Inverted Head and Shoulders Pattern

I’ve spent last week in California meeting with other financial analysts and giving lectures on my views of the market and how politics and market manipulators and makers control the market.

The market is in an inverted head and shoulders pattern and actually has the potential for more upside, yet tips on fragile ground.

Several patterns for you to observe:

*When the market goes up, gold and silver go down. They are moving in conjunction now, and confusing chartists and technicians.

*Gold and silver are typically held as hedges against the USD. Many analysts, including myself, believe the worthless USD could truly shift ground, and although still truly worthless, may dramatically increase in value.

: Another sign of a bottom in the greenback: Longtime and well-respected dollar bulls are throwing in the towel. Having feared a "deflation" that would have seen the dollar's purchasing power grow, many analysts now realize the next crisis will be inflationary – meaning a collapse in the dollar's purchasing power.

And finally… perhaps most ominously… one of the world's greatest investors, Jeremy Grantham, the head of GMO, recently published a long document explaining why "this time is different" and the value of the dollar will not revert back towards the mean. The world, he says, is facing a Malthusian crisis – "peak everything."”-Stanberry and Associates

* Both Gold and Silver, which we read about ad nauseum, are technically due for a correction. We exited all precious metal positions at 1440 to 1476 for Gold and 42.00 for silver. It is our goal TO ALWAYS LEAVE MONEY ON THE TABLE FOR SOMEONE ELSE. NEVER SELL AT THE TOP, BUT NEAR THE TOP.

We’re very pleased with our decision.

Short term (6 months) we are bullish to the U.S.and global markets and have invested our Blue Chip portfolio very aggressively and have shown some truly marvelous returns in both stocks and options.

Good earnings, good money reports, and good political controls (the elimination of idiots like Trump telling us Obama is not a an American, or Huckabee telling us he is “too worldly” perhaps helping people realize there truly are some idiots trying to lead us.

Call profits were difficult last week, as the market opened up and stayed up, but any traders that paid prior day close or higher were able to profit each day of last week.

Please remember, our system and rules are unlike most. We are flexible to the market and recognize we must adjust slightly, as long as we are within the basics of our system

We have been resistant to entry to the put, often to the chagrin of our subscribers determined to see downside, as it should occur. Typically puts return less profits and requires second buys and we remain on the sidelines with a put purchase YET.

In fact we will open the market this week with no new OEX Option signal, as we want to watch technicals.

Separately in our Blue Chip Option “movie of the week” where Floyd speaks of market conditions in general (available only to BCO subscribers) we predict where we see market conditions heading. Sign up for this service and round out our trading at www.bluechipoptions.com

As you read Monday’s OEX alert we are standing sentry at the gates waiting to see what mood swings take place.

Remember, there is always a chance to buy and to make a profit, and even more chances to buy and have a loss, all because we want to trade.

A Critical Juncture

The stock market is at a critical juncture, and we are relying here on technicals, not fundamentals. What we’ve seen occur this past two trading weeks is leading to an important movement to the market.

First, from KeyDates.com

“The S&P ran into resistance just below the February 18 high, traded sideways in early April, then fell into the April 18 turning date. The rally off the April 18 low has formed what appears to be an island reversal on the daily chart, with a gap down on Monday morning and a gap up this morning. If these gaps remain unfilled, we could have a very bullish situation, one that might surprise most traders. The next few days should tell us whether this analysis is correct. The S&P needs to exceed its February 18 high for the bulls to have the upper hand.

The April 26 turning date comes next week, one day prior to the next FOMC interest rate announcement, due on April 27. April 27 also marks the first time Fed Chairman Bernanke will hold a press conference following the FOMC meeting. We may see volatility during that timeframe”

And next, some commentary from chartists:

“-- NEW DOLLAR DOWNLEG MAY BE STARTING FROM BEARISH TRIANGLE

-- THAT BENEFITS STOCKS AS WELL AS COMMODITIES

-- THE FALLING DOLLAR ALSO GIVES AN ADDED BOOST TO FOREIGN SHARES”

The FOMC announcement Wednesday should be surrounded by volatility, as the market watches Bernanke and his responses to quantitative easing, what he says about Standard and Poor’s lowering our debt rating.

This week we’ve tried a new approach to our combined OEX/BCO commentary, with Floyd making a lengthy movie of his commentary for the week. The URL link for this movie, in its test phase, will be found in the BCO alert for Monday.

Here’s a summary of a few of Floyd’s number projections:

-We are now long the QQQ’s with options as it closed about 2350.

-We think the S&P has an upside price of target of 1349; if it breaks this it could gap up to 1400.

-This is all occurring because of the inverted head and shoulder formation we’ve been discussing.

-We agree with Charles Nenner Research that the NASDAQ looks strong, but be watchful at 2385, where we are now long on calls on the QQQ, which could lead to a NASDAQ close above 2450

-And what we’ll show you in our Dow projections is most key. If the market can hold up and close above 12,540 there is high potential of reaching 12,746 and then 12,880 before any correction.

We see a 70% potential of this happening and a 30% probability that the market will first correct again and take us back to 12,540 area.

Floyd has a rule of thumb to always sell for big profits too early and “to leave money on the table”.

We sold Gold at 1446 and Silver at 43.00, and it’s since continued its upward ride. We expected to see a mild correction before more upside, but we now hang our heads as gold and silver appear on a buy signal. Gold may hesitate 1540, and now that its’ hit the magic 1500 mark, a close below 1495 will be a warning signal.

We see more upside in Silver and would rather be long there first, as Gold cycles still show potential weakness until mid May. If we hit 1540 on gold we’ll be very bullish.

We have already begun to build small inventory in SLV and CEF.

By June Crude could reach 116. The market in oil, as with all commodities, is 50% outside of supply and demand and cause and effect, but all based on trader games and market makers leading markets. Obama may think he can stop this, but this is the natural law of option trading from beads 1000’s of years of years ago. Electronic manipulation now puts market makers fully in charge

In Blue Chip we are overinvested and plan no new buys this week. I’ll report on outstanding options and holdings that we are “watching” for our profits, or ready to reinvest again in

And yes, for those of you that ask:

1. We have fucked our sovereign debt, but so has every country in the world.

2. The house of cards of paper currency will somehow adjust to forgive debt, to practice a global valuation, and we see a return to the Gold standard.

False Facts: The Republicans lower debt and lower taxes. The Democrats raise debt and taxes. To yet again teach empirical facts please prove this to me as a summary of the past years.

All is never as it appears, but how we see it.

Be Well

Floyd at OEX and BCO

May 25^th, 2011

Market Basket Trading

Market Basket Trading

We will be introducing more market basket trading over the next few months. Within a market basket the trader invests equal $’s in each position, or does so by % allocation, and holds in a basket.

The stocks can be bought and sold individually, but at Blue Chip we typically hold the basket for sale as a basket.

As an example of how we trade we invested $2500.00 4/8 in the total of the basket below, invested another $2500.00 on market lows 4/13, and now hold a small position of $5000.00 in a basket of the following stocks, with no stop loss:

2012 Brand Basket

NOTE: WE will NOT list any baskets in our Stock Charts portfolio to make it manageable. These are all baskets you can create your own Stock Charts portfolios (if subscribers) to set up your own point and figure charting analysis.

This week we will be introducing three new market baskets for traders. One is from our friend Trader Alan, who invests in breakouts and higher risk speculative plays. We’ve done well with his recommendations and his work brings new dimensions to our style of speculative trading:

Trader Alan’s Dice Roll Basket

THIS BASKET WILL BE LISTED IN OUR BLUE CHIP ALERT Subscribers Alert early this week

With this fund we recommend an equal dollar valuation, meaning pick a dollar amount for the basket investment, and invest equally in each position. Later you can add, sell, and change exposures, but we would start here by dollar valuation

NOTE: WE will NOT list any baskets in our Stock Charts portfolio to make it manageable. These are all baskets you can create your own Stock Charts portfolios (if subscribers) to set up your own point and figure charting analysis.

Michael O’Higgins, head of the O’Higgins Asset Management Group in Miami and the famed creator of the Dogs of the Dow basket created the next basket.

The Dogs of the Dow is based on the premise that one year’s worst performers of the “dogs of the Dow” could become more often than not the next year’s big winners. It’s proved steadily correct.

His new approach, tested since 1995, is called the MOAR Basket, standing for the Dogs of the World, or the Michael O’Higgins Absolute Return Fund.

After every losing year by the Dogs of the World he takes 5% points from each of the other categories and over weights the dogs, again playing the odds that they will outperform. If and when the stocks rebound he brings the equity portion of the portfolio to normal in 15%% point increases.

Using this technique since 1996 MOAR would have appreciably outperformed every major stock index, long and intermediate term bonds, gold and cash and inflation and done so with ONLY ONE DOWN YEAR.

This is a percentage allocated basket:

THE BASKETS will be shown each day in our Blue Chip alerts this week, for our subscribing base. Mr. O’Higgins is hard to argue with, as his famous Dogs of the Dow has worked famously, and we think his thinking of Dogs of the World will be an excellent hedge against turbulent markets

NOTE: WE will NOT list any baskets in our Stock Charts portfolio to make it manageable. These are all baskets you can create your own Stock Charts portfolios (if subscribers) to set up your own point and figure charting analysis.

Make note this is a 4-day trading week. If investing in baskets, start in small increments (Fidelity Brokerage requires only $2000.00) to create a basket, and build equity regularly in buys into the baskets.

Good trading, and please shoot me if Donald Trump becomes President, as we have become then not an ignorant nation, as I see us, but truly a stupid nation, and I’ll be moving out.

The Long Weaks

If Gold is going to be the new reserve currency (it will be), and all paper currency will value around Gold, then Gold should go higher. However, we believe if gold is going to go substantially higher, which we believe, it will more than likely stage a decline first in an attempt to wash out what we traders call "the long weaks". "The long weaks" are those individual traders that have just bought along with the craze, and worry every day when to sell.

We believe this shake out must occur. We sold all Gold, Silver positions at 1440 earlier this year, and have missed only the last few weeks moves to 1480, as otherwise the Gold market held steady with no higher moves than 1440. Silver, on the other hand, also due for correction, just hit tops of $40.00.

Use a stop loss on silver, if you hold it, if it closes below 38.50. You might at that time consider a May or June ITM put on SLV and take 20% profits. GLD will give a sell signal below 1417, but also has potential to rise to 1580 before any correction.

If GLD shakes out many people that have banked great successes, sold nothing, and have no sense of cynicism will lose a great amount of their “paper gain assets”.

We find it most interesting that we are having to utilize moving averages, put and call ratios, big block transactions, sentiment indicators, PnF weekly and annual charts, and less on price action in a market like this.

For those of us that believe in sunspots and moon cycles, the plant Mercury is in retrograde for the next two week. Historically we can see a sudden drop with a market on upswing during Mercury retrograde and then another return to new highs.

And a question from a Blue Chip trader on why some of more volatile recommendations on rare earth or unique commodity stocks, that have brought us great profits, and made us also gasp with fast losses, the question was “what underlying fundamental could have an IPO drop 50% in a three day period?”

The answer is first that many IPO’s go through shakeouts, and Ned Miller, one of our students in small caps/day traders, best answers the second answer…

“As for the negative write-upon ______. we've seen this game played dozens of times in the past month... The short sellers take massive positions in a small China-based stock. Then, the editor writes a negative report about the company – and sends it to every financial blog he can think of. Some writers don't disclose their company for fear of a lawsuit. Others go as far as to hire small law firms to file suits against these companies within a week of publishing their report. 

Once the report is published on blogs, the stock begins to tank. The fear is enough to push these small stocks (which have little institutional ownership) down in excess of 25% in a day.”

Small stocks are the highest risk and highest gain trades. You must expect to return 136% in a week, or to lose 50% in the same time. There are no fundamentals or charts that show manipulation.

Several comments are appropriate for Floyd during these trying times:

-The Pee Party does not have a clue and no money will be saved over the long term

-Despite what any of us may think of Obama, the GOP has yet to give a plan (don’t spend money is enough to kill me, as they were the fucders that first spent the money from a zero deficit and it was okay”), or a candidate that would give me the comfort that they could represent us to the world.

-And yes, Mr. Huckabee, we want a worldly view President. We live in the world, not the U.S.A. That thinking is our core problem.

We as Americans think ours is the best and only way. Most of us have never even left our own counties or states.

I fear us most for our ignorance and prejudice.

Enjoy Life NOW... It has an Expiration Date

Famed trader Jesse Livermore said, "It was never my thinking that made the big money for me. It was always my sitting. Got that. My sitting tight"

Anonymous said, “The stock market is that creation of man which humbles him the most.”

“Sell stocks whenever the market is 30% higher than a year ago” -Eugene Brody

Several weeks ago I issued a challenge: Give me six empirical facts.

I heard nothing from anyone that wrote that was empirically based, which was my lesson to teach, until Advanced Mentoring student

Congrats. Your first 6 are correct. Here they were:

Scientific Empirical facts...

Water vaporizes into steam.

Planets revolve around stars in elliptical orbits.

The gravitational pull of an object is directly related to its mass...

Fire needs oxygen to burn....

Plants need CO2 in order to conduct photosynthesis...

Then he said:

“Market related empirical facts...

All fiat currencies eventually fail or collapse...

Gold is a hedge against inflation because it maintains its purchasing power over time...

Market related empirical facts...

All fiat currencies eventually fail or collapse...

The stock related is not. Flat currencies may change name, but many have survived. Argentina in 80's the peso went under, Ecuador in 2000's also, both moved to USD

Gold we only know historically, as with flat currencies, to eras in which we began tracking history so it is not empirical, but I agree:)

__________________________________________

And again from MP, a video and story worthy of your learning:

Read the story BEFORE you watch the video...

http://www.youtube.com/watch?v=hnOPu0_YWhw

Please read to the end...

THE SITUATION

In Washington, DC, at a Metro Station, on a cold January morning in 2007,

this man with a violin played six Bach pieces for about 45 minutes. During

that time, approximately 2,000 people went through the station, most of

them on their way to work. After about 3 minutes, a middle-aged man

noticed that there was a musician playing. He slowed his pace and stopped

for a few seconds, and then he hurried on to meet his schedule.

About 4 minutes later:

The violinist received his first dollar. A woman threw money in the hat

and, without stopping, continued to walk.

At 6 minutes:

A young man leaned against the wall to listen to him, then looked at his

watch and started to walk again.

At 10 minutes:

A 3-year old boy stopped, but his mother tugged him along hurriedly. The

kid stopped to look at the violinist again, but the mother pushed hard and

the child continued to walk, turning his head the whole time. This action

was repeated by several other children, but every parent - without

exception - forced their children to move on quickly.

At 45 minutes:

The musician played continuously. Only 6 people stopped and listened for a

short while. About 20 gave money but continued to walk at their normal

pace. The man collected a total of $32.

After 1 hour:

He finished playing and silence took over. No one noticed and no one

applauded. There was no recognition at all.

No one knew this, but the violinist was Joshua Bell, one of the greatest

musicians in the world. He played one of the most intricate pieces ever

written, with a violin worth $3.5 million dollars. Two days before, Joshua

Bell sold-out a theater in Boston where the seats averaged $100 each to sit

and listen to him play the same music.

This is a true story. Joshua Bell, playing incognito in the D.C. Metro

Station, was organized by the Washington Post as part of a social

experiment about perception, taste and people's priorities.

This experiment raised several questions:

*In a commonplace environment, at an inappropriate hour, do we perceive

beauty?

*If so, do we stop to appreciate it?

*Do we recognize talent in an unexpected context?

One possible conclusion reached from this experiment could be this:

If we do not have a moment to stop and listen to one of the best musicians

in the world, playing some of the finest music ever written, with one of

the most beautiful instruments ever made . . ..

How many other things are we missing as we rush through life?

Enjoy life NOW .. it has an expiration date