Monday, June 30, 2008

A True Bear Market

What happened Thursday, which may have begun a true bear market, and what continued Friday, was triggered by OIL, the USD, and comments (right ones) on GM:

"NEW YORK (MarketWatch) -- U.S. stocks fell sharply Thursday with the blue-chip index enduring its worst June so far since 1930, and plunging to its lowest finish since Sept. 11, 2006, after getting slammed hard as crude soared to new highs and Goldman Sachs disparaged U.S. brokers and advised selling General Motors Corp.
Floyd's rants Thursday after traders wrote on our not reading Thursday's fall led to some great email responses, which we think relevant to both the mood of the market, and your great loyalty:

From a subscriber Thursday evening:

Isn't it sad that some people are your best friends when things are going good and turn on you if something doesn't go their way. Can't they see that the economy and the market is all screwed up? The most important thing is to shake it off, regroup and get back on track. please take the negitive comments with a grain of salt. I for one would like to know if you think the selloff will stop soon? I entered the 600 calls at 8.75 do you think I should do a second buy yet or at all at this point? Please stick around for us floyd now is when we need you. I still see this as a poss. winner if the market turns around what do you think? I promise I wont turn on you right or wrong. Thanks , Don



And from another:

Floyd, I have to jump in here. You should not be apologizing for not calling the sell off. After reading Black Swan I was anticipating a situation like this, but if you buy puts way out you can go broke because the timing is off. That is the problem. timing is everything!! The whiners are not living in reality, I have been around maybe as long as you and I can not believe these people think you win all the time. Are we Americans that screwed up, or have we had it too good for too long? I'm losing money, what else is new. I am still up, not where I'd like to be but that is reality, not wishing. The golf pro has been taught by sports psychologists to forget the past it does not matter. But it does matter, you are elated after a big win and can get down on a loss. Experience is the past, good judgment comes from mistakes i.e. bad judgment and just bad luck.We may have further to go on the downside,I thought maybe 10,500 on the Dow. I am not surprised by any of this you just can not time everything. I am appalled by the immaturity of some of the whiners, getting down to personal insults. Of course you should make $ on your service, we are paying for your experience. I paid $5000 for Vantage Point. It is accurate but not as accurate as you. I use it as a corroboration, have to since I paid so damn much. Your service is cheap by comparison to other services that are not as accurate. As Will Rogers said " I don't belong to an organized political party, I'm a Democrat" I will close with the following quote by Dick Cheney "deficits don't matter" Docben PS have a good vacation and don't let the bastards grind you down.


Hey Floyd,

I just want you to know that I've also been guilty of questioning your methodology as well. BUT I've come to realize that this is your service and your methodology. I am free to take practice what I like and discard what I don't like.

I also understand that if I was left to myself...I'd be COMPLETELY broke in a matter of weeks, if not days. It is your guidance and support that has kept me afloat and it is my own anti-Floydian practices that have gotten me into trouble. So what I've decided is that I will continue to follow your rules...since they are proven to work (45 out of 48 trades is a ridiculous winning percentage)...and if for some reason I don't feel comfortable with your recommendation...well then, I just won't do it...and if I miss a trade then I miss a trade...tomorrow is another day!!

You are here sharing all of your years of experience with us and it is obvious that your heart is in what you do. It is blatantly obvious that your only desire is to teach us how to succeed in the market. Please forgive our obnoxious and greedy attitudes.

Personally, I ask you to forgive me as well for all of those religious rants that I went on last week. I feel bad about giving you a hard time regarding faith and politics...you've got enough crap coming from greedy subscribers and you certainly do not need any more headaches!

You are a great man Floyd. I just want to let you know that if you decide to close shop because some idiot makes a rude comment such I believe you make more money on OEX Options than actual trading."...Then I'm going to personally come to one of your homes, whether it be in Florida, KC or on the west coast, and I'm gonna make you teach me - ONE ON ONE!! You are NOT getting rid of me brother!!

I love ya Floyd. You are in my thoughts and prayers. Keep pushing forward and have a great week to yourself! I will be practicing your rules today and next week and I will keep you informed of my progress. I do not expect a reply because I know you are taking a vacation but I thought you may be interested in how I am doing since you are a man that cares!!

God bless you brother,

Michael


Traders that took our recommendation to trade OTM puts Friday were rewarded with 30% profit goals.

Friday, June 27, 2008

Positive Thinking has Nothing to do with Stock Trading

Floyd leaves today for a week of vacation. There will be no intraday alerts or commentary during the trading day, or responses to any emails for this coming week. Floyd is NOT trading. Floyd is writing each alert, and will be recommending new trades daily but will NOT be online.

Part of the reason for this vacation are evidenced in the following testimonials from subscribers. I'm often surprised by this work, but yesterday showed the FEAR in the market, and I thought I would share:


-I have been wanting to express this to you for 3 weeks. You were on a roll and then from out of the blue you started saying we have won so many we are due for a loser. Wow --- That scared me! I am a Golf Professional--Tournament Player. If I won a tournament ( wins are hard to come by ) and the next event I thought I could not win--That would be projecting a negative Bias. No one can predict the future or the next event and what has happened in the past is just that ---The Past---It is OVER! The next Future event has nothing to do with what happened in the past event----It is OVER! Now what would have been more positive for you to report would have been " We are 38 for 38 and we plan on winning the next trade " If we were not planning on winning than we would have gone fishing until we were more positive on our recommendation. The point being is I lost confidence when you lost confidence in your self. and dame it all came to Futurity. Of which we wanted the opposite-----You let you stubborness get in the way of your Brilliance. You missed this huge decline and you should not have. I am BROKE



Sigh-We actually hit 47 in a row, and three losses. We were fearful that GREED would take over with subscribers and they would think us infallible Positive thinking has nothing to do with stock trading. We refunded his monthly subscription yesterday. Floyd

-Floyd, I've made $237,000 in trades with you from February thru early June. I've now lost $13,000. Thank you for telling us recently that option trading was risky and that we could lose. I had made 38 trades in a row with you successfully, and I was starting to feel smart. I've learned more from you than any other service I've used, and hold Blue Chip options as a service with most of my IRA account. Thanks.

Nice perspective here-Floyd

-I believe you make more money on OEX Options than actual trading.

This one makes me want to close the service. I advertise $1200 a month, at most, and this small business supports my daughter. It's a way to train her in the market and for me to do good with others. It saddens me that this would be perceived-Floyd

-Whew. Great profits this week, and will lose my ass on this one. So be it. I missed on the one call last week, and on this one, but I'm still far ahead for the year. I've begun to figure out that things really are worse than they were saying. You were right.

An interesting perspective here again, from a trader that understands we only interpret the market, not define it-Floyd

Oil may fall, as we believe we are creating a bubble, but the responsibility for the price of oil today lies in three obvious variables:

1. Algerian Energy Minister Chakib Khelil, who serves as president of OPEC, on Thursday said oil prices could jump as high as $150-$170 dollars a barrel this summer according to reports. However, he thinks crude will fall short of $200 a barrel. At a meeting in Paris, Khelil said a further fall of 1% to 2% of the dollar verses the euro could add another $8 a barrel to oil prices. He cited the weakness of the greenback as a major cause of spiking oil prices

George Bush did this with our rising debt. Supply side economics does NOT work.

2. We are stupid and forget that oil is not a renewable resource. The answer is NOT "drill Florida now".

3. Speculative traders control the pricing of oil.

The market drops yesterday were bad for our traders. One subscriber wrote "your recommendation on calls has been breaking us" and it sums it up. But, the sum up is important to note: we have been wrong 2 of the last 47 trades, and perhaps (most likely) will lose on the call we recommended yesterday.

As I leave on vacation I will share with you some insight, important for your review of the market:

-Option trading you will NOT win all the time. You must allocate smartly.

-The more I recommend that is right (as we have February thru early June) the greater chance of our failing, and my recent emails to all reminding us that I could fail need to be heeded. Option trading is high risk.

-Market conditions have now thrown the cycles of trading to our March, 2008 lows. Stop losses have now been reached by institutions and trading frenzy has increased out of FEAR.

Market declines should prove some very important things to us. Oil controls the world. The USD is in the tank.

Major corporations are now affected. The sell off is world wide.

We will hold the open call we bought yesterday for # of days, as market shifts could occur now in exhaustion gaps. However, we now hold what was an ITM call that was profitable for us on 6/26, and has become a far strike point.

I apologize to our traders for not projecting this downturn. The depth of the Bush madness ("it's the economy, stupid") now permeates to the world. Even China, who holds our debt, questions our economics.

As I suggested last week and this week, IF the market hit March lows and continued, a sell off would occur.

I believed that these lows would hold.


"I am certain we are not yet in a recession, and the economy is rebuilding well. Tax stimulus is what is needed"-George W. Bush, April 16th, 2008

Thursday, June 26, 2008

Lows are now Lower than Prior Lows

Home-price declines will eat into retirement nest eggs. Wealth to drop at least 25% for homeowners in the 45- to 54-year-old age bracket in 2009. The FEDS hits a bit of reality, that perhaps interest rates should rise, perhaps we have been in recession, and perhaps inflation is here. But interest rates did hold, and the market first responded with typical euphoria.


" WASHINGTON (MarketWatch) -- Home prices across 20 major U.S. cities have dropped a record 15.3% in the past year and are now back to where they were in the summer of 2004, according to the Case-Shiller home price index released Tuesday by Standard & Poor's.

Prices in the 20 cities are now down 17.8% from the peak two years ago.
Prices were lower in April than they were a year earlier in all 20 of the major metropolitan areas as tracked by the Case-Shiller index."
It frightens me to even think many of us don't understand this. We have created this problem, and ARE the reason behind the collapses.

With this said, all is not as it appears. The market moved up well to a theoretical Dow top of 11,964 yesterday, allowing traders as much as 5.00 per contract profits on the July600C. Whipsaw traders were also able to profit 1.00 to 2.00 per contract on the reversing July580P.

Whipsaw often occurs around the FOMC. If the market can find any footing today, we continue to see a whipsaw upside. As the market closed historically at 11,800 earlier this year bulls will remember a 400 point plus upswing move. We believe that this could occur again.

The good news is that lows are now lower than prior lows. The market narrowly missed a move above 12,000. Puts may have another run, but the bulls are trying, and will soon trick the market.

Wednesday, June 25, 2008

This is Not a Healthy Market

The Dow hit tops of 11,944, and bottoms of 11,685 in one day. Whipsaw, as we suggested, began.

Our open put was profitable in morning trading to highs of 9.00. For traders that held the July600C we hit 13.70 on good day trading. The market had just enough hesitancy to allow traders a bit of "perhaps it's over".

This is NOT a healthy market, as we know, but a bottom may have been reached from our March lows. Data, FOMC and oil will and can trigger whipsaw.

A few comments from subscribers:


"Floyd...I don't fully understand how you pick these support and resistance lines on the DOW but it absolutely amazes me. Seriously, how do you come out this morning and tell us to sell puts at 11,740 and then buy calls...only to see the DOW act EXACTLY as you predict. How do you do this!!!! Seriously, is this intuitive stuff or are you calculating something over there?


I had to take my daughter to the store and I couldn't watch the market from about 9:50-10:30.

I owned 2 puts at 7.50 from yesterday. I originally placed an order to sell at 9.80 (which was your original top sell target). As the DOW dropped this morning, at about 9:45 - The DOW was hanging around 11,760 and the price of my puts were still in the low to mid 8 dollar range. I had to leave and figured that if the DOW did drop it would only go another 30-50 pts. (according to your predictions) and that 9.80 was probably too expensive of a price. By studying prices and support levels, I decided that 9.00 would be a more realistic sell price so I changed my order to 9.00. I also watched the 600 call option and noticed that it was valued at the low 10 dollar range. Again, looking at the distance the DOW was "supposed" to travel, I estimated that 9.20 was a good buy price for the 600 call. I placed an order for 2 calls at 9.20.

When I returned home at 10:30...I had sold my puts for a nice $300 profit and was already up $100 on the calls!!!

I checked the prices on the day and discovered that I was filled on both positions (which at the time) was the near best price of the day!! It does not get much better than this Floyd!! "

"Now I understand that I cannot expect this to happen everyday...but the point is that, WITH YOUR HELP, I am learning to think like a trader and make "smart" money management decisions.

I truly appreciate all that you are doing for me and my family."


____

" When you say that a correction to a correction could/will occur, that will depend upon certain "NEWS" coming out and triggering it right ? If the "WRONG" type of news comes out, the market will fall even further, if the "RIGHT" type of news comes out for the market, then there will be euphoria and the market will "upswing" ? I'm just wandering if there is no good news at all in the economy, then will the DOW just keep on dropping without correcting ? If the DOW is "triggered" by data/statistics, etc., isn't this very random and cannot be predicted ? Or do you suggest that there is a cycle to the market which is stronger than data/statistics and this CAN be predicted ? ie cycles are more important than data/statistics."


it's best here to explain that market moves gravitate around support/resistance and tops and bottoms, and "news" leads triggers, depending upon the emotional mood of the market. If the market is already fearful, news will be negative.

If the market wants to be UP, showing an overextended market, news may be ignored.


"I just sold my 600 calls for a 30% profit today. I now see that I could have got more...How do you know when to sell at R1 or S1 OR let them go to R2 or S2? We were stuck at R1 this morning for a little bit and I had 30% profits. Did I make the right decision to sell? I bought my 600 calls this morning at S2 but sold them at R1...should I have waited for R2? (one of your rules is to buy and sell at the R2 and S2 levels).


Anyway...let's stay positive...Do you know that I made $890 this morning and I wasn't even at my computer for more than an hour!!! Unbelievable. And the best part about it is that this market is considered a high risk and difficult market to trade. And here you are showing us how to pull profits daily!! Obviously we are going to lose from time to time...but the key is money management."


This is key. If traders are bleeding from two call losses in recent weeks it shows an over allocation to a trade, and a "betting" methodology. Always, take prudent risk.

Tuesday, June 24, 2008

Oil is Going to Fall

I think oil is going to fall. Hard. It may not happen for some time, but it will. We have successfully created a new bubble. And we don't even follow the bubble we've created. Most of us are upset about the price of gas at the service station, not even understanding where the real cost of gas is affecting the markets. A good part of me believes $100 a barrel could occur and shock our populace, letting us right back to the Ford F150's and Hummers, and forgetting the issues.

Traders yesterday wrote endless with a simple sentiment: "I am frozen like a deer in the headlights waiting". "I can read the charts and more downside could easily occur, what will happen then?" "It's the first time I've lost in months, these past two weeks, and I"m embarrassed by what I've done".

Saudi increased oil production, Bunge (BG) bought CORN, normally enough news to trigger an upside after a fall, but by midday nothing had occurred. Truly a market frozen in fear. What may be good news is that the market did not fall again, but held.

Sorry, but trades are hard in times like these....when the market doesn't move nothing happens. Follow our open signals, noting again a higher risk to the vastly overextended downside.

On the Floyd ranting front, an interesting email from our Christian subscriber quoted several weeks ago that I find quite valuable, as it helps point out that my stock market teaching is around Floyd Facts, just as is my analysis of politics. I do not want any of us to be misled by false facts as this very important election comes up. From MP:

"Hey Floyd,

First of all, I would like to thank you again for bestowing upon me the privilege of becoming a member of Blue Chip Options. My family and I have already been blessed by OEX options and I know that it will only continue through Blue Chips. I am going to demonstrate my gratitude by continuing my in depth study of your materials, recommended books, as well as my daily paper trading (do you recommend 3 months of paper trading with Blue Chips as well?)."

Floyd-always try to paper trade at least 90 days.

Second of all, I want you to know that I recognize your working knowledge of the economy and politics is far superior to mine and I'm really open to learning the "truth." Listen Floyd, I am not tied to any one political party. I am tied to Jesus. If someone else comes along with a better plan to run our country, then I don't care what party they stand for. I want the best person to run this country. The only thing I cannot compromise on is a world view. It's hard for to separate "church and state" like you keep stressing because I don't know how it can be done "safely." Maybe over the course of time, you will be able to show me how.

Floyd-our Constitution was written brilliantly, and intelligently separates religion from politics. I respect all points of view, and all people. I believe a good world order is to allow logical behavior in all, and not force morals or religious points of views on others.

I believe the Bible is the inspired word of God and if a political leader is not using the Bible as a standard for their decisions, then it is very difficult for me to support them. Unfortunately, I admit that because of my naive ignorance, I've been assuming that Republicans have a Biblical World view while Democrats do not. I am learning through you that this is not only an unfair assumption, but it is simply not true. Now if George Bush, or anyone else for that matter, is lying to me and the public in order to get elected, then they are at fault and they will be judged accordingly. At the same time, it is my responsibility to become a good steward and recognize when a political leader is abusing their power and deceiving myself and my family. Therefore, I am listening intently to what you are saying regarding politics and the economy and I trust that you are well informed and giving all of us unbiased information.

Floyd-what is most interesting here is that Republicans and Democrats both most likely have a "Biblical" point of view.

The extreme right or left wing (conservative or liberal) that force their views on others are those that create the FEAR and judgmental behavior.

You are a good man Floyd with a great heart to help people. OEX options and Blue Chips is not just a signal service, or a teaching service for that matter. You practically have a ministry over there because of how much you help people.

I hope you can sense my deep desire to become well informed of our political and economic system. I also hope you realize that I am trying my best to take off my "stained lenses" so I can see what is truly going on.

Real facts are: unemployment is 12%, not 5%. The USD has lost great value, and we must understand why. Our nation has the highest deficit in its history. The war in Iraq has been costly in money, and lives, and scholars don't even agree on why and what we are fighting for.

These are facts.


May you realize how much I appreciate our relationship.

I'm listening to you brother. Thanks for your patience.

I hope you experience many blessings this week,

Thanks Floyd,"

Monday, June 23, 2008

Mrs America

The market dropped to a theoretical Dow bottom at 11,778, well below a longer term moving average, on Friday. That it "held" here may show yet another test of a bottom, and the closure of downside, BUT too much in the world is wrong, and too many variables could allow even more downside.

The July620C was sold at stop loss, our second stop loss in two weeks on calls. The July580P was available as low as 6.40 and sold to 8.90, available only for traders paying above prior day close.

At 11,880 as a low, our projection, if the market is not able to hold near or above this level over the next few days, more downside could easily occur, as institutional traders have now begun their stop loss against moving averages.

Floyd read this last downswing wrong. The 21 day cycle pattern that historically shows swings was broken by an extended downside, just as in January's freefall. I do not want to mislead you. I may be wrong again, just as I warned during our 40 plus position in a row success ratio (that I was not infallible and would be wrong again), and I have trouble seeing now where the bottom could occur.

Statistically everything is just as bad as it was three months ago. Even more is being exposed that is wrong, and oil continues to rise. Soon we'll be drilling offshore off Florida.

Oil prices will affect the world beyond our own beliefs, and we do not yet see it, only worrying about the cost of a gallon of gas for our SUV's. Cars get no better mileage now than they did 8 years ago.

At a company I work with there is an employee that I call "Mrs. America" that you should know:

*She makes 11.00 per hour, or 88.00 per day. 1/3 of her income comes out in taxes and benefits. This means she brings home 59.00 a day. She lives 22 miles from work, and drives a 4 year old Ford Expedition that she still owes money on, and that gets 11 mpg.

44 miles a day at 4.00 per gallon, 11 miles per gallon, or 16.00 a day in gas. Add the cost of the maintenance of the vehicle, and insurance.

Floydian Math: this woman works now for less than $20.00 a day take home pay.

Several months ago I began raising pay to hourly's at this company in advance of what I saw as an economic meltdown, and even with raises in pay we'll soon see hourly works that commute more than 8 miles a day wondering the value of working.

Soon she will figure this out, and quit coming to work.

Who is to blame?

With market conditions in constant whipsaw (one week ago Friday a 165 point move up, and a week later 220 points down, with wild swings in between), with eocnomic data that is shocking in its portrayal of our decline, it would appear that a bear cycle is beginning. And it may be.

If the market is able to hold at 11,650, what I see as an absolute bottom test, euphoria may still reign again.

If Israel bombs Iran, or the Saudi oil summit is not "proof" we will be "taken care of" (occurring this past weekend), who knows what devastation can reign economically.

Study our Dow projections carefully. We were right on all moves until this last bottom, which is too lengthy in time.

Other trading services are recommending market exits. This breeds a bit of optimism on Floyd's part that the market will now turn around:)

"Friday's trading produced the fifth distribution day in 13 sessions for the NASDAQ and our market model issued an 'exit' signal. The weekly chart shows volume above the 50 day average for the last three weeks and also higher than volumes when the index was ascending from mid-March to May. The implication is that the optimism that followed the Bear Sterns bailout has evaporated and investors are now expecting that the financial crisis is not yet over, that the economy will continue to decline as the dollar continues "

Friday, June 20, 2008

Flat Lining

Last week a friend told me that "when the Democrats get elected they will raise the capital gains tax."

This is an example, much like GM now deciding to analyze hybrids and slow the manufacture of SUV's and trucks, of misguided logic.

With GM they approach the barn after it has fallen and analyze how to paint it.

With "the Democrats and taxes" a "fact" is provided that Democrats raise taxes. Is this a true and real fact, and can it be proven?

It can be proven that recent Republican administrations have lowered taxes, but increased spending, thusly creating a large U.S. deficit that helps create a falling USD, thusly increasing prices. Thusly, did they lower taxes, or simply move the taxes to a different burden.

As a "factualist" I am often assumed to be the liberal Democrat. In reality, I am the "factualist." I believe in our constitution.

I do not support church and state, but the separation of church and state, as this is what our constitution defines. I don't care if you are Christian, Muslim, or a Jesuit Frog....I want you out of politics and my government, and you should too.

As a stock trader I analyze false facts to understand what it not understood, or is falsely assumed.

4 months ago Treasury Idiot Paulson, who came from Wall Street, told us " the subprime situation is under control."

Thusly, I knew this to mean, "it will continue, it's a bloodbath, and the false books will catch up with us, but I'm afraid of the market collapsing".

When I hear "Democrats will raise taxes" the factualist says: prove when they have done so in the past?

The following email from David S, an Advanced Mentoring client, helps me with perspective, as I hope it does you:

Hi, Floyd.

First, I wanted to offer words of encouragement for you and to let you know that I am one of your students and subscribers that appreciate you. I can imagine all the crap email you must have received over the past week regarding the "losing trades" from your subscriber base due to the fact that folks for some reason can not take personal responsibility for their own actions. It has nothing to do with any particular trade gone bad but everything to do with lack of self control (in terms of money management or decisiveness to trade any particular trade at all). I would hope that there are not any angry or discontented subscribers but I am sure I am wrong. You are an amazing trader, Floyd. Just know that I am one the ones religiously supporting, following and learning from you as much as possible.

I am still working through my book report on Dorsey along with everything else I have going on. I feel maybe I am way to detailed and need to chill out on it a bit - who knows. Anyhow, I am also writing to be taught by you involving getting my ass bent over last week in the market. I have been doing so well with paper trading and real money account for the last 7 weeks... I was almost astounded by it. I had pretty much doubled my money twice in less than 8 weeks! I was only playing your recommendations and occasionally I would play a high volume, leading IBD breakout stock as well. I was on an awesome winning streak.... Every time I got into a play I would sale at 20% profit or sometimes less if the stock "looked funky" to me (as if I really know what that is). A couple plays I even had 100% returns on overnight (options). When any position went against me I would double up on my option positions at a 33% downturn (like we do on OEX) and sit it out until it came up. The longest I had to wait for the trade to pan out was VLO, a few weeks. Anyhow, I only allocated 20% of my total capital per trade and really thought I was following the rules with position sizing and high flyers, in leading sectors, breaking out on high volume. All was good until a week and a half ago began. This is when the market started to plummet ridiculously. I was in good shape going into the downturn as I was 38% cash (of 47k account) so I had room for second buys on my stocks. Then it happened... One by one each stock starting hitting second buy points (remember I was using options instead of buying the stock). So I bought second buys on everything until 100% of my capital was tied up in long positions on second buys. Then the market continued to decline even more. Some of my positions were down 50-70% even after second buys. I started to panic, Floyd. All I saw from a few days earlier was a nonsensesical watershed market fall that I was sure was going to continue, because it had, and my positions went more into the red. So I came to the conclusion to "stop the bleeding" last Friday when the DOW hit 12070 and then closed near the low of the day. I was afraid it was a bad sign that we were surely going lower so I exited all my positions except one (RIG which I am still in on a first and second buy on July options and down 28% right now), bought $3500 worth of VIX calls, an OEX put, and then that day, my account that started with 25k and went up to 47k, went back down to 25k - right back to where I started. So here I sit pissed off while I am not sure what I did that was "wrong" per say, trying to "figure it out" on my own, but my obvious noobness played a role in this damn thing I am certain. So, I lay it out for you to slap me upside the head for doing wrong if I did, and please, please, please teach me what I should have and shouldn't have done in this scenario... I do not want to make the same error ever again. Where did I mess up? Some of the "things" I am thinking I did wrong, while trying to work through it on my own: Playing long positions in declining market? Panic and fear, it overcame me. Should I have had confidence and if so what perspective could I have had to help me? Was my position sizing right? The options I played were they ok? I took second buys, should we not do this on equities? I do not understand, I do not think, the correct concept of a "falling knife"? I am afraid to play any of the OEX call recommendations with the market declining... this seems to me like we are still trying to catch a falling knife, yet all the OEX call recommendations are all working out profitable. I amazed, honestly, about how you keep your composure about what the market is/will be doing enough to recommend calls. Like you are totally objective to it. Even when there was no clear bias you still gave recommendations that worked out. How can I think or what can I do to help me maintain objectivity, as you, in a market decline like this? Alas... help! I guess is my plea. I need help to put all of this into proper perspective so as to learn from it. Right now I am "gun shy" of the market and don't want to be. It is a choice I can make to not be but I do not want to do it foolishly and make unnecessary mistakes again.

Also, while I am writing the Dorsey book report I am almost done reading Wycoffs book - it is excellent. All my AM has been paid in full so I have no mental obstacles there. My list of stocks I have chosen to follow are listed below. Please let me know what you think. A lot of these are your recommendations. I hope you don't mind me copying you on many of these.


Thank you in advance, Floyd, for your patience and teaching administration.

And from trader MP, who played the June600C Tuesday during the downside move:

"You'd be proud of me. I saw your alert again later on in the day regarding the JUNE call. I also noticed that the Dow was hitting some good support at 12,000..therefore I went ahead and bought two calls for 9.00. I quickly sold them in about 10 minutes for 10.00. The DOW retraced and tested the bottom again at 12,000 so I bought 2 more calls at 9.00...only to sell again 10 minutes later for 10.00. That's 400 BUCKS in a matter of 20 minutes. If you do that every day, you'll be making a nice 80k on the year! AND the risk is pretty low because if we break through the 12,000 support level...you just get out of the trade! It's an easy trade because you know exactly when to exit if it goes against you."


Yesterday the market did what is called "flat lining". First the market fell to a theoretical Dow low of 11,938, very close to the 11,880 bottom we saw as serious test of 3 month lows. Traders reported profits of up to 1.40 per contract on the July580P, enlarging our winning streak.
By midafternoon the market turned to the upside, rising 75 points in short time. Many traders scalped profits on OTM calls, for those that day trade with us.

As gas prices soar past $4.00 a gallon, Congress and the Presidential candidates are hard at work trying to assign blame for the record prices, and suggesting fixes.
For Republicans the answer is simple: we need more energy and the best way to get it is to expand domestic production through new drilling. For Democrats the problem is the energy industry itself, that needs to be brought to heel under new regulations.
For Floydian factualists the answer is obvious: we must move prudently and environmentally in a responsbible way away from oil, both foreign and domestic.

Someone should be punished for what we have done, and they are being: the U.S. citizenry, and the world population.

We are who we elect. We are what we consciously become. Do we need an SUV to drive to get bottled water, and do we NEED bottled water. When we go to war, what are we fighting for, who are we killing, and where does the money come from?
These are factual questions that lead our market.

When mortgages were so easy to get, did we wonder why? Who is to blame?

When we cry about foreigners taking our work away, where do the clothes we buy come from, and who did this? We did, by demanding the lower prices. All is not as it appears.

For example:
June 18 (Bloomberg) -- General Motors Corp. has delayed indefinitely a program to replace its current large pickups and sport-utility vehicles as it reassigns workers to develop more fuel-efficient car models.

Engineers working on the redesigned Chevrolet Tahoe SUV and GMC Sierra pickup for 2012 are being shifted to other projects, GM spokesman Tom Pydensaid today.

``This is hugely significant,'' said Rebecca Lindland, an analyst for Global Insight Inc. in Lexington, Massachusetts. ``This is a clear sign they are re-evaluating everything, because this has been the core of their bottom line for years.''

Thursday, June 19, 2008

The Market Bottomed Yet Again

The market bottomed yet again at 12,050. It did hold by end of day, but we should all be very aware of the current market conditions, and the FEAR in the market.

The 21 day cycle passed today, and the amount of whipsaw is disturbing. The next Dow bottom is at 11,880, and we'll list it in our Dow projections below as a potential stopping point. However, take careful note that if the market is not able to hold at 11,880 we will see institutional traders hitting their locked stopped losses at a moving average, and a very important bottom.

Because of this we will list a put for trade, despite the count cycle now over extended, and the 21 day cycle being broken.

Please take caution in any new put trades. If we're off in our call recommendation it will be our second stop loss in a week, meaning I've broken my pattern of constant successes, something I've been warning traders about for several weeks.

Take prudent risk.

The market flatlining that has occurred earlier this week, and the market is general, has been at a point of "hesitancy" that makes it difficult to profit on such tight ranges. No news is good, the world economy is truly in a shambles, and no one is in charge in this country. Sadly. McCain is ready to off shore drill, of course, as this solves our problem....short term.

Many responses to Floyd's rant on "beer on Sundays" yesterday, from the reasonable that agree we cannot legislate morality, to those that asked me if I believe the Bible to be the word of God. As a good person I know there are many interpretations of the word of God. The point I make in "beer on Sunday" is that it is our lack of understanding of what is really important that fuels our financial discontent.

The rants made are part of what I teach. To understand WHY the market moves we must understand human reason, and lack of.

For example, off shore drilling in the U.S. does not take the oil production from the "ugly Saudis getting rich on us (the nerve of them,hmm?...would we do the same thing?) but instead simply creates production in the U.S., without environmental reason, and DOES NOT ADDRESS the issue of how to move from a fossil fuel. There are still tax credits to buy Hummers.

Subprime mortgage comes to mind. We did not stop this behavior. No guidelines or reason was established.

It is our behavior that has moved the market from 14,100 to 12,000. News affects markets, of course, as a trigger, but events trigger even moreso. We are now a nation struggling between fear of more bad news, and fear of deflation and inflation.

Much of our behavior of the past 8 years of lack of economic controls and understanding of true economic conditions is now affecting us. Of greatest interest, the massive deficit we have incurred under Bush is now not even discussed, as the concern over filling our gas tanks, and price of food, has yet again taken us from the even bigger picture. How do we pay this debt off?

Who truly owns our bonds?

Wednesday, June 18, 2008

You Cannot Legislate Morality

June 14 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson said surging oil costs may postpone a rebound in the American economy, which still faces ``challenges'' from the housing slump and credit crunch.

``The recent increase in oil prices risks prolonging the U.S. economic downturn,'' Paulson said in a statement at the end of a meeting of Group of Eight finance ministers in Osaka, Japan. Still, he said ``we also expect to see a faster pace of U.S. economic growth before the end of the year.''

The price of oil reached an unprecedented $139.12 a barrel on June 6, helping to drive consumer confidence in the world's biggest economy to the lowest level since 1980. The G-8 finance ministers met with rising commodity costs topping their agenda.

Please elect smartly. This man is supposedly a financial wizard. He is our U.S. Treasury Secretary.

A six year old could have made this statement 8 months ago.:)

Last week in Missouri on a Sunday I attempted to buy a six pack of non alcoholic beer before 9 a.m. at the grocery store. Of course, the Christians are in charge here, and no beer purchases were allowed.

Dumbfounded, I asked why, and was told with a straight face "No liquor during Sunday church hours".

At my home in Florida it is okay to carry a concealed weapon (even on Sundays). We have perspective, although it's likely also don't allow liquor purchases before praying.

Just as with abortion, sin, pornography, and prohibition, you cannot legislate morality. When we as a nation learn that not all of our citizens are Christians, or that laws like "no liquor" are a sad waste of our time, we'll improve. It is little things like this that have created the big things that are our issues. We keep trying to make others like us. It is what creates war.

From our traders, some interesting thoughts:

1.

"Floyd,

I have to calm down and take a step back .
Yes . I think this is all about me.

If several last e-mail i sent to you was good news.
This one's different. I had lost lot enough from my growing account . since dow drop 2 weeks ago.

So I take a step back and began to see clearly what i've done.
Problem is I take too much risk ( contract ) as my confidence with you is growing. ,so when the big waves came.. it almost hit me back to the beach.

Thanks god i'm still in the water...

When I read Disciplined Trader ( Mark douglas ) , i'm realized i have to work on the three reasons he stated in his book
- LACK OF SKILLS , -LIMITING BELIEFS, -LACK OF SELF DISCIPLINE

and I still have to learn on the last point (SELF-DISCIPLINE )

That's my opinion... after that I think i will move to the next level ( advanced learning with you ) .

2 last days is giving my confidence back.. thanks Floyd

regards
BK "


2. "Regarding your alert:

I was a bit confused yesterday. You alert stated that "if the futures are up, pay only up to prior day close."

The futures were down before the bell...hence the lower open. Because the market opened lower, I thought I had to buy the 620 call position BELOW the 12.00 price. The lowest the price got yesterday was 12.40. BUT it actually hit that price during the beginning of the trading session (first half hour). Being that we opened lower, I thought it would be too risky to buy that early in the session, therefore, I missed the entry at that price.

I guess the question I have is that when the bias is very low, and when the market opens opposite to your bias, how do you decided when to enter? The market could have just as easily stayed below the pivot all day yesterday and no money would have been made on this position. I continue to have difficulty picking an entry point. Are you consistent with your entry plan or do you just jump in early and have no problem making second buys because you have the capital? I would like to minimize my second buys if I can, or at least maintain an advantageous buying position. Does that make sense? The bottom line is I missed the 12.40 entry position, actually, I did not enter at all because I was not comfortable with the opening. What would you look for yesterday that would have supported a buy at 13.00?"

"Floyd: When the count is as low as it is, yesterday and today, only an experienced trader would take the plunge to buy.
I did. Many others did. Many did not.
Much of this is knowing that the best buy and the top sells that I list are INDICATORS. If following the market well with experience one might have made the first buy, knowing a second buy might be necessary, and yes, it does come from capital available."

When you miss a trade, you miss a trade. This is one of the hardest things to learn. As I say when this happens "so be it".
If I sell too early and miss greater profits, it has taken me years to learn "great, I did make some profits", and not to chastise myself for what I "could have made".

Practice makes perfect:)


3.

"For some reason, I've been thinking that I HAVE to or SHOULD make money every day because the market does make it available. I need to let that stuff go and trade smart so I can protect and slowly build my nest egg. You are helping me to become patient and conservative with my trading. Thanks for the support.
Have a great day today."

Market conditions until 2.15 p.m. yesterday showed true flat lining, or trade range movement. This typically occurs before "something happens". We believe the market may be a cusp of euphoric "turn around" with a potential last burst of negative downside. There is NO bias to the market, with a count that shifts only minutely, and options that are trending only lightly.

Several traders have recently asked about "bid/ask" and how important these are in the market. As a trader I NEVER look at bid/ask, but only look at "last" price, as it is my goal in "selling my bananas" to get WHAT THE market will bear, or to BUY at what the market will allow. Using bid/ask in such a way only shows you the history of what was gotten in price, and what someone wants to get. We only care about WHAT WE WANT, not what is.

Tuesday, June 17, 2008

The Shame of Halliburton

The market moved to our 12,340 top (12,347) after a slight reversal to our 12,220 bottom. This allowed traders entry into either the July620C at 12.40, sales to 14.50, and for those traders still playing the July600C buys as lows as 25.40 with sales to 27.50. The market downturn yesterday morning showed good support, and a normal reaction to the upturn we experienced Friday, especially around again rising oil prices.

We continue to see a potential for a nice tight burst to the upside, and are positioned accordingly.

____

The money that Halliburton profited from being the sole provider, non bid, to Iraq on many "redevelopment" models helped fund the move of this multinational corporation headquarters to Dubai in the U.A.E.

The shame of this should be leading our outrage, not $4.00 per gallon gas, which we well deserve.

The fuel for our gas guzzlers is NOT even a small part of our energy crisis, and we aren't smart enough to know it. The shame.

Arab investors have bought the Chrysler Building. The Italians grabbed the Flatiron Building. A Belgian firm bid for BUD. (We own this issue in Blue Chip Options, now up 25%)

84% of all Republicans, in June 08, in a TecnoMetrica Market Intelligence survey, believe a victory is important in Iraq, and 82% do not believe the war is lost. 57% of all Americans do believe the war is lost.

7 intelligent people, I guess, believe there was no real reason to even go to Iraq, and that a "victory" is and was impossible.

But 86% of Republicans are still hopeful that there will be success in Iraq.

As one of the 7 intelligent people, I guess again, I'll ask: what are we fighting for, what were we fighting for, and is the cost of our children and our deficit worthy of "stablizing" the Middle East?

It is this kind of thinking, coupled with our lack of understanding on oil (Drill Florida for example) that should frighten us most.

Fear of terror, fear of "not having", fear of admitting our failures should frighten us all. Yet again, we lock the barn after the horse is out.

It is important to understand this as I rant, as it is this excess that has caused our market decline. Subprime came from GREED, and no controls. False financial statements from conglomerates came from excess, and no controls. $4.00 gas came from not understanding where oil comes from, that its supply is not endless, and that other countries as they grow and develop will have demands even greater than ours.

In the U.S. the United Auto Workers have the audacity in recession to strike. As you "feel for your neighbors", watch this video and see the future.

http://info.detnews.com/video/index.cfm?id=1189



______



Trader MP just read a great book, and shared a book report we thought might be interesting:


Trading in the Zone by Mark Douglas

" FOCUS POINTS

All beliefs demand expression – in other words, what you believe to be true, whether you are aware of it or not, will manifest itself in your behavior. (Floyd calls this: all things are not as they appear)
Beliefs keep on working regardless of whether or not we are consciously aware of their existence in our mental environment.


In order to change our behavior…we must change our core beliefs.

ELIMINATE THE EMOTIONAL RISK: A successful trader thinks in probabilities. A probabilistic mindset pertaining to trading consists of five fundamental truths:

Anything can happen. Accept the FACT that you DO NOT know what is going to happen next.
You don’t need to know what is going to happen next in order to make money.
There is a random distribution of wins and losses for any given set of variables that define an edge. A losing trade in inevitable. Winning trades are also inevitable, providing you trade with an edge. You DO not have to win every trade to make money. As a matter of fact, depending upon your risk to reward ratio, you don’t even have to win the majority of your trades to make money.
An edge is nothing more than an indication of a higher probability of one thing happening over the next.
Every moment in the market is unique. You cannot KNOW for sure what is going to happen next. You can have hunches or feelings, but do not EXPECT to be right.
These five fundamental truths about the market will keep our expectations in neutral, and allow us to focus our mind in the “now opportunity flow.” Being in the “now opportunity flow” or “The Zone” will eliminate our potential to commit the following errors: Hesitating, jumping the gun, not pre-defining our risk, defining our risk but refusing to take the loss and letting the trade turn into a bigger looser, getting out or a winning trade too soon, not taking profits, letting a winner turn into a loser, moving a stop closer to our entry point, getting stopped out and watching the market trade back in our favor, or trading too large of a position in relationship to our equity.”

From page 121, “Your potential to experience emotional pain comes from the way you define and interpret the information you’re exposed to. When you adopt these five truths, your expectations will always be in line with the psychological realities of the market environment. With the appropriate expectations, you will eliminate your potential to define and interpret market information as either painful or threatening, and you thereby effectively neutralize the emotional risk of trading. The idea is to create a carefree state of mind that completely accepts the fact there are always unknown forces operating in the market.

A consistent winner is one who has a steadily rising equity curve with only minor draw- downs that are the natural consequence of edges that didn’t work. If producing consistent results is your primary goal, then creating a belief “I am a consistently successful trader” is our main objective. If that is truly our core belief…the belief will manifest itself, hence money will be earned from the market."

Monday, June 16, 2008

Both Calls Profitable

From Mike Gibbons:

"Friday's rally after a week which saw distribution on the S&P 500 got us wondering if we hadn't seen this trading pattern before. It is rumored that the PTT ("Plunge Protection Team") likes to rally the markets on Friday after a losing week so as to leave investors optimistic over the weekend to avoid a 'black monday'. To put this theory to the test we looked at the number of times the markets had rallied on Friday after losing from Monday through Thursday since the markets peaked last October. To our surprise, we found no evidence for the theory. Since the beginning of October, the S&P 500 and NASDAQ Composite were both losing ground Monday to Thursday (or Wednesday if a short week) in 17 out of the 30 weeks. However, they rallied on the last day of the week just 4 times in the case of the S&P 500 and 6 times in the case of NASDAQ Composite. Although this doesn't prove that there is no market intervention, it does show that our perceptions have been wrong.

Analysts explained Friday's rally on a rise in retail sales during May and a core inflation rate that was not worse than expected.The supposedly modest increase in the core rate of only 0.2% was thought to minimize the chances that the Fed will raise interest rates later this year. However, there is so much bad news about the economy (gas prices, airline fares, rising food costs, rising unemployment, still falling home prices) that it is unlikely that the Fed will raise rates in the near future anyway despite this week's Bernanke bluff to talk up the dollar. As for the rise in retail sales, that can wholly be explained by inflation enabled by the economic stimulus package which will soon run its course.

The S&P 500 charts shows two successive distribution weeks of well above average market volume. The 'gravestone doji' for the week shows bears and bulls are in near equilibrium and is usually interpreted as signifying uncertainty about the future trend. Our view remains that the trend is still down and that the bottom is not yet in sight."

Both of our open calls (July620 and July 600) were profitable on Friday Risk traders that played the OTM July put were also able to scalp tight profits. This leaves us with one unprofitable trade in the last few weeks. If any traders are crying the blues and have "lost their shirts" because of the losing trade, analyze your risk management. With over 43 profitable trades in a row any trader losing on the one trade and being "overwhelmed by the loss" is not effectively managing money.

The end of day run up Friday showed good volume and MAY be the sign of a turning tide; however, note that the count to the call is only 1, and whipsaw is still very likely on oil.

Friday, June 13, 2008

Yahoo and MS Call it Quits

The June590P was available for tight 1.00 per contract profits in yesterday's trading as the market moved in a classic whipsaw. By midday Thursday the market had moved to Dow tops of 12,309, before news of Steve Jobs with Apple being ill led a classic fear move to the market, and Yahoo and Microsoft called it quits. Yahoo shares fell quickly, despite anyone with a brain knowing that those that created Vista could not manage a company that already messed up their golden opportunity before Google came alive.

The poor market can't get a break. BUD, which traders in Blue Chip Options own, advanced handsomely on news of a buy out, and the Bush Dollar began to rise. All was going good. There was and is so much FEAR in the market, however, that Yahoo, Apple, or almost any trigger can create more FEAR in the market.

We continue to see upside potential to our Dow projections.

From historical perspective:

6/16 – Monday before June Triple Witching, Dow down 6 of last 10 but back-to-back 200+ point gains 2002-2003

6/20 –June Triple Witching, Dow up 3 of last 4

Wednesday, June 11, 2008

Hold Your Buy

Here's a copy of our pre-market commentary first:

"With a 'count' of only 1 to the put bias did not appear to be established in any way yesterday. Futures at 6 a.m., however, show a strong futures bias of -83, a sign of a strong opening downside.

We will not issue a new position with the 'knife falling' to the put; however, Dow projections show potential stops at 12,100 and 12,050

Second buys have been made to our open June630C and no further buys should be made. We'll continue to hold this position for # of days stop loss. Conservative traders only could consider a stop loss on this issue at 40% from averaged costs.

We believe market conditions will shift over the very short term and an upside run will again be established, with Dow stops at 12,470 and 12,540

The call may be our first losing signal in some time, but it's too soon to worry or speculate. Hold your buy, and allow market conditions to sort themselves."

Here's the first email we received from a subscriber:

TP from Oregon:

"Hi Floyd,

Last week was evidence that I am learning some things. I played the 630 call so many times last week that its funny. I was the kinda person that would hold the darn thing all week and wonder how everyone else had so many trades as I watched my position in pain because I did not have a plan. Simply putting in the buy order then, sell order when buy is filled, then put in buy order again for same or lower then last buy and just wait. It was like fishing in a good hole. Just put the bait on and wait.

Anyway I played the call in and out with over 20% each trade three times on Wednesday. I was too tired to trade on Thursday although I looked at chart at the end of the day. Now I have purchased the 650 call at $1.5 and $1.2 and holding over weekend. It feels really scary with the fear the heads are spinning. I also look at P&F charts, and the ranges and see a real re-test of the April lows. This gives me a little peace until Monday that maybe this is the great fear that signals the real bottom. Never the less I have made so much last week and have won so many times now that getting this wrong would almost feel kinda good. I guess it would not hurt to win either. But I bet we don't have a dead cat bounce on Monday.

I have been around long enough with your service to laugh in an affectionate way when a new subscriber say "Your the Man Floyd" in many different variations. Now I am sure that you are a Master in my opinion"


Next, a reversing email from MA:

"After loosing thousands of $$$ on 630C today (as stopped loss at 40%), I'd like to NOW focus on short term day trading as you mentioned earlier by drawing the trend lines and scalping for quick and short profits...
Could you please guide me for this as being a Level 3 client?"


Floyd: The question I asked this trader I would ask any.
1. Why 1000's, and did you win on last trades?
2. Why change focus to "scalping" because you lost at owning something for three days? Why will this be "better"?
3. Are you losing money regularly, or was this the first time?


Next, an email from SD:
"Nice trades on the 630C. Still own on my two buys, and bought and sold for .70 scalp profits three times yesterday simply following your support lines. Easy money"

And lastly, what is happening is simple.
The Dow hit lows of 12,166 yesterday, and highs of 12,409. Time erosion exhausts our options, and the market moves are so slight only tight day trades are possible.

Bernanke has said that the weak USD is lifting inflation, and the rate cuts are over. Richmond, Va. Fed President Lacker just criticized the recent Bush led Fed loan programs as risky and distorting.

This political fodder is important. In our Blue Chip Options (www.bluechipoptions.com) portfolio we recently sold off partials on our hugely profitable TIPS (U.S. inflation treasury bonds), and VIPSX, our Vanguard version of these bonds) to lock in profits as the USD tumbles.

Lehmann Brothers at Blue Chip we owned a great long term put that returned 40 to 60% in a week of holding, all as we knew that Lehmann had false books (all investment bankers do), and it ended the week down 10%. The rumors are that they have sought a Federal loan. Lehmann denies this, so we know it's true. Watch LEH, as this could be a Bear Stearns, and will negatively affect any Dow projections, as any surprise news from LEH could act as a catalyst.

The Dow's drop Friday of 3.1% was worst since Feb 07; of interest, the S & P 500 also fell the exact same 3.1%.

______If you are offended by political rants in any way, do not read below.



And now, in my search for a free Blue Chip option subscriber, here's my first response from a reader on what Bush has done right.

Floyd questions are in bold


"Hey Floyd,

Nice commentary...I love the political stuff...I would agree with just about everything you say when you bash George Bush and his actions/policies (even though I voted for him). He has done some terrible things to our county and economy. That being said, in my opinion, there are still two things going for us:

#1 - Though you don't think this is legit ...we HAVE been living safely for the past eight years. You don't live 60 miles, as I do, from the great late World Trade center and you probably don't personally know individuals who lost their lives or were involved in that tragedy. But Sept. 11th truly hits home for the people in my community. Not having to experience something like that again feels comforting.

Proof this is because of Bush, or PROOF his policies have caused this or simply a parallel?

I find parallels like this disturbing. There is no proof in any way that our privacy invasions, trading of human rights, etc. have been instrumental in any way.

Just last week I went through security at the airport (just for fun) with a letter opener. Went right through, but I had to take my shoes and belt off:)

#2 - And more importantly (in my opinion), George Bush believes in ABSOLUTE TRUTH and supports the Judeo/Christian values that happened to establish this country of ours. Though I admit that Bush, and others like him, have made mistakes, if you honestly think that money hungry people like George Bush with hidden agendas are responsible for the downfall of this country, you have been deceived. Here are some facts that can be attributed to democratic liberalism:

* 48 million LEGAL abortions since Roe vs. Wade - that is 1 OUT OF EVERY 4 pregnancies
* 1.6 MILLION ABORTIONS PER YEAR - THAT IS 3 ABORTIONS PER MINUTE AND 1 EVERY 20 SECONDS!!

Please help me understand what abortion has to do with our Government? And what is ABSOLUTE truth? It's a scary statement for those that are not Christian to read this, isn't it? Is our nation Christian?


Over the last 30 years we have seen the following (Heritage Foundation 1993):

* 560% increase in violent crime
* 400% increase in illegitimate births
* 400% increase in divorce rate
* 300% increase in single-parent homes
* 200% increase in teenage suicides
* 75% drop in SAT scores

Did George Bush help any of these facts? Are these facts true? (Written by whom, who is Heritage Foundation?)

Here's who:

"Founded in 1973, The Heritage Foundation is a research and educational institute - a think tank - whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense." Facts from an organization that promotes any specific values, conservative or liberal, should be suspect.


* We lead the industrialized world in murder, rape and violent crime

George Bush has helped this? Hurt this? Where is the parallel?

* In elementary and secondary education, we are near the bottom in achievement scores (yet liberals spend more on education than most and do all we can to make sure that the Bible and prayer remain out of school)

If a Muslim, Jew, Buddhist or atheist a subscriber might be a bit upset to hear we do not separate Church and State, as outlined in our constitution?

Ask a schoolteacher what they think of "No Child Left Behind" or FCAT score teaching? What does the NEA think? This is what teachers think.

There is a coarseness, callousness, cynicism, banality, and vulgarity signaling the decivilization of our nation. I may not be in support of all of President Bush's military tactics or economic policies, but thank God that he stands for Biblical morals and convictions. With all due respect, I appreciate your commentaries, but I am more concerned with the morality of this nation as opposed to anything else. And yes, I can say most assuredly that I would rather have a conservative John McCain over a very liberal and morally loose Barack Obama. The only PERSON who is going to save this county is God himself. And that is the last thing Senator Obama will allow to happen.

How is Obama morally loose? Where is this information gathered? Although I do not promote Obama, it is a scary and judgmental statement to consider someone "morally loose" because they are, God forbid, "liberal."

By the time Obama's 8 years are up..."In God we Trust" will be off our nation's currency, gay marriages will be legal, full blown pornography will aired on prime time television, and it will probably be illegal to wear a cross...and you think we have problems now? If those are values that you support Floyd, please let us know. My wife and I will add you to our prayer journal

Please read this statement above twice and help me follow how the premise is concluded? Seems as if all "false fear" to me.....I've read nothing like this from Obama. Should we separate church and state? What does religion have to do with politics, and why? In fact, "In God we Trust" was not originally on our nation's currency in part for that very separation. It was not added fully until the 1950s, during much of the McCarthyism scare. Isn't the original, de facto motto that existed long before more apt for our country? "E pluribus unum," Latin meaning, "Out of Many, One."


What you are reading above is PART of why our economy suffers. We do not anticipate or analyze, we use our beliefs as what others might and should believe.

My apologies to the subscriber that wrote the above, but I have yet to follow how gay marriage or abortion, or porno on TV, have one iota of detail to our country's economics, national defense, or government programs.

When I read "Christian" to any political narrative I know in my heart it's simply a sales pitch to those that believe, and it's a sad pitch. We have fair evidence of this from the last 8 years:)

Tuesday, June 10, 2008

400 Point Sell Has Good Lessons

Friday's 400 point sell has good lessons. Any Dow projection model that we have will immediately lose all "count" or numerical perspective when an upturn or downturn takes place of this magnitude.

Friday's downturn accelerated on two issues, both critical to our study of the market:

1. The unemployment rate was unexpectedly high. This false report often trigers movement but fear took over Friday.

2. The USD sold off. The recent rise "things are better" and the dollar being "built up". The USD fell off the jobless rate, it's worst one month rsie in 22 years, while payrolls fell for a fifth straight month. Oil and raw material are priced in dollars worldwide, and they will rise when the dollar falls.

It's our lack of attention to our falling USD that led the almost $11.00 spike per barrel in oil Friday. Traders that truly want to follow NEWS will watch is said or conjectured about the USD most, as this leads the oil game. Oil is fully priced now by traders on the floor, not OPEC.

Pay attention to Israel, ready to form attack on Iran. This event could be a trigger to more downside. Although defense analysts think its unlikely, with Iran so well fortified.



Let's just think out the last 8 years as we analyze the market. It's very important in your analysis of what will happen, and what IS and HAS happened:

1. Unemployment at all time highs. (Came in Friday at 5.5 %; real unemployment, not false govt data, is closer to 12%)

2. Oil at all times highs, with a dwindling supply and growing demand (Speculators in control of pricing at this point. Conservatives now screaming "let's drill Alaska")

3. Environmentally at frightening conditions both domestically, and internationally. (Did not promote Kyoto Treaty 8 years ago, and consistently has downgraded environmental concerns)

4. Hated or laughed at by much of the world. Perhaps the USA not even seen as the superpower we were.

5. 100's of billions of debt for the Iraqi war, DEBT created to either find WMD (never were there), or later (my personal favorite), to bring "democracy" to a country that does NOT have the word in its vocabulary (our arrogance astounds even my cycnical self)

6. Personal rights of our citizenry taken away in the name of "security" (I take my shoes off in airport security lines; Defense Dept finds 152 billion Friday in false billings and waste in Iraq spending)

7. Afghanistan in shambles

8. The dollar at all time lows (Tax cuts and rebates now pay for a few tanks of Gas)

9. The stock market so flat that profits have eroded, and a real estate market that has been destroyed because of corporate greed, and LACK of Fed oversight. Bubbles Greenpan even promoted "creative financing" during the Emperor's reign.

10. Human rights of prisoners (Cuba and Iraq) a tragedy.

11. Promoting ethanol as an alternative (lobbyist led) when a small child would know this will raise food prices.

12. Incentivizing the purchase of Hummers (farm vehicles) while lowering tax credits for Hybrids. Lobbyists and oil buddies of the Bush empire? Oil has hit all time highs.

My soapbox pitch is to help us understand that we are in dire straits, and the stock market is and will be affected by this disaster.

My soapbox pitch is to also show us that the devastating unemployment report is actually MUCH worse when REAL DATA (not Bush led facts) is extrapolated, and economic analysts that track this see REAL unemployment at closer to 12-13.5%. It IS relevant to count all unemployed, not the government game, as the unemployed EFFECT and AFFECT the economy.

Do we need more experience in the White House (McCain logic), or perhaps is the "experience" just more of the same old crap we've listened to and watched occur? Is it intelligent to say "I will NEVER surrender in Iraq", or "Bomb, bomb, bomb Iran", and do we want this type of thinker leading us? Certainly a great war hero, and I'm sure a good man, is McCain truly someone that can FIX the above issues, and more importantly, UNITE a very confused people?

_______

As the market moved yesterday here's what was possible:

1. The June 590P moved right with us to a good best buy start as the market moved up, and was available as low as 1.90, selling to 3.30, for another profitable trade.

2. Second buys were made on the June630C, now our hedge position, and we have now moved stop loss to this Friday.


Traders will teach us best today, a few of their comments:

*"Hey Floyd,


It's kind of discouraging that the market can move almost 100 pts. and there not be much change in the value of our options. Is that because of the decrease in time value? What are the chances of us breaking even on those calls?

FEAR fills this trader's commentary. It's so early to even know, why worry?

I'm not writing to you to complain. I am writing because I am studying the manual for a second time and I've been really reading through your testimony...especially the part on page 9 concerning your emotions. You wrote that you "actually had patterns and rituals for failure." What was going on there?

It is obvious that you have a proven system, a simple set of rules that you now follow that allow you to be successful. That being said, I have found that over this short period of time. I have resisted your instructions only to find myself losing...like that would be a surprise.

This occurs when a trader begins thinking he/she understands, and tries to "break rules" to profit.

I could have easily sold my profits last Thursday, as well as not purchase any 650 call positions on Friday (which is what you recommended), and everything would be fine right now. It is one thing to lose a trade because the market just turns on you, even though you followed the system etc. It's quite another to lose because of impulsive or emotional behavior. What are thoughts behind why we self-sabotage. I have a feeling that I am subconsciously choosing to screw things up. How do you stop that?
This takes self analysis. Write a journal to yourself on the trade and why and what happens. Email with me regularly.

Michael

PS - Did you play any puts today? I'm scared to

Here's an example of that fear. Buying the puts would have put $1.00 or more per contract to his bottom line.
This trader began "wanting something".


*"Hi Floyd,


Last week was evidence that I am learning some things. I played the 630 call so many times last week that its funny. I was the kinda person that would hold the darn thing all week and wonder how everyone else had so many trades as I watched my position in pain because I did not have a plan. Simply putting in the buy order then, sell order when buy is filled, then put in buy order again for same or lower then last buy and just wait. It was like fishing in a good hole. Just put the bait on and wait.

Anyway I played the call in and out with over 20% each trade three times on Wednesday. I was too tired to trade on Thursday although I looked at chart at the end of the day. Now I have purchased the 650 call at $1.5 and $1.2 and holding over weekend. It feels really scary with the fear the heads are spinning. I also look at P&F charts, and the ranges and see a real re-test of the April lows. This gives me a little peace until Monday that maybe this is the great fear that signals the real bottom. Never the less I have made so much last week and have won so many times now that getting this wrong would almost feel kinda good. I guess it would not hurt to win either. But I bet we don't have a dead cat bounce on Monday.

I have been around long enough with your service to laugh in an affectionate way when a new subscriber say "Your the Man Floyd" in many different variations. Now I am sure that you are a Master in my opinion."


_____

*"Floyd, nice play on the OEBRR put on Monday. Made some nice 1.00 per contracts, and made my second buy on the call. Fun to watch the analysts."

_____

*


Hi Floyd,

1. Your original prediction was that the market was going to have an "upswing" reaching 12,800 then onto 13,000, after what happened on Friday where it dropped to 12,214 is it possible that it might reach as low as 12,000 where it will reach the next support level ? If it does reach this level, do you predict that there will be very, very, very, very STRONG support at this 12,000 level ?

This is over analysis. It could do this, and it could do an upswing. We have to first establish BIAS. 0000's are a very "magic" number that hesitates a market.

2. I read awhile ago that you predict the US economy will start to improve in October 2008, is this correct(from memory) or have your thoughts changed since then ? Do you predict that the markets will maintain their bull momentum which started in March until October or do you think it might falter ? As in the point & figure graph there was a double bottom signal last week that you showed me in your charts ?

My commentary was "typically recessions last 12 to 18 months historically. I believe we entered a recession over a year ago (Bush disagrees), and that we will be out of recession in advance of the November election.
I also believe oil will drop or maintain semblances of control at some point. The world's economy runs on oil, and we are now hitting a point that all nations will begin "watching".
When oil lowers, America will go right back to the SUV life and miss the boat again.
Anyone remember Carter, when the speed limit went to 55mph?

Did you know that cars are a small part of the use of oil, so our "obsession" at 4.00 per gallon is quite inappropriate to what the rising cost of oil really costs us.

Monday, June 9, 2008

A True Sell Off

Unemployment data was out early and futures dropped over 60 points prior to opening on Friday. Bloomberg news url link on our alert indicated rising oil (up $10.00 in one day), and lowered futures. Noting the "split bias" to put and call I would hope that most traders did not even take entry to the June650C on Friday morning.

What occurred Friday is a true sell off, with a 400 point drop after a 250 point rise the prior day.

If traders did take entry to the June650C it's likely it's our first loss in some time. Midday we issued a higher risk (40% noted) buy to the June630C, and one or two buys were made. Friday's sell off was a clear sign that false optimism may not be tolerated.

The USD declined, oil is priced in USD, and couple this with the horrible unemployment reports....if we were using our Alert before market opening you could see...the knife was already falling.

With this said, what we saw Friday in the early sell off shows the risk to this market. Nothing can seem to keep the market up more than a few days. Many subscribers wrote Friday, wondering how to buy on the downturn. I'll answer one key question best:

I personally do not try to catch a falling knife. There are times this works, or times that "breaking the rules" and following intuition can result in profits. Statistically one will do better always following a system that following the market lead.

Midday we issued a higher risk trade again to the June630C, which was promptly available at an average cost on first buy of 7.00. This is an example of a high risk contrarian trade that we'll now hold as our hedge as we walk the market open this week, and what happens after the kind of drop that we saw Friday.

Any market that can move 250++ points up in one day, and 340++ points down the following day shows an economy that is very very sick. And it's not just oil and real estate. It's much more pervasive.

From our subcribers:


"I just want to tell you something Floyd...I really appreciate you and the people working with you.

You guys are seriously changing my life...and it's not just financially.
I am learning so much about myself and just writing to you is therapeutic.
Thank you for listening.
Michael"

"Floyd, THANK you for telling me to ALWAYS sell for profits when you can get them on Thursday and to NOT BE GREEDY.

I sold my calls and made 17k. If I had held them just one more day my losses would have been staggering. You saved me so much money."-JW

Friday, June 6, 2008

What Do I Do

It is very important that traders LEARN from our most recent experience.

1. We were profitable on the puts safely. We made money consistently.

2. We recommended a call around our Dow projections and sold them profitably 4 days after our first buy, right to our rules.

During this period I heard so many times from subscribers that I'm almost tired:)

Here are the core issues I heard:

*All the market news points to more downturn. You are far off in what you saying and I am going to lose money on the position.

*I have bought too much inventory on this issue. What do I do?

*I sold the calls but want to make more money? Should I have waited for more?

Sigh. Sigh. Sigh.

I will repeat again, ad nauseum:

-Analysts are idiots. They are the Lehmanns or Bear Stearns that are bankrupt, or loans being called, or they are kids reading financial reports.

-The market moves in cycles. It is irrelevant what the news is, only that the news or "facts" are triggers to the market.

-All rules are there for a reason. Make a buy, make a larger second buy, and follow support and resistance lines.

With this said, more upside is likely, around economic data and perhaps in whipsaw. We've profited yet again, and I will say it again: I told you so.

Please learn from this experience. You are paying me to teach to you to trade, not to just give you signals. I hope I'm helping:




"Hey Floyd,

Bought Jun630c @ $12.80. Yesterday Second buy at $7.70 and sold all this morning @ $12.50. Don't know if I read (reread) this in your manual or one of your recent Alerts..that is 2nd buys should be 2 times the contracts as 1st buy. Made a big difference with this trade! Till this trade, my 2nd buys were same number of contracts at lower price!

Thanks again for all your guidance."


______



"Floyd,


These last two trades of yours have been absolutely phenomenal on my end. Had to take the time out to thank you and explain.

First buy: $12.00
Second buy: $8.00

Yesterday - Sold partials at 9.90. Market dropped back down to 8.00 range. Bought at 8.00 and sold at 9.00. Bought again at 7.90 and sold at 8.90. Bought once again at 7.70 and sold at 8.60. ALL WITHIN 90 minutes towards the end of the day. Held core inventory at close.

This morning - Sold all remaining inventory at 9.90, 10.40, 10.90, 11.40, 11.90, 12.40, and 12.90.

Now, Floyd, that was a fun ride. Thanks!!!"

_______

"You da man, Floyd.

I'm heading out to the golf course with another 30k in the account. Only have small inventory in top sells.

Cheers!!!!"

_______

Hi Floyd,

1. Just curious the bollinger chart has alot of Xs and Os which are outside the bollinger bands from mid January to mid March and when the bollinger bands "squeeze" and narrow around mid February there are no Xs and Os at all when the "squeeze" happens. Why is this so ? and most alarming of all why are there huge differences in the outer and lower bollinger bands where the Xs and Os cross outside these ?

Floyd-Pay no attention to too much charting. Use Bollingers to know the tops and bottoms of support and resistance

2. The moving average in the middle of the bollinger bands seems to track the trending very well, where it predicted a short downtrend from January to April, it has passed the moving day average on the upside now with a double top signal there also. However, it has been slow to pick the start of the uptrend which started in March. However, at the end of March the PnF charts show what looks like a catapult to the upside. Now the Os currently show a double bottom signal where the uptrend trend has been broken, however, it has not passed below the moving average. Can you please explain how you interpret this chart in your trading ?
Floyd-Over analysis of charts, again. We only care about the shorter term Dow or OEX projections.

3. Can you please show a OEX projection with the moving average and bollinger bands which show where the next top and bottom are ? Or does this chart show this ? The next top at 660 and next bottom at 590 ? Can you please interpret the bollinger bands especially in these charts in your trading, the moving average is easy to interpret, but I'm confused with the bollinger chart with Xs and Os going outside the outer bands.
Floyd-We are preparing an analysis of our Dow Projections to share with our Level 3 and Advanced Mentoring clients shortly, but please understand that Dow projections are a long term learned skill. LEARN TO TRADE OPTIONS FIRST.
_______
"Floyd, ytd I have made over 100k using your service. You've held my hands so many times I'm amazed you're not tired.
Advanced Mentoring was the best thing I have ever done for myself, and what you have taught me is worth far more than the financial rewards. It's a part of my inner self you've helped me explore, why I chose to be GREEDY, or to fail (subconscious self sabotage). I have learned more in how to trade the market, and how to understand me, and I'm truly grateful. I was afraid of the cost at first, and now...I"m ready to be a subscriber for life"

____


Hillary Rodham Clinton concedes today. This is an historical moment, as it may consolidate the Democratic Party, and more importantly, it may LEAD the market up as our citizenry looks for closure.
Of great interest, I made an offer recently to subscribers to find 5 good things that our Republican Administration has accomplished in 8 years.
My offer was a year of our Blue Chip Option subscription service. My rules were simple. They had to be accomplishments that our subscribers would support.
Of true interest is that we've had NO responses:)

I repeat again: I'm not promoting a Democratic candidate. I am promoting FACTS, not fear and innuendo and false Patriotism around buddy playing and lack of economic understanding.
(I figure I can lecture while we make you money:)) Please do not ELECT on heroism or "we will not surrender in Iraq."
This is not a football game.

Thursday, June 5, 2008

FEAR and GREED

Historically in the past five years there have only been THREE times that there have been five downward signals in a row. Of those three previous times, the fifth signal hit the exact bottom twice; and the other time it missed the bottom by only one day and 79 Dow points. Also of note is that there has never been a case of six down signals in a row in the last five years. This all indicates that the bottom should be either behind us now, or very close to it.

Calls opened strong yesterday and moved to a high of 10.40. And then...came Bernanke. We believe that Bernanke is now starting to distance himself from Emperor Bush and the boys, and as the election comes, is admitting a few things:

1. There is inflation.

2. The USD is in the toliet.

3. We are in a recession and perhaps the interest rate bail out and tax refunds are not helping.

This helped the market shift gears, and during the day we saw shifts from a 12,536 top (note our 12,540 projections) to a re-test of the bottom, with a move to 12,298. With this the market began rebound.

The June660P was available for a $1.00 per contract, a perfect straddle move to a market very very confused and tired.

I continue to see upside. We are bottom testing repeatedly, and there will be a trigger that will start the action.

We had many emails yesterday from subscribers that are best summarized by this one from LS, Indianapolis:

"Floyd, I didn't listen. You warned us that we had too many signals "right" and that you were fallible. I made great money on all your trades for the last three weeks, and have pocketed 39k. I bought the call and now hold a large position, and as you said to me" too large", and I have become FEAR driven.

Then today I saw the market go up and go right to your first Dow projection at 12,540 and I had bought the put during that time and profited a quick 2k on that. I've learned that the market is driven by FEAR and GREED, just as it is with me, just like you said. I bought too much on the call, and GREEDY, became worried when I didn't have a profit in a day.

Thanks for writing me all day today"

Tuesday, June 3, 2008

2 Things Push the Market Lower

Two things continued to push the market lower, and were "triggers" to a downside move to 12,302, before a rebound to 12,442.

1. Bernanke expressed concerns about the USD. This alone should make you smile. Finally, the concerns become evident.

2. Lehmann Brothers showed their financial fraud of numbers, and hit the skids. For traders with our Blue Chip Option service, we owned puts on Lehmann, bought at 7.00 10 days ago, and sold to 13.35 in trading on Tuesday.

Many traders are worried as we have an open call that has lost value. This is the concern I had over the past two months as I've had a success ratio beyond normal, and that traders would begin to think that trading options was easy.

With this said, we believe the market has tipped to the bottom too far, and will rebound, and although we missed puts in yesterday's trading, we were profitable many times in a row, and still could be with the open call signal we have. All is not as it appears.

We will not recommend a put for opening today, as the market "count" is now 7 to the put, far too extreme for anything but a risk play.

Monday, June 2, 2008

The Bush Challenge

Friday the market moved to a Dow top of 12, 730, and bottom of 12,577. The market continues to show signs of a "fight" to the 12,800 area. We continue to see a downside potential move to 12,540, a strong repeating support line, and a stronger upside to follow to as high as 12,950 to 13,050.

Risk traders playing the June640C Friday would have sold out on stop loss for a 1.00 per contract stop loss, and we continue to hold a first buy position to the June630P.

Floyd is flying today, and will NOT be answering emails during the trading day, but this is good. Right now we are simply in a buy and wait mode, as the market must stabilize beyond a trading range in order to again show the 200 point Dow moves that make us the most money.

The rally we saw last week was actually quite lackluster. The first trading day of the month typically has an upside bias, so we may see the market high today or tomorrow. Of interest, the Nasdaq had held above its 200 day moving average, but as volume decreases, we may be reaching a bearish top, and the Nasdaq on a trigger could be the lead to the sell off

Presidential candidate John McCain, who appears Bush's younger brother, recently said: "I will NEVER surrender in Iraq. Let me repeat that. I will NEVER surrender in Iraq."

Seems to be an old war hero with testerone issues. I call people like this, and Bush a good example, DEADLY right. Remember, as you vote, do you want "experience" or even the possibility of change? What has "experience" recently given us?:)

To any Republican subscriber that can successfully prove to me five real things that Bush has done in 8 years that are GOOD, I'll provide a year of Blue Chip Option service, and I'll publish your work. There's a challenge. The only rule: these must be REAL five things that can be agreed upon. Saving us from another terror attack, one I hear constantly, does not qualify as "real":)