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Apr 27, 2009 - Issue #160

First 100 Days

CNBC demonstrates to us daily that's what happens when failing companies are bailed out at taxpayer expense while successful companies are punished with rising taxes. The losers get politicians as their new bosses that I wouldn't let manage a men's room.

Does this affect markets? You bet. It makes markets more volatile. Using stop orders are not as effective as one would hope for.

Is there a better way? I believe so. Using suitably priced Options to enter a trade provides leverage when the trade wins while at the same time limiting potential loss. Additionally, the Option provides built in 'insurance' if the trader decides to turn the trade into a 'synthetic' position. Used in this manner, Options provide a degree of control and efficiency unavailable anywhere else that I'm aware of.

We've been looking for an intermediate term top to be put in place. Friday's price action, while impressive for the day, never the less, was not sufficient to say the market, as measured by the DJ-30 (and the S&P-500 as well), is in a rising trend. On the contrary. Note the deterioration of the Dow score card below.

Closing out the week on a 'New Moon' may, or may not, be significant but it is coincident.

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?

5/9 Saturday - Full Moon (Observe Friday 5/8 & Monday 5/11 market price action).

5/24 Sunday - New Moon (Observe Friday 5/22 & Monday 5/25 market price action).

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

4/27 VZ.

4/28 GM, PFE.

4/30 PG, XOM.

5/1 CVX.

5/4 (Transportations) OSG.

5/5 DIS, KFT.

5/6 (Transportations) EXPD.

Dow score card for the week ending 4/24/09.

DJ-30: 8076.29 -55.04 -0.68%. The Real World (arithmetical) DJ-30: 33.80 -0.23 -0.68%.

UP: 11, Down: 19.

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

Rising (Generally Higher Highs/Higher Lows) 8 (-5) 27%:

AXP, +*CAT, DD, HD, JPM, MMM, +*MSFT, UTX.

Consolidating (Generally Lower Highs/Higher Lows) 16 (n/c) 53%:

-*AA, BA, -*BAC, -*C, CVX, -*DIS, _*GE, GM, -*HPQ, IBM, INTC, KFT, MCD, -*PG, T, VZ.

Declining (Generally Lower Highs/Lower Lows) 6 (+5) 20%:

_*JNJ, -*KO, MRK, -*PFE, -*WMT, -*XOM.

+/- denotes change of direction.

* denotes change of category.