Apr 27, 2009 - Issue #160
First 100 Days
First 100 days of the Obama administration tells us what for the market? In a word, chaos.
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.
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):
4/28 GM, PFE.
4/30 PG, XOM.
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.
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!