What I learned at a symposium

First, a Floydian Trader tip: *After a market correction watch whether a stock or a sector shows higher bottoms on its trend chart while the market averages are making lower lows.

After a correction there is often a sector rotation, a change in market leadership.

We will see sector shifts, which have been massively slowed this past year, from the financial sector only when the greed is slowed. We will see oil drop, but only for the short term. Our USD will not survive as we "use and treat it now". The Gold standard will possibly return, and should. Gold is the only commodity that is limited, and has retained value throughout the history of time. Every other form of "exchange" which is what money is has changed multiple ways

The following appeared in our daily OEX alert today but I thought quite appropriate for our trading:

I gave a speech at a symposium last week to some stockbrokers in Washington DC about index option trading. I had the opportunity to meet with brokers from all over the world that "bet the market", and project and analyze.

They heard me for 30 minutes teach:

*False facts

*A rock is not hard

*Most financial statements are false

*The mood of the public is paramount to the mood of the market

The major question I had during this speech was around "how to project financials for future earnings". As you know, this is what half the talking head analysts do as they "chart" the future.

My answer was seriously listened to, and I'll repeat it:

"No company in 2009 can make long term financial business plan projections beyond one year. Too much in the world is changing. Looking at "three year growth patterns" or what a company projects is much like fishing in a river that has poisoned and has few fish". I shut them up with their questions with this:

1. Years ago AOL owned the internet. It is now broke. Who would have seen that so many idiots could have mismanaged a business that had a 86% market share

2. Who would have guessed that Green Mountain Coffee would rise 190% while Starbucks, missing the change in the environment, dropped dramatically. Both had business plans that analysts had defined as "sound"; in fact,

Green Mountain got a "watch" read from Goldman Sachs while Starbucks got a "strong buy". Interesting, the reversed happened.

The conspiracists will have a field day: was Sachs manipulating the market to short and hold calls on both instruments. You bet. And guess who won the biggest?

While in Washington I heard the babble brought on by the GOP on "Obamanation" and the false facts on "socialized medicine" or "how can we control the right of people to earn money". These were stockbrokers, of course, who benefit when United Healthcare et al rise 428% in profits in 10 years, and will not benefit when costs are controlled and contained by competition. We have no competition or free trade in ANY way in the health care industry, and those that believe that our costs will be driven up are using false facts to analyze WHAT NOONE CAN EVEN BEGIN to conjecture about. We only know that typically when competition lowers price (aka Wal-Mart) that others are forced to find ways to be more competitive.

During the Bush reign we never saw the dead bodies coming in from Iraq. This was on purpose. It helped us hide from it.

During the Bush reign we heard about the thriving economy for years, but it thrived ONLY in the homebuilding industry, which created more than half of the jobs that gave us lowered unemployment.

Few thought out "what happens when the bubble breaks".

I left our great capital saddened by the tears of the public caught in the newsbites that lead us to believe what is not even true, or even partway true.

I ended my speech with the kicker: "the market is up because of the stimulus, and the need for something "good" to lead us first. And, if we do not control Wall Street again the same thing will occur, and this time it will be our fault. A President, even Bush , does not do this. Congress does. You do. You do by your thinking, your vote, and your standing up for real facts.

What person in their right mind thinks that this country could be turned around from 8 years of lies in a 10 month period? I smile at our innocence or our stupidity. I'm not sure which.

Nothing we could have done, by the way, when the bank fraud was finally "admitted" would have been the perfect answer. We have 540 men and women (Congress) daily influenced by lobbyists, all whom represent special interests. This has been taking place since our Government was first formed, but is now in a state of pure corruption. It takes a village....you know the line. The doomsayers of "socialism" make me smile, as Obama only represents the majority of the country, and unemployment rates are part of companies ready to return record profits (study the earnings) by simply having fewer people.

Do not for a minute think that free enterprise truly works. Wal Mart is a perfect example, having grown successfully, by filling huge buildings with goods from China, at low prices, and we buy them.

Thousands of businesses have closed because of this "free enterprise". It's not wrong, it's simply to show us that "all is not as it appears".

The Importance of Illiteracy

It is important to not take things literally. Often traders work a "system" and know that "breaking rules" is wrong (it is) but it is as important to have intuition as part of your system formula to truly succeed.

For example, if one sees a stock grow dramatically in return we often recommend selling in 1/3's. 1/3 at 20%, 1/3 at 40% and hold the final third. Many traders follow the charts and see nothing but upside, and don't "listen" to my concern to never sell at the top, and suddenly watch one piece of bad news destroy all of their profits.

The stock market has changed dramatically in the last 10 years with the advent of electronic trading, and "false financials". Years ago quarterly results were not even considered, or watched. When my Father was training me in the Wyckoff method years ago he paid no attention to P/E ratios, or short term financials but instead he followed the Point and Figure supply and demand on the stock. Volume, and supply and demand are the key variables to study.

I now teach the most important lesson, and the hardest to learn: it does not matter if a company is doing well, or if a company has a good idea or is well run. What matters is what the public and institutional traders are led to believe, and "see" in the movement of the stock. Many stocks we recommend are not worth $200 a share, but it doesn't matter. What matters is that someone, often many, are prepared to pay this price to "not be left out".

As you trade, do not take things "literally". Hold flexibility in your intellect as the integral force that runs how business runs; things change.