May 24, 2010 - Issue #216

Feb 5 low

Feb 5 low. How important is it? Very!

SP-500 is close to violating it. QQQQ already has.

CNBC Kudlow & Company is constantly saying we must get in and support this market. No we shouldn't. Don't ever try to guess tops or bottoms. That's a fool's game. He tries to make you feel obligated. Forget it. You don't owe the market a thing. Also, the market doesn't owe you either.

What should we do? Wait for a bottom to be formed. Then get in. Even then, don't forget to protect your positions by buying Puts. It's called 'Marrying Puts and Stock'. See my article.

In down markets, sell short and protect your positions by buying Calls. Even better, never sell short if a suitable Put Option is available. See also 'The Versatile Put Option'.

A good technique to keep in mind: Start off buying Puts, buy stock on declines with a view to selling the stock on subsequent rallies. The goal: Stock trading profits cover the cost of the Puts. This can be repeated over and over until the Puts expire. If the stock declines after purchase, exercise the Puts. You can't lose.

Repeat the process as opportunities present themselves.

The initial risk of the Put purchase is limited and can be further limited by closing the Put position early.

Warren Buffet's Rule #1: Don't lose money. Rule #2: Never forget Rule #1.

Heads Up

W. D. Gann, a keen market observer, although not an astronomer, nevertheless, was fascinated by the apparent coincidence of important market 'pivot points' and astronomical dates. Theories exist for estimating time and price of important market turning points but astronomical occurrences are computed with mathematical certainty.

There is no logical reason why these occurrences should coincide yet, empirically, they have.

The 'Full Moon' and 'New Moon', among others, have been cited. Therefore, one might be well advised to be aware of their occurrence. Note: The first 5 business days of 2008 concluded on a 'New Moon' and we all know how that worked out. Coincidence?

5/13 Thursday - New Moon.

5/27 Thursday - Full Moon.

During the next two weeks, the following DJ-30 components report earnings. Keep a sharp eye out for possible price swings leading up to 'earnings day' (Subject to revision):


Dow score card for the week ending 5/21/10.

DJ-30: 10193.39 -426.77 -4.02%. The Real World (arithmetical) DJ-30: 44.96 -1.88 -4.02%.

UP: 1, Down: 29.

Trends (weekly charts): This is the subjective part.

Rising (Generally Higher Highs/Higher Lows) 0 (-1) 0%:


Consolidating (Generally Lower Highs/Higher Lows) 16 (-12) 53%:


Declining (Generally Lower Highs/Lower Lows) 14 (+13) 47%:

-*AA, -*AXP, -*BA, -*BAC, -*CAT, -*CSCO, -*JNJ, -*KO, -*MCD, -*MSFT, -*PFE, -*TRV, -*UTX, -*WMT.

+/- denotes change of direction.

* denotes change of category.

Comments? Ideas? Feedback? Let me have it, right between the eyes! I'd love to hear from you. Just reply to this zine and tell me what you think!

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