Trade Closed: FAZ@16.63

We decided to close the trade flat and let the week play out a little longer to see where we stand going into the big Friday employment number and maybe trade options instead. Stay tuned.

Playing the contrary trade

The news and investment community is so bearish that some would say the market is a buy. This is what is happening today and we thought about doing it ourselves. In the end; to buy just because everybody is so negative, isn't always a good strategy. Sure we have used it many times and the payoff can be large. That is why we decided to let the market reverse, go up, and then put a short on. A twisted game. I find it hard to believe the down trend is fully over just yet. Today seems like a good time to try a short with tight stops.

The Numbers Game

It seems Dow 10,000 is the number. The economic numbers were again dismal. If the market is going to break the 10,000 level then the next few days are the days it would do it. A market reversal to negative by the end of the day would be a nice confirmation. The Fed Chairman said basically nothing. They will not act until the move in the markets is completed. It would be a wasted bullet. The new number is 9600. We think it has a very good chance of hitting it. If it does not break down soon, we will cover the short. Odds are odds and the market wants to complete the move so it can move on. Let's see.

New Trade: FAZ@16.61

We bought some 3X short the financial index again. The Dow has a 75% probability of hitting 9600 next week and we will try and play that move.

The Question

Do we short before he speaks? Do we buy after he speaks, if the market tanks? We will see.

Bernanke Speaks in 7 Minutes!

We have our fiingers on the trade...we want to short; however, anything can happen here. We will wait and watch. Stay tuned. Big Day!

Strategy Update

As expected the market had a decent bounce off the 10,000 range. We could have played it; however, we are going to wait for a more significant move (up or down). We are tracking some really good ideas-check emails for details. Let's see what plays out. The Fed Chairman is speaking tomorrow.

1st DOW Target hit: 10,000

Our 75% chance has hit on the mark (+/- 50 pts). Check emails for trade notes and stay tuned.

New Addition: OPTIONS

We decided to add leverage to our programs. We were advised that we are not getting paid enough for our correct market calls (no pun intended). An example was the FAZ play. We could have made a 1200% return in the last 2 days instead of 11%. It makes you think. We can use much less capital and limit our risk to the amount placed while potentially increasing our returns exponentially. I have been toying with this idea for some years and decided now is the time to start running a Beta program. We will put a small amount into a new account called TCM. TCM will be our option account and will trade seperate from our WSR account. It should be ready to go next week.

Trade Update: FAZ

We sold today because in a market like this, when you get an 11% gain in a couple days- you take it. We are done for the day and we are done for the week. It was a good one!

Sold FAZ @ 16.33

How low can The Dow go?

Our computer programs say it can touch 10,000 with a 75% chance, 9600 with a 60%, chance, 9200 with a 45%, and 8800 with a 35% chance. ( in current environment)

Trade Update: FAZ@ 15.91

We continue to hold for now. Currently up 8.5%. Now comes the selling question. Stay tuned.

Death Crosses and Probabilities

I read a very interesting article tonight by Simon Melerhofer about technical probabilities. He discussed the number of "Death Crosses" the market has experienced has been in the dozens the past few weeks. A "Death Cross" is when a shorter SMA crosses a longer SMA on the downside. Over the past 10-years, the probability of a major decline when these have occurred has been 75%-100%! If you combined that with "The Hindenburg Omen" that occurred last week, you have a very scary situation for the longs. Although anything can happen in today's market, we cannot bet against those odds. We got a great price on our 3X short the financials (FAZ) of 14.69 or 1 penny from the low. In poker, when you have those odds-you go all in. Let's see how it plays out.

Playing the S&P500 1100 Resistence

We think the 1100 level will be very difficult to overcome. We will use the opportunity today to try and play a quick short on the financials. The market continues to act in strange moves that seem to come from left field. One day it's the end of the world and the next day everything is getting better. There was very aggressive treasury buying yesterday. Not sure if this is a capitulation buy- if it was then stocks could continue to move higher. Dangerous trading in here. We tend to favor the short side and will keep a close watch on our position.

New Trade: FAZ @ 14.69

Bought at S&P500 1100 resistence.

Strategy Update

The markets continue to be choppy and anemic. The unemployment rate continues to be a static dismal. Bonds continue their extended period of out-performance. The Federal Reserve's rhetoric seems to be borderline exhausted and apocalyptic. Retail investors have all but given up on the equity markets. Faith in the U.S. President is hitting new lows. Volume at the exchanges has been thin and dominated by trading systems. The financial media changes their outlook daily. The stock averages have been range-bound for months. Is this just the August Blues or something much deeper. The strategies are basically: 1. Wait-do nothing 2. Attempt quick in-out trades or "scalping". 3. Ignore everything and try to pick the few individual stocks in companies that are doing well despite the markets.

We will wait and watch while looking for a few "scalping" opportunites at the technical support levels.

We continue to wait

Bad Beats and other common anomalies

Remember that this is a gambling game of sorts. You will not be right all of the time. You are good if you are right most of the time. In Texas Hold'em poker: When you have the highest probabilities and you bet correctly, you can still lose (on The River). This is called a "Bad Beat". You may have done everything correct and it looked like a sure winner and then BOOM. A lot of traders took a BAD BEAT today. The word on the street is this move has totally blind-sided a large amount of capital (unless you have The dealer in your pocket like....you know who). The advanced knowledge some get is just plain fraud. We should have known better to watch what "The Big Stack" is doing. We didn't get hit too bad because we folded quick and just lost some profits. We are now back in CASH and will wait for the next hand. Everyone hates "Bad Beats"; however, they are part of the game.

Dow 11,000: NOT!

Our breakout prediction was smashed by the remarks of The FED yesterday. I guess you can yell fire in a crowded theatre if you are the government. They don't even bother to think when they speak anymore. The market had a really good chance of recovering until they opened their mouth and ruined the party. We got hit by this reversal. We lost some of our profits for the month. Stay tuned. We sit in cash.

Forced to FOLD

We were forced to fold our hands today. FAS sold @ 21, MGM sold @ 10.50, PRTS sold @ 7.72.

The market is telling us we are wrong. Not going to fight it. We fold. We were taken off guard by this one.

Market Update: Critical

The S&P500 is now back below the 200-day moving average. This is critical. It can not afford to stay below for too long. if it does, it is not a very good sign at all. The result would mean that a double-dip recession is a very real possibility. The financials are back below the 200-day.

A Crucial Day

Oil is killing the market. It is back below $80 and a lot of stock programs are tied to it right now. We are very surprised the pre-market is selling off. It is a crucial day for the market bulls. We will have to see how it plays out. The 10-year bond is approaching the march 09 levels...not good. Let's see if it holds a double bottom. The Fed statement was horrendous. Have they given up? Today is the very important short-term day.

A sure way to lose

A message from Nightingale's The Greatest Secret" continues to come to mind in this market. He summarized that if you do what the overwhelming majority of other people are doing, you will fail 95% of the time. He called it "following the followers".The Bears continue to express their doom and gloom and many investors are following these financial media "pundits" or their pessimistic advisers. it is easy to do - you don't actually have to do your own homework. We continue to think the jobs numbers were positive and the decrease in worker's productivity was encouraging. A decrease in productivity means there may have to be an expansion to hiring. The technicals are moving the market (which is a large sum of money) and all it will take is a slight move upward and they will change their "hard thought opinion". We continue to be bullish (since early July) until these lemmings slowly but surely switch sides and start following new followers

Update: Forgetaboutit!

Enough already! Double-Dip, Lickety Split! We continue to buy. The media, most advisers, and weekend traders continue to be bearish. Good grief! They have been short and shorting since Dow 9700. We are now 1000 pts. higher and I still get the emails and texts doubting the rally. I say FORGETABOUTIT! What the economists and amatures don't get is that earnings are going up. What does that mean? Earnings go up thus companies do better thus they higher more employees. What's the problem? The problem is: Wall Street is still under invested and the pros are loading the boat (like us). We continue to trade to around Dow 11,000. We will probally drop short of that.

MGM: Hold-Going up
FAS: Hold -Going up
YRCW: Bought at 26.5cents on Fri and dumped at 34 cents today. The stock is a pig but our computer said take a technical flyer. We did. A nice 30% 1 market day hold!
PRTS: Hold-going up
EHTH: Buy-going up

FAS

$28 target remains intact.

Closing Bell

Looks like we were right. The Dow was down 160pts and closed down 22 pts. We did a lot of buying this morning expecting a full recovery by the end of the day. Some readers even called us crazy. Too much CNBC rots the brain. Let's see what next week brings. Have a great weekend.

Dow 11,000 target remains intact

We continue to target Dow 11,000

MGM

We purchased more MGM today at 10.60. Our Average cost basis is now about 10.95. It is consistent with our bullish stance on stocks.

Market Update

The bears are out in droves again. CNBC is just loaded with "experts" calling the end of the summer rally. Our computer programs say this is the low point for a continued rally. The earnings have been great with 75% of S&P500 companies exceeding estimates. The economists are still negative. I have personally seen signs of a recovery in housing as builders have re-started new homes in desolate, left for dead projects. Jobs are growing. Our sources (recruiters) are telling us the market is getting busy. We are bullish here.

P.S. We thought the jobs numbers were surprisingly good. (The media hated them )

FAS update

The market is down 145 pts right now and FAS is back to 22.06- just pennies above our 21.98 purchase price. Maybe we should have sold at 24.15. Hindsight is 20/20. The market is down today because the jobs report was seen as negative. I thought it was pretty good. The government jobs killed the report. The good news is the private sector was much stronger. I think the market will recover by the end of the day. We hold or buy.

YRCW

It is a good thing we avoided it. I had a feeling it would sell on the news. We were right. It plummeted almost 25% when they reported earnings. The stock will probably be dead money for now. We will wait for .25 to .27.

PRTS/EHTH Update

The stock has exploded to the upside since we recommended it a couple days ago. It is up almost 21%. We continue to hold. EHTH can still be purchased at these levels. It is basically flat.

MGM

The earnings were disappointing; however, the stock action was positive. We continue to hold with first target $12. Our computer gives it a decent 65% probability. We hold or you could buy more with our stops in place.

FAS Update

The stock is setting up very well here. Although it is having some problems with the $24 level, the XLF looks as if it has the potential to really explode upwards through the $15 level (FAS is basically 3X leverage the percentage move in the XLF). The XLF is just above the 200-day moving average and I just don't think it will go/stay below this point again. It would not be a good sign for the sector if it did. The target on the XLF is $16. This is 6.66% from here. If it goes there, that would be approximately a 20% move in the FAS. This would equate to our $28 price target. We continue to hold. The computer is giving us an 80% success probability.

Two online potential winners

PRTS- Online auto parts retailer $6.85
EHTH- Online health insurance $11.11

We are watching these two stocks. I like the prospects and they may be decent accumulation candidates. A small amount at these prices for longer term is a good idea. We will finish our other trades first.

MGM

We recommended MGM at 11.25 today for readers. They are reporting earnings any day now and the chart looks good. We did not buy for our own accounts because we are tracking other trades and have committed the maximum capital we allow ourselves at this juncture. There is a tight stop at the $11 dollar level.

A reader recommendation: YRCW

One of our readers recommended YRCW. A huge trucking company on the verge of bankruptcy but may get lucky. It is a penny stock. He bought a very large amount at around 20 cents the first day it jumped. Our computer picked it up and gave it a high probability of success. It is currently trading around 40 cents. Congrats to him. A news release is due any day now and he thinks it can go to 80 cents short-term. The chart looks good; however, we don't normally play such high risk moves. An aggressive reader could take a flyer here. We will wait because we think it could report bad news.

Market Update

The markets continue to be strong despite some of the news. As we discussed in the beginning of July, stock prices follow earnings. Most money managers continue to be under invested and a lot of financial advisers are still bearish. We continue to hold FAS with a $28 dollar price target. The XLF is approaching 15 again and we will see if it can break it.