Saturday, January 12, 2008



There is a very strong correlation to the Airline Index based upon the 2 charts below.

This first chart is the Model and the second chart is the current index.

Currently the present market is about 2/3 the way through this pattern and has just finished the one large up day that broke through the Moving Averages.

This will give you some kind of idea as to where we currently are in the pattern and what to possibly expect in the future. If the pattern continues to hold true as well as it has been doing, then we can expect the airline index to rally another 10%-12% before running into any real trouble.

The best way to play this pattern is through options and not on the index either as they tend to be very thinly traded. Your best course of action is to look at all of the stocks that make up the index and then buy calls on the strongest of the bunch. You want to make sure that there is liquidity in the options and check their true value with the free option value calculator at
I would also keep my stop loss very close to your execution price as the trade should prove or disprove if it is going to be legitimate in short order. The index should continue to rally sharply starting Monday. If it does not follow this path then we know something is wrong and exit our positions accordingly.

Friday, January 11, 2008


We added to our equity exposure with the weakness on Friday.

Currently we are 40% allocated to equities, which is still a very cautious allocation, but one we feel comfortable with.

These allocation numbers will accelerate once we get the almighty three line break sentiment chart to turn up and I anticipate this to occur early next week.

Below you will find charts of the stocks that have been added to the portfolio.

Typically stocks in this portfolio are held anywhere from 2 weeks to 3 months, depending on the behavior of the stock and also the general outlook for equity prices on the whole.

These picks are not as aggressive as the 20% in 7 days stocks, but they are still classified as higher risk stocks.

New Additions To The 20% In & Days Portfolio

We added 4 stocks to the 20% in 7 Days Portfolio today.

Remember, this is the most aggressive portfolio we have but it offers some great returns.

Take a look near the bottom of the blog and check out how it has done.

The important thing to remember is that these stocks are high risk, but we lower the risk substantially by only looking for a quick spike, ideally in 7 days or less.


PPDI - Tighten Up Your Trailing Stop

I have moved my trailing stop up to 47 1/4 to lock in over 10% on this breakout.

The stock continues to have potential all the way up to $52 and it would be prudent to continue to move your stop up if the stock continues to rally.

The call options are the same story.
Move the stop up to 4 1/4 which represents a 75% R.O.I. and if the stock continues higher then move your stop up with it.

WEEKLY Equity Market Comment - Week Ending 1/11/08

This week was a very interesting week to say the least, but really from a technical point of view it was a very bullish week.

I have seen this market pattern over and over and over and probably about 85-90% of the time it arrives just before a major bottom is put into place.

This week I was very hard pressed to only post the following commentary and charts as there were some extensive points of interest.

So without further fanfare here is the weekend comments.


Volatility is going to give us a very strong clue as to the next major turn in the market.

For the long term viability of the bull market we do not want to see a break and hold to the upside as this would almost assuredly bring a crash of some sort. The reason I say something so extreme like that is purely based upon the measurement factor of a coil. If the coil is broken to the upside then you could expect the VIX to go to 51 and really the only way this is going to happen is through a complete meltdown.

Now, with all of that doom and gloom out of the way, let me tell you what I think the odds are of the vix breaking the coil to the upside. About 20%, that's it. So we have an 80% probability of a break to the downside on the VIX which will bring every bit as dramatic a price rise to the upside as a bearish break would bring on the other side.

There are a couple of reasons that I expect the VIX to break its coil to the downside and thus higher stock prices.

Number 1, we have already reached levels of abounding bearishness on just about 75% of the market sectors.

Number 2, there are some very reliable chart patterns on the VIX right now that point to higher prices for stocks. I am not going to post all the charts of the patterns as it would take up quite a bit of room. Well that and the fact that it would take me a pretty little chunk of time too. But trust, the patterns are there, otherwise I certainly would not be putting my money on the line.

The NASDAQ is really starting to show signs of a strong imminent rally right around the corner.

Add to this the 5 year low on small cap sentiment of only 20% bullish and you have the possible ingredients of a fireball move to the upside.

Many of the sentiment indicators I have devised are not the run of the mill indicators you see so many analysts follow. It is because of this reason, that the sentiment I follow has worked so well and clearly at this point it is flashing a screaming buy.

The chart below represents this weeks price pattern and has formed an inverted head and shoulders pattern, which many times is a harbinger to higher prices.

The market is without a doubt sending us plenty of signals that prices will be moving higher shortly and that the next rally should be of substance say on the order of the S&P 500 going over the 2000 mark. I get ahead of myself though. First things first.

The S&P 500 needs to break the neckline on the inverted head and shoulders which is drawn in blue and ideally the lows of late Wednesdays trading should stay intact. If we can accomplish this task then we will be on to bigger and better things.

Weekly Chart - BULLISH

The weekly chart offers some valuable clues about the current state of the equity markets.

Take a look!

The Two C's.... Cattle and Cotton

The chart of Cattle Futures shows clearly the path prices take when the smart money gets extremely bullish, as they are now.

The question we need to ask is what is the trigger that puts us into the long position.
The answer is right on the chart, with the slow stochastics.
Notice that in both instances of the smart money not only getting at or near 80%, but getting above 90% there is a clear trigger.
The slow stochastics must get solidly oversold, as in below the 10 level and then turn back up.
From this turning up we get our actual go ahead to enter into long positions once the slow stochastics cross above 11.
That is all there is to it. I realize that this will not get you in right at the low, but it will get you over 80% of the move and that isn't bad at all.
So from where all of these indicators are now, it appears that cattle need to become oversold once more on the weekly charts and then we can begin to look for the trigger. So right now cattle remains on the high probability watch list.
The chart below shows how heavily the smart money has sold this rally in cotton.
It is not only the size of their short position, but how quickly these positions were put into place.
You, also can see who the smart money was selling to as the commodity funds reached a new high in their net long positions. The commodity funds are trend followers and are typically wrong at major market turns.

Cotton gave back its entire decline from yesterday and then some, but we remain committed to the short side and we also remain protected with our stop loss order in place.


Time To Increase Exposure

Looking for one more push down here to the 1395-1398 area and if we get some stabilization at this point I will begin to add to the equity exposure we currently have.

This Ultra Short term correction was a bit deeper than I anticipated, but there is nothing to suggest that this is nothing more than a correction of the rally off the lows.

Thursday, January 10, 2008

Commodity Update - Only Cotton Remains

Stopped out of our Short March Coffee trade today, with a loss of $236.

This string of commodity trades seems to have been purchased a bit early, so keep the Hogs, Coffee and Corn on your watch list for another attempt at going short should we get a trigger to do so.

Cotton is currently the only trade that has stood up for us and it looks like it is in the process of breaking down strong. Given this action it should be very shortly we move the stop to break-even and have a risk free trade.
We need it give the other three stop-outs.

Equity Market Comment - 1/10/2008

Barring a complete meltdown in the equity markets on Friday Jan 11th, the weekly chart is on the verge of a major price reversal which would confirm the daily work as well.

The S&P 500 Bullish Index now sits at only 30% bullish, a 5 year low.

We are also awaiting a turn up in the Three Line Break Sentiment chart. Once this chart turns

up and especially from such deep bearish levels, it will confirm the intermediate term bottom and give the green light to really jump in with both feet.
The chart below shows the Fear Index moving up enough from its very fearful readings to generate an intermediate term buy signal. More evidence on the table.
Although there are some indications that a short term pullback is nearing, the majority of the technical work is confirming a buy the weakness strategy.
The 15 minute chart is calling for either some type of short term pullback from here or a narrow consolidation. Either way, it has confirmed what it deems as an intermediate term low point.
A move above the 200 period moving average on the 15 minute chart will almost confirm 100% that a major intermediate term low has been put into place.
The daily chart has two back to back higher days with strong volume, which is bullish.
The volatility of prices we have seen is telling us that we may get a pullback in here before
the resumption of the rally.
Any weakness we may get here should be used to ramp up your equity exposure.
Markets very rarely go straight up and given the price structure damage we have seen, a back and fill scenario would seem most logical.
I will be updating both the Short Term Aggressive Trading Account and the 20% in 7 Days Account tonight if I have the chance. I still do not have the PPDI position posted and the call options as well.
We also purchased AMD at the open today, but I am waiting to purchase call options on the first pull-back.

Wednesday, January 9, 2008

Time To Buy AMD - Delayed Posting

I had mentioned Tuesday that we were getting some very bullish signals from AMD, but it was still to early to begin purchasing the shares or buying call options.

Today, AMD got hit pretty hard closing down close to 8% on the day.

The action today was just enough to send the models into the all clear to purchase mode and thus AMD has become a buy.

However, based upon the clearly strong down trend the stock is in, I would advise your purchases of AMD be split into thirds until you have your full line in place.

In this particular situation, the options actually become the less risky investment of the two.

If you intended on purchasing say 1000 shares to accomplish your full position then you might entertain the purchase of 10 call options in place of the stock.

#1 on BlogElites Seems Elusive

The good news is that for a 3 hour period on Saturday this blog had the distinct honor
of reaching the #1 spot! For 3 hours anyway.

Since then however I have retreated to #3 and have had very limited voting.

I know it is a pain, but it only takes 10 seconds and you have to go to the blog anyway, so why not use the BlogElites gateway and cast your vote along the way. You sure would appeal to my vanity : )

Seriously though, I don't want to sound like I am repeating myself and I know that all of you could think of some better items to put in this space, but if you could take the time to cast your vote on a regular basis I would sincerely appreciate it.

Well enough with that!

I am always looking for new ideas on subjects to cover on the blog and I have received over 100 requests so far that would entail a technical analysis and fundamental analysis of a stock that you pick, perhaps three times a week.

So if you have a particular stock you think we all might be interested in please feel free to drop me an email and I will see what I can do.

Thank You all for reading the blog and thanks for referring many of your friends, family and associates. The subscription base continues to grow everyday.

Commodity Update

Cotton and Coffee are the only two positions we carry in the commodity account as both the Hogs and Corn were stopped out with minimal losses.

Keep the stop tight on both.

Stopped out of March Corn on Tuesday at 4.71 even for a $212.50 loss.

We will be looking for another area to go short again, but until then, stand aside in the grains.


Shorted March Coffee today as the counter trend rally looks to have been completed.

Keep a tight stop 2 ticks above the high on Tuesday.

PPDI - Move Stop Loss To Lock In Profits

Move the trailing stop on PPDI to lock in some solid gains.
Lock in 50% of your profits.

This will depend upon where you made your purchase.
My purchase was at 43 1/8 so I moved my stop up to 45 1/4 to lock in 50% of the profits.

Those who purchased the call options can move their stops to 3 1/2 and lock in a 47% gain.
The options are currently trading at 4 1/4.

I continue to look for the stock to move towards $50.

Equity Market Comment - 1/9/2008

S&P 500 Bullish Index has dropped to a level that has seen strong intermediate term bottoms.

This Index will confirm a bullish signal once it turn up from its current levels.

There are some very strong indications of a climax low being put into place today and not just limited to the S&P 500 either. We have also entered the strongest seasonal tendencies over the next 3 weeks.

The volume today was also another plus for the bulls.

Small Cap stocks also reached their lowest bullish reading since the 2003 low in the markets.

It currently stands at 23% bullish which anything below 30% in the past has been a harbinger of sustainable rallies. This number also helps us to decide which sector should have the best performance and where we should look for possible long candidates.

The NASDAQ is also showing tell tale signs of a climax low here and also has some symmetry with this past decline being of equal length to its previous decline.

The move to new lows that the MACD was pointing to on the NASDAQ has been achieved as well so there are some pretty solid reasons to begin a campaign of putting together long positions.

Tuesday, January 8, 2008

AMD - Getting Close To Pulling The Trigger

Advanced Micro Devices is getting very close to a low risk/high return buying area.

Keep a close eye on the stock and also the call options as well.


Equity Market Comment For The Close Of 1/8/2008

The Advance/Decline Ratio is starting to do just the opposite of what it began doing at the top of the rally when the Dow was trading just over 14,000.

While the divergence is a bit thin it is a positive just the same.

We had a fairly reliable hourly chart pattern just like the pattern outlined on this hourly chart.

This offers us a bit of a clue to the probability of the next move.

As I had talked about yesterday, it was imperative that the market today not violate the lows of Monday, but that did not happen and thus is a bearish signal. Although taking out the lows today leads to the possible pattern in the last chart of this post, we did have yet another bullish formation today, an Outside Day with a Down Close. This pattern is especially reliable if it forms after an extensive decline and I think this current decline would qualify as extensive.

The taking out of Monday's low and a close below that low brings into light the bottoming pattern that is shown below. This indicates that the market needs one more push down in order to complete the bottoming process, but it also indicates the possibility of a very trade able rally on Wednesday.

The bottom line is that I remain cautiously optimistic about the current market, but I do stress caution as the volatility to the downside has been very strong.

Sentiment as measured by the Put/Call ratio is making its way just inside the buy area so that is a plus.

I have not added any new positions as of the close today and conservative traders should continue to be very careful in here.

More aggressive traders (Like Me) can begin to accumulate equities if and when the current road map I just laid out begins to confirm itself. Remember also that we do have risk all the way down to 1340 on the S&P 500 so be very careful in here.

Monday, January 7, 2008


Strong break-out candidate with alot going on in a technical sense.

Minimum target is 46 1/2 with a true potential towards $50.

Good stock for an option play, considering the time and price factors.

Take a look at the Feb. 42.5 calls trading at 2.15 by 2.50.
Fair value for the option is 2.36 which is smack in the middle of the bid/ask spread.

Intrinsic value at minimum target of 46 1/2 is $4 or a return of 69.5%.
Intrinsic value at highest probability target of 48 1/2 is $6 or a return of 154%


#1 On BlogElites Is Within Our Grasp

Thanks to all of you who took the time to vote on BlogElites on Sunday.

I sincerely Appreciate your efforts!

Now the Number 1 spot is within our grasp and if everybody votes
each time they visit the blog, not only will it be in reach and obtained but
we can retain the ranking.

So thanks again for your support and lets grab the brass ring of the #1 spot that is within our reach and once we get it lets retain it!!


With the potential for a short term low in equity prices I have increased the exposure in this portfolio.

Not in a big way, but enough to utilize about 17% of the capital that is allocated for this portfolio.

Please keep in mind that these stocks are very aggressive to begin with and the added risk of timing a turn in the general market makes these purchases only prudent for the most aggressive among us. So if you are conservative by nature I do not recommend the purchase of these shares.

Those aggressive enough to join me on these, please keep in mind that a stop must always be put in place in order to protect us from harm.

The stocks are as follows:


A stop of no more than 17% should be in place for each position.
I will have the specific stop placement levels in the portfolio section.

Wait For Counter-Trend Rally In March Coffee

We had talked about shorting March Coffee for a potential slaughter to the downside.

Given the daily pattern of Friday and Today, I am going to wait for a small counter-trend
rally before I begin to put a short line in place.

Stopped Out Of The Long Feb. Hogs Trade

We were stopped out of the Long Feb. Hogs trade today with the close below 56 even.

This was a loss of $590 per contract.
Nobody likes a loss, but the stop did what we asked it to do.

I am going to wait for a break of the wedge to the upside before I get long the Hogs again.
Perhaps I was a bit hasty in my decision to go long the hogs in the face of lower prices.

The other three positions remain in tact.

Equity Market Comment - 1/7/2008

Analysis of the markets is much like being a detective.
You see a pattern that strikes a cord and you go to your little black
book of patterns you keep and get some answers.

The volatility that we experienced today is indicative of trying to hammer out a point of stabilizing prices in order to stage at the very least a short term rally of 38% to 50% of the decline that was just before.

This pattern however does come with a stipulation and that is, the low of today must not be violated and if Tuesday can stage a sharp rally on top of that then the odds increase even more that a substantial move to the upside is upon us.

But, we get ahead of ourselves here. The first item of business will be the ability of the market to hold the lows of today.

Conservative traders should remain cautious here until we get more confirmation that some type of low has been put into place.

Aggressive traders should begin the process of picking up some battered issues as I began this process today. I am not advocating jumping in with both feet, but a bit of bottom fishing here while aggressive could prove very profitable.

Aggressive traders should not have their trading accounts any higher than 25% short term equities and we can always increase those levels as the market goes our way.

No question, things are looking up, but we are not out of the woods yet and if we do get some type of rally in here it will be the quality of the rally that may dictate the future for our core equity holdings that have been in place since late 2003.

Sunday, January 6, 2008




Commodity Update 1/6/2008

I have yet to complete the commodity trading blog, so the updates will continue to post here.
Time has once again become a very precious commodity and once I have more of it then I will finish the futures blog.

Short March Coffee is a new recommendation and one I have yet to act upon.
It looks poised to make a move sharply lower with sell signals across the board and a very
large bearish spread between the Commercial Traders and the Small Speculators.

No question it is worth a look!

We remain short March Corn with a Buy Stop at 470 2/8 on a closing basis only.
Corn looks to have put in a swing high and this trade should begin to move in our
favor rather quickly if it is correct.

The Protective Stop is very close to our initial position so risk is very limited on this trade.

We continue to hold Long Feb. Hogs with a sell stop at 56 cents even on a closing basis only.
This trade is on a shoestring right now as we are very close to our protective stop price.
However, much like the corn trade, the stop was put very close to the initial position so risk
is very limited.

We remain short March Cotton with what appears to be a very strong probability of a swing high of some significance having been put into place.

Cotton offers the best Risk to Reward ratio out of all the positions currently held, so if you have yet to put the trade on, you still have time to put a line together.

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