NEWSLETTERS & RECOMMENDATIONS - August 22, 2010

Dear Friends and Fellow Traders,

Most aggressive money managers missed the performance trade of the year (the buying of bonds) and some money managers are even closing their doors. According to Barron's this week, the PIMCO 25+ year Zero Coupon Treasury (ZROZ) is up 35% versus the Diamonds (DIA), an index which tracks the DOW, is down 6% over the last year. That's the bad news. The good news is that bonds have now become significantly less competition for stocks with Treasury yields reaching in some cases the lowest yields in recorded history.

Anyone buying and holding bonds today is guaranteed to lose money during the next 5 years even if it's just purchasing power and not capital. The only way this country can solve the current debt crisis is through hyper-inflation and that's coming down the road.

Right now the $64 Million question facing the economy is who's right? In most cases I'd say the bonds. These sharply lower yields are telling us we are in for one heck a recession. Obama bet on housing and employment getting better and pushed all his chips in with his $1 Trillion bet and lost. Yet all is not hopeless. Corporations are in the best financial shape I've seen in my 50 years of investing. Business spending has picked up significantly this year. Many S&P corporations should benefit greatly from overseas growth.

Market Summary:
Given all the plus and minuses, we aren't going to 900-950 with interest rates this low and we aren't going to 1200-1250 with earning multiple compression in stocks given the headwinds we face. I see a wide-swinging trading range that will chop both traders and investors to pieces. (It’s our kind of trading "Nirvana".) This will kill the Quants. But, the real good news is that business cannot meet their pension goals with yields here. Sooner or later bonds will be sold and once this terrible pessimism lifts, (i.e. Dems get beat in November, etc.) business will hire and investors will put money back into stocks. Stocks will, over the next 10 years, outperform bonds from here.

A great strategy for the next 12 months will be to sell any index, selective stocks or calls into strength and then sell their puts into weakness. I'm now looking at JNJ (Johnson and Johnson) and a slew of large tech caps. Buffet has just increased his sizable JNJ position 73% according to his latest filing. JNJ also yields 3.5% limiting the downside.

The last trade I noted in the past week's post had us selling OEX calls and doing a OEX put spread. As expected, the calls, written near highs, expired worthless. However, the put spread broke even with the 490s closing at $4.50. Had we just sold the 470 puts naked priced at over $4.75. The trade would have earned over $10 per trade or doubling our profits.

Biotime:
There is very little I can add here except that I've sold over 300 puts naked and I'm looking to add another 300 more under $5.00.  I will also be looking to increase my call position with new December '10 and March '11 call buys into any weakness below $5.00. Then again I’ll look to sell common on any rally over $6.00. I know that BTIM does not fit the description of a great defensive stock play that most investors look for in today's market. All I can say is that we’ll never get rich in the stock market playing defense. Think Alpha!

Trade of the Week in Summary:
Friday we got lucky again. I suggested in an early Alert Email and on my intraday chart another long OEX call trade scaling into long 485 calls from 1065 down to 1062 level. The low was 1061. We started buying calls small at $0.90. They hit a low of $0.65. We had even more calls to buy in the Chat Room down to $0.40 but we didn't get lucky here.

Friday’s 2:00 PM "B" Chart noted no more hedges and that I expected OEX calls to reach $2.00-3.00. Our upside target was 1071-74. However, the 30" Oscillator hit 62 from a jammed telling us to sell at the first target 1071 or $2.00. The market retested the day's high for the last hour giving traders plenty of time to exit the trade between $1.80 and $2.00. In addition, with proper hedges a Net Trader could have earned another $250-$400 per long call with S&P E-mini shorts. Nice work if you call get it. See Friday’s EOD "C" chart, NET Weekly Money Chart 2010-08-20.

One of the newest NET students in the Chat Room noted he had his most profitable week ever and has made steady progress every week since he started 2-3 months ago. Congrats!

Due to California vacation during the end of August though September 6th I can only be reached by email. I will be in the NET Chat Room September 2nd and 4th (Thursday and Friday). There will be no newsletter for the weekend of August 29 and September 5, 2010.

Keep those cards and letters coming I read every one.

Good trading,

Stan Moore
702.267.0396

NEWSLETTERS & RECOMMENDATIONS - August 6, 2010

Dear Friends and Fellow Traders,

According to a Barron's editorial this week, "There's a problem with the prescription for Marcoeconomic Stimulus". The Barron’s editor feels the government and Fed should no longer stimulate the economy. Most of our problems stem from relentless stimulation dating back decades. Greenspan pushed the "wealth effect" for years. When consumer’s assets rose they felt better and spent. They borrowed against their assets. The economy grew on a mountain of debt that could not be sustained. It's all come home to roost now.

Now, evidence also mounts daily that current government spending (i.e. transfer type and union-saving jobs spending) cannot create net new jobs either. Instead over 1 million workers have dropped out of the labor force since April. Obama and his economic team bet big time that government spending and politically tax-directed monies such as the Clunker Program, coupled with zero interest rates from the FED could force feed private and corporate investment into the economy. Hopefully, Obama has learned that you cannot have a jobs recovery without business confidence and investment.

It's time to try a new economic plan to jump start the economy. Obama could start by extending the Bush tax cuts for all the next 2 years. Then concentrate to build an economy that's sustainable. Barron's editor mentions Richard Florida, an urban planner who wrote the book The Great Reset, that this new sustainable economy is going to be built around new technology, more skill development, a highly-educated population and more human capital. In addition, Americans must save more, invest more and consume less. The generational shift could take over 30 years says Florida. So let's get started.

Can we imagine where the economy and the Democratic election chances would be today if Obama announced the tax cuts were going to be extended for 2 more years six or more months ago? I'd hate to be running as a Democrat come this November if the party leaders don't pledge to extend the cuts before the elections.

I hesitate to say I told you so but it looks like the trading range is alive and well. It's still Mr. Double Dip versus Mr. Softee. Weeks ago the market was looking ahead to a double dip and sold off to 1000 or so in the S&P. When the market rallied rather sharply animal spirits began to run amuck. Higher stock prices brought the bulls out in force and fore told better economic times were ahead. Wrong! Somehow traders believe that higher prices forecast better economic numbers ahead. Some people will never learn. It's not buy high and hope to sell still higher. Today that's a fool’s game. It's still buy the dips and sell the rips.

Given the latest economic numbers the strategists will be all out lowering their own economic forecasts the next few weeks then just maybe we can retest the lows. Remember we will be heading into the worst 2 months of the year, September and October, shortly. If we don't retest the lows we may be getting a new message from Mr. Market that we should all heed.

GS last Friday has reduced 2011 GDP growth from 2.5% to 1.9%. We can now officially throw out the 2011 S&P record EPS estimate of $93.00. I guess we will have to wait at least another year for the S&P earnings to hit a new record. The market already knew this but stock analysts are the last ones to lower their company estimates. Remember the market anticipates as it looks into the future and not the past. Now the market doesn't look as cheap as it once did for these again frustrated bulls.

I just finished reading Peggy Noonan's insightful WSJ piece - America is at Risk of Boiling Over. And our out-of-touch leaders don't see the need to cool things off. Read It! She writes, "You will know that things have reached a bad pass when Newsweek and Time, if they still exist 15 years from now, do cover stories on a surprising and disturbing trend: aging baby boomers leaving America, taking what saving they have to live the rest of their lives in places like Africa and Ireland." She further notes. "I thought of this again when Drudge headlined increasing lines in London this week for Americans trading in their passports over tax issues and the sale of Newsweek for $1.

Here's a few more thoughts. She continues, “Do our political leaders have any sense of what people are feeling deep down? They don't act as if they do. I think their detachment from how normal people think is more dangerous and disturbing than it has been in the past." I feel that since Obama is not on the ballot this November the easiest way to send him a message would be to vote against every Democrat.

Peggy finishes with, "When adults of a great nation feel long-term pessimism, it only makes matters worse when those in authority take actions that reveal their detachment from the concerns--even from the essential nature--of their fellow citizens. And it makes those citizens feel powerless. Inner pessimism and powerlessness: That's a dangerous combination.”

I could not have said it any better. Normally I could care less which political party is in power. Somehow, I've managed to make money and live well regardless of which party was in power. But yes, I've done much better in a Republican administration. However, this time I'm so concerned as to where we're going as a nation that I too am looking to live outside this great country. I'm a pre-baby boomer so I'm looking now, not in 10-15 years. I'm also looking forward to the day when I can get all new body parts from BTIM stem cells and live to a ripe old age into my 100s. Hell, it only took me 20 years to finally crack, understand and write about trading the markets. (See my book The Definitive Trading Bible.) I don't want to die just yet - go BTIM!

Where is our leader's comment like the one I believe came from Bill Clinton, "I feel your pain," when we need it? For all of Obama's smarts he appears very dumb. Still it's hard I believe either of our current or past leaders can really feel our pain when signing books deals valued at upwards of $10 million plus attracting million dollar speaking engagements after leaving office.

Trade of the Week in Review:
Given the disappointing jobs data Friday it was easy to see the market would open lower and right into a T#3 buy level. I sent an Alert Email before the opening to buy calls into the 1110-12 buy zone. The OTM 510Ws traded as low as $0.60. The calls doubled to $1.30 by 10:00 at which time a good sell S&P E-mini hedge could have been entered. If held with only partial profits taken at the retest of the lows could have earned $400-500 per long call. Click here to see the NET Money Chart for 2010-08-06.

I send another Alert Email suggesting that between $0.60-.80 the OTM 510W now an ATM calls would be a great hedge trading option the rest of the day. I thought trading range. Unknown to most of us were a couple of subtle bearish news bits put out. I didn't like the price action at the time near 10:30 so I put out another Alert Email saying I was no longer scaling into the 510 calls.

The market broke lower shortly thereafter. Price settled in to a much bigger, better buy area a 5-day 60% buy level, a large 30" shelf and a new daily chart up-trend line. I sent another Alert Email suggesting buying the 505W calls under $1.00. Shortly, the calls traded down to $0.65 where the hedging and parlaying commenced.

There were two small short S&P E-mini hedges that more than paid for the calls or allowed a NET trade to substantially increase one’s long call position. The market did as NET trades expected, by not going lower, the market was poised to rally. After 3:00, a NET Squeeze Time trade started. I immediately sent an Alert Email to start scaling out into strength. The 505W calls closed worth over $4.40! This is nice work if you can get it. Alas, the original Alert Email 510 calls only rallied to $0.20 and closed worthless.

Vacation Update/Correction. I will now be at the 4 Seasons in Carlsbad CA from Sunday, August 29th until Sunday, September 5th.

Again as always keep those cards and letters coming I read every one.

Good Trading,

Stan Moore
702.267.0396

P.S. I found these rather disturbing real estate mortgage figures that tell us we are nowhere close to the end of this recession, not by a long shot. But its effect won't be hitting us anytime soon. An Excel spreadsheet released from a recent briefing by Mark Zandi and Robert Shiller is making the rounds within the blogosphere. It provides a useful compilation of the underwater equity statistics in the country. In a nutshell here are the observations:

• 19% or 14.748 million of the 77.570 million US households are in negative equity

• 30.6% of the 48.243 million of homeowners with first mortgages are in negative equity

• 21.8% of the 67.578 million in owner-occupied single family homes are in negative equity

• 4.133 million of the 14.748 million of underwater homeowners are underwater by 50%+ meaning the owe more than 50% more than their homes are worth

• Of the 50%+ underwater category, the worst states are California (672K), Florida (423K) and Texas (344K)

• Total Negative Equity in the US is currently estimated at $771.1 billion

• California mortgages have $234 billion in negative equity, Florida mortgages have $79 billion in negative equity and Texas mortgages have $48 billion in negative equity

• $2.4 trillion in total mortgage debt is impaired due to negative equity.

How Mark Zandi, who prepared this spreadsheet according to the meta data, could look at this data and come up with his recent paper in collaboration with Blinder, claiming that the recession is over, is, in my opinion, simply beyond rationalization.

NEWSLETTERS & RECOMMENDATIONS - August 1, 2010

Dear Friends and Fellow Traders,

Ben Bernanke says America's economic outlook is "Unusually uncertain". This comes on the heels of the FED nearly tripling the size of its balance sheet with zero interest rates while Obama's increased the size of the deficit nearly $3 Trillion over the last 18 months.

We had a 4th quarter GDP near 6% with the 1st quarter dipping to 3.7%. The recently released 2nd quarter growth slowed to 2.4%. More forward looking economic statistics are pointing to a further slowdown in the 2nd half. I'm reading by the 4th quarter GDP growth could be as low as 0.8% or as high as 2.8%. We know generally from past economic weakness the economy was flying at this same time. I know it's different this time. Sure!

I won't bore you with the details but just say corporate America have never been stronger than now and are sitting on $1.7 Trillion in cash. The CEO Survey, a very important leading indicator, says 70% of CEOs expect profit growth over the next 12 months. Still, jobs may not recover to pre-recession numbers for nearly five years. Why the disconnect? Small business stinks, period. I could write a book answering that. Let me try to give you a simple answer.

When I look back in history I find our founding fathers did a magnificent job setting up our nation. The gave us a Constitution, a Bill of Rights and a Declaration of Independence, all spelled out in six pages that have stood the test of time and pretty much created this great country. Today, we have new bills that run thousands of pages that I'm sure no one fully understands the future consequences and add to this many similar executive (Presidential-type) orders still to come. This is "Uncertainty squared" or to the 10th power if you're into math. Big business is much better equipped to handle the new regulations. However, this scares small businesses and individuals who don't understand the costs and how it will impact them hence the tale of two economies.

I’ve read thousands of editorials and opinion pieces, mostly economic and finance related from countless sources including overseas over the course of any year. I've attached two of the most recent editorials from Forbes and Investor’s Business Daily. I have read Forbes for over 45 years and even spent one day on Malcolm Forbes yacht. I skim through IBD nearly every day. I have a great deal of respect for these publications. The information below is the stuff that keeps me awake nights. I could care less where stocks trade as NET traders can make money in all types of markets.


Furthermore, our old friend Marc Faber, better known as Dr. Doom, closed the Agora Financial Symposium last week with a speech that pretty much reaffirmed that there will surely be tremendous dislocations to the existing world socio-political and economic landscape and are expected to take place with some very dire consequences for the US too.

I have read Marc's stuff for the last 5 years. He's both a micro and macro prognosticator and he's one of the best pundits out there. He's not negative. He's what I call a realist. Over the last few years he has made significant dollar gains with his picks, if not he’s the most profitable member of the Barron's Roundtable.

I'm concerned enough about the current leadership of the US and where we are headed that I've started early this year to look for another place to live other than the good old USA. I'll let you know if I find one.

Looking ahead to this week:
This will be a most interesting week ahead. Sunday night, China will release a significant piece of economic data much like our "ISM" number which has been getting softer for the last 3 months. Much lower, markets could sell-off hard over night. Then on Monday traders await our own "ISM" number at 10:00 AM. GS put out a report on Friday speculating that the number may even come in under 50. The market’s not prepared for this case. Lower yes but not under 50. Wednesday’s ADP reports their jobs numbers. Friday's jobs top line should be lower with government cuts but should show a small increase in private employment. All these numbers are potentially market moving events. My Alert Email subscribers may want to pay special attention this week.

Until one or more of any economic numbers moves us out of our trading range (between 1000 and 1150), we must continue to buy the dips below 1030-40 and sell the rips over 1125-50. Since the 4/26 highs the market started a move down with lower highs and lows. However, the market has formed the aforementioned trading range since mid-June. Investors/traders will be looking for a breakout above the 6/21 highs of approximately 1128 that will start in many minds a series of higher highs and lows. However, don't chase strength. Trade!

Also, after FED governor Bullard's comments, "The US is closer to a Japanese-style outcome today than at any time in recent history." There are rumors that the FED is considering new measures to prevent the possibility of a double dip. There are a lot of balls in the air at the present time so be alert but all re-enforce the limited downside so continue to buy the market dips.

Review of BTIM:
BTIM is one great trading stock for sure. After trading up to $7.02, BTIM dropped below $4.50 in less than 3 weeks only to rally back to $6.50 last week. My suggested strategy to buy calls on any break under $5.00 and then to sell stock out into strength was right on the money. Buying $5 strike calls under $1.00 was possible as was selling BTIM above $5.50 even as high as $6.50. This strategy would have kept one long while freeing up substantial dollars to buy more BTIM on dips like now. For me, missing this one trade alone made for one very expensive vacation.

To tell the truth I was disappointed with how fast BTIM corrected after hitting $6.50. Maybe the selling was brought on by comments on Yahoo that BTIM may sell stock to raise cash to fund their research. These comments are totally off base given BTIM offered a warrant exchange that will alone generate over $19 million in cash between Aug 31st and Oct 31st 2010.  

Regarding Geron, there was significant FDA-generated Geron news that popped the stock and hurt the shorts rather big time. I'm not sure what this means for BTIM.

Unless the market goes to hell in a hand basket such as war breaking out in the Middle East, I believed we have seen the lows for BTIM this year. I recommend NET traders to buy the dips and sell the rips – the same applies here too.

Trade of the Week in Review:
July was one of the best months in recent years rallying almost 7%. Looking at this number one would think we would not have had an EOM markup but a protect profit trade on. No, that was not the case. Remember how often I told you that most everyone is looking for a larger correction and when it didn't happen the majority of PMs were caught off guard and severely under performed. The only PMs performing were those closet indexers who want to mimic the S&Ps.

Only last week Bloomberg noted the extremely high cash positions that hedge funds were holding and even those HFs that had substantially outperformed their peers over the last 3 years with positive high returns. These same HFs are playing very small, trading less and also holding larger than normal cash. This is another support for trading ranges to continue. No one is really trading aggressively this summer.

On Friday, the market opened below the previous day’s low and just in front of the up turning the 20 and 50DMAs between 1080 and 1085. I was trying to buy the 495W ATMs for $2.00. These never traded below $2.50. C’est la vie again. One of our newest students bought the OTMs and nearly tripled his money and ran. Congrats! See Friday 5 min "C" chart, NET Money Chart 2010-07-30.

After 12:30 there was a good put trade Alert Email to buy the 500Ws near $1.00. Shortly thereafter, these puts went from $1.00 to $3.00 in less than 90 minutes. Later another $0.85 put trade became the best hedge trade in sometime. Once the market held the 60% buy level after 2:00 the markup boys went to work and drove the market straight up into new intraday highs resulting in nearly a $300+ long E-mini profit per put versus losing say $0.90 on the long put. Both put trades could have returned almost 3X in very short order.

In Conclusion:
Remember the market does what it can to screw most of traders most of the time. The market broke the previous day's low to stop out the longs and let more shorts in. The A/Ds were 1-7 negative and bonds were up sharply yielding 2.96%. A Goldman report tells us Monday's ISM number may come in lower than expected. Looking at a really weak market right? So what does the market do next? To screw the most traders, the market rallies to new intraday highs with bonds also at or near the day’s highs. If you are an average trader go figure it out. Most are lost. NET traders know what to expect but we know exactly what happened and I'm sure most traders were badly burned in the confusion.

There is one closing note I will not enjoy imparting to all of you. Our clueless President and his highly qualified non-business political hacks may have just cost US tax payers almost $10 billion to help clean-up the Gulf oil spill. BP said it plans to claim $9.9B in U.S. tax credits based on the $32B charge it reported related to costs for the Gulf clean-up. This will put even more heat on BP. However, it's all legal as current IRS regulations are written. Shakespeare in Hamlet called this "hoisted by your own petard.” I can't wait to see how this plays out.

Keep those cards and letters coming I read every one of them.

Good trading,

Stan Moore
702.267.0396

NEWSLETTERS & RECOMMENDATIONS - July 23, 2010

Dear Friends and Fellow Traders,

It's great to be back from a week of tramping through 3rd world jungles, visiting Mayan ruins, eaten by mosquitoes, swimming with the sharks and stingrays trying to rest and get away from the real world sharks of Wall Street and Obamanomics. The rest of my vacations will be spent lying on a beach somewhere, drinking and licking any wounds. Yes, wounds! Unless you sold all your BTIM like my brother did near $7.00. He truly was relaxed and enjoyed the time we spent in Belize. As for me I sent an Alert Email at 3:00 AM MDT with instructions of what to do when not if BTIM broke $5.00. I must say my email’s strategy worked fine if you were not as cautious as I was out of touch every day while the markets were open.

Remember it was just last March when I noted to all of you to sell everything except BTIM. I fully expected the S&Ps to correct at least down to the 200DMA or 10%. The retreat slightly exceeded that target but stopped just above 1000 for a 15% correction. It's only called a correction until the market drops 20%. (There is no hard and fast definition of the term "market correction", but most will agree that it usually a 15-20% (max) drop in the markets in the midst of an overall uptrend.) Beyond that we call the decline a bear market. At that time the investment world turned very bearish, 980 and lower was just around the corner.

Instead as I noted on my Intraday Charts and a number of times in the Chat Room, I had a reverse head and shoulder target of 1100 on the S&P 30-minute chart. The market rallied over 7% from the July lows and is about flat on the year. During past recoveries markets have rallied sharply with PEs averaging 15 with very low rates and no inflation like exists today where PEs have traded near 17X. Is it any wonder than why those brilliant Wall Street strategists were so bullish so long and were so wrong. Depending on next year’s earnings projection the market is currently trading between 12-13X or very cheap by historical standards. If the S&P goes lower than 1000 the markets will great value. Above 1150, there are strong economic headwinds. Some of these may be lifting and I'll explain why.

So why am I so happy? The Democrats are in disarray. Not only are they attacking one another they are attacking their party leaders. Remember, to pass Obamacare Obama had to promise to personally campaign for those who didn't vote for passage. The bill passed and many now feel that some Democrats have been thrown under the bus by leadership.

Maybe Obama secretly wants the Republicans to win in November so he can blame the Bush agenda again for his failure when he runs in 2012. All kidding aside there is a new wind swirling thought Washington D.C. these days. Cap and Trade is dead. Gentle Ben (or BB), two Democratic senators and other house members have spoken out for retaining the Bush tax cuts. Speaker Pelosi responded that it’ll be over dead body but the Bush tax cuts may be extended for a year or two. The only real question - will the cuts be extended for all tax payers? This is a huge win for equity markets. Just the tax comments by two Democratic senators rallied the market over 300 Dow points Thursday and Friday. Sharply higher taxes was one of the principal reasons I turned cautious looking out into 2010's second half.

Furthermore, B.B. stated the policy should be to not raise taxes but continue spending to further stimulate the economy. And, and another piece of this situation has the Dems caught between a rock and a hard place. There is nothing Obama can do between now and November to get the employment rate down much below 10%. No one in D.C. is in any mood to spend any more money for stimulus. The Dems blew their chances. Even Europe is now in a sweet spot with their short-term issues handled. Traders have 6 months to a year before the chickens come home to roost. It only matters when it matters.

I've saved the best news for last. Recently the FED had been telling us that the markets were growing nicely although slowly. Markets have been screaming for months that the economy was not recovering but getting weaker. Finally, B.B. told us Wednesday the markets were "unusually uncertain." He never understood the situation, the real financial (securitization) situation, like Sub Prime would not affect the economy. The problem was too small. Besides B.B. and the Fed has not even drawn up double-dip contingency plans.  However, for such an event but he would take appropriate steps.

My key point is that he's got it finally but the markets have already corrected and are on a road to healing with or without Fed help. The market is always better with the Fed on the market’s side. Somehow we will muddle through over the next 3-5 months with no serious damage until we see what the election brings. Think trading range for the next six months of, say, 1000-1150 and prosper MOORE.

Additional Thoughts on BTIM
That was one of my most expensive vacations ever as BTIM dropped from $7.02 a few weeks ago down to $4.44 on Monday. Don't get sore buy more. This was nothing more than a bear raid. I've lived through many during my trading years on Wall Street. BTIM's short position increased 72% from 1.9M to 3.3M shares. That’s one heck of a lot of selling to absorb with no up ticks needed. Don't forget there is also an 8M warrant arbitrage going on at the same time that may have resulted in additional sales of BTIM common on the unexpected weakness.

My strategy was to sell as many puts as I could on a break of $5.00 given expected margin selling and buy as many calls as I could. Then I would sell as many shares as I bought calls on the expected Agora Conference rally after Dr West's presentation. I'd hoped to increase my net longs by buying more calls and selling puts but taking substantial $s off the table by selling shares well over $5.00. This way I create additional buying power should the need arise in the future.

I'm enclosing more of Patrick Cox's (an Agora Financial Analyst) comments in addition to the ones already sent this week, given while introducing Dr. West at the conference. Cox notes, "People always think the current state is permanent. They're wrong. The world goes through cycles. We're in the middle of a terrible downturn right now and that means the opportunity out there is amazing. Nylon, television, radio, neoprene and home refrigerators all took off in the Great Depression. Transformational technologies are taking off again, right now in 2010 but no one's talking about them. This is your chance. BTIM reversed the aging of a normal human cell." Cox continues, "BTIM is the most important company in the world." (Emphasis added.) He mentioned five other companies but that's for another time. At this time I'm only interested in Biotime. He did say and, I noted in an earlier Alert Email, that he thought BTIM could be up 500X over the next 10-15 years.

Today, BTIM is a very different company then the one I started accumulating over the last 3 years. BTIM should have close to $30M in cash at year end or almost a $1 a share with no debt. Biotime has over 200 patents and growing and they’re worth over $200M. They own their own manufacturing facility in Singapore, have a great Chinese joint venture and have 2-3 other joint ventures in companies with highly promising outlooks. I could go on. Suffice it to say BTIM's total market cap is only $160M. Cox thinks it could be worth north of $5-8B. Go BTIM!

So, if you still own BTIM, keep your shares and return to my recommended stock selling into technical strength at resistance points and buying dips into support areas. Stocks go up and down. The worst that can happen after you sell a portion is that the stock goes substantially higher and you cry all way to the bank.

Trade of the Week Reviewed
I'll be brief. I sent another Alert Email suggesting another trading range day bound by 1081-83 on the low side and would look at calls there. We would look at puts between 1095 and 1098. The market opened lowered with the 495W puts hitting a low of $1.40 and could have been sold on a scale up between $3.50 and $5.20.

Later in the afternoon we started to nibble on the 500W puts small near $2.00 and scaling in as low as $1. These puts traded as low as $0.60 before hitting a high of $2.50. Here given the market strength more money was made on the hedges while a small amount was lost on the actual puts. See Friday "C" chart, NET Money Chart 2010-07-23.

Keep the faith. I have a few new ideas I’m looking at. HUN is doing great. YHOO has great value and shouldn't be a public company much longer. Someone should really take a buyout crack at them again. Stay tuned.

Good trading,

Stan Moore
702.267.0396

P.S. I will be traveling to Carlsbad, California and staying at the Four Seasons between August 23-31 where I look for to meeting old and new friends. Please contact me so we can setup a mutually agreeable time if you wish to meet.

NEWSLETTERS & RECOMMENDATIONS - July 5, 2010

Dear Friends and Fellow Traders,

It seemed just a few months ago we couldn't get enough of the talking heads on CNBC reminding us how they bought during the '09 lows and were fully invested looking forward to a self-sustaining recovery and a much higher S&P. They were so sure. Now we hear these same talking heads telling us they're just as sure were going into a recession.  Don't trust anyone who is absolutely sure that he or she knows what the market will do.

I have a reasonably good idea of when we reach that point of maximum risk because I've studied fear and greed up close and personal going on 50 years now. Besides, I'm risking my own money, not others. I've learned when it's too good to be true and it's time to take my money off the table and when it's time to get back in. Even then I'm always early by a few months. This isn't an exact science. Reference this fear and greed chart (source unknown).

Back during March/April the market got a bit crazy - momentum reigned while risk was increasing substantially Europe. That's when you become fearful. You just know the crap will hit the fan. The easy money was gone. Right now I'm guessing we're between desperation and panic. My friend capitulation is just around the corner. We could get it very soon if the market crashes through a 1000 in the next few weeks. I would hazard to guess we'll have a new trading range then between 950 and 1040. We can still ton money here trading and looking to own a few of my current favorites.

We must always be looking ahead and not what's in front of us. Now that everything I thought would happen has it's time to look further ahead than our nose and see what could be good news out there. There have been only 3 double dip recessions in the last 150 years. I like the odds the country will muddle through for now.

This week's Barron's cover has a great lead story - a standoff on the Hill. Their call has the Democrats keeping control of Congress this fall but barely. Barron's believe a strengthen GOP could reshape crucial issues. The lead: Get ready for the end of big government. They even suspect Democrats will have to compromise on a raft of tax increases expected next year. Furthermore, if Obama's smart enough he may even move to the center like Clinton and away from his super liberal base. Just when does the market start thinking about this shift. This is the million dollar question but I guess much sooner than later. This is super bullish for the market unless he wants to go down as Carter did after one term. The Democratic states are set to lose a large number of electoral seats after this next census and before the 1012 election. Go Red States!

There is something even more interesting going on right in front of our noses. We now have three carrier battle groups as of last week in the Gulf area. If Obama's intention is peaceful we only need one. Obama would shock the world if he attacked Iran and wrapped himself in the flag as a wartime President. I think this would be a swift strike and could cripple Iran's leadership at a very vulnerable time with great internal unrest. This could be a new beginning for Obama. If nothing else the world would look at Obama in a new light. Yes, the market would drop at first but I'm guessing rally big time shortly thereafter. I believe, a few grateful Gulf oil countries led by Saudi Arabia would gift the US over $200 billion to pay for our effort. Did you know Obama recently visited the King of Saudi Arabia? Now Obama tacks right and all's well with the country going forward. Democrats hold back to GOP and govern from the center. I can dream can't I?

The story of Margaret Thatcher, ex-British prime minister. Thatcher was elected with a mandate to smash the Unions, inflation and make the hard decisions to save the country. The first year her polls were a lowly 25% favorable. Meanwhile back in Argentina General Galtieri was in a similar bind. So to unite the county he declared war on the Falkland Islands never thinking Britain would go to war. The result was soaring popularity for the "Iron Lady" and the rest is history. Here’s the article link.

A Few Thoughts on BTIM's Rather Hard Down Last Week:
Personally, I believe buyers got really caught up in the BTIM entry into the Russell 3000. Last week I noted BTIM even traded over 200,000 more shares after the closing block trade of 1,200,000. This record volume coupled with the strong close may have trapped many newbie momentum buyers.

Furthermore, last week BTIM filed a registration for 1,300,000 new shares and 300,000 more warrants exercisable at $10. Given the shoot-first-ask-questions-later mentality the stock was sold down hard. However, BTIM was only registering the sellers of the Singapore company shares per their agreement. These shares cost $7.75 and will not be sold any time soon. I mentioned that on the Yahoo message board but too late, the damage was already done in a weak market.

I hope you all understand why I continue to preach becoming a more proactive investor/trader and sell a portion of BTIM or any other holdings into strength then looking to buy them back on weakness. I sold stock as high as $7.02 and bought back stock as low as $5.53. However, I wish I could say I sold all (or even most) of my position at the all the high and bought it back at the low. That never happens.

BTIM traders should read Dr. West's blog on the company site www.biotimeinc.com.

For those that have bought BTM on my multi-year stock purchase recommend should be reading this newsletter (and hopefully my Alert Email service) for when to sell and re-purchase.  BTIM buyers who only hold will, at times, find themselves underwater as the stock, as most stocks do, oscillates. Last week’s newsletter explained my proactive fringe trading strategy. As stated earlier, check my IRA transactions and you will find I’m consistently making money with Biotime. In any case, I have always encouraged NET traders (that’s you) to contact me if you have any questions.

Trades of the Week in Review:
The highly anticipated Jobs Number was nothing to write home about. Given the S&Ps were down 8 out of the last 9 trading days the number was not bad enough for the S&Ps to take out the largest 40% buy level at the Thursday low. Here’s the NET Money Chart 2010-07-02, Friday’s C chart.

Expiration option trading doesn't get any better even in front of what I thought might be a dull pre-holiday summer in the city trading day. Again. I sent out an early pre-market Alert Email outlining a trading range day. I had the day’s high bracketed between 1029 and 1032 and the low at 1017-8. Later, I expanded the downside to 1011-2.

I recommended the 470 weekly puts near $2.25. I missed these as they never traded below $3.00 since the market never got above 1028 and into the sell zone. The same 470s traded as high as $9.90. I never looked at the OTMs 465 Ws at a $1.00 which reached $4.60. A few of you caught this trade.

I also recommended before 11:00 buying the 465 weekly calls under $1.00. The calls traded as low as $0.55. However, the market broke the opening range (an ORBO) for a great hedged profit of nearly $375 which more than paid for the calls. Still I quickly alerted to sell these calls. The calls only rallied back to $0.70. I now believed these calls would be too far OTM to be used even as a hedge. I suggested buying the 460 weeklys for $1.50 (then trading near $3.00 at the time). These calls hit a $1.70 at the low or at the bottom of the new recommended trading range.

There was a further strong short-term Oscillator crossover with divergence buy confirmation on the 5" chart at this level. The market rallied just short of the break down level but barely retraced lower into the squeeze time with a nice reversal buy bar. I noted the down's over. An aside, the 465W calls hit $0.10. I did buy them back at $0.30 and told the Chat Room I would hold them. I chickened out plain and simple and related that to the Chat Room. I sold them for a small loss because I was concentrating on an E-mini upside break buy through the 1020 area. This was the shelf we broke down from. You know support becomes resistance and vice versa.

Once the market rallied through and retested the breakout of 1020 (confirmed by rising wedge) the "machines" took over and rallied the market straight up to the 80% sell level but not quite the day's high and the 30" mid Uni (resistance) at 1025+. After the breakout, I quickly send a sell all Alert Email to scale out of the calls into this rally (trading at $4.40 at that time). The 460s calls hit $6.60 but surprisingly the 465s calls hit $1.60. I was a little green but it’s still made nice money on the E-minis. Even more surprising was the 465 weekly puts hit $0.05 at the high and closed 15 minutes later at $1.15-1.20.

It seems given a 30-35 VIX daily range reading, there is never a dull moment in the market even with summer in the city. A few weeks ago I related in my newsletter that I believe these weekly expirations are much more exciting and profitable than the big monthly expo week where everyone is working to pin the market to a nearby strike. Here the machines have little or no interference. In fact, I noted on the early "A" chart and in the Chat Room to be especially alert given the thin staffs minding the store. Anyone with a mind to could move this market with ease. It seems they could and did both up and down with ease.

I hope these weekly reviews give you a bit more insight to these profitable trades especially when most of you are not able to join me in the Chat Room. You should try it. You may find the room entertaining, informative, instructive and profitable.

I’m leaving for vacation (out of the country) this coming Saturday so no newsletter next two weeks and no Alert Emails and Intraday Charts from July 12-19.  I’ll be back at my desk on July 20^th. I will have limited access to email.

Good trading,

Stan Moore,
702.267.0396

P.S. Rick Santelli’s Uncut (And Free) Comments, compliments from ZeroHedge.com.

“Having rapidly become the only person worth listening to on CNBC, Rick Santelli's insights on the economy are now far more valuable than any other guest's on the Jeff Immelt propaganda station. Which is why we were very happy to find that Eric King's latest interview was with none other than Mr. Santelli. The topics discussed are numerous, varied and very critical to our economy, covering such concepts as deflation, deficit spending, bailouts, government spending multipliers, Fed transparency, spending cuts, austerity, the folly of Keynesianism, strategic defaults, direct bidders and treasury auctions, and lastly, tea party dynamics, making this a must hear interview for anyone still on either side of the economic fence, and who enjoys listening to Rick for longer than the 45 second segments the CNBC producers will allow.”

I check the KingWorldNews web site every week as it has some very good info and insightful interviews on economic and financial subjects.

NEWSLETTERS & RECOMMENDATIONS - June 28, 2010

Dear Friends and Fellow Traders,

It's the spending countries versus the cutting countries. In the far corner is the US with new tax and spend programs and in the near corner is Germany et al with their new austerity programs. As long as the G20 doesn't break out in a fist fight both sides will declare victory and with expectations so low no one will be disappointed. That is now but the fight is just starting. Ed Yardeni a top strategist just back from Europe writes, "The La Dolce Vita era in Europe is coming to a close. The EU just can't afford it."

Unsustainable government intervention in economies has now reached its limits. The European crises are a symptom of Keynesian disease. Government backstops of private risk through bailouts and guarantees are ultimately tested by the markets. I believe history has proven the liquidation process is a better public policy than the eventual default of the US bond market. If the housing crisis was handled like the RTC S&L debacle of 1989-90 housing would be on the upswing by now. The pain would have been almost unbearable but it would be over. Instead we are looking at another $1 Trillion in losses at FRE and FNM alone and who knows what else is ahead in the housing market. After all housing is 20% of the economy.

Even today Obama still wants to pass another $130 Billion stimulus program. Currently, the votes aren't there. Politicians are running scared. Furthermore, according to ZeroHedge.com: “The sudden and unprecedented departure of Peter Orszag, the day prior to the US Budget's formalization (which incidentally never happened as now the US will likely not have a 2011 [corrected] budget at all, for fear of disclosing to most Americans just how broke the country is ahead of mid-terms) was due to Orszag's disagreement with the administration, particularly Larry Summer's inability to fathom that reckless spending is a recipe for bankruptcy.”

Larry Summers is the advisor who's championing increasing unemployment benefits to 99 weeks. As the Financial Times of London (FT) reports: "Peter Orszag, Barack Obama’s budget director, resigned this week partly in frustration over his lack of success in persuading the Obama administration to tackle the fiscal deficit more aggressively, according to sources inside and outside the White House." And so, as any remaining voices of reason realize they are dealing with a group of deranged Keynesians, soon there will be nobody left in the administration who dares to oppose the destructive course upon which this country has so resolutely embarked, which ends in one of two ways: debt repudiation, or war. Scary! No wonder I am looking at owning gold for the first time in 50 years.

Late last year I said 2010 would be the year of the stock picker. I was wrong. Everything went up early. Now everything is going down with very few exceptions. Most investors/traders are now more perplexed by the global macro environment than I've ever seen. Specific company fundamentals matter less than ever.

Cramer contends "everyone is selling stocks without reference to how the underlying companies are doing in reality. Sales, profits and cash positions are being ignored." I couldn't agree more. Most economic releases with the exception of housing suggest moderate growth not a double dip. I find the proximate cause for his adoption of "Malaise" is the loss of confidence in our leaders. The public has finally recognized that our leaders are inept and partisan.

In a world weighed down by debt and low nominal GDP growth with deflationary pressures mounting it's a no brainer that risk assets aren't likely to fare well. Fortunately, looking at corporate fundamentals I continue to see favorable results and good forward guidance. Good fundamentals coupled with low interest rates as far as the eye can see can support share prices here. The risk to this view comes if psychology becomes sufficiently negative to impact the consumer and corporate investment behavior.

There is one potential negative technical factor we all should be aware of. If the market fails to rally from here there could be an imminent "Black Cross" in the major averages? Helene Meisler from TheStreet.com notes the 50DMA is falling fast and the 200DMA may soon be rolling over. A penetration of the 200 by the downward slopping 50 will be taken a very bearish sign going forward versus a "Golden Cross" which is the opposite and considered bullish.

Black and Gold Cross Signals by Harry Schiller on RealMoney.com:
Harry explains in his article that over the past 56 years there have been 25 S&P Golden Crosses. A Golden Cross is defined as the 200 DMA being crossed up through by 50 DMA. If one were to take this trade long, the return averaged 33% over 15 month average holding periods. The last time the S&P Black Cross (defined as the penetration of the 200 DMA by 50 DMA coming down) occurred was back on Dec 21, 2007 when the S&P was at 1484. In less than 15 months the S&P dropped more 800 points to 666. In conclusion, long-term investors trade these crosses in favor of the bias.

BTIM (Biotime) Trading – NET Style:
First, there is BTIM and how NET traders can trade a portion of their stock position at the edges. I recommend trading no more than 20% of the total position at the edges. For example, if one has 10,000 shares trade this technique with no more than 2K shares. To do so you must learn to trade (versus just buy and hold) and become more proactive about your holding in you want to make better than average returns and retire in luxury. No matter how much one believes that a stock is going higher in the long term the move is never in a straight line. There are plenty and I mean plenty of ups and downs. Just look at those swings on the notated 2010-06-25 BTIM Daily Chart.

Now I trade BTIM every day for the most part and I make very good returns doing just that. My IRA account up over 10X in 15 months and the account’s only asset (other than cash) is BTIM stock. So, I practice and document what I’m teaching here but I’m going to give you a less frequent and still very profitable way to trade BTIM for your personal BTIM account.

As noted by [1] on the chart, in April there was my breakout Alert Email to buy BTIM. The stock hit new highs and ever since has been in a rough $2.00 trading range. BTIM appears to be in a triangle [see red and blue lines] posed to breakout to the up side assuming the market does not crash anytime soon. See the retest failures ([2]) at or near the $8 highs and the pull back to the 200 DMA ([3]) and the Oscillator is oversold ([4]) then a rally back to the 20 DMA ([5]) and the start of the trading triangle.

I’d like to focus on just a few trades from the May low ([2]) at a retest of the April breakout level and 200 DMA pullback. Here NET traders buy and, subsequently, the stock rallies in a week from $5.25 to $6.50-6.75 and runs smack into its 20 DMA ([5]). I recommended sell some or all of what you just bought. In less than a week BTIM sells off to an 80% buy ([6]). At this level I recommend re-buying back at the edge and keep the profit of the last sell trade to buy more stock if it goes any lower. Another week goes by and BTIM has now rallies to its 50 DMA ([7]). Sell a portion of one’s account using my tranche trading technique. When I say portion I mean trading about ½ of one’s edge-trading position but this is a judgment call.

Shortly thereafter BTIM announces that they will be added to the Russell 3000 on June 25^th. So, I recommend selling the edge position when BTIM hits the top of the down trend line ([8]). I got lucky and sold 1000 shares at the exact high of $7.49 as I was scaling out as BTIM move into the resistance.

Then on Wednesday, June 23, NET traders (who follow my advice) got lucky. A Washington Post article printed an old negative story. The shorts pound the stock down $1.40 in just 2 days to the uptrend support line at $6.09 ([9]). I’m love it in the sense that I sold a good portion of my shares sharply higher and I now have a more profitable opportunity buy back my shares much lower with the upcoming Russell 3000 news on Friday.

I scale into a much larger tranche than I sold. On Thursday I send out a few Alert Emails telling everyone that index equity funds will have to buy 1.1 Million shares come 4:00 PM on Friday! I even post this tip (a most profitable trade) on the Yahoo BTIM message board for the world to know as well. I suspect few really grasp the situation and use this data to their advantage. BTIM’s average daily volume is only 250,000 shares and the index purchase is equal to 10% of the publically held shares.

As expected the stock has goes higher. If it hadn’t been for the 2 days sell of BTIM would have closed Friday at a new high with a short squeeze possible Monday. Anyway, BTIM closes at $7.01 ([10]) on record volume of over 2 million shares! I recommended in the NET Chat Room to sell most of one’s edge position but hold some to see if there is a squeeze on Monday or an EOQ markup come Wednesday then sell the rest and look to buy any weakness. This can be done again and again and again. You get the idea I hope.

The outlook for higher Biotime prices for Monday looks good. The over-the-weekend bid-ask spread is $7.02-8.05. Typically, the normal overnight bid-ask spread has the closing price as the mid-point. This implies that BTIM will open higher Monday and hopefully continue still higher into the EOQ markup on Wednesday where any remaining edge-trading positions should be sold into strength. I may even sell into my core position. I don’t expect the euphoria to last very long. If you have questions, please contact me.

Long term, personally, I believe the stock will be over $20 sometime next year. Go BTIM!

Option Trade of the Week:
I did it – I hit the Trifecta of options trading last Friday. I made money hedging and on both the put and long call purchases. See the NET Weekly Money Chart dated 2010-06-26, Friday’s C chart. I recommended the purchase of both puts and call nearly in the 10:00 Alert Email saying that we’d be in a narrow 10 point or so trading range. Buy the 490W puts under $2.00 and the 485W calls under $2.00.

I missed the first put trade going from $2.55-5.70 but at the lows we filled our calls near $1.58 average (low of $1.35). I (Alert) emailed to scale out into strength starting over $3.50. The calls hit $5.00. After selling all the calls I again recommended via email the 490 puts under $1.50 with scale-in. The low was $0.90 Again I emailed to sell into weakness the puts closed at $3.50.

I was drained between trading BTIM and the options. I must have been in the Chat Room over 90% of the time talking. Was I ever in a great mood. It was great close for BTIM and the Weeklys. Thank goodness this is still one of the best kept secrets out there.

Keep those cards and letters coming,

Stan Moore
702.267.0396

NET Oscillator Release Announcement As of today, June 25, 2010, New Era Trader is releasing the NET Oscillator on NinjaTrader Questions? Contact Support@NewEraTrader.com

NEWSLETTERS & RECOMMENDATIONS - June 20, 2010

Dear Friends and Fellow Traders,

The Euro rallies and all's well with the world. Markets recover smartly. GS cut their Euro estimate from a $1.35 to $1.15 and I and many others raced to cover our shorts as fast as we could.  The CFTC COT (Commitment of Traders) showed that over 44% of Euro shorts were covered. I'm guessing the number is more like 75% today given the Euro rallied from 118 to 124 in the last 2 weeks. In essence the shorts may have rallied the market?

Recommendation: It's now time to short the Euro again into 125 with a 131 stop. This should be a multi-year trade. To survive and prosper most of Europe needs a sub-1 Euro value then we may wish to visit our friends across the sea once more.

I see France is doing its part to cut expenses and help the Euro. On Thursday, France announced they were raising the retirement age from 60 to 62 by 2018. What were they thinking? Greece went from 54 to 68 immediately. I can see more street riots coming from Greece and the PIGS sooner than later.

There is a silver lining in these European debt crises. Our own debt crisis have been pushed further into the future as investors rallied to the dollar in droves. This means our own rates should not rise until late 2011. I can even see a sub-3% yield on the 10 T Bonds. One Fed governor said the Fed will buy long-dated treasuries if needed to accommodate quantitative easing (QE). Our mortgage back securities will not be included in any Fed purchases.

These lower rates are what puts a floor under the markets looking out the next 6 months. So what takes the market higher? This depends on what companies tells us with their 2nd quarter earnings reports. Come July most companies should report excellent numbers. However, for the first time since the correction started analysts have not raised their estimates. Still they have not cut estimates either. Given the softer economic outlook out there we may get a taste a caution from corporations this time around. So we wait.

There is a $95 earnings estimate out there for 2011 and if investors really believed the estimate the market would already be higher. I'm guessing that estimates will come down. This is not good and means there will be no rising PEs so it's difficult to see a significant rally back to new highs. All predictions of higher market levels from strategist or gurus are based on better earnings coupled with higher earnings multiples. Hence creating a rally ceilings and we have a nice trading range for some time. So buy the dips and sell the rips.

Pimco, the largest bond manager on the planet, talks about a new normal for future growth much lower than previously thought. I want you to think of the new normal as greater and more dynamic instability. There are already more Black Swans out there these last 10 years than I ever saw in my first 40 years. I'm worried about the skewing of business and the thought of government with its foot on the throats of all businesses.

No wonder business today has more cash than ever before and just sits on it for fear of just what government might do next to them. All this makes it hard for me to envision a world like this with higher earnings multiples. Instead, I can see a world of continued contraction of multiples and that worries me. No wonder I love investments like BTIM so much. Here I only see bright skies ahead.

In advance of the G-20 meeting this week, China announced the dollar-yuan peg will end. Not quite sure what this means for western currencies yet. Since June, the Chinese 1 Month Repo Rate has exploded nearly tripling in the past 3 weeks from the 1.5% area it traded in for the last 3 years. Friday, this rate was trading at a 52-week and close to all time high of 3.8%. The Chinese market may rally on this announcement but in the long term the limited removal of the peg can't be good with the Shanghai Composite hitting a fresh 52 week low. At least someone is paying attention.

BTIM will be included in the Russell 3000 come Friday. This is a $63 Billion cap index. Think of this - the higher BTIM goes the more shares the funds have to buy. I'm amazed. I never saw this coming. Remember BTIM is setting the stage in 2010 for a great 2011. Patience will be rewarded. (The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.)

Trade of the Week in Review:
The market rallies sharply early in the week but traded narrowly sideways for the last 2 days. So I did something a bit different Friday when I realized we had the making of a narrow trading range. In my alerts I recommended purchasing both a put near highs and a call near the lows.

As always hedging will ton money in this sort of day. I was going for a Trifecta, a winning put and call trade coupled with huge hedging profits. The hedging profits worked for over 3X returns on the bought options. I then noted to sell the puts first going into the 3:30 EOD weakness. The trade was nothing like past winners but a 50% profit never the less!

Next, I suggested piling into the slightly OTM $0.20 calls (originally recommended at $0.50) for a shot at a closing rally. Alas, the calls only hit $0.35 and we exited for a small lost. This trade was almost one for the books but we didn't make any history. I've come to realize that maybe the monthly expiration has many more cross currents that have a tendency toward Pinning equities to Strikes. At the monthly expiration many more traders are involved. NET traders have a much smaller game with the weeklys and this performance bears watching throughout the summer. Click here to see the NET Weekly Money Chart 2010-06-18 (no post-day special notation added) or Friday’s 5 minute chart.

Keep those cards and letters coming.

Good Trading,

Stan Moore
702.267.0396

NEWSLETTERS & RECOMMENDATIONS - June 13, 2010

Dear Friends & Fellow Traders,

I always tell it like it is. Even when it looked as though S&P 1040 would be a distant memory even after that BP wipeout Wednesday, I said, “Trading Range.” There is enough good news throughout the decline to hold the lower end say 1020-40 and a slew of bad news to cap the market somewhere north of 1107. Let the market and the news tell us when this trading range will end.

It has only taken me 15 years to Master the "Rhythm" of the S&P market. Thank goodness it only took about 6 months to understand and master the machinations of the "Machines" or HFT (high frequency trading). I know we love it with these cheap expiration week options. So fasten your seat belt and enjoy the ride.

The best news is this new casino trading mentality perfectly fits with the NET trading methodology. Most traders can't handle the fact that trading one day has nothing to do with the next. We thrive with our gap trading strategy, a technical trend trading Oscillator indicator. The market was down hard on Monday and closed on the lows then rallied on Tuesday and closed on the highs. On Wednesday the market sold off and again closed on the lows while reversing on Thursday and closing on the highs. That's eleven trading days I believe out of 14 we have done this. Getting the picture? The “trading machines” are in control.

To top off this mania a high-ranking SEC employee quit to join an HFT hedge fund on Friday. She knows where the money is and just what does this tell us about future SEC changes or her new employer’s ability to skirt or profit from them? I'm guessing there won't be any changes. My conclusion, like trends, is not to fight the "machines" but embrace them. I still am a great counter-trend trader who has come into the "light". Trends truly are your friend. Today's trends are bigger and come more often than I've ever seen before. "Machines" do not start or end most trends but tend to greatly exaggerate the ones once they begin in either direction. Think of these moves as just much larger buy and sell programs and don't fight them. Embrace the new force out there.

One way to know where the market is going in the next few weeks would be to pay attention to the pre-announcement comments coming from companies regarding their second quarter EPS forecasts. With the many world-wide negative cross currents buffeting our market companies may use these issues to hide management’s short coming. The more early negative pre-announcements the harder it will be for the market to break out of our multi-week trading range. So pay attention.

Our favorite stock BTIM had a very successful annual meeting and first Biotech presentation sponsored by a brokerage firm, Jefferies & Co. The story is getting out there. I would not be surprised to see Jefferies recommend BTIM sometime in the future. There was a lot of highlight information from these meetings sent to our Alert Email subscribers. On Sunday, BTIM announced this, more good news and the stock is up nicely this AM!

Trade of the week in review:
Market volatility is our friend. The weekly option lottery scores big time again. During the day I made numerous statements about the day’s action and I sent out 4 Alert Emails. This time I’d like to present Friday’s NET trading action in sequential format as shown via the NET charts, Alert Emails and the Chat Room:

1. Pre-market Chat Room Discussion. Early Friday the market appeared to be building a trading range. All the bad news was out.
2. Chat Room. As the day unfolded it became apparent that the lows, 1072-5, were going to hold.
3. Alert Email. Before 11:00, I alerted subscribers to start buying the 490 OTM weekly calls under $1.00 small and increase positions as the price declined. Since we were early in the day, S&P hedging would work rather well and permit significant multi-trade parlaying of contracts. The total hedging earned over $300 per call contract.
4. Chat Room and “A” Chart. After 3:00 the down was over and the short squeeze mentioned earlier on the “A” chart was about to take place into our EOD trade time. I let the Chat Room members know, in no uncertain terms, that the calls, selling at $0.45, and almost ITM were a steal buy and might fly.
5. Chat Room. By 4:00, the calls reached $3.50.
6. Alert Email. After 3:30 when the calls were selling over $2.50 I noted sell all calls into strength.
7. EOD Chart. NET Weekly Money Chart 2010-06-11.

A NET training video is underway that discussed the above in detail.  The day was another win for the HFT as the price was driven above the day’s highs in less than 30 minutes. So now I can truly write "How I've learned to love the machines and stop fighting them". A review of Friday’s 5-min S&P chart you can see how HFT helped push the market to new highs in rapid fashion.  This move smacks of being artificial with no real news. I now trust you can see this too.

Keep those kind words coming I appreciate all of them.

Good Trading,

Stan Moore
702.267.0396

NEWSLETTERS & RECOMMENDATIONS - June 6, 2010

Dear Friends and Fellow Traders,

The markets were expecting a blowout Jobs Number Friday morning. Obama and Biden were touting the NFP (Non-farm Payroll) number so aggressively you'd swear "they" had inside information. I used the number of 450-700,000 on my Thursday charts. Goldman raised their estimate to 600,000. Later in the day I was hearing upwards of 900,000 were being whispered. Anything over 600K would be market friendly.

As I’ve said before, there are about 30 or so major news announcements a month that can move markets but only 3-4 really work well for a NET trader. NET traders look for news announcements at price extremes. If the market is expecting good news and is up hard into resistance the prior night we look to buy puts before the news is released and vice versa for bad news with price at lows.

The trading results using this strategy have been outstanding over a total of 28 years but specifically during a five year stretch I noted these trades on my Intraday Chart postings to prove my teaching point. The results showed that if a trader did this trade he/she made money 85% of the time -the winners returned on average nearly 100% while the losers averaged a point lost.

We now look forward to these trades with cheap weekly options – every week. This strategy builds on one of my many trading pearls - buy the rumor then sell the news. We are expecting the news is already priced-in but should the news disappoint we ton money. Besides, there is almost always some profit-taking on the good or bad news as the case may be. We generally only lose money if the news is a blowout in the expected direction.

Thursday night the 495 weekly puts closed at $2.65 and they opened over $6.00 on the lousy jobs numbers but reached $13.00 Friday near the close. So I drank the Kool-Aid (I believed the pre-announcements) with everyone else and I missed a great put trade. The puts doubled overnight and turned into another 10 bagger, the eighth this year. This is a rather simple trade strategy that pays rather large returns.

Why the President touted this NFP number so aggressively is beyond me. I'm guessing his advisors are all truly incompetent and have no idea what the market perceives as good or bad news. It's always bad when the government creates 95% of the jobs.

If I told you over 15 months ago that Congress would spent nearly $1 trillion on stimulus and that 2.5 million more Americans would be without jobs would you have believed me? Never! Even Obama said unemployment would not exceed 8.4%.

What's with that great neo-Keynesian "multiplier" that states that for every $1 the government spends the economy expands 1.5 times in output. However, I believe this multiplier is a myth because this money has to come from somewhere in the private economy, either in higher taxes or borrowing. Taking money from private enterprise to be spent on transfer payments (jobless benefits (now up to 99 weeks), Medicaid expansions, welfare, illegal immigrants, etc.) does nothing to create incentives to invest, take risk or create jobs.

Let's get this through our brains once and for all:  Governments do not create or generate wealth, they can distribute it. The challenge for both parties is simply define how much distribution is "enough". There is no such thing as enough as far as Obama is concerned. Let's get the Government out of their "creating wealth" illusion and start asking how to get business to hire again. Only then will the economy start a real jobs recovery.

Until that shift in thinking occurs our stock markets will be mired in a casino like mentality. I keep saying we're on a "Mr. Toad's Wild Ride" with markets up and down triple digits from one day to the next. Into early last week, the market had a streak of seven days in which the S&P 500 reversed its prior-day direction and closed at its extreme high or low for the session. Traders should love this action but most step off feeling whiplashed. Personally, with my trading style, I find it most rewarding. The velocity of trading (AKA market volatility) has accelerated the ups and downs. In the past we used to take months if not years to correct. Now the market corrects in a month.

Friday's action was nothing more than catching everyone on the wrong side of the market and crushing them. Until analysts' profit forecasts fall a lot further and faster than they have yet the market is locked in a 100-125 point trading range. There is plenty of good news but it will take time to unfold. Commodity prices are settling back nicely. The bad news, for the most part, is in this market. Europe's fiscal crisis is not a new crisis but an aftershock of the global financial crisis. Yes, I'm a bit nervous that the Euro’s erosion could nudge the world back into a recession while European public services cuts could trigger unrest and radicalize the political climate. However, this is just what we need in the US to put us on the right track to correcting our own excesses in government and state budgets. Government seems to only act sensibly in a crisis.

I think I see a bright spot on the horizon. By the end of May investors took out $30 B from stock mutual funds. This one month flight from risk surpassed the $25 B withdrawn in Feb '09 and the $26 B pulled out in Mar '09. At that time in ’09 it wasn't the best time to be a seller of equities.

Trade of the Week in Review:
See this week’s NET Weekly Money Chart 2010-06-04 or Friday’s 5" C chart. Yes, the easy trade was to buy the 495 W puts anywhere in the first hour between $4.00 and $6.00. The puts hit $13. There's nothing wrong with a 2-3X return but forgive me I don't trade for doubles in what I thought was going to be a huge down day. The S&P was down 30 intraday S&P points. On a day like this we can make 5-7X if done correctly.

Personally, I could never buy already expensive OTM puts into weakness. This is not a NET trade methodology. No, we have to work much harder, doing more trades (5-7 versus 1) when buying much cheaper OTM calls near $1.25 and scaling in lower using our hedging profits to buy more calls.

Friday I put out two Alert Emails suggesting buying calls near a $1.00 average price and NET trader must hedge our brains out because there was no way this side of hell the market was going higher until much later in the day. The overall hedge results were posted on the chart. If handled well a Net trader could have earned over $800 net for each long call traded assuming the calls were sold for 80% of their purchase price. If the calls expired worthless knock off $50.

Once the downtrend was established rather early, a trader just sold all rallies back to the 20 expo (MA) middle line while the NET Oscillator traded between -8 and 62. In a downtrend a 62 high reading from a jammed 1/-8 reading at the lows tells us we can continue to short lower rally highs without fear. This strategy was further confirmed by a -1400+ negative Tick reading.

The S&P had a nice 7 point rally into the close but it came too late to help the calls which expired worthless.

I expect I will have a few more “get rich slowly” trades this week if the wheels don't fall off the train. Both YHOO and HUN are above last week’s recommended entry price and still very doable on any further stock weakness.

Keep those cards and letters coming. I enjoy hearing how well some of you are doing. My goal is to get all of you doing well as full-time traders should you wish to so.

Good trading,

Stan Moore
Ph 702.267.0396

---

 Stock, futures and option trading is high risk and you can lose a great deal of money, maybe all, in the process. You agree and understand the risks involved and have made your own assessment of your personal risk tolerances. You agree to not hold NewEraTrader.com and/or anyone affiliated with this site liable for any losses that may result from the information provided. By submitting your membership form, you agree and fully understand that this site and its contents are not meant and were not developed to be viewed as trading advice or recommendations. You agree by viewing the contents of this site or this newsletter that you do so at your own discretion and that you will not hold accountable anyone affiliated with NewEraTrader.com for any losses or interpretations you may have. Past performance is no guarantee of future results.

NEWSLETTERS & RECOMMENDATIONS - June 1, 2010

NEWSLETTERS & RECOMMENDATIONS - May 23, 2010

Fellow Friends and Traders,

All I heard and read last week was that investors were cutting back risk. Traders or investors have been too complacent about risky assets. I see China rolling economically while Europe is trying to bail itself and their banks out. Carry traders are carted out head first while the U.S. is generating Greek-like debt numbers. I'm wondering if HFT traders are next to lose their jobs with the new financial regulations. Investors need to get ready for a whiff of deflation and lower bonds yields. Yet, I feel the world is better than you think. I smell opportunity and, if time permits, I will put out my next 3 Special Situation recommendations soon to our Alert Email subscribers. I'll call this my Get Rich Slowly Program.

One major thing to keep in mind at this point is that a failed rally attempt back to high is a major change in market character. We have not seen this happen much at all during the last 15 months. Many traders, I guess, were/are not prepared for Mr. Toad's wild ride after all while traders were dumping assets like we're headed for new lows.

At this point I'm sure most of the downside risk is off the table for now. Friday's opening sell-off was climatic, to say the least, coming after a 30-to-1 negative Decline-to-Advance ratio on Thursday. I cannot remember a number so poor before. The extra hard sell off came after Germany moved to ban all short sales. Many US investors remember all too well the 28% market decline suffered over eight days after the SEC imposed a similar short ban in September 2008. The first time I was concerned but not much the following times. Most portfolio managers (PMs) around the world will embrace America in this flight from risk. In a sorry state of world affairs we're still the best of breed.

The buy and hold strategy has been dead for some time now. Even PMs are trading around their core positions. Unfortunately, they are selling weakness and buying strength when it should be the other way around. This makes for great market volatility and profits for a NET trader.

Trade Reviews:
The hardest and most rewarding trade in these last 3-4 weeks was to short the indexes (i.e. the OEX puts) to protect and/or make money for one’s account(s). Short traders were taken out and shot these last 14-15 months. Even then my "Put Protection Trade" didn't make enough money to completely protect my large BTIM position. Still, my short protection trade earned a 9X return in the 3-4 weeks the trade was on! However, I can buy a lot more BTIM lower now. BTIM retraced back to the BO level of $5.25-.50 for an excellent reentry.

BTIM's CEO Dr. Michael West will be speaking at a stem cell conference in Boston next week on May 27. Information can be found on the company's website.

For the second time in as many weeks NET traders had another possible 10X+ return in less than one hour. In an Alert Email sent at 2:48 PM I suggested buying the 490 calls starting at $0.75 scaling in lower. See Email Alert date 2010-05-21 2:48 PM, see trade entry below:

From: stan@neweratrader.com Sent: 5/21/2010 2:48:08 P.M. Eastern Daylight Time Subj: New Era Trader / Looking @ 490 calls $.75 scale in throwaway into 1070 ----------------------------------------------------- Hello Intraday Chart/Alert Email subscriber, Again Hedge. Good trading, Stan Moore

and 3:48 PM trade exit Alert Email:

From: stan@neweratrader.com Sent: 5/21/2010 3:48:27 P.M. Eastern Daylight Time Subj: New Era Trader / Hits $1.55 I and I’m already gone. Tonned $s on hedge ----------------------------------------------------- Hello Intraday Chart/Alert Email subscriber, Good trading, Stan Moore

(Of course hedging always helps reduce costs and parlaying allows building a larger position.) Shortly thereafter the calls hit a low of $0.20. I then sent another Alert Email to sell the calls trading at $1.40-2.00. The calls finally closed at $4.40 for a total possible return of 5-22X in about one hour! That’s leverage with minimal risk! See the Friday’s NET Weekly Money Chart 2010-05-21.

I have just finished a two-part 40 minute video on the Put Protection Trade on the daily chart and another reviewing the 20 bagger and related subjects from the 30- and 5-minute charts this week. If you would like a link to this two-part advanced-subject video send me an email.

Congrats to all the put and call traders that scored big time these last few weeks. This success warms the bottom of my heart.

Keep those cards and letters coming.

Good trading,

Stan Moore
702.267.0396

P.S. “The world is on a journey to an unstable destination, to unfamiliar territory, on an uneven road and, critically, having already used its spare tire.” Pimco’s Mohamed El Erian, May 2010

NEWSLETTERS & RECOMMENDATIONS - May 10, 2010

Dear Friends and Fellow Traders,

Over a year ago I was hearing and reading about high frequency trading (HFT), flash orders, predatory algorithms and other such terms but it's only in the last few months that I begun to fully understand what weapons of mass destruction (WMD) these trading programs truly were. Sure regulatory government agencies knew about these programs but the SEC was sold a bill of goods that these programs "provided liquidity" to the markets and were absolutely necessary. So the SEC drank the "Kool Aide" supplied by Wall Street and the hedge funds. Can these guys (SEC) really beat GS in a trial? I don't think it will come down to that. GS is under tremendous pressure to settle. Too bad!

Let's try to understand what really happened this past week especially Thursday. First let me tell you there was no trading error according to the CME exchange!! There was no "fat finger" as "They" would like you to believe. Our market can handle Billion $ buy and sell programs. I've been talking for months now in the Chat Room about this low volume rally. I exited all my equity holdings over 3 months ago to concentrate on E-mini, weekly expirations, option/S&P hedging strategies and BTIM. The returns have been quite adequate. For example, BTIM is up over 60%. Stocks were no longer attractively priced.

By now you've all heard about the "Shadow Banking System" I've talked about for years and how it totally fooled the Regulators. Remember B.B. saying sub-prime was not a problem? I told you it was a serious problem for the markets way back in early '07. Now say hello to "Shadow Liquidity"! So long as there is nothing wrong in US markets, the depth of liquidity that is, the amount of stock, currency, futures, etc. you can trade without materially moving the price is impressive almost certainly the best in the world.

Largely unnoticed and least known among nonprofessional investors, liquidity has changed immensely in recent years because traditional providers of liquidity in the past market makers and other participants are not standing so ready to make the other side of the trade. Today, the machines (computers) are in control! Today, in the snap of your fingers, a computer can complete over 20,000 trades. So now fewer market makers are prepared to make a market for the sake of market health. Potential market makers find that others, such as HFT traders, are jumping in and out in front for pennies and thus frustrating many of these former market participants.

For the first time we have a lot of providers of the shadow liquidity algorithms (there are more learning and entering the game weekly) and high frequency trading accounting for as much as 70% of daily activity. However, it is now very apparent that in market crisis when liquidity was always the hardest to find liquidity now doesn't just become hard to find, it disappears altogether. Market makers now stand aside as panicking orders pour in. The machines can turn-off or even become sellers with a push of a button. Viola! Down 700 DOW points in a flash!

The recent gapping of the market is a symptom that our markets are not functioning correctly. It's a wake-up call that the renowned liquidity of our markets can still disappear in a crisis. I'm now awake and aware just what can happen. I truly believe now that what happened Thursday was nothing more than computers all selling at the same time. The crash was caused by a little boy standing in the crowd shouting out that this rally actually had no clothes or was that an emperor I read about back in my youth.

The sell off came "because there were no real buyers." The Quants had the ability to manipulate the market higher. These HFT-type traders worship at the altar of momentum. When the momentum changed so did the machine’s program. If the SEC, Congress or whoever cannot fix the problem the next 1,500 DOW points will be down and that decline could occur in a day.

You all can't say I didn't warn you recently:
The VIX was 16. Over 90% of all NYSE issues were over their 40 DMAs. China was down 13% YTD last week and is now 18% down. China led the last decline. I told you the Greek crisis was a potential market killer, could last for years and prompts investors to sell risk assets and buy bonds. Providing more debt to Greece doesn't solve the problem. It's like pouring gasoline on a fire to put it out. The strong dollar is killing commodities and those stocks that pushed the market to new highs. We were approaching 1225-50 the last real target for this move up. The market was selling good news and earnings. US taxes are going higher and growth will slow down across the globe. I could go on. I've seen the movie. I know how it ends.

The present:
Today, all good assumptions about the market's solid footing and the enduring economic recovery were most likely swept away. More selling into what seemed to be a great job’s number Friday reinforced that feeling of unease. If nothing else it's a slap in the face reminding us that risk (or uncertainty) remains in the system. Tomorrow, ECB President Trichet could address the debt crisis when he speaks after a meeting of Central Bankers. He blew his first opportunity punish the speculators with his hedging comments last week.

The good news heading into Monday is that EU leaders agreed to setup an emergency fund to halt the spread of Greece's fiscal woes. The size was not specified. Only time will tell if this statement is enough to satisfy the "market vigilantes". To get ahead of this crisis the fund must approach $1 Billion. This amount is needed to buy Greek debt and support the Euro. If the EU cannot punish the "speculators" all bets are off.

This crisis is a serious deflationary event for Europe and will lower U.S. growth. The major problem ahead is whether the financial system gets frozen once again. The banks are in better shape this time. Be alert there are very strong cyclical tailwinds that will collide with very substantial headwinds in the second half of ‘10.

In summary:
The stark choices before the Greek government are not now in America's immediate future, However, a US fiscal deficit (one year debt) at 11% of the GDP and the overall federal debt level is rapidly climbing toward 100% of GDP are testing the risk tolerance of domestic and international markets. A WSJ editorial on May 8th noted, "…all of this ought to be a cautionary tale for politicians in Europe's other high spending slow growth states -- and for those in Sacramento, Albany and Washington, D.C., too. Greece shows that the welfare state model of development, dominated by public unions, onerous regulations, high taxes and other political allocation of capital has hit the wall. Down the road lies more Greek tragedy." So taking for granted Uncle Sam can indefinitely borrow at reasonable rates is a very risky proposition.

Trade of the week in review:
I wish I could say I earned the returns I wrote possible on my Thursday "C" chart or NET Weekly Money Chart 2010-05-07D. I setup a long call/short S&P hedge in the Chart Room earlier but I was trading the hedged side so poorly I exited the trade. I was leaving too much on the table and not letting the short side work better. Hindsight is 20/20 if I stayed in the trade. I could have lost $200 per call option and earned $2,000+ per option with the E-mini hedge. That's a 10 bagger in a few hours. Yes, you did equally well with long puts but you had to pay between $4-$6 depending whether you wanted to buy OTM or ATM and you had to be right about the direction which doesn't matter when hedging. The risk was much higher if you were wrong. OTM calls were less than $2.00. Besides, I was already positioned with the put spread from 2 weeks ago which are now fully paid for I might add. I'll tell you I was kind of frozen in disbelief as the decline started. I tried to sell the reminder (10%) of my long spread puts (paid $3.75 originally) for $45 worth $46-$48 at the time but were too deep ITM. The bid/ask spread was over 10 points with a $6.00 discount bid. The puts did trade at $40!

I did something right in the Chat Room, I bought over 10,000 BTIM for less than $6.10 and sold out over Thurs/Fri for better than $7.10. Nice work if you could get it.

Over the last month I started to highlight why (see above remarks) I was becoming more and more negative on the market. The best way to protect and/or make my students money was to create an OTM put spread just far enough OTM to mitigate the risk yet receive maximum return if the market declined to the 200 DMA.

Two weeks ago in an Alert Email I recommended my first multi-week option put trade in over 2 years - buy the 530 May monthlys and sell the 510s for a $2.00 debit. We even were lucky enough to double our money in a few days so I gave the students a chance to get out and re-enter the trade again at a $2.00. I found out some did. I even increased my position. It's easy to hold a position with no $s in the trade. That's what makes hedging so good. You take all the cost out of the option trade with 1 or 2 hedged E-mini trades.

As of last Friday the OEX closed in the 506 area where a 9X return would have been possible if Friday were the May Expiration. My recommended long put trade is a 6 bagger at this point. It's always up to you when to take some profits. Given the current market situation I see the need for more of these type trades not less. You can use the leveraged ETFs but the put trades define your risk better with more substantial returns like 7-9Xs if I'm correct.

As I predicted, Mister Toad's wild ride went off the rails last week. Lucky we had our put spread seat belts on. Keep them fastened. We ain't seen nothing yet.

Keep those cards, letters and calls coming. I read every one.

Good trading,

Stan Moore
702.267.0396

NEWSLETTERS & RECOMMENDATIONS - May 3, 2010

Dear Friends and Fellow Traders,

Greece seals an historic bailout deal with the EU and IMF for $133 Billion as thousands protest in the streets. Greece now faces "unprecedented" austerity and is caught between Greek bond holders who want faster reductions and voters and unions who are already chafing at existing austerity measures and will forced to give more. I feel no sympathy for the unions who can retire at 45 with full pay and receive between 14 and 16 months pay for 11 months work. I thought we had it made here in the US! At one time I thought unions were good. No more that's for sure.

We won't know what all this means for quite some time but let the market tell us this week.

Hello Greece. We, the USA, are right behind you. A week ago the stock market ignored the Treasury's redemption of nearly $494 Billion in April. That’s a truly stunning number and an indication of just how much cash the Treasury needs access to keep rolling its short average maturity debt load. Friday, investors starting to hold our collective breathe. By the end of this past week, the Treasury has now redeemed $596 Billion in April, an all time world record. Add $47 Billion in Notes and there is almost $650 Billion in redemptions. This number is simply mind boggling. Forget the interest expense. This ever increasing roll is the number one danger to the US and world economy. Should the Treasury be unable to keep issuing shorter and shorter dated debt it is for all intents and purposes "game over." However, this won't happen during the next 12 months. However, I suspect this won’t come to a head in the near term.

BTIM Update:
BTIM announced a $10 Million acquisition last week, an overseas stem cell company. The deal should close this week with more details to follow. Without Friday's sell off I believe BTIM would've have closed over $8.00 with $9-$10 sometime after that. Go BTIM!

Trade Reviews:
Last Thursday, 4/22, I send an Alert Email to all subscribers to protect your portfolios, the first email of its kind in the last 18 months. I bought May 530 OEX monthly puts and then sold the 510s for a $2.00 debit. The spread wasn't doable until the Friday/Monday rally. If the market declined 7-10% the bullish put spread would earn 9X return in 4 weeks. We got lucky and the market declined almost immediately. By Wednesday morning the put spread doubled in value to $4.00. I recommended take the profit and re-enter on a subsequent rally. That's exactly what happened into the Thursday/Friday highs. After Friday's sell off and if given the opportunity Monday exit again or hold the protection a while longer.

If you examine Friday’s NET Money Chart 2010-04-30D you will note not only the above trade but 2 other possible option trades for substantial profits. Wednesday morning, I sent out an Alert Email recommending an OTM call trade on the retest of the previous day’s lows. There was an early warning on the Final Tuesday "C" chart telling stating the same. The market held. Calls could have been bought as low as $1.15 and exited from almost $5.00 the next day. Most of the time, we start scaling into the lows and scaling out into the highs. For example, an average long option costs a $1.35 or so with the selling starting very small over $2.50 with most options sold over $3.50 if you did not hedge against the options.

Thursday, I recommended buying the OTM puts and hedging but selling all puts and taking none home resulting in a profitable trade. That seemed like good advice because the puts traded as low as $0.20 early Friday morning even with GS down over $5.00. The market seemed to be ignoring GS misfortunes. I recommended buying calls and selling S&Ps thinking its range would be quite subdued. I even sold almost 100 OTM naked puts around $0.75 after a brief selloff. I thought for sure these puts would go out worthless. I started getting nervous after 10:30 when it appeared that the market was failing at a morning break down level. I was lucky enough to cover the short in the Chat Room at $0.25. Why I didn't buy the OTM puts long escapes me. I started buying calls and selling S&Ps per another Alert Email. I fought the law and the law won as the song goes. Yes, I made money in the Chat Room but I missed the best trade of the last 6 months. The puts went from a low of $0.20 to $4.70 in a perfect down stair fashion as you will ever see.

Again let me say who needs to trade stocks or anything else with setups like these every week - trade cheap weekly option expirations and hedge and, potentially, parlay your profits.

Fasten your seat belts. Mr. Toad's wild ride (an amusement park ride) just got wilder. I see more of the same volatility in the weeks ahead. I thought I had a nice quite drift down into the summer doldrums. Think again!

Good trading,

Stan Moore
702.267.0396

P.S.  The above firm GS made over $500 Million for the U.S. Government while the 4 turkeys below will cost us taxpayers over $1 trillion. Yet none of them are going to jail where they belong. They are the dumb ones. GS was smart.

Dear Friends and Fellow Traders,

We may have entered and are only two months into a market sweet spot similar to Jul of 2006/Feb 2007 time period where the market rallied over 200 points with all corrections falling into a 25-35 point range.  Until last Friday, the market has held above 10 DMA for 42 days in a row, the longest stretch in 10 years. M&A is about to explode.  NET traders stay tuned.

The U.S. stock market has rallied 8 weeks in a row. All news is treated well. The market is chewing up and spitting out bad news with only a moment’s hesitation. It's spring and this spring a young man's fancy turns to thoughts of speculation as the Fed promises look good and as long as you're not a small business, you can borrow to invest and speculate at almost no cost. B.B. in fact is begging us to speculate, being unfair only to savers, conservative income investors like retirees, CD owners and money fund investors.

Under these conditions we have to be brain dead not to make money. Right? No, wrong! Most rational people understand easy access to credit has been the engine of growth for the past 30 years. Past and present easy credit is now being exposed in the media as a total fraud and has threatened to be dismantled or least turned into a shadow of its past and has created one of the greatest financial bubbles we have ever seen. At this same time the GDP would be solidly negative if it would not for inventory rebuilding, massive government spending and an additional $8-10 billion per month of consumer spending obtained from defaulting on their home mortgages. Yes! Virginia there is a Santa Claus and his name is Obama and his chief elf is none other than B.B. Just remember Bush started the bailouts with a $700 Billion TARP.

Exactly what is going on? It's taken me many years to understand that the game is "rigged." We have "Rigged Capitalism" designed to benefit the rich, connected and powerful - Wall Street and other financial institutions. These powerful forces will always find ways to benefit under any circumstances. Obama's trying but I'm afraid regulations won't work except to force capital to where it's treated better. Don't get me started here. That's a book!

Here’s a peek into our future. GE, one of the world's largest Corps, earned over $10 Billon in '09 but didn't pay a single dollar in US taxes. Their US operations lost $400 Million. Recently 5-6 S&P listed companies moved their corporate headquarters offshore to tax-friendlier countries. The rich will leave too and become citizens of other friendly nations. They will be welcomed with open arms. Frankly, I'm looking too. The "beat goes on" and will only get louder. Thank you Sonny and Cher.

Today and going forward, the major financial institutions are poised to make money like it's 2006-07 again. The primary bread-and-butter of Wall Street and its ilk are new issues and M&A. Deals are in a sweet spot where $5 to $10 Billion friendly deals can now be financed. New issues are coming to market in greater numbers than any time in the last two years. In fact, seven new issues came to market on just last Friday.

Wall Street's Black Boxes:

Right now Wall Street does not want anything to affect their money machine and will do everything in its power to keep the market from a sizable sell off. How does GS et al keep the markets up? There is been much talk from the SEC about "high frequency trading" or AKA HFT. The practice (see below) is frowned upon but it has never been seriously regulated because it's considered necessary to keep markets "liquid." This HFT game is dominated by Goldman Sachs. I've always called these investment banks Hedge Funds in Drag. The leading force, GS, was an investment bank until the fall of 2008, when it became a commercial bank overnight in order to capitalize on federal bailout benefits providing virtually interest-free money from the Fed so it could speculate, manipulate and control markets. Nice work and virtually cost-free money if you can get it.

Just how does Automated Trading Systems (ATS) work? ATS trading uses high-speed computers governed by complex algorithms to analyze data and transact orders in massive quantities at very high speeds and has been likened to a poker player peeking into a mirror to see his opponent’s cards. HFT allows the program trader to peek at major incoming orders and jump in front of them to skim profits off the top. Today it's estimated to account for over 70% of all trading in NYSE equities!

Unlike the NYSE which is only open from 10 am to 4 pm ET daily, ATS trade around the clock and is especially busy when the NYSE is closed, a time when stocks are thinly traded and easily manipulated. No wonder I now find trading the overnight S&Ps easier than the intraday session. The market moves in more or less straight lines.

Tyler Durden notes on the Zero Hedge web site, "As the market keeps going up day in and day out, regardless of the deteriorating economic conditions, it is just these HFTs that determine the overall market direction, usually without fundamental or technical reason. And based on a few lines of code, retail investors get suckered into rising market that has nothing to do with green shoots or some Chinese firms buying a few hundred extra Intel servers. HFT are merely perpetrating the same Ponzi market methodology last seen in the Madoff case, but on a massively larger scale."

The above quote may help explain that when the market drops into or even falsely breaks a "support area" for lack of a better word these computers can spring into a buy mode for no apparent reason and force the shorts out and the longs to re-enter. I spent a considerable amount of time analyzing what "They" do to manipulate markets in my new book, The Definitive Trading Bible Advanced Edition. In today's market, little volume is all you needed to turn the market. The ASTs have become the ultimate dip buyers or sellers when the need arises. WOW! I see this all when I'm in the Chat Room just by reading "price action."

The Present:

We've had this powerful rally from the February lows without any meaningful correction with economic data and earnings all moving in the right direction."If you like last week’s EPS numbers, you're going to love next week," said Art Hogan, chief market strategist of Jefferies & Co. In addition, 83% of earnings so far have surpassed analysts’ expectations. I believe the S&P can get to 1227 before resting. At this level I'd look to take trading profits and start looking for some typical post-earning retreat.

Why? The latest sounding of advisory service opinion by Investors Intelligence tells us we are at extremes of bullishness. We have reached a 3-to-1 bulls-to-bears reading (53% Bulls to only 17% bears). This has happened only 4Xs the last 10 years. These setups, after the correction has run its course, offer traders and investors great buying opportunities. The biggest 3-1 bull sell-off came way back in 1987. Not exactly a time to be super bullish. Given the above games "They" play with their new computing toys, this time may be different. However, somewhere down the line investors and traders will have to face the prospect of weaker consumer expenditures, higher interest rates and taxes eventually. God help us if we ever get a VAT tax; the spending will never end. We’re no different than the PIGS of Europe.

Then we have Greece and the rest of the PIGS. The current Greek bailout may fail to ease investor crisis angst. Trust me this will end bloody, literally. I'm more convinced than ever that there will be a government overhaul in less than 3 months, hopefully peaceful but more likely if the IMF bailout in fact occurs and continues a vicious spiral from financial crisis to sovereign debt crisis to a new banking crisis in all the PIGS. GS is telling clients to buy PIGS bank Credit Swap paper. PIGS bank deposits are starting to flee for safer institutions. After awhile "Government Guarantee" will be meaningless. I am never comfortable with things that are driven by politics rather than fundamentals.

Next week the big show between Goldman's Blankfein and the Senate's 30 year veteran Carl Levin:

The show will be billed as Wall Street’s smartest versus the Senate's toughest that could provide a seminal moment in reckoning after the current financial crisis and similar to like back in 1933-34 which generated new regulations and the SEC. Testimony is scheduled to begin at 10 AM ET, Washington on Tuesday, April 27th. Bloomberg believes the hearing presents a "lose-lose situation" for GS because the firm is fighting a battle over its reputation as well as the law. I expect this will be no walk in the park for Blankfein like he received in front of the Financial Crisis Inquiry Commission led by a California state treasurer in January of this year. Levin's hearing should have serious implications for financial regulations. Companies involved with Levin in the past emerged with one hell of an image problem afterwards. Go Levin!

Maybe just a harbinger of what's to come - the China market was down almost 5% last week and now is down almost 10% YTD while we are almost 10% higher. China led world markets lower in the 2007-08 decline. Enjoy it for awhile longer. Not to be trite, but most of the above problems will only matter when they matter. Right now, party like there's no end in sight. I'm wondering if B.B. and Obama will ever get us off this “sugar” high until it's too late. The next correction will make the last one seem like a mere dip in the road. I hope I'm wrong. I'm guessing we have at least 3-4 years before we have to really bite the debt bullet. By the way, new numbers coming out on Obamacare tell us we're looking at a $300 Billion short fall now. I'm guessing the shortfall will be 5-10X that new number.

NET Trades of the Week in Review:

There is no doubt we got lucky with the GS fraud news giving us multiple 20+ point trading setups. See the final 30" "D" chart for Friday, April 23, 2010. If you were so inclined there was a perfect IRA Tax Trade setup Monday-Wednesday morning using OTM calls for nearly a 3X return. This is the 1st time in 17 years I can remember 2 trades during tax time, one before and one after. I did write that the option trade may be tricky because the trade was broken up by a weekend and no cheap options available for the second trade. However, the range expanded rather nicely.

A second option setup, a put trade occurred Wednesday at the opening when the market rallied back to the year’s highs and the top of the newly formed trading range of 1206-10ish where I recommended puts. The OTMs traded as low as $1.25 only to reach $7.40 the morning of the 22nd or Thursday. That same Thursday morning a call trade setup near the week’s lows could have been entered. The OTM calls went from $1.25 to $5.50! I was trying to scale into the week’s lows and missed the calls.

Friday morning at 9:00 before the opening, the first of seven Alert Email recommendations was sent to buy puts, scaling right into the 1210 highs. The average purchase price was near $0.75, the low was $0.50. Remember the lower the option goes the more we buy at each traunche (think 1-3-5 or any such combination). That way we end up with an average price much closer to the low. We closed the trade out as high as $2.50 before 11:40 am with numerous E-mini hedged profits totally upwards of $250 per put. Remember, we're long a $0.75 put and sold over $2.00.  Add another $250 gives us a nearly $4.00 profit or about 5X.

After exiting the puts I looked at the calls. The ITMs were over $3.00, not our price – too much. The OTMs were $0.15-0.20 and 6 S&P points OTM. I didn't see an expanded range possible so I passed. A number of students in the Chat Room and outside loved this "Throwaway" call price. I won’t say it very often but I was wrong big time! The market continued to rally into new highs. The calls hit $2.80 before closing at $2.65 for a 15X return. See Friday’s C chart, NET Weekly Money Chart 2010-04-23.

I continued with the puts, hedging and parlaying and sending more Alert Emails. After awhile I realized the market would most likely BO to new highs. Had I suggested a simultaneous hedge like last week, long E-minis and long puts on the BO, the trade would have been a big winner. Because we were already long puts and sold our long hedges we had a higher average price, say $0.50 versus $0.20, for the long put. This trade was only a push or breakeven.

I will conclude by saying who needs to trade stocks with option profits like this every week. Keep those cards, letters and calls coming as I read them all. I must say I received a very gratifying call from a student who started with me over three years ago. He has been trading for over 20 years and has never seen any other professional take the news and give it meaning so a trader can use it to make money. He has seen this over the last three years. Yes, I am blessed with gifts to be helpful to a few of you out there. Said a bit differently, I spend almost six hours a day preparing to be gifted. Trading is in my blood and my life. Your kind thoughts make it all worthwhile. For this I am most grateful. I thank you all. I could have packed it in more than once but I'm still here.

Good Trading,

Stan Moore

702.267.0306

P.S. I may be in California next weekend for business so there may be no newsletter next weekend or Chat Room the following Tuesday.  I’ll let the Chat Room subscribers know as to how things develop.

NEWSLETTERS & RECOMMENDATIONS - April 17, 2010

Dear Friends and Fellow Traders,

This was supposed to be the week of earnings and the S&Ps soaring to 1250 but the week was overshadowed Friday morning when the SEC charged Goldman Sachs (GS) with fraud. Most traders and investors shot first and asked questions later. Financials were hit hard in the market selloff. The timing couldn't have been worst for the financial industry as big banks had been aggressively making their case to resist increased oversight on their derivatives trading operations. Obama quickly announced he will veto any bill that does not regulate derivatives and have them trade on an exchange. Finally, one of my favorite naked puts sales, the CME Group, should benefit greatly.

Months ago on 12/24/09, Gretchen Morgenson of the NY Times exposed GS practice of these deals. See Banks Bundled Bad Debt, Bet against it and Won. To date, while appalling, the case has not been made that these CBOs were fraudulent. This week’s hammer blow will unleash waves of “Schadenfreude”. It seems the Germans have a word for everything. This means “satisfaction or pleasure felt at someone else's misfortune.” which seems quite apt here. GS is now the most envied and yet hated company in the world.

No where have I seen anything in the media regarding the GS answer to the SEC charges. I'll provide a few salient points. First, GS answered that extensive disclosure was provided. Second, the risk associated with the securities was known to the two rather large institutional investors who were among the most sophisticated mortgage investors in the world. Third, in normal business practices, market makers do not disclose the identities of a buyer to the seller and vice versa. Fourth and finally, any investor losses resulted from the overall negative performance of the entire housing sector, not because of which particular securities ended in the referenced portfolio or how they were selected.

A class action lawyer commented on a cable network channel Friday that this case is analogous to a client approaching GS asking that GS build him a house where the client would supply the building materials which were highly flammable. GS would then find a buyer for the house and then the client would take out a fire insurance contract and wait for the house to burn down shortly to collect the insurance proceeds. That's nice work if we could get it.

What do I think and what this means looking ahead:
My first observation is why now and why in the middle of a trading day and not before or after hours? Maximum impact! Punish investors! Populism! It's Obama and Main Street against those greedy Wall Street fat cats. Everyone is talking about it now. We've pushed rampant spending, record deficits, health care and the Tea Party right off the front pages. It's officially the golden age for attaching the world's leading investment bank. It's likely other suits will follow.

Last year I was really happy to having Obama as President, looking forward to a breath of fresh air. Instead now I find out Obama is out to control huge chucks of the economy: ENERGY, PUBLIC EDUCATION, NATIONAL HEALTH CARE and FINANCIAL INSTITUTIONS. We even threw in the AUTO INDUSTRY for free. It's hardly a coincidence. I suspect that the SEC’s move against GS comes as Congress is wrangling over financial reform. The complaint, whatever its eventual disposition strikes me as odds-on favorite to yield a much tougher reform bill as appeared as early as this past Wednesday.

Many more reasons for this action come to mind but that principle reason is that if the SEC can get a favorable ruling or a large settlement out of GS, the SEC can use these settlements as leverage in future suits against other banks and financial institutions. This scepter of potential lawsuits will chasten other institutions and potentially bring them to the table to avoid costly and disruptive litigation especially as Friday morning's news had hardly sunk in before Goldman Sachs stock closed down over 12% or a $10 Billion cap hit. Ugly!

There is a rage of populism which spilled over at Thursday's nationwide tea parties. These people may not quite understand what Wall Street and specifically Goldman Sachs does but it seems these Tea Partiers are mad as hell to see the financial sector enriched as the traditional economy crumbles. While the SEC has more independence than most other government agencies the commission's actions are ultimately computed back to the President and it's good press to go after the great Wall Street money machine. Just a reminder - Obama greatly rewards his friends and seeks to punish his perceived enemies. Obama makes former Presidents Richard Nixon's famous "Enemies List" now look like child's play in hindsight.

Summary:
Regardless of the outcome of the GS suit investing in financial stocks may never be the same. Risk is back according to the WSJ's Saturday's Heard on the Street column article, "Goldman's Grief may be Shared". The article goes on the relate, if reform results in stricter than otherwise previously expected legislation surrounding derivatives and trading activities as proposed by former Federal Reserve Chairman Paul Volcker and the Obama Administration, profits may suffer elsewhere. However, the bigger risk for Wall Street is how much the latest assault damages reputations and upends profitable activities. Financials are one of the largest sectors in the market and one of the fastest growers looking ahead into the next few years without further restrictive legislation.

Right now all I can say is we have to watch this case closely. Until then the market just might consolidate or even correct for awhile. NET traders do make more money with a two-sided market than only one.

Meanwhile, the fundamentals continue to look good. The U.S. is no longer the only train pulling the economic engine out there. Asia is exploding so much so that some of the BRIC countries are raising rates. The FED is on hold. Nothing should happen to upset the apple cart before the late June FOMC meeting at the earliest. So party on but be alert.

Trades of the Week in Review:
The good news was there was a great IRA Tax Trade for the 17th straight year which I'm happy to say a few of you caught for a handsome return. Congrats! The bad news, for me, is that I missed it for the first time in 17 years. The market over the last 60 days had not corrected by 1%. Tuesday's action had the market pulling back the usual shallow 10 S&P points but to a great 40% buy retracement at a multi-week breakout level as well. In the Chat Room I thought we could wait and buy the calls on any retest. A retest if this level never happened. The S&P rallied straight-up right into the close and into super INTC EPS number. The OTM 555 calls rallied from $0.85 Tuesday morning to a high of $5.60 Thursday afternoon from a 5X return versus a normal 2-3 bagger.

The Tax Trade has us buying any weakness into 4/13-4/15, staying long generally 2-3 days as IRA monies are invested into the Equity markets. See the 30" Friday NET Money Chart of the Week 2010-04-16D. This year sell offs of any size during the last 8 weeks were near impossible to find until Friday.

Thursday afternoon I sent an Alert Email to buy the ATM 555 puts (trading over $3.00 at the time) near $2.00 and scale-in lower as the S&P retested the 1209-11 area a multi-day (MD) and multi-week (MW) Target 2 level from both the 5" and 30" time frames. The puts traded down as low as $2.00 and hit $12.00 at Friday's lows or 6X was possible!

I must say I did send an Alert Email to close out the puts near $5.00 but I recommend buying the 550 calls near $1.50. Again I emphasized the hedging because the market wasn't ready to rally yet. Some of you did hold the puts. Way to go! We lost over 70% of the call price but 2 S&P E-mini hedged trades netted over $400 profit per long call for over 3X returns and more if you parlayed once. Before 12:00 I sent another Alert Email to start hedging with the 545 OTM calls as the 550s were too far OTM.

The 545s calls rallied from a low of $0.65 to $2.30 quickly but pulled back to $0.50 for another long setup. The calls then rallied back to a $1.50 where another Alert Email recommended a sale. See Friday 5" 2010-04-16C chart. Overall I put out 7 Alert Emails on Friday for a record.

I'll count these 2 call trades as my IRA Tax Trade for over a 2X return plus hedging profits which only increased the return. That’s 17 straight winners over 17 years. I truly do not know of a better trade and it only goes long and works well in bear markets too.

Keep those cards and letters coming. I read everyone of them.

Good trading,

Stan Moore
702.257.0396

NEWSLETTERS & RECOMMENDATIONS - April 11, 2010

Dear Friends and Fellow Traders,

Why is 1200 important? 1200 was the last leg down in July 2008 and became initial support if you look on the left-hand side of the daily chart. You further see the market rebounding 10% into September 2008. Then the S&Ps broke 1200 support, experienced a weak rally and from that point it was a near vertical descent in a matter of weeks to the 850 level. Now previous support at 1200 becomes resistance the first time back.

The Outlook:

Given the market’s 70% rally since the March lows someone new to the market might even think there is in essence an SEC ban on all selling. Recently, stocks have risen in over 70% of all sessions for over double-digit gains. Declines were less than 0.5% during the last two months. Mondays are almost guaranteed a 1% rally with all the mutual fund cash being put back to work after the weekends.

Barrons writes this week in the Trader Column - "Let's not even pretend there's any suspense: Come Monday companies will begin reporting first-quarter earnings that will be nothing short of great". Analysts are penciling in a 37% rise in first-quarter profits versus a rather weak '09 quarter.  The reporting season will lead to blowout year-over-year comparisons for many firms.

The only real question we have to answer is will investors be looking for more?  Even if the earnings come in much better than expected will investors who have bought the rumor now be looking to sell the news. We know the S&Ps have seen six straight weeks with a gain of more than 6% over the stretch. The economic data is improving by leaps and bounds. Still the last two rather good quarterly releases has seen investors taking profits.

There is even more good news expected from the EU. Over the weekend investors are hopeful of news for a German below market rate interest rescue plan. Bloomberg writes: Germany said to accept compromise on loan to Greece.

Just released news on Greece:

Eurozone finance ministers agreed to specific terms for possible aid for Greece saying they would provide up to €30 billion for the country in the first year of any support program. The finance ministers agreed Greece would pay an interest rate of around 5% for a three-year loan program, according to European Commissioner for Economic and Monetary Affairs Olli Rehn. If there ever is a time where the markets should rally through 1200 and into a larger resistance near 1225-50 this is the time.  Thereafter, let the profit taking begin.

What can go wrong? But it won’t happen in the near future.

I truly believe the biggest geopolitical risk, Iran, is off the table. Obama and Clinton appear resigned to a nuclear Iran. Israel will not attack. I cannot believe how Obama treats our friends and welcomes our enemies.

Bloomberg in a commentary entitled the next "Big Crisis" is unfolding in the muni-bond market: The author Joe Mysak touched on some of the problems. I'll sum up his comments with one rather bleak thought: he believes that conditions in the municipal bond market almost match exactly the conditions that existed prior to the blowup that sparked the worst recession since the Great Depression. Barron's had a great piece as the lead story a few weeks ago. This will only matter when it matters.

I have some further thoughts on the "Greek Tragedy" playing out. Right now markets (investors) around the world are buoyed by a cyclical recovery and have yet to recognize the complexity of the situation. When they do it will also become apparent that Greece is part of a wider and historically unfamiliar phenomenon that of a simultaneous and large disruption to the balance sheet of many industrial countries and represents a significant nontraditional headwind to growth and financial stability. Fasten your seatbelts we're in for a bumpy ride.

To further complicate matters we have two divergent views from equally intelligent analysts on interest rates through year end. The two best economic forecasting teams of the past two years couldn't disagree more about where treasuries will go next. Morgan Stanley believes the ten-year yields will rise to 5.5% this year, the highest estimate among top treasury dealers. Goldman Sachs, on the other hand says yields are headed down to 3.25%. You now understand why I have no position in the Bond market long or short. We won't know who's right for awhile so enjoy the ride.

Trade of the Week in Review:

Overall the market was rather quiet in front of what should be an explosive week of news ahead. Our best trade of the week was a put trade. An Alert Email was sent out before the Friday opening. I suggested buying the 545Ws under $2.00. The puts traded briefly at $1.80 on the gap-up opening. I mentioned in the Chat Room I was bidding $1.75 so I missed the 1st trade setup and canceled the order.

Before 10:00 AM and into the next rally I sent another Alert Email suggested a second put with a buy now. The market rallied rather quickly. I started buying puts small around $1.40 and finished averaging in at $0.95. The strategy is to start small and buy more options at each tranche buying lower, i.e. 5-10-15. This way you are profitable the minute the market turns in your expected direction. The trade was put on in less than 10 minutes and was over in 30-40 minutes. I mentioned in the Chat Room my average price was $1.15. I scaled-out selling some as high as $2.50 on the bid. My average was $2.15. Great way to start the day in what I said would be a rather narrow trading range day. See the linked NET Money Chart dated 2010-04-08, Friday’s 5 minute chart.

Later I sent another Alert Email to re buy the puts. By that time the trading range was obvious the puts never traded back to the lows. The puts did hit $1.10 but only sold down to $2.00. I mentioned later in the Chat Room near 3:30 a potential Simultaneous Hedged Trade. I recommended buying the S&P E-mini futures on a breakout (BO) of 1189.50 and scaling into puts. We did not want to buy the puts first but only into the BO they'd be $0.15-0.20. This is the perfect throwaway protection trade because the puts increase in value nearly point for point should the BO fail.  Yet the E-minis could run unlimited up but we'd only lose $0.20 or so but make $50 every point the E-minis went up.

Had a NET trader gone long 20 E-minis and long (short direction) 25 puts the result would have been nicely profitable. The trader loses $500 on the puts yet makes over $100 per E-mini or $2,000+ in less than 40 minutes. The options could have been traded in much larger quantities. You can do the math.

This week we have an IRA Tax trade setup for all NET traders. Be alert!  I've been teaching this trade for 16 years and the trade has averaged 3X returns in 2-3 days. No losers. It's now in The Definitive Trading Bible going on 3 years.  All you need to do is to register on the New Era Trader web site or call me to get the details.

Good trading,

Stan Moore
702.267.0396

Stock and option trading is high risk and you can lose a great deal of money, maybe all, in the process. You agree and understand the risks involved and have made your own assessment of your personal risk tolerances. You agree to not hold NewEraTrader.com and/or anyone affiliated with this site liable for any losses that may result from the information provided. By submitting your membership form, you agree and fully understand that this site and its contents are not meant and were not developed to be viewed as trading advice or recommendations. You agree by viewing the contents of this site that you do so at your own discretion and that you will not hold accountable anyone affiliated with NewEraTrader.com for any losses or interpretations you may have. Past performance is no guarantee of future results.

NEWSLETTERS & RECOMMENDATIONS - March 21, 2010

Dear Friends and Fellow Traders,

By Sunday night, by hook or crook Obamacare will be here. Either the market doesn't care or it thinks this is now no big deal. Wrong! This bill vastly accelerates the march to a totally state-driven health care system, Obamacare is really about who controls the country's medical services. Next the Dodd Financial Reform Bill if passed in its present form will give regulatory control of the financial system to the government. Add to this if there is time before the November elections, we will get Cap and Trade, Check Card (Walmart finally gets unionized) and a major immigration bill legalizing all illegals. The later will completely overwhelm medical care as we know it today. I feel if this movement goes unchecked this is the end result. I hope I am wrong. The market is not prepared for this chain of events.

I believe this is one of those times where the markets get it totally wrong like they did with Sub Prime back in 2007. Right now, I don't expect markets to price in these immediate concerns or the strong structural headwinds we will face next year as most of this is currently out of today's mind set. Today, investors have only thoughts of the liquidity swashing through the system and markets driven by strong technicals in what most believe is a normal cyclical recovery.
Presently, markets are only focused on the April 2 Jobs Report. Funny, the report is scheduled to come out on Good Friday morning when our stock markets are closed. Think the government will want to release the data Thursday? Otherwise that will be one long weekend to digest the numbers. I'm hearing job numbers could be as high as 300,000 with 400,000 the whisper number. I'll have a better idea how to trade this expectation as we get closer. Meanwhile I believe the market wants to rest until we get into earning season in a few weeks.

The markets have broken through the January highs. We have experienced one wow of a rally. We have rallied about 50 S&P points over the last 20 days. That's 2.5 points a day. This lack of volatility is killing active traders. Most of the big money is sitting and waiting for a better setup to trade.

I have learned over many years that over 90% of the time markets oscillate in tradable ranges while 10% of the time a good NET trader/investor can make a killing. Again, don’t confuse a bull market with brains. Since most investors can't or don't have the necessary skills to benefit they can only perform if they are in the markets when markets move. Therefore, investors must be invested all the time and hoping. NET traders are fortunate because we have the skills and knowledge to take advantage of those 10% times either though the wide-ranging and special financial instruments and techniques. For example, the use of cheap expiring options or a very good fundamental understanding of markets. Right now I and other NET traders are out of the equity markets except for BTIM. I am watchful, waiting and actively trading Thu-Fri cheap expiration setup. So far I've counted 6 ten baggers this year. We're happy with just pieces of them. Then again we have one additional arrow in our quiver. NET Advanced students know this as a great time for "Hedging and Parlaying".

Trades of the week in review:
There was little to do early in the week but trade E-minis for a few points each multiple times a day. Thursday afternoon I put out a call buy Alert Email for the OEX 530s under $2.00. The calls traded down to $2.45 and closed at $4.00. On Friday morning, the call opened at $4.50 into a Tenet #3 sell. I related in the Chat Room that the first 10 minutes were a further Expo week mark-up for the expiring calls and for "They" to get short into the retest of the year's high. "They" would lose money selling calls this month but "They" never get mad they get even. By late Friday the market dropped 15 points "They" got even by selling S&Ps or shorting other indexes.

Everything happened in the first 5 minutes. Personally, I missed the put trade and the E-minis. Things just happened too fast. A few early callers bought the $0.50 OEX OTM puts against my wishes. I was trying to recommend the 530s ITM put under $2.00 but a trader would have had to been in before the opening to get the $1.60 low price. After that you were buying put offers (or paying too much). The puts did hit $6.00 two hours later. In this case, taking offers doesn't look too bad in hindsight.
I tried to send out a sell E-minis or buy puts (sell/buy) Alert Email out after the market gapped (at the opening) higher than the overnight high. But the rally failed immediately and went straight down for the first 20 minutes or so. A few students in the Chat Room got short S&Ps on the opening. Those OTM puts went from $0.40 to $1.70. Congrats out there!

After 12:00 with the market stabilized near 1152-54 just above the 1150 breakout major support area, I sent an Alert Email to buy the same 530 OEX calls under $2.00 again with the usual caveats about having to hedge the market. I further noted that the market wasn't ready to rally until later. The first put trade under $2.00 occurred at $1.70 when I related in the Chat Room I was starting to buy small. I averaged into more at a $1.00. All this time I was selling S&Ps and using the profits to buy more calls. By 1:30 the market was eroding premium fast in the 2-3 point range occurring over 2 hours. I was still buying calls down to $0.50 with my hedging profits. I wrote on the 2:00 intraday "B" chart as long as 1150 holds into the late sell-off we should get a strong closing rally. At one time near 2:30 I was long 250 calls near $0.90 and short 200 E-minis over 1155. I started to exit calls near $1.00 into the 2:30 rally at the 40% intraday sell level. One of my students in the NET Room remarked “I was building a pyramid.” Inferring I was building an ever larger option trading position after starting with only 10 option contracts at $1.70. Restated, I was parlaying with my hedging profits.

I then told the Chat Room we can expect one more retest into the lows, cover and then we should get long. After the market sold off, I covered some of my 200 S&P shorts as low as 1151.50. The market bottomed at 1150.25.This area, previously mentioned on the intraday “B” chart, was the perfect RT/F and EOD long trade setup. My short hedge E-mini trading made a small killing. However, I couldn't sell the calls as they were OTM by a $1.50 and offered at $0.05. Still knowing a rally was coming, I chickened out and sold the calls at $0.10 and regrettably left $8,000 on the table when a few minutes later they closed at $0.53. The noted trade was good for 6 points into the close. Cie la Vie! See attached NET Money Chart 2010-03-19.

The Breakout Trade of these last 2 months:
In last week’s newsletter I noted that I thought BTIM looked finally ready to breakout of a multi-month triple/quad top 60% Fib sell area. Click here to see 2010-03-19 BTIM daily chart. I even suggested profit taking on a portion of one’s investment into this expected strength. Trading forces were aligned. I detected strong buying in the face of warrant arbitrage. I was buying BTIM warrants all week. Friday, March 12, was the highest close in some time, BTIM closed at $5.44. Monday morning I tried to buy 10,000 BTIM common at $5.50. I didn't buy a single share and we never saw that price again. Mid-morning NASDAQ and AMEX stopped BTIM trading and for news.

On Monday, BTIM jumped to $5.92 but was stopped at $5.80 after trading only 120,000 shares. Since trading had stopped, nothing occurred all day until a company press release before the open Tuesday. Price broke sharply higher hitting $8.42, a Target #3. I sold all the way up. I guess I started to buy back a bit early. BTIM closed back at the larger BO level and a 60% Fib buy level at $6.65. For the week, BTIM was up very nicely.

I sent out a special BTIM NET newsletter (email) to all of you Wednesday with all the links and info I had. Regenerative medicine is here as announced in a peer-reviewed research paper. This news was great news for BTIM but any deliverable product is still a long way off in the US but should occur sooner in China. As I’ve said before, stem cells are for real big time!

Biotime rallied almost $3.00 or a whopping 60% on the news. The $3.00 BTIM warrants almost doubled. Later in the day the stock sold off almost $2.00 and this action is not normal. What have I missed and what have we learned here? First and foremost with the large and rapid rise the BTIM shorts were killed. The shorts had to cover their position by buying back the ever increasing price of BTIM stock. Second, price went higher than it should have on the news because SEC regs now have the shorts forced to buy-in immediately. The brokerage firm executes the purchase and the short trader is informed after the fact. Short stock traders should be alert to this new risk. As you may recall over 10% of the BTIM float or about 1.8 million are short. Short sellers, normally a large buyer on weakness, were taken out of the buy market. Therefore, the stock pulled back further than it should have. In addition a lot of weak players got buried as well. Earlier in the day Dr. West was on CNBC again, the first time at being listed on the AMEX. Sorry Sport. NET traders only buy the rumor and sell the news. BTIM Trading Summary When trading BTIM into announcements we should all be aware of the open short interest. The larger the short position is the more selling we should do into strength. Normally, I trade 10-15% of my total position and wait a bit longer to replace and/or increase the investment position after the announcement. Had I know what I know now I would have sold 25-30% of my stock. My only problem should be that the stock continues much higher and I’m left holding only 70% of my original position. Would you feel sorry for me? My ratchet stock trading style allows the taking of the stock profits from selling high and buying lower to increase my profits and to increase the number of shares owned on re-purchase. This style of stock trading is akin to hedging parlaying with options. This is a game that only small traders can take advantage of to build capital to become a large investor.

The good news is that BTIM is clearly #1 or #2 in the stem cell space and now more investors then ever will be looking at BTIM. There will be more announcements and more research grants. Testing, maybe even in humans, maybe sooner than not overseas. The list grows daily. Given the excitement currently ahead for stem cells, NET traders can now own BTIM for what can be viewed as the price of a 10-year call option (on the stock).

A very large BTIM shareholder asked me recently why do I even bother to ratchet trade this stock? He told me to relax, sit back, enjoy the ride, that BTIM is only just now pulling out of the station and we have a long ride ahead. I once told all of you just a short while ago. If we are to stay and live in the new Obama world we have to get really rich. BTIM, other special situations as they occur plus option expiration trades over time will make us extremely wealthy. A personal motto: Living well is the best revenge. New research says you need $2M+ at retirement to maintain your current lifestyle. NET can help.

Keep those many cards and letters coming. I read every one.

Good trading,

Stan Moore
702.267.0396

---