to the call, and more upside, but a more hesitant buyer.


Tomorrow is November expiration day, and the Dow has been up 5 of the last 6 years.

27 states have banned texting while driving, but 25 states offer traffic updates via Twitter :)

6% of British women say they have never had sex while sober.
Frightening, but these are facts.

As is this: http://www.nydailynews.com/opinions/2009/11/15/2009-11-15_the_worst_is_yet_to_come_unemployed_americans_should_hunker_down_for_more_job_lo.html
___________
We believe part of why the OEX has exceeded normal resistance trade ranges in the move up is because we have seen an influx and shift of funds to blue chips, which have driven the index up.
This drives up the Dow. This move to Blue Chips works well with how we trade at www.bluechipoptions.com, and it's interesting what a "blue chip stock" can be by definition.

As an example of our Blue Chip service we thought we would share a new recommendation, what a preferred subscriber would be receiving:

Here's your stock tip.

For investors seeking dividend and long term return we are ready to buy Leggett and Platt (LEG)
Study this company: http://www.leggett.com/
It's in classic restructuring:
1. No longer growing from acquisition, but from streamlining
2. Yields 5.1%, and company has raised dividend for 38 years
3. This could rise to the 28.00 range in a year, return a dividend, and be a great value stock investment.
4. Watch for any consolidation and slight dip and buy LEG at market price, with a stop loss at 17.00

So, The Stage is Set...

Usually after run ups as we have seen there is a historic retracement, often occurring on a Tuesday, just as you'll often some of the strongest upsurge days. Yesterday was so flat it could, yet again, be interpreted two ways: 1. The market is at a top, OR 2. The market held on a potential downturn and there wlll be more upside.
We could make no moves with either of our signals by 3 p.m., a market not even worth


We will lead today with some shared commentary from www.bluechipoptions.com:

“The idea that there is a competitive 'private sector’ in American is appealing, but generally false. No one hates competition more than the managers of corporations.

Competition does not enhance shareholder value, and smart managers all know they must work at ways at “controlling” government intervention.

This is is not new. This is not Obamaland. When Congress created the first regulatory ageny, the Interstate Commerce Commission, in 1887 the railroad barons quickly recognized they were to be subdued, but could benefit. “The older a commission gets to be the more inclined it will be take the business and the railroad and business point of view. It thus becomes a sort of barrier between the railroad corporations and the people and a sort of protection against hasty and crude legislation hostile to railroad actions.”

All the above from Richard Olney, a railroad lawyer during that time period that lived his thinking, as soon after this quote he got himself appointed to run the U.S. Justice Dep, where he spent his days busting railroad unions.

8 states in the U.S. consider “spousal abuse” a pre-existing medical condition.

As we trade this week remember that equity mutual fund flows remain in the red; the little guy isn't all in yet. This is key, as he must enter,and these trading dollars further stimulate the market, and will, we think, lead to greater upside.
Part of this is Fibonnanci, who's math tells us 10,700 is a normal retracement from the bottom we reached. And remember the stock market, for whatever reason, in emotions (upside or downside) ALWAYS precedes the public.

And yet, trader MR studies well and shares:

I was reading on the “History News Network” tonight about the 1987 stock market crash. Tonight I was curious what caused the crash and what the market conditions were at the time. One explanation was G7 policy and issues around US currency valuation. Other explanations were tied to computer trading, derivative securities, liquidity, trade and budget deficits and overvaluation.

Brief thoughts on each contributing cause of the 1987 crash in light of our current conditions:

The US dollar is currently in a free fall and if it ever gains support, that's GOING to affect the market. Granted today (11-16-09) it broke through strong support and made no signs of turning back, so we may not see that any time soon. Also it may not be undervalued at this point - due to the current flooding of the market from federal fiscal policy. If it ever finds support, there will be ripple effect felt around the world.

Computer trading - we've seen this in the news recently. The hyper trading programs of the market movers have been suspect of causing some of the run up - and certainly could contribute to a quick run down.

Derivative securities - we trade these :) but the derivatives market is growing exponentially, and is firmly embedded in commodity markets so that the effects of derivative trading can be far reaching.

Liquidity - In my mind that makes me think of some of the big banks that are still insolvent... (As are many of us) That can't be good.

Trade and budget deficits - Last week's recent international trade report showed just that the overall U.S. trade deficit widened by 6 billion dollars in one month's time. And our budget deficit needs no real comment, but here is a fun fact i found today: Of the $5 trillion in gold ever mined... in HISTORY- The U.S. debt is more than double that amount so far this year.

So the stage is set. There is no guarantee that a crash is coming, but there are certainly ingredients available. Some would argue that today's circumstances are unique to 1987, but at the same time I think many would agree that we can't separate the similarities.

I Hate Banks

STOCKS AND COMMODITIES JUMP AS DOLLAR DROPS -- LARGE CAP INDEXES HIT NEW HIGHS FIRST -- SILVER, PLATINUM, AND COPPER BREAKOUT -- COAL STOCKS LEAD ENERY COMPLEX HIGHER -- BRISTOL MYERS SQUIBB BREAKS OUT -- CHINA LEADS EMERGING MARKETS HIGHER

This headline says it all. The market moved to tops of 10470 by noon on Monday. We are seeing higher highs, so consolidations are likely to be lesser, while the market moves to new highs.
Read our Dow projections for updates on my thoughts on yesterday's action.



The week before Thanksgiving the Dow has been up 13 of the last 15 years.

I have always hated banks, long before the debacle that we've seen. I do not keep any money in a local bank, never have, have always used brokerages, and refuse to do business with companies that appeal to consumers but keep "bankers hours." Now, you're seeing the many games they are playing. This is an ugly sector, filled with greed and avarice at the top, and a great deal of stupidity in the middle.
So, this brings me to John, my neighbor. He's a top banking official with Wachovia in Florida. He drives a very nice car, and leaves for work all suited up at 8 a.m. He returns each day no later than 5.30 p.m
Counting in that business lunch, this guy is working less than 8 hours a day. I'm sure earning 250k or more. He's a "lead dog" for a region.

And the poor guy knows Floyd.

Of course, he's a Republican. Big McCain signs, Bigger Bushy signs, during the elections, and strong on "no government intervention," and "too much debt" (Wachovia was swallowed up by another bank for having "too much debt," but that's beyond his scope).

John the dumb banker and I talk all the time. We both share having dogs, and the dogs are friends. So we talk.

And here's what I've learned:

*This top banker has no idea what cash or credit derivatives are.
*He believes that the over mortgaging was the fault of the American people going "over their means" and that the banks and mortgage companies were only responding to "demand"
*Wall Street will lose its top people if more controls are put in (but he has no idea what a credit derivative is)
*The USD is falling because Obama is a socialist. And this guy is a banker :)

Any trade, and any occupation, has its idiots. But John is a typical banker. When I tell him how hard it is for my consulting clients that own family businesses to gain any form of letter of credit or financing with banks he responds with "we have strong banking covenants to to control high risk lending."

And it's why I've never trusted banks, or the fraud of the FDIC, which doesn't have enough money (as we now know) to even fund the true bankruptcy of banks.

And what it leads me to...is this if John is the typical banker, is this whole debacle really down to a few thousand, that used many others?

These are my typical Floyd "how does this really work" questions. It's unanswerable.

Get the "Homeless Girl" for $95 : (

We will lead Monday’s commentary and alert with a summary of our NEW Dow projections.

1. The market has held three times now in 5 days at 10,350

2. The market hesitates and flat lines often around 10,200, with bottoms near 10,150 during the same whipsaw

3. Historically the market drops an average of 586 points from its highest high.

4. Using the whipsaw we’ve seen, and the bull resiliency, here’s how we see support and resistance lines

10,476-10,512- Highest top. 10, 550 strong area of former resistance

10,350-10,420-Likely top

10,150-Resistance

10,050-A strong “not sure area”

9764-9950-Potential support bottom


The Monday before November expiry, the Dow was down 6 of the last 9 years, and 2007 broke a 3 year bull run.
Friday, of course, on bad news, the market rose over a 100 points, and allowed our December 500 Call, already held, to hit highs of 11.80, for up to 35% returns. We are left holding our hedge December 490P, already profitable in day trading, as as our "backstop" on the inevitable consolidation that must occur in a market like this.

Call profits may also be possible, for tight gains, depending upon the whipsaw the market.

A common question asked of Floyd is "why I choose specific OTM, ATM, or ITM options" and what my reasoning is behind the choices. There is little systemology to these choices that will appeal to the logic and "method" oriented trader. Heres' how I do it:

*How close are we to expiry?
*How excited and volatile is the market?
*What is the volume and open interest on the option?
*How extended (overbought and oversold)?
*What have our most recent win ratios been? So good that it's time to move to a OTM issue because the market is no longer as easy to read?

We've had a great run this past three weeks, despite a very difficult market to read. Remember, take profits when profits are available. Don't hold all of a position for top profits, and use our %'s down to buy as indicators, NOT as exact numbers.
And a real fact: *56^% of unemployed individuals are described as “permanently separated” from their employers. In prior recessions that figure never reached higher than 45%

And some other facts:

81% of Las Vegas homes are now worth less than their mortgages.

The company "American Doll" has unveiled a new character - the homeless girl - and the doll is available this Christmas for $95.00

Reality is only as we see it. We know only what we know, and do not know what we do not know, nor know that we do not know it.
Start your week planning to "watch yourself" as you trade, so that you can learn "through you" your own behavior. There is a zen to a trading sequence in which someone must lose for
you to win, and you are pitting yourself against others in buying and selling, as in life.

All Day the Market Struggled

All day the market struggled. It opened with a run up to 10,361, and by 2.30 p.m. had already moved to 10,175. Oil led this game, as analysts began analyzing crude inventory reports, and energy stocks suffered.

We are at a turning stage in the market, and simply follow news to see how the market will do. Not the time for the investor. We saw strong downside begin in the after 3.30 p.m. hour, leading the market down over 100 points.
The key to trading is watching the nuances and when the "same thing happens over and over again." This, with an option, is called "falling in love," when you know it intimately. We are this way with the Dec 490P already, learning in nuances.

Downside we believe will be limited before the market rebounds. We'll hold with our open put, now already profitable, and end the week on another profitable and good note.

Sit and Watch

The bull run that skeptics hesitate with continued to market tops of 10,392 in morning trading. The market moved as lows as 10,206 in hesitancy at another market top.

Each move up that holds decreases the amount of consolidation, based on the count of the market. The bias stays clearly at near 5 to the call, and there is always an upside.
Profits are possible on both of our open signals, for fast day traders; otherwise, the market is hard to trade for index options, and actually hard to day trade in general.

An appropriate email from subscriber Dave

"Good Morning, Floyd.

Hope you are well. Been a little while since I wrote you with any questions J. I have been studying the market and alerts for months… I don’t even paper trade – I just sit and watch the market (OEX, DOW, and YM Futures) every day possible, all day when I do. I have learned a great deal by doing this and have come to understand your approach to the market much much more than I ever have before. Much appreciated are your teachings by me. Though I feel I have learned a tremendous amount, and am still learning and I have a couple questions… Stuff that is basic but that I am curious about…

As you begin to calculate up or down on the 21 day cycle… Either the 500 – 600 current market swings or 21 days, whichever comes first fulfills that particular cycle right? Then we see the 2 way trading more apparent and whipsaw as the market sorts itself out to establish the direction of the next cyclical move (whichever direction)?

Day-Trading the options that swing in ranges, to me, appears to be much more reliable than using the pivots. Just like trading channels. I’ve come to not like the pivots as far as trading them but I do see their value in establishing S/R because you can clearly see when one of them is honored vs those that are not. Just matching up the option swings with the market swings (syncing them) among other things stacks the odds in ones favor.


Anyhow, Thanks again, Floyd. All your teachings are very much appreciated."

Floyd's rule of thumb and answers: Sitting and watching the market for months is how many of my best students have gotten rich. They learn patience, and truly following the market, with fear or greed.
Right now the 21 day cycle is closer to 30 days, but each consolidation, even in stages, has averaged 586 points down. I'm actually watching this with all of you now, as it does not appear the market would consolidate deeply with the higher higher we've seen, and our Dow projections so reflect this.

There are many stocks we are recommending in our Blue Chip Options service (www.bluechipoptions.com), however, and there is more upside potentially over the next 6 weeks.

Do Not Argue With the Stock Market

*Do not argue with the stock market.

*If a stock is up 20% in three weeks or less after your purchase, hold it at least 8 weeks.

*After a stock breaks out it follows Fibonnaci patterns and sells offs are likely at 38%, 50%, and 62% profits.
These are basic rules we teach at our sister service, www.bluechipoptions.com, and that are very "present" to how the market is acting.
Yesterday brought theoretical Dow highs to just over 10,300, and a bottom of 10, 187. Consolidation, when occurring, may now only whipsaw downward to 9900-9950 before a stronger bull run, as we approach the Fib top of 10,700


Do not argue with the market. Whew. 10, 700 seems so high, and yet so low, from where we were, and yet, has been a meteoric rise that has restored some wealth, and created more.

For most of the trading day yesterday we found a hard to trade market. Some traders caught entry to the Dec500 Call and made 2.00 per contract by fast trading, but most traders only were able to take entry to positions.

Our recommendations are thusly a repeat of yesterday's, as the market may continue to hold to new highs, or simply "tightly consolidate."

100 Percent Return on Our OEBKT Call

Investors are getting carried away again. The Dow hit new highs, on a 200 plus point upswing. The reasons:

*The Dollar fell to a 15 month low after G20 meets. Gold hovers at $1,100.00.
*Increased investor certainty that we are "out of the woods" and it's time to get in the market, that there will be a global economy.

Whew. We're revising our Dow projections to show new highs that could be reached, and following historical patterns, still see an overall 586 point drop from whenever this market does top.

Read our Dow projections carefully. We are showing the ascent now necessary to the next resistance line, and make note of the 586 historical correction from any top.

Although it's hard to believe our 11/6 recommendation of the OEBKT NOV 21 2009 500.00 CALL hit highs of 10.20, for a 100% return. All it took to hold out for that kind of profit, as many traders did, was to read our re-calcualted Dow projections, sent out by Twitter, which showed a new R3 of 10,206, a great place to sell out watching the mood of the day. It's not often we can return 100% in a short time, and many of you experienced 30-60% profits, so are banging your knees, but this was a great trade. We'll likely lose on our OTM put on Wednesday stop loss, and note the 10 count to any call trade. Very overbought conditions.

Because of this we'll list two opposing signals, with special instructions.

Friday Was Beyond Me

Note that Wednesday is Veteran's Day but that the market is open.

Friday was beyond me. Unemployment rose to over 10.2%, and Wall Street was caught selling a new kind of insurance derivative, again with no regulations. And despite this, the market held. It didn't rise, but it didn't fall, and did stay over 10,000. Many floor traders were confounded, waiting for a consolidation so clearly that the market might defy it.
We are holding to our Dow projections, noting specific support and resistance areas that have held this past week.

A bull market trend, to Dow Theory, is defined as a series of higher troughs and higher peaks. A bear market trend is defined as just the opposite, a series of lower peaks and lower troughs. In addition, a newbull market trend is said to have begun once a market makes a new higher trough followed by a higher peak, and a new bear market trend is said to begin once a market forms a new lower peak followed by a new lower trough.

It is likely to see more upside to a fast top before a choppy whipsaw downside, but the market is now clearly hesitating.

The Study Continues

The market showed flat futures, and varied news data prior to opening. Gold was already rising. And, from a futures of 12+ the market opened to highs of 9945.73, or almost 10,000 on the theoretical Dow.
Retail sales data was reassuring, and the market opened strongly bullish. The sadness in the country in the lack of true investigative reporting ,and the finding that over half of the derivatives being traded don't even show accurately on the exchanges, showing Wall Street still in charge. For some reason, this frightening news was not even understood, and the market just forged ahead.

We remain concerned that 10,000 will not hold and that another consolidation, led by the USD shifting, oil dropping, and made a buy to an Out of the Money Put, for a fast downside we see. The amount of massive moves in the market, up 177 points for example by 10.30 a.m. makes it difficult to trade. But to see the day hold and run up over 10,000 and hold....we'll see. More data reports out today that "excite" the market, and right now in such an emotional way it's hard to read. We seem to be repeating the same cycle, part of what some would see as a head and shoulders pattern that is ominous.

Our Dow projections are right to target, just hard to figure which way first.


More on Trader Bill's study on the count:
His premises:
How do the parts of the count stack up to correlation of movement.

I'm still trying to figure this question out.

ie. When I developed my spreadsheet, I broke down the 5 parts to the count.

Part 1 compares the current day price action
Part 2 compares the last 3 days
Part 3 the last 2 days


I recently asked our Blue Chip traders the question "why do you trade?" The answers were astounding, and showed me as person all the different reasons people are trying to make money trading options.

So, my hard question to you as a trader for a Friday is this: would you prefer smaller, steady profits, or larger pools of money invested in simple signals?
Neither answer is wrong, but your answer to this question is key.

_________________

How can we as a nation manage to take simple subjects, with simple solutions, and make them undefinable, filled with graft public or private, and inept.
Simple problems. Simple solutions.
Like, where is Osama Bin Laden. L.A.?

That is not a statement to annihilate Bin Laden, but come on, how hard is it to figure out where he is?

_________________
Trader MR gives an update on his BCO and OEX trading:

> Closed out last MKDAC today for 60% gains. I'll look to re-enter at lower price point, as MCD hit P/F resistance today.
Floyd: McDonalds has done us well, and he's right....we'll soon have a new entry on this.
>
> I made out on those GLD calls from last week. Finals positions were 80% gains.
Floyd: Gold remains a buy. CEF is an excellent long term investment, and we'll soon have new Gold calls/puts listed. There may be a correction,but Gold is headed to $2000 or more an oz.
>
> Bought AAPL dec OTM calls yesterday. Up 22% today, I'll hold for greater return.
Floyd: Smart. He's learning on his own. Apple we've played for years, and I'm soon ready to recommend a position before the January numbers come out.
>
> Now for the bad news. My index option trading has been horrendous. I can't get a good read on the market, and/or I am making bad choices. I have messed up enough OEX trades to cancel out those fantastic trades and my trading account total value is still flat lining. It's sort of comical.
>
> I feel like I am "missing something" like there is a key data point, or indicator I am not looking at. Maybe it's my mind's eye that's not focused. I think I should take a couple days to "go fishing."
Floyd: Although this is for OEX traders, it's a very honest piece of information. The indices right now (SPX, DIA and OEX) are all difficult to trade because of the amount of whipsaw in the market. When traders experience situations like this, just don't trade. This is what I call my "fishing time."

>
> I can ETF trade fairly well. My conservative portfolio (my wife's IRA account) is up 10% in 6 weeks, and its 75% cash at the moment. I may be starting to find my own style in trading. buying "longer term" or "trading the swings" seems to work for me, and I have been fairly accurate in the trades I've made.
Floyd: This is the purpose of learning to trade with me. Develop your own style, and learn what NOT to learn.
>
> The study continues...
>
>
>
> MR

Lead to the Call

The market is almost stuck in a pose. A 9968 high by mid day, and lows by 3.45 that shocked the market. We were not sure of this whipsaw, thus no dual trades. We had no open signal, as with the FED announcement and the confusion to the count was not clear on bias.
Some of the work that Trader Bill is doing shows this, and when the market fluctuates as it has with these swings, is something than overbought/oversold, or just plain feverish?

November begins the Dow's "best six months" historically. We are also at a turning point in the market with all time highs having been reached in a very short time. Being prudent on upside is paramount.
So we'll help you review the thinking and facts that got us in this mess. A rock is not hard.

*10.6^% drop in the U.S. Weekday newpaper circulation, pushing us to soundbites and "blogs"
*GMAC has asked for another 2.8 to 5.6 billion
*Only 2 million people worldwide, including online and overseas subscribers exist now for the Wall Street Journal, Barrons.
*Tomorrow unemployment, non farm report, should show a drop to about 175,000. A drop below 200,000 would indicate the economic recovery is on track; others report we will come in at 9.9%.
(Floydian theory: unemployment will stay at 10% for several years in the "new America".
*One of the lead dogs of Pepsi unloaded a lot of inside shares early last week. Wonder what it means?

And a quote of great value: "A number of financial institutions are quietly becoming overcapitalized through regulatory fiat, as well as through massive earnings leverage from the yield curve, the latter of which rarely fails as a leading indicator of economic growth"-Jeffrey Bronchick, RCB Investment Strategy Letter

We'll close with a signal lead to the call, but with caution. Often after the FEDS announce, and the immediate euphoria passes, there is a reaction in the market.

Flat As a Pancake

Berkshire bought Burlington Northern, the USD went up, and the market was flat as a dead pancake. We hit highs of 9827 and lows of 9663. The November 450Put was available for as low as 2.45, and could have sold to 3.60. There were numerous times in the trading tight whipsaw today that day traders could have watched any put in the November chain and found tight .50 profits to be made, and movements were still over 200 points in a day, despite many tight moves.

I had a number of inquiries today about knowing when to trade the market up, when to trade at "best buy," and when to trade at prior day close. In today's market, outside of our OEX Manual, and because of the extreme market conditions we are finding a number of ways to successfully NOT be let out of the market.

1. Our standard rule is to never buy above prior day close.
2. Our secondary rule is to try to buy at discount from prior day close.
3. We follow futures and watch the mood. When the market shows upside or downside of 70 points up, it is a lagging indicator of the market opening. As one "watches futures" they find that as they "move" you can see the strength in the bias, or the lack of strength.
4. When bias is strong and one wants to trade the bias, and our recommendation, sometimes it is right to pay to market opening "the first prices available" and sell for 30 to 40% profits same day.
5. When bias is weak, or confused, as we have seen some days, it's best to just wait for the discounted and best buy price, and because the bias is less strong.

The market held much more steady today, a sign that put strength and downside may be waning, yet it also did not gain significant volume in index options. The count is now a very low bias. It is a market waiting for a strong upside move, and still not finished, or certain if a downside move should come first.


*When we trade we expect numeric precision, or system, and this can be done, but not literally. The market is a moving instrument filled with the fear and greed emotions of the trader, and will confound historical charts and facts, but never argues with supply and demand, or cause and effect.
This is what drives the market. And time. It is this simple, and no one will accept it.

Most traders want to know HOW Floyd projects the Dow and we've got a video and article on it on the website, but I will confound you most with "my view of numbers is if they read out to me, and I just know," as much as S/R on Pnf charts. I believe this comes from years of simplicity in viewing, and in my limiting of my actions. That "clean desk" video on our home page is me. I do not have much around me when I trade.

The whipsaw that we saw, and the massive sell off, after an exhaustive gap day UP, did nothing be reassure me more that the economy is rebounding, and investors are starting to slow their own frenzy.
We want this. If the market hesitates a bit, it is breathing, and we want calm.
Last Friday who could have predicted a 250 point overall decline?

Numerically, the number 0 is key, and I've suggested in our Blue Chip Option service things that I think could happen in 2010, and WHY things happened at 10,000.
The 0's concept does not work or have meaning with numbers like 9800, 7600, etc. but in the total rounds of 9000, 10,000, etc. and the reasons for 2010 showing something will be on our Blue Chip blogs this week.

Bernanke and the Fed kids, staying at high priced resorts, will likely inform us that they are holding rates steady. The focus will be on the phrase "extended period" to see if Bernanke rightly opens the door to a potential down the road rate increase.

_______________________________
And from trader MR on the question: what does trading mean to me?

What an articulate response:

Last week I promised my comments on what trading means to me. In the simplest of terms - it is continuing education, understanding myself, and a chance to regain my long term losses of 2007-2008. On the dark side, I can relate all to well with the comments from some of my fellow traders about the anger, fear, and other negative experiences that can be common side effects of the trading "lifestyle."

Recently I listened to an audio summary of the book "Sway" by Ori Brafman and Rom Brafman that highlighted a very interesting set of facts on how our brains are wired and discusses several psychological forces that derail rational thinking. It relates directly to how we understand our emotions when trading. Here is an excerpt directly from the summary, with my emphasis added throughout.

In an experiment, the NIH researchers placed participants in a specially modified MRI machine fitted with a computer monitor and a simple joystick. Lying inside the machine, the subjects played a video game reminiscent of the Atari era. At the start of each round of the game, a circle, square or triangle would appear on the screen. Each shape held a unique meaning: A circle meant that if you succeeded in completing a task — zapping a figure as it appeared on the screen — you’d earn a monetary reward. However, when subjects saw a square instead of a circle, they braced themselves for bad news. The object of the game would be the same — zap the figure — except that failing to do so would result in a monetary penalty. If the participants saw a triangle, it meant that no money was on the line; whether they hit the target or not, they would neither lose nor gain any money that round. While the participants were playing the game, they were shown a running tab of their earnings and losses. Meanwhile, the scientists monitored their brain activity and noticed that every time a circle or square appeared — that is, every time there was money to be gained or lost — a certain part of the brain lit up.This region, which remained dormant when the triangle appeared and no money was at stake, is called thenucleus accumbens. Evolutionarily speaking, the nucleus accumbens is one of the most primitive parts of the brain — one traditionally associated with our “wild side.” Scientists call this region the pleasure center because it’s associated with the high that results from drugs and gambling. At its most extreme, the pleasure center drives addiction. The MRI study surprised the researchers because it revealed that the pleasure center is also where we react to financial compensation. And the more money there is on the line, the more the pleasure center lights up. A monetary reward is — biologically speaking — like a tiny dose of a drug.

Pleasure Versus Altruism

Now compare this reaction with our neurological reaction to altruistic behavior. In 2006, after the NIH study, Duke scientists asked subjects to play a similar game, but instead of earning money for themselves, the participants were told that the better their score, the more money would be donated to charity. In the MRI images, the pleasure center remained quiet throughout the game, but a different region of the brain, the posterior superior temporal sulcus, kept lighting up — the altruism center. This is the same part of the brain responsible for social interactions — how we perceive others, how we relate and how we form bonds. Considering the two studies, scientists discovered that unlike the parts of our brain that control movement and speech, the pleasure center and the altruism center cannot both function at the same time. It’s as if we have two “engines” running in our brain that can’t operate simultaneously.We can approach a task either altruistically or from a self-interested perspective. The two different engines run on different fuels and also need different amounts of those fuels to fire up. It doesn’t take much to fuel the altruism center: All you need is the sense that you’re helping someone or making a positive impact. But the pleasure center seems to need a lot more.

(end of excerpt)

When I listened to this (and re-listened to it) a giant cartoon light bulb lit up above my head. Put this in terms of trading. When we put our money on the line strickly with the goal of making more money (I need 30% on this trade, I need to clear 10k in profit this week, this month... I need to raise 50k for my kid's college before June) it AUTOMATICALLY engages our carnal, beast like senses. It disengages our logical capabilities and leaves us shell shocked at our trading screens wondering where our money went and wondering why we did @$!% instead of the prescribed X-Y-Z.

First off - this explains for new traders why it is critical to paper trade. We see that when no money is on the line, our primitive brain is dormant and we can think logically and learn. For those of us who trade (or attempt to trade) on a regular basis I propose a paradigm shift. Rather than sitting down for the day with the goal of "daytrading for a living" or "making a set profit" we can redefine our role in a way that engages the altruistic center in our brain and shuts down the primitive side in the process. Perhaps we can define our selves as "Non-Profit OEX Liquidity Providers " who provide the service of buying options from motivated sellers and selling options to needy buyers. We enable trade. If a by-product of our effort results in profit, fantastic - that's just a function of our efforts to keep the market healthy. I think this is the science behind why Floyd teaches us to be Fruit Vendors.

When I learned of the scientific implications of the way we define our trading - I learned the REASON we feel the way we do at times (out of control, insane, frustrated, powerless to change.) More importantly I learned that we can learn to systematically disengage those negative side effects just by assigning a new paradigm to our system of trading - redefining our purpose in what we do.

Obviously there are other ways you can define your frame of reference in regards to your day-trading "mission statement" but the moral of the story is that it does not have to be about the money. In fact - it's probably more healthy if it's not.

OEX Service Provider MR

PS: Floyd made the following comment in the Oct 20th OEX daily alert and I think it stands repeating: "What we may be seeing is the re-making of the USD, and of the values we put on things." I think it will be important to bear this in mind as we trade and watch the market through Q4 2009 and Q1 2010.

Stocks Drop the OEX Makes Money ; ))

Futures were up but the market only opened 30 points up, allowing easy entry to the call, which moved to profitability by 10.30. a.m. with a 119 point run up.

Traders watching the market were able to trade fast and easily to good profits, from lows of 6.80 to 9.00 in a short hour and a half.

Then, as the market rose, traders were able to enter on the put as low as 2.25 to as high as 4.25 by 2.30 p.m.

Both signals were profitable!

*Much of learning to trade is learning who you are trading against. When you are buying, their are sellers and they are your adversary. If you were selling an OEX Option, for example, that you owned, under various conditions you could be anxious to sell, or waiting to sell at a top price. Its' the same when you are a buyer, wanting the best price, and your goal as a fruit trader is to buy right, and at the right time. That's the trick.

I make my most money trading by simply getting to know something well. Our trusty November 490 Put comes to mind that could have been traded 11 or more times profitably in a 6 day period, and was massively profitable on the big run down last week.
When I find an option that seems to "swing in a range" I begin watching it, if the Dow or the OEX is also holding to a range. I become familiar with what prices the option seems to have the most volume and sell the most at, and that do my watching on that option.

When I provoke you, it is to find things that simple, and work from this perspective.

And as an example of provoking, trader MP wrote me this past weekend. You will note MP shares his thoughts with another person also, who explains it is all "liberals" faults :)
My comments are noted, as his questions and thinking are much like many:


"Hey Floyd..

I've got several questions:

1. Seriously, how can the market drop 140pts. on Wednesday..then rise over 200pt.s on Thursday and then drop 250 pt.s Friday...What the hell is that all about? One day there is good news and the market bounces 200pts. and the next day - fear kicks into the market? What could have possible changed that dramatically? The VIX went up 6 pts. on Friday and I'm just curious as to why ALL OF A SUDDNEN there is fear in the market? Did people really believe that things were fine two days ago?


Floyd: This is simply the law of supply and demand, and cause and effect. The market had moved up dramatically, and a fall was due. The move up on Thursday was nothing more than false euphoria and an exhaustive gap up.


U.S. Stocks Drop as S&P 500 Ends Streak of Seven Monthly Gains-- Floyd: This is a silly, dramatic headline that makes one feel " the end of the world_
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By Rita Nazareth

Oct. 30 (Bloomberg) -- U.S. stocks tumbled, ending a seven- month streak of gains for the Standard & Poor’s 500 Index, as declines in consumer confidence and spending and the threat of a CIT Group Inc.bankruptcy raised concern over the durability of the economic recovery. (IS THAT REALLY THE REASON WHY WE SAW A DROP?)
Floyd: This was the "reason,", but the real reason is that the market was OVERSOLD.

“I’m well-spooked for the Halloween weekend,” said James Paulsen, who helps oversee $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “We can talk about disappointing consumer confidence data. Bank charge- offs are still happening. There’s a growing sense on the Street that there’s got to be a pullback.” SO ARE WE GETTING A PULLBACK BECAUSE THE MARKET "NEEDS" A PULLBACK OR ARE WE GETTING A PULLBACK BECAUSE THINGS REALLY AREN'T THAT GOOD...AND HAVEN''T BEEN THAT GOOD? AND WE DIDN'T THINK THIS A WEEK AGO? AT LEAST NOT GOOD ENOUGH TO WARRANT THE RUN WE HAD TO 10,000 ANYWAY CORRECT?
Floyd: This is the normal law of supply and demand and cause and effect. Nothing more


What cracks me up is how come last week...before we hit 10,000...everything was all positive - hearing about how the S&P is looking for 1200 and that the recession is over and that our economy is moving in the right direction....now Citigroup is going under...what the frig is going on and who can you trust for the proper information? Does anyone really know WHAT IS GOING ON? WHAT IS THE TRUTH?

Floyd: But if you read our alerts, not was all positive. You are fed newsbites. Citigroup is not going under. Everything was not GREAT a week ago, but things are better than a year ago.

_________________________________

I noticed that oil took a hit and your DUG calls are gaining some ground....I almost bought your .dzgkn signal for the first time the other day for 25 cents...they hit 75 cents on Friday...that would have been a nice 200% gain - instead I sat out and now I'm kicking myself...

Anyway...I'm beginning to hear more and more about the real estate plunge that we have yet to experience..what do you think about another one of those plays?

Floyd: We're doing fine on our DUG calls and will soon recommend a new position to SRS. We were too early in our inverse call on this last month.

And lastly..I often forward your political rants to my buddy Steve who is a retired marine fighter pilot, Christian, Neo-con and big time black and white guy. He is a currency trader and has yet to trade successfully over an extended period of time.He also just got out of alcohol rehab.

I was defending some of your arguments in a conversation with Steve and he had this to say about you:

Floyd may be a good trader but his underlying analysis of things is not accurate. He still refuses to acknowledge the fact that it was government meddling by the left that created the current disaster, not Bush lying. He is a statist and as such must be fought on every level. He is either a willing or innocent participant in the left's march to tyranny but it does not matter. The fact is he is an enemy of liberty.

Floyd: People like this struggle so much to believe it is "someone else's'" fault. This is a name caller, that does not know the words he uses. Statist and liberal...Limbaugh and Beck name calling, without logic. These are the people I see living in "black and white", not knowing it is grey.

My question to you is the following: How come when I read stuff like this from Steve, I see and hear how ridiculous it is...but at the same time, I'm unable to see or hear how absurd my own remarks have become. And why is it so obvious to me that a man who speaks and thinks like this will never succeed as a trader but think I can succeed when I've said and thought other things just as ridiculous?

In other words, how come it is so easy for me to see Steve's weaknesses but not mine...let alone change mine? Why so difficult?

Michael

The Greenback has Bottomed

The first trading day in November the Dow has been down 3 in a row after a 4 year bull run,and was down 362 points in 2007. Just think, at that time, being down 362 points was a HUGE day down.

It became the norm last year. And now, we see typical 586 point moves between a top and a bottom, often within 21 days or yet. The market has become FAST.

Now, the facts: The market dropped to 9644, just below our strong support line of 9679. Within our Dow projections, updated, you'll note our next potential bottom, and the exhaustive gap lines the market could use to "run up" again.



Stansberry and Associates wrote Friday:

"Today is a pivotal day for the market.

Stocks are either ready to break down and head toward the October lows – a break below will lead to a much more negative move over time – or the bulls will make a stand and rally into the seasonally strong period of November and December.

I favor the former scenario, but it could go either way. And it all depends on the U.S. dollar.

Stocks have been moving inverse to the U.S. dollar for the better part of two years now. Indeed, when the dollar bottomed last September, stocks began their nosedive. And the peak in the dollar in March coincided perfectly with the bottom in stocks.

The dollar broke to the upside of a bullish falling-wedge pattern on Wednesday. That event spooked the market and was largely the reason for the extended decline and temporary breakdown in the S&P 500.

The dollar was weak yesterday. It dropped back down to retest the breakout level. Not surprisingly, stocks rallied in response.

So the future of this market is entirely in the hands of the dollar. If the greenback has bottomed, stocks have peaked. If the dollar starts to fall again and make new lows, stocks will make new highs.

It's really no more complicated than that"

The dollar broke to the upside of a bullish falling-wedge pattern on Wednesday. That event spooked the market and was largely the reason for the extended decline and temporary breakdown in the S&P 500.

The dollar was weak yesterday. It dropped back down to retest the breakout level. Not surprisingly, stocks rallied in response.

So the future of this market is entirely in the hands of the dollar. If the greenback has bottomed, stocks have peaked. If the dollar starts to fall again and make new lows, stocks will make new highs.

It's really no more complicated than that"

The Great Depression and World War II created the modern world in lots of ways. They also created one of the primary lenses through which we view it. What the war brought us was a middle class, yearning more, buying on "lay away," and leading to more and more ways to communicate. And now the newsbites and Blackberry news of instant attention, or the desire to spend $100 on a dinner has become a norm.

I believe we are seeing a major shift worldwide in human sentiment, and action, and are being knifed in the corners by the many that do not want any corruption to change. Note I didn't say corruption to end, as it's been going on forever, but a way of thinking long term on "what the right thing to do is."

So, look at a large drop that was a record in 2007, and is now "a day" in 2009.

I Gave A Speech

For those trading on 10/29 note we had re-projected the Dow, and are doing so again, and gave the following instructions:
"There has been enough consolidation to justify a 586 run down, and it’s likely to see the market whipsaw to 10,150 area again, before another consolidation to 9850 to 9679 again."
We wrote the above yesterday, and saw the market hit 9964 by 1 pm. Our contrarian play on the November 500 call returned 33%-45% to traders, all able to buy just slightly above prior day close.
We read that the market would react to the downside, and we saw a market upturn of over 200 theoretical Dow points by 1.45 p.m.

The reason the market gave for this was that the U.S. economy expanded for th first time in more than a year amidst the stimulus. We are seeing, to a GDP follower, "recovery."


I gave a speech at a symposium last week to some stockbrokers in Washington DC about index option trading. I had the opportunity to meet with brokers from all over the world that "bet the market," and project and analyze.

They heard me for 30 minutes teach:
*False facts
*A rock is not hard
*Most financial statements are false
*The mood of the public is paramount to the mood of the market

The major question I had during this speech was around "how to project financials for future earnings." As you know, this is what half the talking head analysts do as they "chart" the future.
My answer was seriously listened to, and I'll repeat it:

"No company in 2009 can make long term financial business plan projections beyond one year. Too much in the world is changing. Looking at 'three year growth patterns' or what a company projects is much like fishing in a river that has poisoned and has few fish." I shut them up with their questions with this:

1. Years ago AOL owned the internet. It is now broke. Who would have seen that so many idiots could have mismanaged a business that had a 86% market share
2. Who would have guessed that Green Mountain Coffee would rise 190% while Starbucks, missing the change in the environment, dropped dramatically. Both had business plans that analysts had defined as "sound"; in fact, Green Mountain got a "watch" read from Goldman Sachs while Starbucks got a "strong buy." Interesting, the reversed happened.
The conspiracists will have a field day: was Sachs manipulating the market to short and hold calls on both instruments. You bet. And guess who won the biggest?

While in Washington I heard the babble brought on by the GOP on "Obamanation" and the false facts on "socialized medicine" or "how can we control the right of people to earn money". These were stockbrokers, of course, who benefit when United Healthcare et al rise 428% in profits in 10 years, and will not benefit when costs are controlled and contained by competition. We have no competition or free trade in ANY way in the health care industry, and those that believe that our costs will be driven up are using false facts to analyze WHAT NO ONE CAN EVEN BEGIN to conjecture about. We only know that typically when competition lowers price (aka Wal-Mart) that others are forced to find ways to be more competitive.

During the Bush reign we never saw the dead bodies coming in from Iraq. This was on purpose. It helped us hide from it.
During the Bush reign we heard about the thriving economy for years, but it thrived ONLY in the homebuilding industry, which created more than half of the jobs that gave us lowered unemployment.

Few thought out "what happens when the bubble breaks?"

I left our great capital saddened by the tears of the public caught in the newsbites that lead us to believe what is not even true, or even partway true.

I ended my speech with the kicker: "The market is up because of the stimulus, and the need for something 'good' to lead us first. And, if we do not control Wall Street again the same thing will occur, and this time it will be our fault. A President, even Bush , does not do this. Congress does. You do. You do by your thinking, your vote, and your standing up for real facts.

What person in their right mind thinks that this country could be turned around from 8 years of lies in a 10 month period? I smile at our innocence or our stupidity. I'm not sure which.

Nothing we could have done, by the way, when the bank fraud was finally 'admitted' would have been the perfect answer. We have 540 men and women (Congress) daily influenced by lobbyists, all whom represent special interests. This has been taking place since our Government was first formed, but is now in a state of pure corruption. It takes a village....you know the line. The doomsayers of 'socialism' make me smile, as Obama only represents the majority of the country, and unemployment rates are part of companies ready to return record profits (study the earnings) by simply having fewer people.

Do not for a minute think that free enterprise truly works. Wal Mart is a perfect example, having grown successfully, by filling huge buildings with goods from China, at low prices, and we buy them.
Thousands of businesses have closed because of this 'free enterprise.' It's not wrong, it's simply to show us that 'all is not as it appears.'"
________
Back to the market. Study our new Dow projections, as we have a two way possibility:

1. The market will continue another run to 10,167 before consolidating again to 9800
2. The market will slowly build to 10,256 and the last consolidation is over.

We'll give only a one way day trade today, sell before the weekend.

Thought I Would Share

Thought I would share the following document with you as you progressed in my ongoing argument for downside. Yesterday the Dow hit a theoretical low of 9744, which exceeds our 586 point average move over a 21 day period. Sure enough, the market dropped and the November 490 Put , an "option I fell in love with" hit highs of 12.73 before the 3 p.m.. hour. Available as low as 9.50 for the day, and with many traders, we'll close out our position with this put with many traders reporting 5 to 15 actual day or two day trades on this signal over the past weeks.
I've stuck to my guns downside, as logic will always "just for a moment" prevail.

So, read this article I wrote a few days ago:

Much has been make about Dow 10,000 last week, but technicians may want to focus about 500 points higher instead. The chart below shows Volume-by-Price for the Dow Industrials. Notice that the longest bar is around 10500-11000. This represents a potential resistance zone in the coming weeks or months.

Oct. 27 (Bloomberg) -- Investors worldwide are borrowing dollars to buy assets including equities and commodities, fueling “huge” bubbles that may spark another financial crisis, said New York University professor Nouriel Roubini.

“We have the mother of all carry trades,” Roubini, who predicted the banking crisis that spurred more than $1.6 trillion of asset writedowns and credit losses at financial companies worldwide since 2007, said via satellite to a conference in Cape Town, South Africa. “Everybody’s playing the same game and this game is becoming dangerous.”

The dollar has dropped 12 percent in the past year against a basket of six major currencies as the Federal Reserve, led by Chairman Ben S. Bernanke, cut interest rates to near zero in an effort to lift the U.S. economy out of its worst recession since the 1930s. Roubini said the dollar will eventually “bottom out” as the Fed raises borrowing costs and withdraws stimulus measures including purchases of government debt. That may force investors to reverse carry trades and “rush to the exit,” he said.

“The risk is that we are planting the seeds of the next financial crisis,” said Roubini, chairman of New York-based research and advisory service Roubini Global Economics. “This asset bubble is totally inconsistent with a weaker recovery of economic and financial fundamentals.”

‘Wall of Liquidity’

The MSCI World Index of advanced-nation equities has surged 65 percent from this year’s low on March 9, while the MSCI Emerging Markets Index has jumped 96 percent. The Reuters/Jefferies CRB Index of 19 commodities has added 33 percent.

Roubini said he sees a bubble in emerging-market equities and that gains in some developing-nation currencies are becoming “excessive.” The rally in oil “is not justified by the fundamentals,” he said.

An asset “bust” may not occur for another year or two as a “wall of liquidity” pushes prices higher, Roubini said. In a carry trade, investors borrow in countries with low interest rates to invest in higher-yielding assets.

Roubini said the U.S. recession seems to be over, though the economic recovery in advanced nations will be “anemic.” He’s “more optimistic” on the outlook for emerging-nation growth.

The U.S. economy probably expanded at a 3.2 percent pace from July through September after shrinking the previous four quarters, according to the median estimate of 65 economists surveyed by Bloomberg News before the Commerce Department’s report on gross domestic product due Oct. 29.

Roubini on Stocks

The economy shrank 3.8 percent in the 12 months to June, the worst performance in seven decades.

Roubini’s July 2006 warning about the financial crisis protected investors from losses in the Standard & Poor’s 500 Index’s worst annual tumble in seven decades. The U.S. equity benchmark has surged 58 percent from a 12-year low in March even as Roubini said that month the advance was a “dead-cat bounce,” that it may “fizzle” in May and warned in July that the economy is “not out of the woods.”

___________
Here's some commentary between a subscriber and myself on my predictions about the sell off. My comments are in bold:

> Hey brother..
>
> I am amazed at how you called the downside this week.
>
> I am also kicking myself that I did not purchase the 490 put on Friday of last week for 4.50 and then again on Monday for 5.50...She was over 12.00 a few minutes ago...unbelieveable...
>
> I've got some questions for you...
>
> Since you were "certain" of downside this week and being that we were so overbought...can you share with us how you specifically traded the put signal because I know that you sometimes hold out for bottoms or tops of your DOW projections and sometimes you grab your profits and get out...
The market struggles at 000's. I bought and sold the 490 11 times in the past 5 days.
>
> I sense that this week you held out one position for large profits while you scalped other positions using another account...or maybe you purchased another strike price as well and held one longer than the other...did you do something like that?
Always the same strike
>
> Also, I noticed that when the DOW hit 9800 (magic number and good support)...the market bounced nice...giving a trader an opportunity to grab and easy .70 on the 495 call...would you or did you play something like this too?
Absolutely.
>
> I love it when you share with us how you specificaly played the market...it helps me develop strategies in the future...
>
> Anyway, nice job again on the signals this week...you were right on...

Fruit Vendor Trading

We saw hesitancy. The theoretical Dow hit 9987, not crossing 10,000, while dropping to 9798. New buys were possible on our open November 490P, it hit highs of 10.30 for those already holding, and was available as low as 8.20 for a first buy.
Anything could now move the market, but oil earnings come out this week for the giants, and they will be bleak. We'll hold only a position to the put for the time being.


Many of our new traders read our OEX Manual, and study our Support/Resistance lines and write me often about "following the exact rules." I do not believe that anything in the world is absolute, that a rock is not hard (we only know what we know) and that even a trading system cannot be "absolute," but must have flexibility and intuition built in. The market breathes, and itself only follows rules "to a point."

What certain "types of personalities" do is key. At Level 3 and Advanced Mentoring we offer a Myers Brigg psychological test that I score, and it helps identify "traits" in your personality that you can watch for.
For some obvious examples:

*An "introverted" "engineer" "type" will want absolutes, and black and white.
*An "extroverted and "emotional" "type" will thrive more on risk, often too much risk, and break rules
*The "type of person" that "knows" what "should be" will have difficulty "fighting with themselves" over what is, not what should be.
*The personality type that "suffers" will potentially subconsciously sabotage their own successes, based on their own self fulfilling prophecy that they have "bad luck".
*Those types that "name" things (Obama is a socialist), or "freedom is being taken away" will struggle with false facts, the leading cause of failure in trading.
Many "believe" what they read or more sadly "listen to" on radio and TV and without any investigation or analysis of what the "definition" is will struggle with "black and white."

Smart traders know that a "rock is not hard," and know that facts are often not facts, but "half done" pieces of information.

As you trade, it is key you question facts, not get caught in "defining" what is occurring (as we as a public never have ALL the facts), and have a basic question about EVERYTHING.
For example, when town hall meetings became "screaming fits" was this the American people speaking out, or was it American people being misled with false information, thusly resulting in more bi-partisanship?
Did this truly represent the country, or did it disrupt our country?
How did this affect the stock market? (Suggestion: something must get better, and the market leads the economy, so we will buy stocks and not be "left out.")


Trader MR wrote me last weekend to share his successes in "fruit vendor trading" on the OEX:

>> I found some excellent material on the human mind that were infinitely enlightening when compared to the trading experience. I'll be summarizing sometime this week as a follow up to the "what trading means to me" (WTMTM)commentary.
>>
>> My laptop contracted a virus last week; I've been less prolific in my communication, and this doesn't count as my "official" WTMTM reply email :)
>>
>> A general comment though, it was a great week to trade wasn't it? 5/5 on OEX trades all returning 10% per trade. My trading portfolio is up about 4% in a week when the DOW was flat to declining, still holding an open GLD call (that I opened on my own advice).
>>
>> I started to actually follow the rules this month - with the exception of the first trade of October. I am 11/15 for the month and I saw that when I actually follow the rules: trade at S/R, make 2nd buys wisely, don't overbuy and break the rules due to fear of losing a large % of the portfolio --- it all works together.
>>
>> I am looking forward to sharing the data I found. I believe it can be truly helpful in daily trading.
>>
>> Fruit Vendor MR

It Will Be Interesting

Of course, the market opened with an exhaustive gap up to 10,100 theoretical Dow by 10 a.m., and then began hesitating. This was the perfect day for trading,as we saw light futures, no bias, and traders were able to buy the Nov 490P at best buy of 5.20, to highs of 10.00 by early afternoon. This was an easy trade. At the same time, traders had no time to enter on the call, as it rose in a fast gap up, and held.
Yesterday was the perfect OEX profit, with every rule intact! Returns of 40% plus were easy.

It might be harder today. There are struggles at 9800, but the market wants to go much lower. Earnings should look good for many reporting, and housing starts may appear falsely "up."
It will be interesting to see if the consolidation will hold.


Many market makers believe the market is now not only oversold, but overpriced, and that equities will suffer, despite what have been good earnings so far. Part of this is that Wall Street and companies set easy earning expectations because of the financial debacle, but earning analysts are now "pricing performance, not just cutbacks" into their future earnings projections.

The bottom line: this will make it harder for companies living on their growth by "restructuring" to sustain that growth, and that earnings expectations will be much higher.


Long term trader Bill D is actively studying and analyzing with us, and I have been attaching many of his charts recently. Here's how this Advanced Mentoring student is thinking and working:

"This all started because I wanted to keep track of the count from day to day on a number of strikes. Your bell curve analysis is based on the $2-3 option. Well since that changes from day to day and you need data from 3 days prior I figured I'd keep it in a spreadsheet and update daily. Takes all of 3 minutes I think. I use "Thinkorswim" nice platform.

Well just for shiggles I decided to throw it on a chart to see what it looked like. Followed it a couple days and decided to share.

My first thought is, the 475 put stuck out like a sore thumb the day before the big afternoon selloff. Could this be a leading indicator by identifying a strike that is becoming active?

Why/how does your count system work, because of demand. Logic will show, well the math will show that based on the bell curve count parameters demand "should" create an increase in price and the count method should indentify the most demand for an issue because it happens over a number of days. The proprietary systems identify most actives on a daily basis. I think the count system takes that a step further by using the 3 previous days close its not a one and done thing it is a potential trend.

By tracking all strikes on both sides the $2 option is always on the chart.

So first off, we can identify a specific strike in a string that is increasing in daily closing price.

Next is the bias. The day after option expiration both chains were flat although the calls were running on the 6 line and the puts were running on the 3 line, which indicated to me that there wasn't a clear bias either way but something might be up. It also might have been because of option expiration. Don't know that one yet.

The next two days were where the movement was and when the 475 Put started to show its bias and a possible change in the short term trend. The markets ended down for the week and the put string was running a higher count than the call string.

The one thing I've noticed when copying the data is the put prices are usually more uniform than the call prices.

I think it is just another way to identify the most active issue in the string. The caveot is the bias. We'll see how this works, need more time."