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:)

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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

A Cup of Coffee

Before we discuss the whipsaw that allowed profit 4 of 5 days in our OEX trading, and before we discuss the disruptions of Middle East due to social networking, or the horrors that have hit Japan, let’s gain perspective about our government. This article helps explain how we utilize firearms illegally to gain footholds, and the mighty Greed that is rampant:

http://www.rollingstone.com/politics/news/the-stoner-arms-dealers-20110316?page=6

When we discuss world events we need clear perspectives on the environment.

We all know the GOP and PEE Party idiots who say “drill baby drill” and that there is no world catastrophe environmentally, and those of us with vision know these views to be funded by the oligarchs that make us want to believe nothing is wrong. So, an empirical fact:

A Cup Of Coffee

It takes 37 gallons of water to make a cup of coffee.

Many of our citizenry want to cut government spending and waste. Most of these poor folks have no idea what “little things we cut” (like education, or our new distaste that it is unions that have caused all the problems, so here’s an infrastructural question:

“Nearly 30% of nuclear plants in the U.S. fail to report equipment flaws that could pose safety risks, the NRC said.”

Of great interest: last week I challenged readers to provide me with an empirical fact. I must be making progress in my teachings of “most facts are false”, as I did not receive one comment on an empirical fact. I challenge you again to produce an empirical fact and let me share it with our readers.

“Floyd, 25% of Detroit is gone because of what unions did to raise the cost of the American car.

The real fact: American carmakers refused to trend to the future, kept making big, fat cars, invested poorly, have now taken most pension pools away, and only recently have begun making cars of quality.

I know that until 2009 the vast majority of American cars were just shit. I rented them every week, and would come home to my foreign cars and just shake my head. We just made shitty cars and did it to ourselves

Trader JS and I have been studying the true value of the USD, and the true price of Gold/Silver. The results are frightening:

This chart I found tonight confirms my Gold/Silver/Greenback theory. If you take the $50.00 dollar (face value) 1oz. gold Eagle in my formula and divide it by $7,500 you get a completely worthless Greenback. (.006)

Based on today’s Gold/Silver ratio, which is approx. 38, that would put silver at approx. $200 per oz. if gold were $7500. If you take the $1.00 (face value) 1oz silver Eagle and divide it by $200 you get a worthless Greenback again (.005)

That chart assumes we have the gold in Ft. Knox to back the dollar. Ron Paul has been trying unsuccessfully to get legislation passed to audit the gold, which has not been done since 1974, coincidently one year after we went off the gold standard. Paul thinks that we don’t have a fraction of what is claimed. Neither do I.

Money is a Construed Value Commodity

Japan and the deficit.

What will happen to all the talk of deficit and budget cuts when we as a country fund Japan, to whom we are the largest debtors with Treasuries. All of the talk, all of "Obama from Kenya, a socialist, or a Muslin", and the breaking of unions is all to rip apart government and stop the waste.

Pee partiers sleeping on their couches in the House and Senate, the reform of America.... hmmm, the devastation is overwhelming and our repayment of debt by giving them money, and this deficit will soon have to be Cheney's famous "deficits don't matter) have to be true. Cheney was right, if the economy grew and equities gained value. It's pure Keynesian thinking and to a large part it's become reality that will be, a perpetual house of cards

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Money must be understood. It is a “construed value” commodity, only

worth the value that we put on it.

Most Americans never understand this. All third world countries do.

The Gold/Silver/Greenback Ratio- A Floydian Point of View

The US Government is trying to tell us that the US Dollar("greenback") is only worth between .028 cents & .035 cents adjusted for true inflation. Take three instruments of US legal tender, 1) a one dollar bill.("greenback") 2) a 1oz. silver Eagle(face value $1.00) and 3) a 1oz. gold Eagle(face value $50).

All three are legal tender in the US. All are recognized, backed and printed or minted by the US government and backed by the US Federal Reserve for ONLY their face value.

If you want to buy a $1.00 "greenback" from the Fed, it will cost you $1.00 or 100 pennies.

If you want to buy a $1.00 1oz. silver Eagle from the Fed, it will cost you 35 "greenbacks".

If you want to buy a $50.00 1oz. gold Eagle from the Fed, it will cost you 1,400 "greenbacks".

$1.00 silver Eagle divided by 35 greenbacks = $.02857142

$50.00 gold Eagle divided by 1,400 greenbacks = $.0357142

It will tell you what your greenback is worth adjusted for TRUE inflation since we went off the gold standard in 1973.

OEX Options Won Again

WE won again. For the fourth year we were listed as one of the top 5 option advisory services READERS Choice Award for 2011.

We competed with thinkorswim.com, tradestation.com and optionetics.

Huge companies.

And little old OEX Options won again!

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Study the economic calendar for the week every day before market opening:

http://www.bloomberg.com/markets/economic-calendar/

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Today in our Blue Chip Alert we are recommending a great new stock issue, internationally based. Consider a full subscription at: www.bluechipoptions.com

“Money will always flow towards opportunity and there is an abundance of that in America. Our best days lie ahead”

Warren Buffet, commenting on his plans to make major capital investments in the U.S.

“Americans are not paying off debt so much as banks are forgiving it; banks do so as they know their lies have been exposed. Much of our debt will be paid off by the banks, now caught in their own money laundering game.”

Warren Buffet

“The liberals in this country have bankrupted us and we are headed to economic calamity”

Rush Limbaugh, the idiot half of Amerika actually believe

And I must climb on the soapbox. Obviously our youthful country, many citizens who have never even left the state they live in, are again being influenced, just as the stock market by:

1. False facts. “82% of the deficit has occurred since Obama took office”, from Murdoch’s Fox News. The fact is the reverse; 18% of the deficit has occurred since Obama took office.

2. Irrational thinking: There is no doubt that America will rise to the effort to provide monetary and humanitarian aid to our largest ally, Japan. Not a thought will be mentioned of the billions that will be added to our deficit.

3. At the same time we will take away union bargaining rights in many states, cut public services, not fix our infrastructure. None of it will work and our core services will suffer. The deficit we’ve created will continue to blossom:

a. Libertarians will say free enterprise will solve this. Business owners such as myself argue there is no such thing as free enterprise.

b. Republicans, led by Rove and Limbaugh and the like, will infiltrate us with TV newsbytes blaming liberals for raising the deficit.

c. Sarah Palin, with an IQ of 98, but great looking legs and new tits, has a 20% chance of becoming our next President.

d. The “liberal free press” is secretly (obviously as no one seems to know it) owned by archconservatives R. Murdoch and a conglomeration of right-wingers, neocons that have created Comcast. There really is no “liberal newspaper or TV", except for a few low circulation or high brow intellectual magazines. There is no liberal free press. We have falsified our own facts.

4. In the coming days the market will be tougher to navigate. It will make the decision whether to break apart of this consolidation, or break down and get a good correction. If a good correction occurs the talking heads will begin babbling “economic breakdown”, “ false economy bolstered hopes”, and these are the same people that over the last few months bolstered the market up. Thusly, they are not incorrect perhaps in their statements, but they are liars.

5. Only when we see there is “no black and white” and that “white does not always have to win” will we begin as people to understand our souls, and what we have done to our earth and ourselves.

The 120-Year Cycle

"To me, the "tape: is the final arbiter of any investment decision. I have a cardinal rule. Never fight the tape"-Martin Zweig

1990 was a very volatile year, with wide price swings. 1990 + a Fibonacci 21 years = 2011. This Fibonacci time count, as well as the peak of the 6-year cycle that is due soon, suggest that 2011 will be a volatile year. The political upheaval in the Middle East has been blamed as a fundamental reason for the volatility in oil, gold, and stocks. Is it oil or just Fibonacci time counts and natural cycles? Subscribers who remember my discussion of the 120-year cycle in past letters should not be too surprised at the events in both the Middle East and in state capitol buildings around the country. As you may recall, the 120-year cycle is both a revolution cycle and a depression and renewal cycle. When the cycle turned in the late 1700's, it created both an economic depression and the American and French Revolutions. Most people are unaware that the economic depression of the early 1780's almost destroyed the new American Republic. And what of France? It was an economic depression that resulted in the overthrow of King Louis XVI and Queen Marie Antoinette.

One hundred and twenty years later, an economic depression nearly bankrupted the United States Treasury in 1896. The stock market crash of 1893-94 resulted in a depression that caused riots in the major American cities. And both Cuba and the Philippines revolted against Spanish colonialism, culminating in the Spanish-American War of 1898. Today, we are seeing tremendous political upheaval in the Middle East. Amazingly, the American media is not telling people that the Middle East upheaval is primarily a result of poor economic conditions. Central bank easy-money policies have caused rampant food inflation in third-world countries. In addition, jobs are scarce and rents are exorbitant.

Now, in the early 21st century, we are not immune to the cycles of the universe. The 120-year cycle is alive and well -- and it is beginning to exert enormous pressure on political and economic conditions. What we are witnessing in the Middle East -- and around the United States -- is only the beginning of historic melodrama that will outlive us all in the pages of history.

"Whatever method you use to pick stocks...your ultimate success or failure will depend on your ability to ignore the worries of the world long enough to allow your investments to succeed. It isn't the head but the stomach that determines the fate of the stock picker"-Peter Lynch

The facts are unimportant. It’s what they are perceived to be that determines the course of events.

Most empirical facts cannot even be proven.

This is the Floydian Rule: A rock is not hard.

Higher Growth Could Mean Our Debt Worries are for Nothing by Stephen Gandel

http://www.time.com/time/magazine/article/0,9171,2055183,00.html

Gold and Silver:

1. We believe Gold is ready for a breakdown, short term, and remains near or at its high. We are completely out of Gold for the short term.

2. Silver hit our high of 34.50. If it closes below 33.50 we see silver also breaking down, for the short term

Our traders exited Gold at 1386 to 14.10, and should have exited Silver at 34.50. Our Silver long term leap was sold for up to 65% profits, two week hold

We will not, and have not gone short in the market. Any breakdown, and one could occur this week, we believe to be short term, and if the market hits 11,740 in downturn we would ADD to any existing long-term core position

Oil we believe could top at 107, perhaps this week.

Historically our recent upside has lasted over 205 days, one of the longest on record.