Thursday, July 9, 2009

The Volex System Of Trading

Create bands around the ATR. Upper-H plus ATR Lower-L minus ATR When the option reaches the upper or lower bands of the ATR/Volex, a position is established. A break to the upside initiates a call longside. A break to the downside initiates a put longside If a trade isn’t established, the system resets itself with new triggers

Wednesday, July 8, 2009

Sarah Palin, Joe Biden, and The Perfect Answer


Sarah Palin, Joe Biden, and The Perfect Answer


By now we all know Sarah is either very very shrewd, or a complete flake.

Noting that she could have been President has always disarmed me, that there could be enough stupid people in America to vote for McCain with a 70% chance Palin could have been President within two years, following actuary laws.


Then, Biden is kind enough to tell us this over the 4th of the July, when unemployment hit 9.4% that “we underestimated the situation and there may be a need for more stimulus”.


Biden is the smarter idiot as he told the “perfect truth”.


What the Obama administration inherited is still unknown. The financial ruins of betting on ethanol, to funding a useless war, to letting the boys on Wall Street have unfettered power led to the Global greed. Hell, we hear now that even the Amish got greedy during this time period.


It hit the world, the global economy, and we began to see it all unravel. The financial house of cards fell.


Does Obama have it right? Will this stimulus work? Can we absorb the debt?


Here’s the real answer: there is no such thing as free enterprise. It sounds so good, but the games begin even with the lemonade stands.

And, things are much much worse than we could anticipate, and Floyd predicts that even more will come to the surface.


Creating a big government that buys our way out, and creates controls that stop our GREED (environment, Wall Street, autos, et al) is a necessary evil that will later cycle out, after having served its purpose, and smaller government will return.


This is a cycle. And Sarah, dear girl, is part of our current drama. As is Sanford. Stanford.

Madoff. Greenspan giving 100k speeches when he led the debacle.


Biden told the truth. We’ll need more stimulus, and we’ll uncover even more muck.


However, some scary survey just shared that 7 of 10 Republicans would vote for Palin in 2012. Any readers that would do so are invited to THREE free months of Floydian Therapy

http://www.oexoptions.com/pages/FloydianTherapy.html

The State of Gold

“Gold stocks have been taking it on the chin lately. And that's bad news for anyone who owns gold.


Gold stocks often move ahead of the metal. A rally in the stocks usually leads to a rally in gold, and a decline in gold stocks often foretells of weakness in gold. So the 20% drop in the Gold Bugs Index (^HUI on Yahoo Finance) over the past five weeks is a bad omen for the shiny yellow metal.

Gold is on the verge of breaking to the downside of a consolidating-triangle pattern. A move below $920 per ounce will likely set off a short-term correction down to support around $870.” You see, we know gold is in a bull market because the metal is trading above its 40-month exponential moving average (EMA), which defines a bull market for gold...”This from Jeff Clark, a well known trader with Agora Publishing.


From a Floydian perspective Gold (GLD) and lessly Silver (SSRI or SLV) are commodity plays in a world that has become commodity driven, and Gold is now thought of less as “the only real money”. This is wrong thinking. As China works us to a “world currency” and the G20 begin to consider it, as the dollar weakens again, and it will, Gold will become a currency.


In the meantime we may consider both a short term put on Gold (GLD) on the downside potential, and plan a long buy on GLD (which we already own a core position in. We’ve sold 2/3’s of our holdings thru 2/28/08 at 45% to 68% profits. Blue Chip subscribers that know all of our holdings saw us build 15% of our portfolio to GLD in the past 10 months, and begin to reduce it.


Here’s our suggestion for long term subscribers. Hold your remaining 1/3 of GLD, and buy puts short term on a downside. When Gold hits 870 to 820 we’ll consider adding to our position in GLD, if market conditions remain precarious.

Trading Inverse ETF Funds Profitably

ETF inverse funds have some great opportunity right now. A number of ETFs are now offering high risk "inverse" funds that can play bull or bear moves in the general market by investing in 2X or 3X bull or bear moves.

This is a form of hedge fund trading, and can be utilized for long term investing, as a hedge (ex: hold a bear fund while investing to the upside), OR for a good swing trader can offer some tremendous opportunity for 5% to 10% returns, when traded like a swing trade.


Let's use two of my favorite trades. BGU and BGZ. Dirextion DailyLarge Cap Bear and Bull 3X funds, medium volume, priced well in the $30.00 range (leaving out the baby boy traders), and quite easy to play to 5 and 10% returns quickly.


Here's simple logic. Use our longer term Dow projections and at the bottom projection to the Dow buy a position to BGU, the 3x Bull Large Cap. Sell it for up to 10% profits as the Dow moves to our top projections. Near the top, begin the buy on the inverse, BGZ, and repeat the sale at the bottom.


How often will this not work out? On estimates 25% of the time and when this occurs the trader is creating a “natural hedge” to bi-lateral positions, as the market begins establishing a bias, diminish the holding in one of the hedges.


The trader wins two ways:


  1. Swing trading puts or calls managed in group, on large caps.
  2. Gaining large cap exposure, short and long, for a portfolio.

Tuesday, July 7, 2009

Amazing It's Not Worse

"Bubbles" Alan Greenspan, the core culprit to our economic demise, recently announced that "hyperinflation" is a threat to the economy. From a Floydian contrarian and logical point of view this is proof we will not have hyperinflation. In fact, Floyd is more concerned about the third and fourth quarter 09 for all U.S. companies. The first quarter corporations were able to do huge write offs to their bubble induced mistakes and acquisitions, and the second quarter still has plenty of games that can be played in financials.
A small child can figure out that with unemployment at 9.5% and the true unemployment at over 20%, and a savings rate that has risen to 6.9%, that there is less money being spent.

This is deflation. Bubbles Greenspan is a free entreprise boy, that trained under Ayn Rand.

Want the detail of why "Bubbles" led many Presidents through the "good times" as he lowered interest rates, and promoted "creative mortgaging", and was not able to slow any bubble......simply pay Alan $100k for his speeches and he'll tell you his side. It's why he's talking hyperinflation now?
How can he talk about what he "did". ; - )

Study up. Here's how our economic crisis began, long ago.

http://www.nonfamous.com/wp/2008/10/23/alan-greenspan-is-an-idiot/

http://www.huffingtonpost.com/2008/10/24/greenspan-shrugged-how-di_n_137465.html

http://www.nytimes.com/2007/09/15/business/15atlas.html

http://www.commondreams.org/views/041800-106.htm

And as we know now, Clinton took advantage of the bubble economics to "look good" and "balance the budget". In came Emperor George and Shooter Cheney, and the neocons took over, influenced by Goldman Sachs, as they allowed oil to become a speculators game, stopped even watching Wall Street (their buddies getting rich, right up to Paulson's bail out to his friends before exit), and oh yeah, Iraq. Getting rid of the evil ones.

It's almost amazing it's not worse, isn't it?

Making Money with Inverse Funds

ETF inverse funds have some great opportunity right now. A number of ETFs are now offering high risk "inverse" funds that can play bull or bear moves in the general market by investing in 2X or 3X bull or bear moves.
This is a form of hedge fund trading, and can be utilized for long term investing, as a hedge (ex: hold a bear fund while investing to the upside), OR for a good swing trader can offer some tremendous opportunity for 5% to 10% returns, when traded like a swing trade.

Let's use two of my favorite trades. BGU and BGZ. Dirextion DailyLarge Cap Bear and Bull 3X funds, medium volume, priced well in the $30.00 range (leaving out the baby boy traders), and quite easy to play to 5 and 10% returns quickly.

These work very well as high risk, high profit options also

Watching the Market Breathe

At www.bluechipoptions.com we teach is that we are not watching whether the market moves up or down to buy or sell, rather looking at the normal ebb and flow of the market, and observing how the market breathes. We use a method to identify whether the market is at the end of inhalation or exhalation and exercise the option that will move enough with the inhalation and exhalation to take advantage of it to make a profit. So it really doesn't matter if the market is in an up trend, down trend or sideways trend.
Traders typically never really trade the trend, and are trading contrarian, and it’s why most lose.
We are making money on the respirations of the market, no matter what the overall direction.

Fibonnaci as Support and Resistance

UTILIZE FIBONACCI RETRACEMENTS

We use a variation of Fibonacci (1170-1250), the famed 13th Century mathematician, and his retracement logic to further identify Support and Resistance lines.

38/50/62%.

As the market moves up the first steady moves to correct will move to 38% below the index high. At times the market will continue the downside, first to the 50%, and sometimes to 62%, before reversing again and beginning the upward trend again.

This theory is used by many chartists with stocks and option trading, and can have some validity for analyzing short term moves on an index.

Start with the high and low prices of the index.

Track each of these % as Retracements levels.

S/R form around these Retracements, especially the 50% level, and there is more

likelihood of reaction at these levels.

The 50% retracement is now so obvious to all markets that it’s more difficult to see if this is really the market moving, or traders in unison creating the trend.

Knowing the obvious, and where the S/R lines will fall, is based on how well the trader tracks moving averages, highs and lows, and all the tools to begin to see “edges” and “trends”.

Monday, July 6, 2009

AIG

AIG might be a long play. Just fell 22% despite a 20 for one stock split.

Just delisted from NYSE. Buy slime? Watch it ooze up? :)

Watch How the Market Breathes

  1. Watch how the market breathes. At www.bluechipoptions.com we believe in Richard D. Wyckoff’s Composite Man. This means the market is comprised of our “group emotions”, and typically the market moves precede the changing psychology of the mob.

Sector Funds

1. At the end of each month identify the 5 sector funds that have advanced the most in the last 240 trading days. 2. Buy and hold these five funds until the end of the next month. Repeat the process each month

Linear Weighted Moving Averages/Use of TNX

Index traders should explore using linearly weighted moving averages. This type gives greater weight to the latest data. For example, to compute the 10-day linearly weighted moving average you would take the closing price of the 10th day, multiply by 10, the 9th day by 9, etc. Then the prices should be divided by the total number of multipliers (using a 10-day example there are 55 multipliers. Similar to the exponential moving average, we see this type of study as best for studying new rather than old data Using interest rates in conjunction with earnings is another effective way to study movement. There is a formula used to measure the impact of rising rates on valuations of the stock market as a whole. It’s the reciprocal of the US 10-Year Treasury ($TNX) multiplied by the expected earnings of the S and P 500 companies. www.sp-global.com leads to the Standard and Poor website. Find the expected projected earnings of the S and P 500 and multiply by the reciprocal of the yield on the 10- year note. Ex: The TNX yield is 4.1% Earnings for the whole S and P 500 is projected at 67.40 divide by .041 x 67.40= (24.40 x 67.40) = 1645 In this example if the SPX is trading near 1220 it is 36.50 undervalued by this formula. If the SPX were near 2000 it would be 21.5% overvalued. TNX is a valuable tool for review.

Watch the TICK

Watch the TICK. The tick refers to the price change of an investment. If, for example, IBM is at 80.00 and moves to 85.00, the stock is on an uptick. The tick index ($TICK) helps the trader know best when program trading is overly influencing the market. Program trading is over 57.9% of the trading of the NYSE (Dow Jones Newswires, Dec. 16, 2005, page C9). If more than half of the total trading on the NYSE is program trading, it helps explain why the market sometimes experiences sharp, sudden intraday swings and why large institutional investors often have the power to move the market. The TICK Index can be either + or -. Typically is runs -900 to +1100. When TICK increases, upticks are outnumbering downticks. If so, buying pressure is increasing and the bulls are in control. When the bears are leading, or gaining control, the tick index is falling, and selling pressure is increasing. Pay little attention when $TICK is +400 or -400, but begin watching + or – 600 as it leads to + or -800. As the TICKS increase to +1200 or -1200, institutional traders are aggressively in the market; the goal is to trade on the same side as the institutions….and know when the large buy/sell orders hit the stock market.

Using Average True Range

ATR (Average True Range) - first we must compute the true range of movement. 1. H – L 2. Previous Close -Current High 3. Previous Close -Current Low True Range (TR) is the greatest value derived from these calculations. The true range is computed as the difference between the high and the low when the day’s trading range is large. If a large gap down: When the previous close is greater than the current day’s high, the TR is the difference between the previous day close and the current day high. If a big gap higher: When the previous close is lower than the current day’s low, the TR is computed as the difference between the previous days close and the low of the current day. The ATR is simply the average of the true ranges over a period of days. As each day of new data is calculated, the last is dropped. The ATR calculation is the number of days divided by the sum of the number of TR. Typically chart services begin with an ATR of 14. Higher ATR valuations often occur at market bottoms. Low ATR values are often found also during sideways periods, such as those found at tops, and after consolidation periods.

Sarah Palin

Sarah Palin has what it takes to be the head of SEC. She's cute, erratic, and has accomplished nothing but embarassment for her party. To think we could even consider this woman as President, if McCain had passed, and what her behavior would be like. But, for the SEC, it would work.

Sunday, July 5, 2009

Oil Dropping

With oil dropping, we continue to not see a good entry point for oil stocks. Within our portfolio we continue to hold Exxon and Chevron, and have an alternate natural gas play in Oneok Partners (OKS).
At the same time we won't begin to play microcap oil companies on the great "hope" of sell off to a major, or "hitting it". We will continue to watch our crude oil play DXO as a double long ETN play.
Study up on this new sector development, specifically on DXO at : http://www.powersharesetns.com/portal/site/etns/crudeoil