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May 25, 2009 - Issue #164



Out of Money?



Out of Money? Yes, according to President Obama, we've spent too much money. Duh!

CNBC reported the US and UK are on the verge of losing their AAA credit rating.

Here's an idea: Cancel the proposed spending stimulus that hasn't taken effect yet. Stop this insane spending. 'Too-big-to-fail' is an insane concept. Bankruptcy is available for sound business reasons. Allow the free market to work its magic. Just a thought.

MRK has just formed, IMO, a significant upward trendline of support on the weekly chart. Can you see what looks like an 'inverted head-and-shoulders' bottom forming?

Buying the Jan '10 25 Calls (3.30) would provide a limited risk with upside potential if the stock continues to rise while, at the same time, acting as 'insurance' if a 'synthetic Put' position were to become desirable. If the Call Option is already owned, the stock can be 'shorted' with impunity, can it not? Can you see possibilities to 'swing' trade by 'shorting stock' on rallies and 'covering' on declines? The moment the 'short' position is 'covered' you are back into a 'long Call' position. Think of it as an 'on/off' switch. Also, consider how valuable the 'synthetic Put' position would be if the stock suddenly made a major downward move?

You absolutely must learn all you can about 'synthetics', if you would become a successful trader.

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?

5/24 Sunday - New Moon (Observe Friday 5/22 & Tuesday 5/26 market price action).

6/7 Sunday - Full Moon (Observe Friday 6/5 & Monday 6/8 market price action).

6/22 Monday - New Moon.

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):

None.

Dow score card for the week ending 5/22/09.

DJ-30: 8277.32 +8.68 +0.10%. The Real World (arithmetical) DJ-30: 34.64 +0.03 +0.09%.

UP: 13, Down: 17.

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

Rising (Generally Higher Highs/Higher Lows) 5 (+2) 17%:

+*DD, KO, +*MCD, MRK, +*PG.

Consolidating (Generally Lower Highs/Higher Lows) 19 (-5) 63%:

AA, BA, BAC, C, CAT, DIS, GE, +*GM, HPQ, IBM, INTC, JNJ, JPM, KFT, MSFT, -*PFE, UTX, WMT, XOM.

Declining (Generally Lower Highs/Lower Lows) 6 (+3) 20%:

-*AXP, -*CVX, HD, -*MMM, T, -*VZ.

+/- 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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