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Feb 27
2010

Greece + Jobs Report = New Support Area

Posted by Stan Moore in Untagged 

NewEraTrader


NEWSLETTERS & RECOMMENDATIONS - February 28, 2010


Dear Friends and Fellow Traders,

Greece will be bailed out by someone. Rumors had a German bank loaning Greece funds. The markets rallied on the rumor. Most economic news wasn't very good and the markets sold off nearly 25 S&P points before the Thursday reversal. I continue to maintain we are in a trading range. NET traders buy the dips and sell the rips.

Trade of the week review:

Thursday had the market gapping down almost 20 points at the opening.  The jobless news was a rather disappointing and Greece was shut down by union strikes. The market gapped down through a large support area from Tuesday's low at 1090. Now support becomes resistance at the 1090-1092 area. All longs got stopped out on the break of Tuesday's low while the breakout traders pile-in on the short side. This is the perfect setup if someone is looking for a nice contra-trend long buy. Why? Because everyone is positioned on the wrong side. The longs are out and the shorts are in. This support level sits at a rather large 60/40 commonality buy zone coupled with the 20 DMA and only 4-5 points away from the mid-February breakout level from the January correction lows. This is the trap "They" use to move the markets in the desired expiration direction to inflict Max-Pain on option buyers. Additionally, this support level needs a lot more than Thursday’s negative news to blow this buy level out.

Early Thursday morning before 10:30 AM I sent out an Alert Email to buy calls in the 1080-1085 area and scale-in more lower into 1080ish.  The Adv/Dec opened at 1/10 (1 to 10) negative but at oversold extremes. This expected rally wasn't going to be a "V" reversal anytime soon. I recommended subscribers use the ITM 500W calls then trading at $2.00 then trading at $3.50. A subsequent low price of $2.10 was reached near 12:00 noon and was noted on the "A" chart, close enough for Government work. I noted NET traders must hedge because the trade would take time to unfold and, according to the NET methodology, the hedges would take a large part of the cost and risk out of the long call.

In addition to the large Fibonacci support (20 DMA) area we had great Oscillator divergence on the 30" chart and an Oscillator crossover with divergence on the 5" chart as well. However, there was one more important item most traders are not aware of.

We have regular Monthly and Quarterly Portfolio Manager (PM) Markups.  The majority of their trades are long. (NET Portfolio Markup training comprises quite a few pages The Definitive Trading Bible.) Since the markets sold-off hard into the February lows PMs would like to see their stocks higher to gain a performance advantage over their completion.

The market should begin to be marked-up starting either sometime later Thursday or lastly early Friday, the last day of February. An early clue emerged after 1:00 PM Time of Day (TOD). Price should have been at the lowest low near 2:00 PM in a sharply down day and could only retrace 40% back down from the day’s high. Higher prices coming - look out above!  Price exploded through resistance at the 1090 area just before 2:00 PM with a great Opening Range Breakout (ORBO). Now all the shorts are scrambling to exit while the longs are getting back in. This combo buying power is explosive. The trading trap was sprung. After the rally was well under way, I sent another Alert Email to scale-out the calls into strength. These calls near closed at $6.00 on Thursday, reached a high at $7.20 on Friday and was good for a 3X trade! Here’s the trade on Thursday’s NET Money Chart 2010-02-26.

There were four more Alert Emails throughout Friday with an early call buy and a late put/hedge trade. Both trades were nicely profitable.

I’ll be on vacation for 10 days and I will be back Tuesday morning, March 9th.

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.
Feb 21
2010

Fed's Bernanke to assure Congress higher rates are not imminent

Posted by Stan Moore in Untagged 

Dear Friends and Fellow Traders,

Bernanke does his semi-annual report on the economy and interest rates to the House and Senate panels Feb 24-25. Bernanke will assure Congress over and over again there will be no tightening until there is real job growth in the economy. The stock markets should be relieved.

The other big geopolitical event out there, Greece, has been put-off by the EU until March 16th. However, we may glean something from two events scheduled for next week. First, we have a $7 Billion 10-year Greek government bond auction. If successful, the offering could help soothe bond markets across Europe which remain jittery weeks after the crisis over Greece’s finances first flared. But, if the new bond issue falters, European Union leaders could be forced to decide whether an EU bailout of Greece is in order.

Second, Union workers in Greece are planning a national strike on Wednesday to protest the countries austerity measures recommended by the EU. In any case, next week will be interesting to observe how all this plays out.

There is very little out there this week to get traders’ blood racing. What can I say? We will let the market tell us what to do.

Trade of the week in review:
With the put setup we got real lucky last week. Thursday afternoon the S&Ps reached a rather large resistance area, the 50 DMA, coupled with the largest 60% sell of the recent 9% sell off. If there was ever of high-probability put trade this was it. I (email) alerted traders before 2:00 EST to buy puts in the area near $2.00 and scale-in. Hedging is always a prescribed for aggressive trading and greater profit-making opportunities.

The market traded in a narrow range after reaching the sell area for the next two hours. We were able to pick-off a few nice hedges for enough profits (as much as $400 per put) to pay for the original puts while allowing us to scale in under $1.10 for some additional puts. The puts closed near $0.80.

This is the lucky part. Approximately minutes after the close Thursday the Fed raised the discount rate 25 basis points. Over the next 5-6 hours the market sold off nearly 14 S&P points in the overnight session. Aggressive traders could have scaled into E-minis some 10-14 points lower before going to bed knowing they were locking in as much as $400-500 profits against each long put even if the markets went lower. Only E-minis were available overnight; if intraday, I would have recommended cheap calls.

I sent out an Alert Email before Friday’s opening to sell all puts into early weakness. The 505 puts opened near $1.20 and rose to $1.50 by 10:00 AM. Traders may have lost very few $s on the long puts if they failed to average-in lower (all part of the NET Methodology) but hedged traders could have earned anywhere from $900 to $1100 per put contract. Great work if you can get it.  Reference the NET Money Chart 2010-12-19.

A triple call trade occurred Friday morning that I missed because a $1.70 OTM call was a bit expensive for what I thought was going to be a narrow range day. However, Friday afternoon gave us some additional profitable long put with long E-mini hedged trades.

Summary:
Many of you have often hear me say, "I rather be lucky than good looking" but it's important to remember we position ourselves in a trade to get lucky. Just keep thinking 10 bagger of which there have been four so far this year! Show me something more profitable than this and I’m all ears.

I am leaving for a 10 day vacation starting after the close this coming Friday and returning for work Tuesday March 9th. There will be no newsletter, alert emails or charts will I'm away. If needed, the Chat Room will be open to display charts and indicators.

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.
Feb 15
2010

Is Greece the proverbial canary in the fiscal Coal Mine?

Posted by Stan Moore in Untagged 

NewEraTrader


NEWSLETTERS & RECOMMENDATIONS - February 15, 2010


Dear Friends and Fellow Traders,

From Barron's this week, “Brace yourself for the second wave - the wave of sovereign defaults that typically occurs a few years after a financial meltdown.” John Mauldin writes we are between "Dire and Disastrous" and "that Greece is a precursor of a new era of sovereign risk". Claims that the Euro could be headed for total collapse are particularly striking when they come from one of the oldest and largest French banks. In a note to investors, SocGen strategist Albert Edwards said, "My own view is that there is little ‘help’ that can be offered by the other Eurozone nations other than temporary confidence-giving ‘sticking plasters’ before the ultimate denouncement: the breakup of the Eurozone".

All this new news is very alarming because it came shortly after European Union promised "determined and coordinated" action to shore up Greece. This lack of action happens because I feel that these countries are constrained in what they can and cannot do. I further believe there will be no specific plan just verbal support hoping Greece will bite the fiscal bullet and rollover their debt shortly.

The real risk here is that if Greece defaults, the 3-4 largest European banks would be bankrupt and that starts a series of markdowns across other nation’s bank assets. This screams for more bailouts after more writedowns, mark-to-market and so on etc. Subprime will look like a blip on a radar screen compared to this potential global meltdown.

Normally, countries that are highly uncompetitive are able to slash interest rates and devalue their currencies to prop-up their economies. Does this sound familiar? It’s happening right before your eyes here. But this is not possible within the Euro, given its one-size-fits-all economic governance. The implication is that weak, peripheral Eurozone members will have to suffer years of painful deflation and tumbling living standards as well as Draconian budget cuts in order to adjust. Greece has promised to cut public spending $2.75 Billion and raise taxes $6.7 Billion. This can't happen. There will be blood in the streets. Can you just imagine if we tried that here? This monumental change would take a great leader and it isn't Obama or anyone else I know right now.

Harvard University Professor Martin Feldstein, a long-standing skeptic on the Euro on Friday, said, “The single currency isn't working because member governments have no incentive to keep their public debts under control. There's too much incentive for countries to run up big deficits as there's no feedback until a crisis.” We can only hope the above can't and won't be allowed to happen.  We can hope that this ends once and for all the march to total socialism in Europe. Governments can't spend their way to prosperity for very long without inflation or serious repercussions.

I recently saw an interview on TV with a city manger of a bankrupt town outside of San Francisco. When asked why he failed he answered I'm paying for three police forces. One is on duty the other two are retired. The US, states and municipalities have to break these union strangleholds once and for all. It won't be easy but it's absolutely necessary. However, where do jobs increase, employees get steady raises in pay and benefits while millions of other citizens are without raises, cuts in benefits or no jobs at all? Welcome to the new improved "Obamaland" where everyone is a Government employee. Gee but I thought socialism was on its way out. Not here.

We can only hope Obama gets the message before it's too late. I'm not hopeful. Looking ahead as far as the eye can see we are no different than any of those "PIIGS" in Europe. Congress just increased the national debt limit almost $2 trillion. Right now, the US spends only 9% of the budget on interest because rates are so low.  What happens when we try to inflate our way out by printing money?  Interest rates will rise substantially and consume say 20-30% our budget. I'm not sure. It's estimated that if interest rates rise to only 3% the entire Japanese budget is consumed by interest alone. Japan is Banko (a slang for bankruptcy)!

Summary:
The only solution I can see for us is to get "filthy rich" before this entire fiscal situation blows up in our face.  With wealth, we then have the freedom to live anywhere in the world we choose. Those countries that have sensible fiscal policies will be great places to reside. I'm still suggesting buying as much BTIM stock as you can and do all these weekly option trades in sizes you can afford to build your capital as rapidly as possible. I see trouble here as early as 2-3 years if not sooner.

A review of last week’s trades:
Again there were good option trades both Thursday and Friday. I noted on the Wednesday "C" chart that if the market retests the lows we buy calls. The S&Ps made a marginal low Thursday morning but because I was leaving for most of the day I did not put out an Alert Email call buy. In hindsight, I could have before I left because the S&Ps went almost straight up from $1.30 to $4.00.just before I returned. However, some of you did catch the long. Congrats!

Friday morning was expected to be more of the same trading range because Berkshire Hathaway (BKB.B) was joining the S&P at the close. This meant that $8 Billion of BKB.B's stock had to be bought and $8 Billion of the remaining 499 members stocks had to be sold. This can explain the lower S&P opening and the narrow sideways trading until the 12:30 PM high. Before the high was reached I put out an Alert Email suggesting we buy the 495W puts near $1.00. The puts hit $1.10 and rose to $3.10. I noted on the "B" (the 2:00 PM Intraday chart) intraday chart to sell some at the large Retest/Failure 60ID buy area or hedge.

On Friday afternoon, the market rallied again into 2:30 PM where a $300+ hedged profit could have been taken and additional puts purchased as low as $0.65. From here we started down. I sent another Alert Email to sell all puts into weakness. All puts could have been sold for at least a 3 bagger when the puts hit $2.45. I even suggested in the NET Chat Room that the very cheap fully-paid for puts were a great hedged long E-mini trade. Yes, you lost a $1.00 when the puts expired worthless but picked up over $400 per contract on the hedge. See the attached NET Money Chart 2010-02-12 or Friday "C" chart.

I noted in the Chat Room a long E-mini trade into 3:30 PM EOD low but not the calls. I thought the OTMs calls would expire worthless (and they did) while the ITM $3.00 calls were too expensive. These calls only closed at $5.00. The ITM calls were not our usual cheap Friday option trade. I had learned from CNBC after 3:00 PM that there was an imbalance of BKB.B sell orders of over 50 million shares or $3.5B. This imbalance meant that traders would have to cover over $3.5 B of the other 499 S&P shares sold short earlier and could spark a tradable rally. That's where the $400 hedged or E-mini long profit came from. These 2 puts trades could have earned a good NET trader over 5X on the puts and over $700 more in hedged profits per put contact! Trading like this could get you rich in a hurry starting with only 20 contracts and only 10-15 E-minis at a time.

A look ahead:
The EU meets Monday and Tuesday but I don't expect much. Meanwhile our manufacturing rebound probably accelerated into January adding evidence the US expansion continues without missing a beat, economists tell us. Still we have to see how the market reacts to this and inflation numbers later in the week. All the stocks I looked at for writing puts rallied so those ideas are still valid for another time if the market goes lower. I still believe we are going to trade in a 100 or so point S&P range until some geopolitical news breaks us out.

As always keep those cards and letters coming I read every one of them.

Good trading,

Stan Moore
702.267.0396

P.S. So what have we learned in 2,064 years?
"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance." – Cicero, 55 BC

Is Greece the proverbial canary in the fiscal Coal Mine?

xxxxxxxxxxxxxxxxx

Dear Friends and Fellow Traders,

From Barron's this week, “Brace yourself for the second wave - the wave of sovereign defaults that typically occurs a few years after a financial meltdown.” John Mauldin writes we are between "Dire and Disastrous" and "that Greece is a precursor of a new era of sovereign risk". Claims that the Euro could be headed for total collapse are particularly striking when they come from one of the oldest and largest French banks. In a note to investors, SocGen strategist Albert Edwards said, "My own view is that there is little ‘help’ that can be offered by the other Eurozone nations other than temporary confidence-giving ‘sticking plasters’ before the ultimate denouncement: the breakup of the Eurozone".

All this new news is very alarming because it came shortly after European Union promised "determined and coordinated" action to shore up Greece. This lack of action happens because I feel that these countries are constrained in what they can and cannot do. I further believe there will be no specific plan just verbal support hoping Greece will bite the fiscal bullet and rollover their debt shortly.

The real risk here is that if Greece defaults, the 3-4 largest European banks would be bankrupt and that starts a series of markdowns across other nation’s bank assets. This screams for more bailouts after more writedowns, mark-to-market and so on etc. Subprime will look like a blip on a radar screen compared to this potential global meltdown.

Normally, countries that are highly uncompetitive are able to slash interest rates and devalue their currencies to prop-up their economies. Does this sound familiar? It’s happening right before your eyes here. But this is not possible within the Euro, given its one-size-fits-all economic governance. The implication is that weak, peripheral Eurozone members will have to suffer years of painful deflation and tumbling living standards as well as Draconian budget cuts in order to adjust. Greece has promised to cut public spending $2.75 Billion and raise taxes $6.7 Billion. This can't happen. There will be blood in the streets. Can you just imagine if we tried that here? This monumental change would take a great leader and it isn't Obama or anyone else I know right now.

Harvard University Professor Martin Feldstein, a long-standing skeptic on the Euro on Friday, said, “The single currency isn't working because member governments have no incentive to keep their public debts under control. There's too much incentive for countries to run up big deficits as there's no feedback until a crisis.” We can only hope the above can't and won't be allowed to happen. We can hope that this ends once and for all the march to total socialism in Europe. Governments can't spend their way to prosperity for very long without inflation or serious repercussions.

I recently saw an interview on TV with a city manger of a bankrupt town outside of San Francisco. When asked why he failed he answered I'm paying for three police forces. One is on duty the other two are retired. The US, states and municipalities have to break these union strangleholds once and for all. It won't be easy but it's absolutely necessary. However, where do jobs increase, employees get steady raises in pay and benefits while millions of other citizens are without raises, cuts in benefits or no jobs at all? Welcome to the new improved "Obamaland" where everyone is a Government employee. Gee but I thought socialism was on its way out. Not here.

We can only hope Obama gets the message before it's too late. I'm not hopeful. Looking ahead as far as the eye can see we are no different than any of those "PIIGS" in Europe. Congress just increased the national debt limit almost $2 trillion. Right now, the US spends only 9% of the budget on interest because rates are so low. What happens when we try to inflate our way out by printing money? Interest rates will rise substantially and consume say 20-30% our budget. I'm not sure. It's estimated that if interest rates rise to only 3% the entire Japanese budget is consumed by interest alone. Japan is Banko (a slang for bankruptcy)!

Summary:

The only solution I can see for us is to get "filthy rich" before this entire fiscal situation blows up in our face. With wealth, we then have the freedom to live anywhere in the world we choose. Those countries that have sensible fiscal policies will be great places to reside. I'm still suggesting buying as much BTIM stock as you can and do all these weekly option trades in sizes you can afford to build your capital as rapidly as possible. I see trouble here as early as 2-3 years if not sooner.

A review of last week’s trades:

Again there were good option trades both Thursday and Friday. I noted on the Wednesday "C" chart that if the market retests the lows we buy calls. The S&Ps made a marginal low Thursday morning but because I was leaving for most of the day I did not put out an Alert Email call buy. In hindsight, I could have before I left because the S&Ps went almost straight up from $1.30 to $4.00.just before I returned. However, some of you did catch the long. Congrats!

Friday morning was expected to be more of the same trading range because Berkshire Hathaway (BKB.B) was joining the S&P at the close. This meant that $8 Billion of BKB.B's stock had to be bought and $8 Billion of the remaining 499 members stocks had to be sold. This can explain the lower S&P opening and the narrow sideways trading until the 12:30 PM high. Before the high was reached I put out an Alert Email suggesting we buy the 495W puts near $1.00. The puts hit $1.10 and rose to $3.10. I noted on the "B" (the 2:00 PM Intraday chart) intraday chart to sell some at the large Retest/Failure 60ID buy area or hedge.

On Friday afternoon, the market rallied again into 2:30 PM where a $300+ hedged profit could have been taken and additional puts purchased as low as $0.65. From here we started down. I sent another Alert Email to sell all puts into weakness. All puts could have been sold for at least a 3 bagger when the puts hit $2.45. I even suggested in the NET Chat Room that the very cheap fully-paid for puts were a great hedged long E-mini trade. Yes, you lost a $1.00 when the puts expired worthless but picked up over $400 per contract on the hedge. See the attached NET Money Chart 2010-02-12 or Friday "C" chart.

I noted in the Chat Room a long E-mini trade into 3:30 PM EOD low but not the calls. I thought the OTMs calls would expire worthless (and they did) while the ITM $3.00 calls were too expensive. These calls only closed at $5.00. The ITM calls were not our usual cheap Friday option trade. I had learned from CNBC after 3:00 PM that there was an imbalance of BKB.B sell orders of over 50 million shares or $3.5B. This imbalance meant that traders would have to cover over $3.5 B of the other 499 S&P shares sold short earlier and could spark a tradable rally. That's where the $400 hedged or E-mini long profit came from. The 2 puts trades could have earned a good NET trader over 5X on the puts and over $700 more in hedged profits per put contact. Trading like this could get you rich in a hurry starting with only 20 contracts and only 10-15 E-minis at a time.

A look ahead:

The EU meets Monday and Tuesday but I don't expect much. Meanwhile our manufacturing rebound probably accelerated into January adding evidence the US expansion continues without missing a beat, economists tell us. Still we have to see how the market reacts to this and inflation numbers later in the week. All the stocks I looked at for writing puts rallied so those ideas are still valid for another time if the market goes lower. I still believe we are going to trade in a 100 or so point S&P range until some geopolitical news breaks us out.

As always keep those cards and letters coming I read every one of them.

Good trading,

Stan Moore

702.267.0396

P.S. So what have we learned in 2,064 years?

"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance." – Cicero, 55 BC

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.

Feb 08
2010

The New Rocky Horror Show brought to you by Global Currencies

Posted by Stan Moore in Untagged 

NewEraTrader


NEWSLETTERS & RECOMMENDATIONS - FEBRUARY 7, 2010

Dear Friends and Fellow Traders,

Why do global investors pile into the US dollar and its bonds if the US is a complete financial mess? The same reason the UK is not under fire by the market (yet give it 6-9 more months). Ditto with Japan. These three nations have the ability to kick the can down the road, lowering our standard of living and effectively steal our money. It's called a printing press.

Right now it's the member states of the European Union that are in trouble. They do not have their own "in country" printing press anymore. So they face actual hard decisions. European bank stocks have fallen nearly 20% in weeks.

America and Japan are way to the far right of the European states at 100-200% debt to GDP and are happy to go the backdoor route rather than deal with the issues at hand. They are happy to print money. (On Jan 13, 2010 Kyle Bass of Haman Capital wrote this confirming article: Kyle Bass of Hayman Capital: Japan Defaults on Debt or Devalues in 3-4 Years; United States in 10 to 12.) Which is why the value of your dollar, over the long run, has been and will continue to be crushed in the future.

Furthermore, Bill Gross from PIMCO Advisors says, "We are Greece with a money tree". The US is a disaster and, aside from Greece etc., we are worse than all the "PIIGS" we are hand-wringing about. I think this is very important for all traders to understand.

As investors, here is the problem. This is not a one week or one month or even one year problem and will be hanging over us constantly. I've been discussing this currency crisis (specific to the US) since 2008 and before Obama became our President. I've been discussing the European issues since mid-2009. For many months this crisis did not matter one iota. But, as I like to say, "It matters only when it matters." Now it matters. Maybe after the IMF rescues Greece et al, the market will surge 5% overnight and we'll cheer! Problem solved! Then what? Then another decade of more sovereign debt issues - one country after another. This is a massive global headwind.

Markets around the world are only now recognizing that sovereign balance sheets in many advanced economies are now in play when it comes to broad positioning considerations. Just look what happened these last three weeks to the reflation trade as traders ran to cover USD shorts and sell commodities. Gold (a safe haven?) dropped over $175, oil fell nearly $10 and copper $0.50.

Now for the good news! The S&P nearly completed the 10% correction I anticipated. The 2:00 PM low was only 6 points from 1035, a 10% correction level, and only another 20-25 points from the 200 DMA on the daily chart. In addition, the Oscillator on the daily chart is oversold for the first time in 7 months.

NET traders know we get rallies of 50+ S&P points from retests of the 200 Day when we have not retraced back to this level for an extended period of time. Remember, only 6 months ago the S&P was 20% away from this average. We should also remember when I mentioned over 90% of all stocks were over their 50 DMAs. This 90% number serves as a good alert that the market is quite extended. Well, now only 34% of stocks are over their 50 DMA. Under 30% the market is now extended to the downside.

Soon, I will issue a new list of 3-5 stocks to our Alert Email subscriber list that I'm looking to sell naked ATM or ITM puts to create cheaper entry prices. I will then recommend selling calls into strength to further lessen any short term risk.

Trades of the week in review:
First a little background data. I am still too cautious when it comes to buying puts aggressively. I seem to have forgotten what I wrote in The Definitive Trading Bible. Generally according to NET trading methodology, when we are in strong down markets we sell in front of the resistance and at the actual resistance level versus selling at the number and behind the number in strong markets. So, in strong down markets, scale into options just a little lower. It's that simple!

Friday morning before the market opened I placed my scale-in put orders at resistance, 1067-70. I had my Alert Email ready to be sent. The market opened and traded to 1064 in one bar and the up was over and my orders were not executed. I personally hate buying OTM options over $2.00 with only a day to go. Nevertheless, the 490Ws traded down to $1.60 hitting $8.20 near 2:00 PM. “I missed it by that much" as secret agent Maxwell Smart used to say on his TV series.

So, instead I put out two additional option trades. The first involved selling a 490 straddle for at least a $4.00 credit. After a near death experience for non-NET traders not knowing the market did an ORBO (Opening Range Breakout) near 1:30 PM. NET traders know to short E-minis on market breaks through the opening high or low. I sold an equal number or S&Ps for each put short just before the break and as well relating in the Chat Room to sell a break of 1050. The trade was a nice $300 winner per straddle with the puts expiring worthless and the calls just over a $1.00.

The second trade recommended at the same was to buy the 490W calls and hedge aggressively with E-mini shorts. I recommended buying these calls under $1.00 and scale-in at lower levels. Personally, I was filled as low as $0.55.

Why is the above strategy safer and better than a straight put buy? Once the market breaks down after the opening the VIX explodes as everyone is buying puts. I even mentioned in the Chat Room on Thursday when the VIX was 22ish that I thought the VIX could trade up to 28 this week. Friday the VIX almost hit 28. To put this rise in volatility in perspective, imagine if we bought a $4.00 put on Wednesday with a 20 VIX. On Friday with the VIX at 27 that same $4.00 option would cost you 33% more or $5.25. Call prices are affected by the higher VIX but are still much cheaper than a similar strike put. In addition, you have a limited loss with the long calls while you have an opened-ended profit potential with a short E-mini. There is one more great benefit. At an important inflection point (the market could go either way), if you are wrong and the market rallies you can also make money going up. Conversely, you would lose substantial monies on any expensive long put. You only lose if the market stands still for a few hours. In this volatile market movement is highly probable.

The hedges made between $350 and $550 per long call depending on your option trading skill level. If you sold the calls near the low subtract $50-60.00 from the profit. However, if you held these "free" calls until the close you could have sold them for a $1.30.

On the 2:00 PM “B” Intraday Chart I recommended that if you wanted to continue to hedging buy the 485Ws under a $1.00. These calls traded down to as low as $0.60. There were two possible hedges. The first could have earned $100; the second hedge would have lost $100-150 when the trade got stopped out at either the breakout of the downtrend line or the ORBO resistance. Remember this common trader maxim: broken resistance becomes support and vice versa. Knowing this the trader could have held long calls into the close. The calls closed at $6.30, another possible 10 bagger (10X) the 4th in 3 weeks! Tell me where else could you have so much fun. The market was so volatile at one point I found myself long and short the same 490 calls in two different brokerage firms from the short straddle to the long call with the E-mini hedge on. Yikes! See NET Money Chart 2010-02-05 "C" chart.

Summary of the Week in Review:
This past week reminded me of the time back in late Feb of '07. The market had just rallied about 240 S&P points from the June '06 lows in a straight line into the year high. At that time the traders were unwinding of the Yen carry trade. Every year there is a strong upward bias in the Yen as Japanese firms repatriate funds back home before the March fiscal year end. The strong Yen was generating substantial margin calls around the world. I wrote that if the Yen broke a certain key level the market could drop 100 S&P points in a matter of days. Every foreign dignitary that was worth anything came out in support of the USD. The Yen stopped rallying but not before the market dropped over 100 S&P points anyway in 3-4 days. After that selloff the market rallied to new all time highs into October ‘07, the bull market top. This last 110 point S&P decline reached a climatic low Friday after huge USD carry trade unwound and massive reflation trade liquidation took place. The market action may seem similar but the world is in a very different place today.

I did say that 2010 would be the year of the trader where stock selection is key. No longer can traders count on the buy the dip mentally to make easy money as in ‘09. 2010 has already seen four 10 bagger option trades in 3 weeks. Happily, I'm looking forward to many more before this year is over.

Regarding BTIM and ISCO, Pat Cox said the ISCO would report an important company announcement. In my book, it’s an SEC rule violation (Rule 10b-5) when a corporate executive secretly gives out material information to a Pat Cox or any other stock-picker newsletter person without first disclosing the information to the general public. Because there was no such "major" disclosure by ISCO that should have been evidence that there was not going to be some "major" announcement on Feb. 5 as Pat Cox suggested there would be.

I was extremely disappointed with Friday’s ISCO investor’s conference call. In the first 5 minutes the CEO related there would be no significant announcement. This “great announcement of impending news” supports my trading thesis of "Buy the Rumor and Sell (before) the News". Just over 30 days ago ISCO was $0.50. Three days ago ISCO was at $1.98 and had a $200 million fully diluted market cap. Friday morning, the stock was $1.79. I had already told one of my Chat Room traders who bought ISCO around a $1.36 to sell almost all (selling at $1.73 at the time) before the conference call started. As anticipated, ISCO closed lower at $1.20 Friday. Trading like this isn’t Mr. Toad's wild ride, an amusement park ride. For the record, I may consider going long ISCO under $0.75. Too bad BTIM had to suffer along with ISCO. Keep buying BTIM lower and keep the faith.

As always keep those calls and letters coming. I heard a number of you did quite well this week. Keep up the good work.

Good trading,

Stan Moore
702.267.0396
Feb 01
2010

The Good, the Bad and the Ugly; this isn't just another Clint Eastwood movie!

Posted by Stan Moore in Untagged 

NewEraTrader

NEWSLETTERS & RECOMMENDATIONS - January 31, 2010

Expanded title:  The Good, the Bad and the Ugly; this ain't just another Clint Eastwood movie!

Dear Friends and Fellow Traders,

The 1st quarter GDP grew at 5.7% - that’s the Good. Upon closer examination the real GDP growth was closer to 2% - the Bad. Coming out of a recession given all the financial stimulus and Fed monies thrown at the economy.  US growth should have exceeded 10% - the Ugly. Expectations this time were much too high based on previous experiences.

Experts in Davos, Switzerland this week see another global dip ahead. Heavy government and consumer debt will weigh on governments and consumers in the western world while these economies look for growth from emerging markets to bail us out of this mess.

Looking back to last September-November the world was coming apart. We were staring into an abyss. Stocks were dumped indiscriminately. I was screaming for my students to buy any MLPs (Master Limited Partnerships). MLPs yields in a matter of weeks rose from 8-10% to 25% as their share prices plummeted. These same MLPs after seeing their yields double and triple are now back to yielding 10%. Near the March lows, I told everyone who would listen to sell naked puts with premiums that never existed in my lifetime. Why?  Because I've seen and profited handsomely from the previous 7-8 disasters during my 49 years studying this game. Markets always rally big time once governments and central banks start throwing money at the problem.

A few months ago I wrote it's time to exit the market. Today, we are facing much higher valuations after a 60% rally, strong headwinds in the form of higher taxes, lessening stimulus and the asset allocation from bonds into stocks is pretty much over. The news couldn't be better. Yet I am shocked by the poor price action given the beating the markets have taken. The fact that markets haven't bounced more is worrisome to me. I missed 3 put trades each a ten bagger these last two weeks by a few S&P points just being too cautious.  Instead I buy calls and find myself E-mini hedging in quantity of trades to make the call trade profitable. Trading like this is exhausting to say the least. Just listening to me trade in the Chat Room will wear one out.

I am thinking what is different this time is our moving from a period of economic uncertainty to a time of great political uncertainty. I have no idea where government rules and regulations are headed today. Many other countries at Davos found some of our ideas rather interesting. Ugh!

Raghuran Rajan, a University of Chicago finance professor, writes, "The disparity of the outlook between emerging and developed economies is particularly stark." He further notes. "…that the combination of 10% unemployment in the U.S. and the 10% economic growth in China could prove politically toxic as U.S. politicians might resort to "populism” and protectionist measures." Sound familiar? This talk started in the Great Depression. Right now any successful industry, multinational corporation or wealthy person is front and center in the government's cross hairs. Class warfare or the targeting of financial success can't be good for the economy.

Looking ahead to Friday’s job numbers, the Bureau of Labor Statistics (BLS) will announce final adjustments to its benchmark estimating the number of people without jobs.  Preliminary estimates the BLS under counted 2009 job losses by 800,000. I’m not sure how the market will react to this backward looking number but I can’t believe it’s good for Team Obama. The President should have known about this lower number in November.  It’s more bad news.

Thoughts on my all time favorite stock Biotime (BTIM)
Peter Navarro, a newsletter author, writes, "The U.S. markets are in a major correction.  If you see any bubblehead portfolio manager on TV telling you this is a great buying opportunity, know that this man/woman is merely a gambler rather than an intelligent speculator.  For the foreseeable future, the market is a roulette wheel. Until the dust clears – that is, until market participants figure out the direction of the economy -- this is a good time to be in cash (and non-cyclicals like biotech).”

That leads me into the only long I hold right now - BTIM. I enclosed a few thoughts from Patrick Cox of Breakthrough Technology Alert. Patrick has known Dr. George West, the current CEO of BTIM, for over 15 years. Dr West is considered by many of his peers to be the "Godfather of Stem Cells.

Patrick writes,
"Several friends of mine, in fact, worried enough to ask if they should sell when BioTime (BTIM: AMEX) and International Stem Cell Corp. (ISCO: OTCBB) dipped. My short answer was, “Hell no.” My long answer involves a conversation I had with noted futurist, author and venture capitalist Juan Enriquez.

“No one has done a better job of communicating the economic importance and financial opportunities of biotechnologies. Happily, I was able to spend time with Enriquez at Agora Financial’s big conference in Vancouver a few months ago. As chairman and CEO of Biotechonomy LLC, Enriquez has been able to direct significant capital to important biotech startups.

The subject of stem cell or regenerative medicine (the core work of BTIM and ISCO) naturally came up. I asked Enriquez if he had plans to invest in the field. His answer was that as a venture capitalist, he saw no avenue to do so. The reason, he said, was that the IP, or intellectual property, was already wrapped up. This, in fact, is the point I want to reemphasize to you today. The IP is already wrapped up.”  I say the regenerative medicine IP is primarily wrapped up by BTIM and ISCO.

He further writes, “Regenerative medicine differs fundamentally from almost every other area of medical research. This is because there are not numerous methods of producing and programming pluripotent cells. As they are discovered and patented, these tools will revolutionize medicine. They will make it possible to restore any cell in the body to healthy youthful status. And remember, the IP is already wrapped up.

“This is completely unlike the situation with regard to cellular engineering, for example. Numerous researchers are working to create new microorganisms. They are coding with DNA to produce organic hardware. One example of this hardware would be algae that consume sunlight and CO2 while excreting high-grade jet fuel. There are probably many ways to skin that cat, many different microorganisms that would accomplish the same task."

There is a major update of ISCO's (currently valued at $1.30) future outlook scheduled for Friday Feb at 10:00 AM PST. The outlook should be ground breaking. BTIM and ISCO have an extremely close business relationship and should be most informative for investors of both companies. I will seriously consider buying ISCO if all my known information and more information than is currently known is confirmed.

Trade of the Week
I did it again. I recommended calls before 2:00 Friday for a hard fought win of minor proportions. I realized shortly after the purchase the market was too weak and recommended a rapid exit. But, again I missed the early put trade for a 10 bagger or (1000% return). These missed trades hurt!  See attached NET Weekly Money Chart of the Week 2010-01-29.

Good Trading,

Stan Moore
702.267.0396

Jan 24
2010

Is the Thrill Gone?

Posted by Stan Moore in Untagged 

New Era Trader

NEWSLETTERS & RECOMMENDATIONS - JANUARY 24, 2010

Dear Friends and Fellow Traders,

What a week. After seeing stock markets hit new yearly highs it took all of three days for the S&P 500 to move from 2 standard deviations above its 50-day moving average (DMA) to 1 standard deviation below its 50 DMA. Yes, I've been talking about a 10% or so correction but not now. While the potential cracks in the market were apparent for some time, vast amounts of worldwide liquidity sustained rally after rally.

This week’s stock market 5% decline couldn't be ascribed to any one thing. A potential decline has been building and all of the negatives hit at a time when the markets were priced for perfection. It started last week when stocks sold off hard after beating EPS estimates and continued as a possible default in Greece grew. (Greece's is too big to fail?) There were signs of Central Banks exit strategies and raising rates had begun in a number of countries. China froze lending for all of Jan after loans grew 100% year over year. After the Massachusetts Brown Senate election win the Dems seemed to be in disarray. Fed Chairman Ben Bernanke may not be reappointed Chairman of the FED as some up for re-election Dems were out looking for a scape goat. Finally, Obama tours the country telling everyone he wants our money back bashing banks in the process.

I believe out there in markets around the world it appears that the giant global liquidity pump that rallied asset prices is slowly being turned off. This points to lower prices for risk assets as the USD gets stronger in this environment. Right now the market lacks sector leadership. The three best groups’ techs, materials and financials are failing. It's hard to see the markets going back to 1150 let alone 1200. Goldman Sachs thinks everything is starting to point in the direction of Japan's lost decade. Ugh!

There is good news out there is that markets are oversold. Volatility is back with its 20-30 point range days if we're lucky. 1085 is a large support shelf that held the October breakout prior to the breakout to new highs. However, it’s bad news if this level fails to hold. The market spent two months basing before breaking out again to 1150. The next important support area is near the 200 DMA or 1010ish. This would give us our 10% correction. Look on the bright side, YTD China's down 14%, Brazil 10% and Germany 8%. I think we may get a 10% correction just not yet.

Next week, Obama has a great chance to lead this great country as he will give his first State of the Union address. Between now and then, he needs to stop, rethink, recalibrate and learn some painful lessons. Obama should be focused 1000% on Jobs and growing the economy and nothing else. He needs to accept that the country was not voting for a left-wing agenda in 2008. Instead, the public was voting out a Republican leadership they deemed unable to govern effectively. The person the American people thought they were voting for in 2008 was a moderate who wanted to bring transparency to government and work with leaders of both parties on common-sense reform.

Remember JFK did the same back in 1962 [yes I was alive then] when he attacked the steel companies. The market crashed by 20%. He adjusted, cut taxes and focused like a laser beam [didn't have 1 back then] on the economy. He was a great leader when we needed one. We can only hope we are at the fork in the road. Obama can become a great leader and do the right think or he can take us down the path to divisive class warfare than helps no one. May he chose wisely but don't get your hopes up.

Looking ahead the Wednesday FED meeting should contain no surprises. Another big decline in weekly jobless claims could upset markets but the number should be in the markets already hit hard. 4th quarter GDP released Friday should be in the 4.5%-5% range. But this would be no surprise.

Last week we clearly broke down from a multi-week trading range as noted on the Wednesday 30" NET Intra day Chart. On Wednesday I wrote on the 30" intra day chart we could go with the breakout in either direction. A possible break down was confirmed on the daily chart given the large divergence on the Oscillator headed from jammed to 44. I wrote that we could become more aggressive and favor the short side in one of my Alert Emails.

I mentioned in the Chat Room Thursday morning I was looking at puts on Thursday morning but the market never rallied into my sell zone. I favored the Osc divergence on the Daily chart. In hindsight, I was much too cautious given the power of the 10 month rally and I thought the better trade was the call setup at the large 60/40 buy commonality and the 20 DMA with a possible daily chart sitting on the Oscillator’s 44 from a jammed high. This trade had been gold for the last 10 months.

I recommended buying calls in a Thursday morning Alert Email at the above large buy level with the caveat that the call trade may take awhile for the trade to work out. Therefore aggressive hedging of the calls was recommended in the Alert. The calls did double off the lows but the hedging turned out to be one of the best opportunities I've seen in months. Ideally there were 5-6 S&P E-mini hedging opportunities against the calls.

Depending on the skill level of the trader and the % hedge (50-75% could have been used). I calculated a full hedge could have earned over $1,500 per S&P hedge while a less aggressive style might have earned over $600. In the Alert Email I did write that one should hedge aggressively since the market would not rally much if at all until GOOG and AXP reported their expected much higher EPSs after the close Thursday. Both companies beat but all the S&Ps could muster was a 4-5 point rally back to 1115 in the overnight session that should have been hedged or sold into.

Friday's pre market Alert Email confirmed we were not going to rally much and to sell calls into any rally. I thought at best the market would rest. At the opening calls were crushed from the $1.65 previous day’s close. A trader would have lost over 50% of the call purchase price. A brief rally would have mitigated the lost somewhat. Again Friday morning I mentioned buying puts in the Chat Room at the 1113-5 area but the market never reached this area. I wasn't aggressive enough and watched the markets slice through support after support. The $0.80 OTM puts hit $8.80 later in the day! See the NET Weekly Money Chart 2010-01-22.

In summary, the markets were totally shaken by the build-up of bad news every day after Brown's Senate victory and sold off. Good news didn't help. Traders were aggressively taking profits, content to shoot first and ask questions later. I also believe that selling was more pronounced given the expiration of the January LEAP puts. Therefore, the risk protection under the market was not there in size. The VIX rallied over 50% for the week. There is a great deal of fear that wasn't there before. I will look to take advantage of this decline to load the boat on BTIM and sell market rallies back into break down areas until I lose money.

This is a rather good link describing relationship of BTIM with their partners as well as their business plan -> Good News from the BTIM Message Board. And checkout this article: IPS cells are big part of stem cell future therapeutics; hence BTIM will be major leader -> UW Stem Cell Study Makes Heart Association's Top Ten List.

Thank you for all your support and keep those cards and letters coming.

Good trading,

Stan Moore
702.267.0396

Jan 21
2010

Just a speed bump on the way to 1200 or something more serious?

Posted by Stan Moore in Untagged 

NewEraTrader

NEWSLETTERS & RECOMMENDATIONS - January 17, 2010

Dear Friends and Fellow Traders,

If I had the answer to this email’s subject I'd be writing this newsletter from my own island in the sun somewhere south and warmer. What I do know is to have 2 marquee companies like J.P. Morgan (JPM) and Intel (INTC) released much better than expected earning and have the markets react the way they did is not a very good sign.

Overall the markets did not suffer any major technical damage only testing the multi-week low and 20 DMA before closing off the day's lows. However, Friday’s retracement back was rather shallow.


Next week it may not be earnings or anything fundamental we are looking at but the results of Tuesday's election in Massachusetts. In a state where Democrats outnumber the Republicans 3 to 1, Republican senatorial candidate Brown has pulled into a statistical dead heat with his opponent. Obama will fly in Sunday to help. This trip had not been planned. Should Brown win or come in close conservative Democrats in all corners of the land may run away from Team Obama especially Pelosi and Reid. We get gridlock in the Senate and maybe the House. The markets will love that and the rally should continue before a more serious sell-off occurs.

Thoughts on last week’s market action:
What have we learned from the first real sell-off in the new year? Yes, this market is extended. Yes, we are due for some weakness. However, is this the time for markets to succumb and roll over? My favorite answer is let Mr. Market tell us what it wants to do. It may be a mistake to believe the market is wrong when it doesn't rally on what seems to be great news. Understand this, "The Market is never wrong". The market does what is has to do to "screw" most of the traders most of the time. Don't ever argue with Mr. Market. You will never win. I have learned great respect for this "Force" over the 49 years I've been trading.

Anticipation by Carly Simon is a great song from our past. Markets anticipate on all levels and timeframes. Therefore, to become the best trader you can be, you should learn how and when to buy the rumor, sell the news versus scalping a trade here and there. See where that gets you. Otherwise look for another gig. I cannot recall how many times I've said this to students over the last 10 years after I started teaching fundamentals with technicals.

Well, at NET this is exactly what I teach. The vast majority of traders can't or won't trade in front of news. Traders can trade what they perceive the reaction to the news is. This is much easier to understand. Here you can earn a very good living but the risks are bigger. How many times have I said, “We should have an expectation for every trade.” For example, from this or that news or this technical setup we should do X. So, if X doesn't happen we go the other way. This understanding alone puts us in the top 5% of all traders. Anticipation is the key idea here.

Corporate earning and other fundamental information can always be found at these news sources:

Market Watch, Yahoo Financial, Bloomberg, Wall Street Journal, New York Times, CNBC (commenting all day long on upcoming earnings) and other financial websites and newspaper articles.

From several of these sources I determined that INTC and JPM would have excellent earnings this quarter.

Last week two market-leading companies INTC and JPM were expected to report outstanding earnings. INTC was further expected to blow out profit margins at the same when the market was selling at 52 week highs. 1200 here we come? Were these earnings numbers already anticipated by the market? My answer in the NET Chat Room and my Alert Email subscribers was “Yes!” Buy puts! Why? If I've learned anything in my 49 years of trading you only own INTC when gross margins are going up, not topping out or going down. INTC's margins can only go down so it wasn't hard to make the leap from expected record margins. A rather simple rule of thumb: Don't own any company when its gross margins are expected to fall. Just where do you think INTC margins will be in the 2nd half of 2010 higher or lower?

Summary and look ahead:

The market has enough momentum to rally 50 to 100 S&P points from here. The liquidity is still too large out there. After that I am looking for a selloff in the order of 7-10%. Right now all the news ahead looks good. There is a contrary indicator out there that is flashing bright yellow now. Investors Intelligence (or just II) found in its advisory services survey that 53.4% were bullish, the highest since December ‘07. Only 15.9% were bearish. Alan Ableson points out in his Barron's column this week that this number was just a fraction above the 15.6% a few months before the October '87 high. Stay tuned! I will try to navigate us all through this morass as I study the many messages from Mr. Market.

Review of last week’s put trade:
The first setup notice for this week’s put setup came on the Wednesday "C" NET Intraday Chart at 3:45 PM where I stated, "I will look at puts tomorrow." This was followed by an early Alert Email Thursday morning telling you that "They" [see Advanced Course, Market Intelligence Chapter 20, pages 231-240] wanted the market lower and 1120ish would be the Max-Pain target. Buy the 530 puts under $2.00 with the market at or near the year’s high 1147. The puts were trading near $3.80 at the time.

I, again as in the previous week’s trade, mentioned that I thought it’s best to hedge since I did not expect a large sell off. On Thursday’s 2:00 PM "B" chart I wrote “530W’s hit 2.20 Long small scaling” into 1147 highs. Students bought more puts near $2.00. There was another Alert Email sent at 3:44 PM to hedge near the 40ID buy level with long E-minis. Here I mentioned the best trade would be to sell longs into the INTC earnings ramp and look to hedge any weakness prior to JPM's EPS announcement prior to the opening.

After the close INTC’s sales, EPS numbers and margins blew out. INTC rallied to new highs over $22.10. The S&Ps only rallied back to the previous highs. The hedge could have earned as much as $150-200 per long hedge nearly paying for the puts. In afterhours trading INTC started selling off. If the markets were open I would have put out a short alert for INTC and the S&Ps. The INTC price action confirmed to me that a short-term top was in and it didn't matter what JPM reported the next morning. Last quarter INTC beat the numbers and then sold off more than $2.00

Overnight INTC was down over a $0.60 from the highs while the S&Ps sold off nearly 9 points. There was an early rally attempt near the opening. Friday morning I put out an Alert Email at 9:43 AM to sell puts into weakness. Some of the students were lucky and sold puts over $5.00. The 535 puts did hit $7.70 after 2:00 PM but the best trade in hindsight was to buy the 530s when the S&Ps broke the large 1138-1139 support level. The 530 puts opened at $0.40 and were trading near $0.70 when the S&Ps were near support 1138. These puts hit a high of $3.40! See 2010-01-15 B Multi-day Chart for the put trade write-up.

If a trader bought 25 535 puts @ $2.25 and hedged with only 15 long E-minis he/she could have made $5,000 or more with the hedges and possibly doubled his money ($6,000 more) on the puts. With NET knowledge and other learnable fundamental skills it was possible to earn even more substantial profits by shorting INTC, JPM or the E-minis in the overnight market. (For NET Advanced Bible purchasers refer to Chapter 19, section “News Release at Extremes Upper/Lower Unis” pages 225-227.) Pure technical traders are always at a disadvantage and were probably trapped by the expected good news at the market’s high.

Regarding the Intra day Alert Email, a NET subscriber should expect between 2-4 alerts per trade. There was even an Alert Email for the stock BTIM after the stock rallied to a triple top/60% sell level. I wrote that I thought the stock could pull back $0.40-0.50. BTIM hit a high of $5.39 that day before selling off to $4.95 Friday. Lucky? No, just years of market-watching experience. Here's a rather simple two page blog on BTIM posted this week that will give you more back ground and thoughts. Enjoy!

http://www.scimitarequity.com/blog/2010/ (See BTIM mid-way down the blog page.)

As always keep those cards and letters coming. I read every one of them.

Good trading,

Stan Moore
702.267.0396

New Era Trader

NEWSLETTERS & RECOMMENDATIONS - December 21, 2009

Jan 10
2010

Buy good or bad news 1200 is just a stone's throw away

Posted by Stan Moore in Untagged 

NEWSLETTERS & RECOMMENDATIONS - January 10, 2010

Fellow Friends and Traders,

It doesn't get any easier when you understand that fundamental news, money flows, etc. move markets and technicals only paint a picture of these fundamentals. The fundamental money flows out had the market going down into year end and the huge new inflows (mentioned in the last newsletter) told us the market would be higher the first week of the new year. The market’s down 1.5% the last two days of '09 and now up 2+% the first week of '10.

During late '08, the start of tremendous world stimulus programs by all governments and central banks told us the equity markets would move substantially higher into '09. In fact, every naked put suggestion or recommendation I ever mentioned in the Chart Room or wrote about since September '08 and again during March '09 will expire worthless this coming Friday 1/15/10. Nice work if you can ever get those put premiums again.

Yes, some of the put premiums did go to buying calls that did extremely well. In hindsight I should have put all the put premiums into Jan '10 calls and took the year off. That good I'm not. I am a very cautious person by nature and I like to make money even if I'm wrong on the markets and the markets didn't go up. I will continue to sell puts on those stocks I'm willing to own below the market. This is not a strategy for every one even though it works rather well. Call me if this appeals to you.

Why you may ask? The largest part of the '09 Obama economic stimulus program is being spent during the first 6 months of '10. By design!  Everything should come up roses these next 3 months. The FED is on hold for all of '10. S&P making 1200 should be easy as I said making 10,000 was for the DOW in the 3rd quarter. Furthermore, I now believe the one big geopolitical risk is off the table for at least the next 6-9 months. The IRAN’s drop dead date of 12/31/09 has come and gone without a peep. I'm totally convinced the Obama team is resigned only to containing or trying to contain a "nuclear" IRAN. The U.S. is now slowly moving to help the Iranian opposition but Israel cannot wait. Stay tuned but the story is off the front pages for now.

According to Stratfor.com in this week’s Barron's Russia is moving quickly to recreate the old USSR and is moving ahead quite aggressively while we are pinned down with all our problems. This will give them even more power over IRAN in the future. Obama good luck here too!  Russia and Germany are moving ever closer over energy and German technology which give Russia's energy and political future a huge boost. But that's a problem for another day and not quite tomorrow.

Option Trades in Review:
I emailed the first option put trade alert for 2010 Thursday after 2:30 PM. The stock market was expecting a very positive Jobs # Friday morning @ 8:30 AM. The S&P was at a yearly high near 3:00 PM. This alert was put out as a "must hedge" trade. Traders should buy the 525 Ws under $1.50.and trade E-minis long on dips. The puts were purchased as low as a $1.35. Within 30" the puts were trading over $2.00. The S&Ps sold off over 4 points into a 40% buy. S&Ps were bought and could have been sold after 30 minutes for $200 profit per E-mini.

There were a few early morning hedging opportunities pre-opening after the surprise negative Jobs #s. The market dropped about 5 points into a MD 40% (1133) buy level where long E-minis could have purchased for a $150 profit when sold at a 40% sell/retest area. Shortly after that the market hit the overnight low at a 60 MD buy level near 1131. Another long was entered and could have been sold at the opening near 1136 for as much as $225 profit per hedge. The 525 W put opened on the small gap lower @ $1.15 on a few then hit $1.65 at the 10:00 low.

Trade Summary:
If a trader bought the 20 puts @ $1.50 (a $3,000 investment) and bought only 10 E-minis long (or, optionally, could have bought as many as 15) as outlined above the trader could have made as much as $525 per hedge times 10 E-minis or $5,250 which let's say lost $0.25 or $500 on the puts. Net profit was anywhere between $4,000-$5,000 in less than 2 trading hours with no overnight margin. You can see why I said this was a "hedged trade" set up. I sent out at least 5 intraday emails over the two days to help you through this trade.

These fundamentally-based option trades have worked extremely well over these last 28 years because at price extremes the news is already in the price (market) so when we are wrong (rarely) we lose very little. However, when we are right we average returns over 100% in a day or less using options alone and much greater returns when hedging. I've been teaching exactly this fundamental and technical- based technique going on 10 years now and I'm the only one doing so – that I know of.

Other possible trade Reviews:
There were other possible option trades Friday. A few students called in and bought calls as early as 10 AM. I also mentioned in the Chat Room I wanted to short the 525 puts over a $1.00 since they should go out worthless. They did. After 2:00 PM I mentioned in the Chat Room that I thought there were 2 possible trades given the extremely narrow range then.

First, we could buy puts under $0.50 and go long the S&Ps. I could see a few hedged trades making $150-$200 per long contract or losing $50 on our puts even if the market did not take the high. The best trade I thought was to buy the 525W calls under $0.70 down to $0.50. Even if the market only went back to the highs we could make 2-3X depending what we paid for the calls. The calls could be worth between $1.50 and $1.75. I entered a scale-in buy order for the calls lower than $0.90. Unfortunately, the 525s never traded below $0.90 and closed at $2.80 as the market took out the high by a few points, stopping only near the 60% sell of the May '08 highs.

So, if you want to take your trading to the next level or if you just want to receive our Intraday Charts/Alert Emails, don't hesitate to call or write.  I expect to generate another 25-30 alerts this year any one of which could more than pay for years of my services.

Good trading,

Stan Moore
702.267.0396

P.S.
“The US faces projected deficits that seriously threaten its bond market, exchange rate and the economic future of every American.”   – Robert Ruben, former US Treasury Secretary
Dec 29
2009

For 2010 Expected the unexpected. BTIM Alert?!

Posted by Stan Moore in Untagged 

NEWSLETTERS & RECOMMENDATIONS - DECEMBER 27, 2009

Fellow Friends and Traders,

I hope the Christmas holiday was good to you and your family. My grand children are worth their weight in gold and must be God's reward for having children. Next time, I'm skipping the children and going straight to the grand kids.

If we all do what the so-called "Markets Gurus" tells us we will never make a dime investing or trading. Yes!, we must understand what those so called "Professionals" are telling us and then ask ourselves what can go wrong? Never lock your mind into any one expectation. Otherwise you will find yourself buying into declines or constantly selling short into rallies. I keep saying let the Markets tell us what they want to do and follow.

Every time I turn-on CNBC I hear a talking head tell me he got out of the market in '07 and got back it at the March bottom. We know this is not true because one hedge fund manager, David Tepper, disclosed this past week he made $7 billion buying financial stocks earlier this year. Someone had to be on the other side selling them to him. Tepper now manages about $9 billion today and earned himself over $2.5 billion this year. That's nice work if you can get it.

After reading last week's Barron's 2010 economic outlook we note that the consensus falls into a very narrow range for the majority of key economic components:

* 2010 S&P profits are expected to come in between $75 and $80 a share.
* They have an S&P target price between 1,200 and 1,300.
* Next years GDP will be up between 3.0-4.0%.
* Finally, 10 year T bonds will yield between 3.5% and 4.5%.

If we all believe this outlook we must think  we are now capable of self-sustaining economic growth coming out of the "recession" and the market will be higher next year. If there is any variant outcome to this view there will be some very dramatic swings ahead from Mr. Market.

Here a few thoughts to chew on:
The biggest economic and market surprise I see ahead is that 1st quarter GDP growth comes in over 4.5% and the market goes sideways or down given the extensive rally to date and with strong economic headwinds ahead in the 2nd half of 2010.

My biggest concern is the geopolitical risk when, not if, Israel attacks Iran. This could come at any time after the 12/31/09 deadline for talks ending and sanctions to be imposed by the U.N. This will bring U.S. growth to a grinding halt by already strapped consumers.

Bonds yields can be greater than 5% or less than 3.0%. Take your pick. War and the economy falling apart could see rates fall below 3% or no war economy grows too fast and rates soar around the globe.
I can see no reason for housing or employment to recover at all in the next few years. I also see 2nd half growth flat. Not good for stocks.

These are just a few things we can chew on looking ahead. I will let the "Market" tip its hand. I have a few good guesses but nothing is set in stone. Fasten your seat belts! This isn't Mr Toad's wild ride in any amusement park that I know of.

More BTIM info to come next:
In my next alert letter I will put out extensive information to paid subscribers on BTIM. It's written by a pro who has followed Dr. West for over 10 years now. I was blown away by the information contained.
Last Monday I sent out an alert email on a deal between Pfizer and Athersys (ATHX). The later has a very limited portfolio of stem cells. ATHX was $0.44 in March,under $2.50 on Friday and near $3.00 on last Monday morning. From my conversations a number of you bought ATHX on my alert. Congratulations! Initially on the announcement the stock did not run away. There are only 18M shares outstanding. By Wednesday the stocks hit $6.40 with 49 million shares trading that day and then closed at $5.50 Thursday.

Now look at ATHX.  They got $6 million in cash, signed a deal with PFE for another $105 million in the future. Their market cap explodes by nearly 500% with just one stem cell line. Both companies now have about $150 million market caps. I expect future joint ventures with Pharma companies will be better than ATXH's and given its vast 200+ stem cell lines. It's not a question of if there are future deals just when.

We may get one more great opportunity to buy BTIM cheap. Thursday was the 18th day BTIM traded over $4.00. According to the last BTIM SEC filing BTIM could call their warrants that expire 10/31/10 early if BTIM trades over $4.00 for 20 straight days. Effective 12/30/09 BTIM may call the warrants. If called the stock will sell off. I'm guessing the stock will trade under $4.00 for a few weeks. BTIM will then have $18 million in the bank and the stock should rally right back. Over 50% of the 8 million outstanding warrants are held by insiders and will not hit the markets.

Personally, I've already exercised over 200,000 warrants. There must be less than 4 million out in the public's hand. Investors can own BTIM at a discount to the common by buying the warrants and converting  into common by paying a $2.00 exercise price. Then again, BTIM may not call them at all. I just want to give you a heads up. I've written talked about this before.

Good trading, have a Happy and healthy New Year.

Stan Moore
702.267.0396
Dec 21
2009

Looking ahead into 2010 - my crystal ball is a bit hazy

Posted by Stan Moore in Untagged 


New Era Trader

NEWSLETTERS & RECOMMENDATIONS - December 21, 2009

Fellow Friends and Traders,

Get ready for 2010. After a flood of money lifted all assets in '09 I expect '10 will be a year of much smaller gains and will require better risk management. Performance for the year of front-end loaded as the rest of the stimulus is spent with a 2nd half swoon looking ahead to higher taxes, lower growth, shrinking PEs and higher interest rates.

The above assumes we get through early Jan/Feb with no one at war with Iran. This is starting to heat up and will be front and center on the world stage as 2010 opens.  Israel is chomping at the bit to take out their nuclear facilities. Currently, Iran remains defiant in the face of any possible sanctions and has been making well-planned excursions into Iraq recently. Iran even planted their flag on an Iraq oil facility and let the world know they did it. A release of this news early Friday rallied oil almost $1.75 giving us a small rally into the opening.

All I can say is I'm in cash trading my brains out intraday. I will use any BTIM weakness to increase my holding in a major way should it break much lower. If and when news on Iran breaks badly I could see the DOW drop over a 1000 points intraday if there were no trading curbs [A temporary restriction on program trading in a particular security or market, usually to reduce dramatic price movements; also known as a collar or circuit breaker] were put on. Fasten your seat belt we may be in for a bumpy ride.

Weekly Money Chart in Review
This was another week trading in what has become known as the "Channel of Death". The market tries to rally on good news only to get sent lower by a rising USD then this cycle repeats. I expect this carry trade to unwind sometime next year as liquidity is sucked out of the markets by world central banks with rising rates. Meanwhile we sell rallies and buy the dips. Works well for NET traders.

I was looking for a call trade on Thursday's sell off but I could not see any upside given the extra heavy Friday expiration rebalancing of the S&P. We have VISA being added to the S&P in with significant capitalization additions to both Citicorp and Wells Fargo allocations after their $38 billion equity offerings. In plain English, index funds were selling about $7 billion of stock in 497 companies in the S&P while buying $7 billion of shares in the other 3 companies at the close of business Friday. So, I suspect it will difficult to see the market rally much higher after a small gap up opening. I could see the S&Ps being pinned or going nowhere most of the day. The OEX calls opened much lower from the overnight close even when the market opened 5 points higher. This option action further confirmed the trading range and only happens when traders are expecting very narrow price action.

On Friday, I looked at the ATM puts but they were $2.50-$3.00 - too much risk to own with a small expected decline. Never looked at the OTMs given what I thought was going to be only a 6-7 trading range day. I even mentioned in the Chat Room I would sell the OTM calls short because these options should go out worthless. I rarely recommend this trade because of the opened-ended risk. However, the trade was highly probable so I sold the calls which expired worthless.

A number of students called in and I related the above info about how I thought the market couldn't go up. Guess what if the market couldn't go up, they bought OTM puts between $0.35 and $0.50 and later hit $1.35. They were lucky as the USD broke to new highs and the market range expanded about 2-3 points more to the down side. They called back later to thank me. See 2009-12-18 Friday "C" chart.

Reminder: I will be away from the Dec 25 through Jan 4. There will be no emails or posted charts. I will be following the markets because I expect a lower market into year end. My ability to answer calls or emails may be sporadic.
Have a great Holiday Season and a Happy New Year.

Keep those cards and letters coming.

Good Trading,

Stan Moore
702.267.0396


Dec 20
2009

2008-2009 Investment Performance and Strategies in Review

Posted by Stan Moore in Untagged 

NewEraTrader

2008-2009 Investment Performance and Strategies in Review


Fellow Traders and Friends,

Time flies when we’re happy and healthy. I hope this note finds you well and looking forward to a Happy Holiday and a prosperous 2010!

First of all, I'd like to take this time to thank you for your business and continued relationship. Many of you have been with me over these last 10-15 years. Without you, Rhythm, Option Magic and New Era Trader would never have become what they are today.

You have challenged and pushed me to levels I could never have achieved alone and it's all there in writing. Just when I thought I was out of the market I was sucked right back in, and it was definitely the right move. I now plan to die happily in front of the computer hitting a trade button.|

I truly hoped the aggregate of New Era Trader materials, indicators, videos, intraday charts, email/newsletters, my blog, and alert emails have proved rewarding. We keep improving.  For Chart subscribers, you now receive the Intraday Charts real-time via email. With our newly updated email lists, I will start the Alert (trade) Emails again. I expect you will receive more than 25 this coming year and plan to expand these alerts as time permits.

As I look forward to the New Year, I believe 2010 will be one of the best stock-picking years that we’ve seen in some time. I see limited upside – maybe 1200. Although in June of 2009 we experienced a single 9% correction after the March bottom, I predict that this year may have several 10-15% corrections.

2007-2009 New Era Trader Trading Recap

A lot has happened in the last 28 months since our Intraday Charts advised you to get out of the market back in August '07. At the time I thought we would have had 3+% up and 25-30% down. Was I ever wrong. We went down over 60% and covered most of our financial shorts way too early.

Between September and November '08, during and after the Lehman Brothers (LEH) bankruptcy, I suggested a number of great buy ideas; most focused on the master limited partnerships or MLPs. Lehman had a $3 billion hedge fund of only MLPs. The fund was liquidated along with LEH, and within 2-4 weeks all these stocks were cut in half. Their yields increased from 10% to 20-25%.

Perhaps you’ll remember a few of my recommendations:

(HTS) – At my time of recommendation, Hatteras Fin (HTS) was trading $16-$18 with a $4.00 dividend that I thought would pay $5.00 sometime this year. I thought HTS would trade north of $27-$30. HTS hit a Sept high of $33.59 and declared a 4th quarter $1.20 dividend. I was close. HTS was my 2008 favorite before HUN.

(NLY) – Annaly Mortgage (NLY) was trading at $10-$11 with a $2.50 dividend and then hit nearly $20 with a $2.76 dividend.  Recently NLY has been around $19.00.

(LINE) – Linn Energy (LINE), my 2nd favorite, was selling around $11 with a locked-in, fully hedged $2.62 dividend for the next 3 years. Today, LINE sells near $26.

Even with a market headed still lower, none of my MLP ideas were ever at risk. We even collected over 6 high-yield dividend payments before exiting these positions.

I also recommended a number of put writes with Jan '10 expiry with enormous premiums - puts on FRE, CAT, CME and CKE and other energy stocks. As foretold, all these puts will expire worthless next month.  I even wrote that the major oils would take over the gas players in the next few years removing additional investment risk. In early ‘09, Burlington was acquired by Conoco and XTO is going to be merged into XOM next year.

(HUN) - Huntsman Corp (HUN) was recommended in December 2008 at $3.00 and we averaged down into $2.00, with a $0.40 dividend for added yield protection. A good number of NET students cashed out most of their HUN position at $7.00+. Some are still holding positions awaiting a possible take-over out in 2011. Currently, HUN is trading around $11.00 – don’t forget the 17% annual yield.

There were additional put write and long call suggestions in Feb of '09 when I wrote that the decline would end 600-700 in the S&P. The market then bottomed in March '09 at 666.

A few months ago I wrote that NET traders should sell all stocks and concentrate on E-minis and Expo week option trades. We may have left a few dollars on the table as the market is up 50 points or so.  Just look at those unbelievable option trades these last few months in the weekly blog. I plan to make these shorter-term option trades the focus of the Alert Emails in the future.

If you followed my advice these last few years you obviously did very well.  My own self-managed IRA, which I opened in Feb ’09, hit a high in November ’09 - a 10X return in 9 months. I expect substantial returns into 2010 as well.

Even though none of us have ever experienced anything like these last 2 years you will realize the game is still the same, only the players are different.

As can be seen above and below [Charlie’s Interaction] my trading and mentoring style is quite unique among professional traders, very profitable and risk adverse. I also employ sophisticated money and trade management learned from my many years of experience. For 2010, I plan to continue recommending “normal” and the more advanced trades such as hedging and parlaying trades, partial position trades, pair trades and seasonal trades. Of course my more advanced trading techniques maximize returns, limit risk or achieve both. As most of you know, while I primarily trade E-minis, cheap expiring options and a selected handful of stocks, I also dabble with ETFs, currencies and other securities as market opportunities arise.


So, by staying connected, you can either trade along with me or just learn from my trades and recommendations!


Jan 2010 - It’s Remuneration Time

It's the time of the year to ask for your continued financial support. Above I've provided a brief reminder of what many of you received over the last 2-3 years. Just one of these ideas pays for many years of my services. For example, one student doubled his trading account with HUN alone.  Another told me he earned over $250,000 buying HUN.

For 2010, I’m offering a $2,200 tax deductible, professional investment advice bundle of NET services - Intraday Charts/Alert emails, my emails/newsletters, videos, indicators and your access to me for consultations – all for one year.  The normal unbundled price for these services is $3,750. Here’s the purchase link (requires login). This special will be offered until Jan 10 and is available for previous NET course purchasers only. If you prefer to send a check dated 12/31 my home address can be found below.


For those that want to trade options NET style on Thursdays and Fridays, I’m offering a special Chat Room price of $175.00. Here’s the purchase link.

Charlie Comerford is one of the main reasons I came back into the student-teaching business after a shortened retirement. Charlie is now my newest full-time trader who moved from the chills of New Hampshire to Arizona, showing that you can live anywhere. He loves the hours.  See our email correspondences and samples of our phone calls.

I will always be available to you at anytime. I stand ready to answer any questions about trading, a specific trade, economics, etc. Just call me if you have any questions or want anything special.

Over the holiday season, I will be away from December 25th to January 4th.

May your family be happy and prosper in the New Year and Happy Holidays! I can't thank all of you enough for all your support.

Stan "Ed" Moore
34 Avenida Fiori
Henderson, NV 89011
Ph 702.267.0396

Charlie Comerford and my interaction during real-time trading:

This is the first of two real-time student-mentor interaction examples from New Era Trader student Charlie Comerford who emails Stan Moore to thank him for a 3X winning trade that lasted less than 2 hours.


Interaction Example 1


December 4, circa 2 PM

Friday, December 4, Stan notes a call trade setup and posts Intraday B Chart at 2:00 PM. Charlie sees the chart.  See attached 2009-12-04 B chart.  Stan recommends purchasing the 510 Weekly calls near $1.25.

December 4 at 3:16 PM Email

Student Charlie acknowledges the profitable trade setup:
From: sendtocharlie@yahoo.com
To: easyryhthm@aol.com
Sent: 12/4/2009 3:16:16 P.M. Eastern Standard Time

Nice call on those calls baby!


December 4, circa 4:10 PM

Stan reviews trade results. Calls went from as low as $1.10 to $4.30 or 3-4X in less than 2 hours. See attached 2009-12-04 C chart

This is the second of two real-time student-mentor interaction examples from New Era Trader student Charlie Comerford who calls Stan Moore wanting to buy OTM call options.


Interaction Example 2


November 18, circa 3:00 PM

Charlie calls Stan November 18 wanting to buy OTM calls expecting a breakout to new highs. Stan advises ‘No’.

November 19 at 10:35 AM

In a message dated 11/19/2009 10:35:34 A.M. Eastern Standard Time, sendtocharlie@yahoo.com writes:

Nice call, Ed. Thank you!


November 19 at 10:46 AM

From:
"EASYRYHTHM@aol.com"
To: sendtocharlie@yahoo.com
Sent: Thu, November 19, 2009 10:46:54 AM
Subject: Re: (no subject)

Saved U a few $'s buddy Didn't I??


November 19 at 10:55 AM

From: sendtocharlie@yahoo.com
To: EASYRYHTHM@aol.com
Sent: 11/19/2009 10:55:23 A.M. Eastern Standard Time
Subj: Re: (no subject)

You certainly did, sir. I was dead sure it was going to pop to 1120, get everyone long, then sell off hard.

DEAD WRONG!

U da man!


November 19 at 10:55 AM

Stan acknowledge thank you. Charlie saves significant money.  See attached 2009-11-19 A chart with large gap down.

Don’t believe it? Contact Charlie Comerford, a full time trader and
NET student at phone 603.512.2444.
Sign-up today and get a generous discount!



Dec 13
2009

What happens when we no longer get good news?

Posted by Stan Moore in Untagged 

New Era Trader

NEWSLETTERS & RECOMMENDATIONS - December 13, 2009

Fellow Friends and Traders,

Another week of good news and the markets goes nowhere. The news next week will be mixed with the PPI and CPI showing higher inflation but not enough to send the markets lower. The last FED meeting of the year will be the week’s highlight.

There is no doubt that next week's meeting of Federal Reserve policymakers will receive lots of attention and generate lots of headlines. The result is likely to be rather anticlimactic.  However, I don't anticipate any major changes to Fed policy and there will certainly be no shift in the target interest rate even though last month's employment data was better than expected. Federal Open Market Committee members will not view a single data point as the start of a trend and even though the employment report will be on their minds, jobs will not have a significant impact at this meeting. Before any rate hike, the Fed will remove the words "extended period" from its statement and I don't believe that's in the cards yet.

It may be hard for the market to extend any gains next week given the current Dubai situation. On Monday as much as $5.25 Billion of Islamic bonds are coming due. The chance of full repayment at this point is slim. However, overseas bankers are speculating that Nakheel, the borrower, may repay part and extend the rest. Most of the bonds are selling near $0.50 on the dollar since crashing late November. Anything would be better than an outright default.  If there is a favorable settlement we could see a rally as the USD should sell off. Right now commodities like oil and gold sold off nearly 10% since the USD found its new legs. It's hard to imagine any rally without commodities at this point. Stay tuned it may get a little bumpy out there.

I noted a potential call trade in the Chat Room and on the 2:00 PM "B" Wednesday chart near the Dubai news low of November 25th and the 50 DMA. I was hoping for a slightly lower low that never came. The Market bounced sharply from a triple bottom Wednesday and the calls went from $3.00 to nearly $9.00 but I don’t of anyone who did this trade.

Biotime rang the opening bell on Tuesday and did we ever get a surprise. Dr West was interviewed by CNBC for a few minutes and BTIM immediately exploded to $5.25 just as my Internet went down. BTIM spend the rest of the day trading under $5.00. Volume hit nearly 800,000 shares. These rallies out of the blue are almost never sustained and should be sold. We can purchase the shares back lower later on as those Johnnie come latelys get buried once again.

The interview was quite the introduction on national cable for BTIM and for stem cells in general. I personally feel that Biotime's price will move higher over the next year even if there were no extraordinary events. The stem cell field is advancing too fast. I feel there will be at least one extraordinary event within six months and at least two within a year. Go BTIM!

Keep those cards and letters coming.

Good Trading,

Stan Moore
702.267.0396
Dec 06
2009

Is the 9 month rally driven by the "Risk Trade" now at risk?

Posted by Stan Moore in Untagged 

New Era Trader

NEWSLETTERS & RECOMMENDATIONS - December 4, 2009

Fellow Friends and Traders,

Are investors around the world awaking to the fact that borrowing USD to buy risk assets across the globe may not work anymore? This carry trade strategy has been a God sent to world traders in '09. Did this all change with the Friday’s jobs numbers that showed a much greater uptick in economic growth? The FED has been on hold well into a worsening job outlook throughout 2010 and maybe even 2011.  Interest rates rallied sharply higher last week. Fed funds futures are looking for rate increases starting mid-next year.

Early last week the USD was sitting at a 15 month low holding under the 50 DMA for the last 9 months. Suddenly, Friday morning both the USD and stock markets rallied strongly together. The reality must have set in shortly thereafter because investors rushed to sell risk assets and cover USD shorts. The USD rallied over 1.5% while the S&Ps fell about the same. The USD is now over its 50 DMA. Gold was down over $70 at 1 point Friday but closed only down about $50.

Yikes! Friday was some day. Remember bear market rallies are hard and fast. The USD can rally 3-5% before resuming a down trend. I'm guessing markets won't like the USD rally in the short term. However, if in fact the FED really starts to raise rates early next year and not much later as is now the plan, the dollar will resume its sharp rally as the carry trade starts to unwind. Anyway we look at this situation 2010 will be a much harder year to make the same returns investors did this year.

This shouldn't affect our E-mini/option trading style. Stock pickers should have a great 2010. Most investors confuse a bull market with brains. These investors will find 2010 will not be easy as '09 was.

Looking ahead good economic news may not be so good for stocks. The stronger the economy starts to look the sooner the FED may have to raise rates. We should let Mr. Market tell us what to do.

Stock thoughts and ideas:
HUN. I've started to sell puts on Huntsman (HUN) again. HUN had a blow out presentation last week at a Citibank Conference. It's a totally different company now with only 18% of the business coming from the U.S. I will look to do more analysis and get back to our paying subscribers with more specific trading strategies.

BTIM. Biotime announced Dr. West will ring the opening bell on NYSE Tuesday morning. BTIM is getting noticed more every day. There was more good news last week as the National Institute of Health or NIH approved over a 100 stem cell products for use. Even more, stem cells products should be approved shortly. BTIM has over a 180 separate patents. Stem cells have a real future that starts now. BTIM bounced nicely off its 200 DMA of $3.18 and rallied to $4.63 before pulling back. I love the stock under $4.00 and the warrants under $2.00. Go BTIM!

I strongly suggest you go to Yahoo Finance and visit both the HUN and BTIM message boards for in-depth commentary.

Last week in review:

Over these last few weeks I have alerted you to the rather large resistance area in the 1114-20 area. I pointed out the 2 year downtrend line on the largest time frames and I spelled out the importance of "Triple Divergence" on the daily chart. This week we experienced that same Triple "D" on the 30" chart. We had 3 higher highs in price with 3 lower Oscillator highs and ending with "Leading Divergence". There were 2 possible put trades this week. The first, on Thursday, had the 515 weekly puts going from $1.10 to $4.50 then late Thursday, near the close, I tried to buy the weekly calls at $1.00, my bid, but the low trade was $1.05. The calls opened over $4.00 Friday morning. What can I say but buy the rumor and sell the news.

There were 2 weekly puts setups could have been bought into Friday’s opening at new yearly highs. The 520s ATM puts traded as low as $1.60 while the OTM 515s traded as low as $0.20.The ATM 520s hit $9.00 while the OTM hit $4.40. Later I alerted the Intraday Chart subscribers to a 510 Weekly call buy on the 2:00 PM chart near $1.25. These calls were trading at $1.80. Thirty minutes later they hit $1.10. I bought them in the Chat Room with some long E-minis. The calls hit a hit of $4.30 in less than 2 hours and closed at $3.90. See Friday’s charts - 30 Minute and the 5 Minute.

These option trades are available every week and you only have to be successful once a week to have a very profitable trading week with cheap expiring options.

Right now there’s a 40 point S&P trading range. Unless there is news that's off the charts this range should be very profitable for us. If for any reason we break out up through and hold above 1120 I can see a final '09 high of about 1150. We may have a better idea after Asia opens tonight to note any follow on selling.

It's taken the good part of the year to get all our mailing list up-to-date and working. I will attempt in early Jan 2010 to get the option alert trades out to the paid subscriber list as I see them setup. Prospective students will see those recommendations at a later time.

Please stay in touch and keep those cards and letters coming.

Good trading,

Stan Moore
702.267.0396
Fellow Friends and Traders,

Are investors around the world awaking to the fact that borrowing USD to buy risk assets across the globe may not work anymore? This carry trade strategy has been a God sent to world traders in '09. Did this all change with the Friday’s jobs numbers that showed a much greater uptick in economic growth? The FED has been on hold well into a worsening job outlook throughout 2010 and maybe even 2011.  Interest rates rallied sharply higher last week. Fed funds futures are looking for rate increases starting mid-next year.

Early last week the USD was sitting at a 15 month low holding under the 50 DMA for the last 9 months. Suddenly, Friday morning both the USD and stock markets rallied strongly together. The reality must have set in shortly thereafter because investors rushed to sell risk assets and cover USD shorts. The USD rallied over 1.5% while the S&Ps fell about the same. The USD is now over its 50 DMA. Gold was down over $70 at 1 point Friday but closed only down about $50.

Yikes! Friday was some day. Remember bear market rallies are hard and fast. The USD can rally 3-5% before resuming a down trend. I'm guessing markets won't like the USD rally in the short term. However, if in fact the FED really starts to raise rates early next year and not much later as is now the plan, the dollar will resume its sharp rally as the carry trade starts to unwind. Anyway we look at this situation 2010 will be a much harder year to make the same returns investors did this year.

This shouldn't affect our E-mini/option trading style. Stock pickers should have a great 2010. Most investors confuse a bull market with brains. These investors will find 2010 will not be easy as '09 was.

Looking ahead good economic news may not be so good for stocks. The stronger the economy starts to look the sooner the FED may have to raise rates. We should let Mr. Market tell us what to do.

Stock thoughts and ideas:
HUN. I've started to sell puts on Huntsman (HUN) again. HUN had a blow out presentation last week at a Citibank Conference. It's a totally different company now with only 18% of the business coming from the U.S. I will look to do more analysis and get back to our paying subscribers with more specific trading strategies.

BTIM. Biotime announced Dr. West will ring the opening bell on NYSE Tuesday morning. BTIM is getting noticed more every day. There was more good news last week as the National Institute of Health or NIH approved over a 100 stem cell products for use. Even more, stem cells products should be approved shortly. BTIM has over a 180 separate patents. Stem cells have a real future that starts now. BTIM bounced nicely off its 200 DMA of $3.18 and rallied to $4.63 before pulling back. I love the stock under $4.00 and the warrants under $2.00. Go BTIM!

I strongly suggest you go to Yahoo Finance and visit both the HUN and BTIM message boards for in-depth commentary.

Last week in review:
Over these last few weeks I have alerted you to the rather large resistance area in the 1114-20 area. I pointed out the 2 year downtrend line on the largest time frames and I spelled out the importance of "Triple Divergence" on the daily chart. This week we experienced that same Triple "D" on the 30" chart. We had 3 higher highs in price with 3 lower Oscillator highs and ending with "Leading Divergence". There were 2 possible put trades this week. The first, on Thursday, had the 515 weekly puts going from $1.10 to $4.50 then late Thursday, near the close, I tried to buy the weekly calls at $1.00, my bid, but the low trade was $1.05. The calls opened over $4.00 Friday morning. What can I say but buy the rumor and sell the news.

There were 2 weekly puts setups could have been bought into Friday’s opening at new yearly highs. The 520s ATM puts traded as low as $1.60 while the OTM 515s traded as low as $0.20.The ATM 520s hit $9.00 while the OTM hit $4.40. Later I alerted the Intraday Chart subscribers to a 510 Weekly call buy on the 2:00 PM chart near $1.25. These calls were trading at $1.80. Thirty minutes later they hit $1.10. I bought them in the Chat Room with some long E-minis. The calls hit a hit of $4.30 in less than 2 hours and closed at $3.90. See Friday’s charts - 30 Minute and the 5 Minute.

These option trades are available every week and you only have to be successful once a week to have a very profitable trading week with cheap expiring options.

Right now there’s a 40 point S&P trading range. Unless there is news that's off the charts this range should be very profitable for us. If for any reason we break out up through and hold above 1120 I can see a final '09 high of about 1150. We may have a better idea after Asia opens tonight to note any follow on selling.

It's taken the good part of the year to get all our mailing list up-to-date and working. I will attempt in early Jan 2010 to get the option alert trades out to the paid subscriber list as I see them setup. Prospective students will see those recommendations at a later time.

Please stay in touch and keep those cards and letters coming.
Good trading,
Stan Moore
702.267.0396
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Nov 30
2009

Another Black Swan and a harbinger of things to come?

Posted by Stan Moore in Untagged 

New Era Trader

NEWSLETTERS & RECOMMENDATIONS - Nov 29, 2009

Fellow Friends and Traders,

No sooner did our Thanksgiving turkey get digested when world markets suffered indigestion. They choked on Dubai's sovereign debt. While we enjoyed a holiday closed session, most world markets suffered a 3% decline overnight. I believe this was the biggest 1 day decline since April '09.

The world's credit debacle over the past few years was truly a "Black Swan" event of the 1st magnitude. Dubai hardly qualifies as one but we all remember others that started small and insignificant currency or financial crises that then wreaked havoc on world markets in the past. This will impact oil producing countries in the Middle East and European banks more than the U.S.

However, we should all be worried not only about the default itself but about the possibility of Dubai's sovereign wealth fund having to sell off assets in a hurry to raise liquidity. A lot of the assets in question are UK commercial real estate, a further fall in the prices of which could be painful all over especially the US and in China.

Could little Dubai become a harbinger of things to come? Moody estimates the total stock of sovereign debt worldwide will rise by nearly 50% between 2007 and 2010 to $15.3 trillion. Most of this debt will come not from irrelevant little states but from major economies like U.S, Europe and Japan. Perversely, these same countries are the key beneficiaries of the "flight to safety". Could these currencies cause an unwinding of the risk carry trade that has made so much money in '09? Stay tuned.

Even after our sharply lower opening Friday, the market like a Timex watch keeps taking a "lickin’ but still keeps tickin’". Why you may ask? Answer: "The Market Play Book".  You again ask what's that?  I have observed that over the last 49 years of financial turmoil the FED has always bailed us out. How? Through lower interest rates is the answer.

At the start of any recession, economic weakness, financial debacle, whatever the cause, investors rush from hard assets, real estate and finally stocks into fixed income especially Government bonds.  This is equally true for these last few years.

Remember the March '09 bottom? No one wanted hard assets or equities. As interest rates and stocks declined bonds enjoyed a substantial rally. Most domestic pension plans, endowments and even insurance companies have a balance between equities and bonds. The decline in stocks and the rally in bonds after awhile distort those ratios. Eventually these fixed ratios must be maintained for those institutional investors. They must then sell bonds and buy stocks etc. This is nothing more than "asset allocation" that's talked about in the "The Definitive Trading Bible".

This asset reallocation out of bonds into equities is what's most likely the primary driver of this year’s late and continued rally and has nothing to do with fundamentals. This is most likely to end for most institutions by December 31st. Then, I'm waiting for "Joe Public" to sell his bonds and buy equities once more then I'll know the top is in or I hope so.

Friday's call trade and Chart of the week:

Our option expiration trade always works best on Friday. Why? Because expiring options are basically throwaway trades. Your reward/risk is outstanding when your option trades for $0.50 or less. You only have a 1 point E-mini risk on the downside but you are totally open-ended on the upside. Last Friday the market opened down nearly 31 S&P points lower or -3% like most world markets did the previous day. Today, most overseas markets were better. Start your engines.  

Enter your orders before the market opens because the market is going to open @ or near the 40% buy from the Nov 2nd low and the 20 DMA. The market also opened at 2.3 Uni Band that have contained 98% of price movement in most markets over the last 28 years. The 50 DMA is only 7 S&P points lower. Go for it! This is a great tenet # 3 buy made even better with cheap expiring week options.

In two hours the market rallies back to a multi-day 60% sell 1098 and back to the lows where support becomes resistance. Sell all calls!  The throwaway OTM 510Ws (Weeklies) go from $0.25 to $2.20. The better ATM 505Ws calls go from $1.50 to $7.00. See linked 30" weekly chart. Yes you could buy the E-minis and make $1,000 on a $500 investment or a 2X return. But why, when the risk is open-ended and not just $50 per option contract. Cheap expiring options are still the best game in town!

Since we had a 60% rally off the lows our trading range lives for awhile longer bounded on the downside by the 20 and 50 DMAs, 1114ish on the upside and the multi-year downtrend resistance line. Remember this is still a bull market. The declines are sharp and fast. Enjoy the ride ahead.  Just watch the sign posts and stay in touch with New Era Trader.

I hope you all had the best Thanksgiving and are now looking forward to a healthy and happy holiday season.

Good trading,

Stan Moore
702.267.0396
Nov 22
2009

Hold your party hats! 1200 is still a ways off

Posted by Stan Moore in Untagged 

New Era Trader

NEWSLETTERS & RECOMMENDATIONS - Nov 22, 2009

Fellow Friends and Traders,

Hold the party! After the "Talking Heads" all told us these last two weeks now that we cleared 1100, 1150 was just around the corner and 1200 was the year-end target, the market does what it has to to cause the most pain to the most people. It turned around and broke back below 1100.

Why do this? Because the market can. Last week, I showed you some of the signs that the market would rest. We had a giant down trend line going back to the '07 highs. We had triple "D" on the daily chart and the market was ready to pause but not crash. Furthermore, the week before I spelled out the "bonus put trade" under the market. Most money managers have in this one year, '09, have earned the best gains than any other of the last 9 or so years. So lock them up!

The aggressive managers (i.e. hedge funds, HFs) would setup a bearish put spread. For example, HFs would buy a near the money 1075 put and sell a far out 1000 put for January. Then, to help pay for the puts they would sell some OTM calls being content to let the market play out. They would sell partial equity positions if the market went higher to prevent loses on the up side.

In fact, the large option open interest in November calls that told us the market should correct. NET Chat Room traders and those who have taken the NET course know this. "They", those mysterious forces aligned against traders, needed the market lower to inflict the MaxPain on the bullish call buyers. Someone has to sell those calls. I've written about "They" in my new book too. Over the 28 years I've observed "They" have been on the profitable side of this trade over 95% of the time and that’s not coincidental.

Lastly, since yearly gains are significant and hedged few are now minding the store as we go into year-end. Volume has contracted and will continue to do so into year-end. In fact, there is something occurring that I have never seen before in the "T" bill market. You can earn a 0.003% return on a 30 day "T" bill. However, if this T-bill expires in today’s extremely high-demand Jan ‘10 you lose a minute of money. The yield is a negative 0.001%.  So, in fact, hedge funds and other buyers are paying the U.S. government to hold the money for them until next year. That's true risk avoidance.

Review of this week’s expiration trade
The market rallied early on Monday and Tuesday to new yearly highs so NET traders were looking for a put setup to take advantage of an anticipated decline. Often, Wednesdays set up the week’s trade and, sure enough, there was a late rally Wednesday afternoon. If you note on the 2009-11-21 NET Weekly Money Chart, a 30” chart, shows a declining wedge pattern, i.e. flat bottoms with lower highs. This high-probability short trade is to look for a breakthrough of the bottom support. A few students called-in to discuss buying puts and most did.

As for me, I got too cute. I noted the late Wednesday closing rally broke out the top so I would have bought puts into any Thursday opening near Wednesday’s close. If the market opened near this area the puts would have been anywhere from $0.25-.40 lower. Needless to say, the market opened down hard and continued lower. The puts traded at the Wednesday’s close near $2.50 and hit $8.20 Thursday morning. This was a 3X return overnight! As the seller of calls, "They" scored again; the call buyers came up empty.

Looking ahead
There is good support first near the breakout low of 1073-4 then some 10 points lower at the big September 40% buy area near 1063-4. I’m expecting an overall 7-10% correction but that I believe the bulk of this correction will occur sometime early next year. The market should get good (early) December jobs numbers and should rally into year-end.  Expect heavy selling into a December 29-31 as most investors start to push '09 gains in '10 thereby depressing the market these last trading days of the year.

Review of Biotime (BTIM)
It was the best of times and it was the worst of times pretty much sums it up for BTIM this past week. It was the best when BTIM got listed and became marginable over $5.00. It was the worst of times because BTIM became marginable.

This week BTIM broke $5 and its 50 DMA simultaneously. Margin selling hit with a vengeance. How do I know? I bought stock all the way down and they killed me with market on close orders. Nearly every day this week there was 20-30,000+ shares to sell on the close. The stock dropped every time from $0.15-.30 in a few minutes. Hopefully, most of the sellers are finished.

This reminds me a little bit of Huntsman back last December '08 when I first recommended HUN at $3.30-3.40. I was so confident back then even as the market was getting killed. I started to buy a massive long stock position and sold naked puts while the stock continued straight down to $2.04. Seems like I was bleeding from every orifice. One student even asked me in the Chat Room when I would stop buying HUN? I answered, “When I ran out of money.” Shortly after that HUN turned around and you know the rest. HUN traded near $10 a few months ago. With my HUN recommendation, a large number of you made 6 figure returns. Only this time BTIM may go a bit lower first but the upside is much bigger than I ever saw for HUN.  Go BTIM!

Next Week – Thanksgiving Week
I will be out this Monday with jury duty. With any luck I will not be picked and will be back on Tuesday. Reminder: Friday is a half day. The stock market closes at 1:00 Easter. Friday is usually a strong up day if you're trading. I will take the day off.

I wish you all the best for Thanksgiving. We all have much to be thankful for this year.

Good trading,

Stan Moore
702.267.0396

P. S. Societe Generale has advised clients to be ready for a possible "Global economic collapse" over the next 2 years. It's a win win for them if it happens I'm guessing a 5% chance SC gets credit. If not, who will remember? Thought you want like to read it anyway. Here’s the link:
Nov 15
2009

Trading Mutliple Times Frames

Posted by Stan Moore in Untagged 

New Era Trader

NEWSLETTERS & RECOMMENDATIONS - Nov 15, 2009

Fellow Friends and Traders,

It's not very often that I read over 200 pages these last few days and find very little worth relating. This is one of those times. Looking ahead this week there is even less to report on the economic scene that could move this market sharply in either direction. It's been quite a trading year so some rest is in order.

Multiple Time Frames Training with Example Put Trade
This gives me a chance to review the technicals as NET would teach them. Today we will concern ourselves with trading "multiple time frames". Generally, a good part of the time traders are trading only what's immediately in front of them. Day traders may only look at lower time frames, say 5" or smaller. Swing traders may look at a 60" chart or even a daily one occasionally. Less active traders find daily and weekly charts with trend lines and moving averages useful.  Each trader group has certain advantages as well as definite disadvantages.

As NET we look at all time frames from the monthly down to the lowly Tick chart. Yes, we realize all time frames are not always in sync but when the majority are we find that we are able to bet more money in those situations because we find the higher the probability of success is derived from larger picture.  This NET technique is opposite of what many single time frame technical traders do.  Additionally, these traders rarely change their trade size lacking the confidence provided by the larger time frames.

I estimate 50-55% of our trading bias as derived from the from the 30" chart. Only 30% of NET trades come independently from the 5" or lower time frames especially on Thursdays and Fridays when we focus on trading the weekly expiration options. The remainder comes from the daily or higher time frames. These trades would tend to favor the swing trader who can trade monthly options, ETFs, stocks, commodities, etc. for days or even weeks.

You will find four charts with this week’s multi-time frame trade set-up starting with the monthly chart, followed by the daily confirmation. Entry timing is confirmed by the 30" and the trade is entered on the 5" chart Thursday morning.  In this case, either puts or short S&P E-minis can be used.  However, the put trade returns a greater leveraged trade without excessive risk.

The NET Training Charts
NET Training Chart 1 of 4 2009-11-10 Monthly

NET Training Chart 2 of 4 2009-11-12 Daily
NET Training Chart 3 of 4 2009-11-12 30 Min
NET Training Chart 4 of 4 2009-11-12 5 Min

Chart 1: Monthly Chart
The monthly chart displays a multi-year down trend line from the October '07 highs to this week (2009-11-09) in the 1100 area. This down trend indicates a point at which the market should have trouble breaking up quickly and may take a number of tries or retracements before the intermediate term uptrend continues.

Chart 2: Daily Chart
Next, we note a multi-month trading range on the daily chart while showing a powerful up-trending Oscillator and price pattern (higher highs and higher lows). Since late July ’09 the NET Oscillator has traversed between jammed (98 to 107) and oversold (35 to 44). Price has made higher highs and higher lows.

Some background data
No other oscillator even comes close to this indication of strength and the Oscillator works just as well in jammed down trends, -1 to 8, and overbought, 62 to 71).  Further note the trend indication for larger timeframe traders is to enter multi-week long positions or calls each time the indicator reaches the oversold zone (35 to 44) and exit at the jammed area (98 to 107).  NET traders drop down to the 30" charts and confirm exact entry and exits each time.

Referring back to the daily chart the market reaches a marginal high but only succeeded in getting overbought (89) not jammed. Also note the 3 successive higher price highs and now 3 successive lower highs in the Oscillator. One of my earlier books “Option Magic” calls this triple divergence. I write when we get Triple "D" on these larger time frames "back up the armored car, shovel all the money in and make a deposit in your favorite bank".

In my original book "Stan Moore’s Trading Methodology”.  I note that all price/oscillator divergences could be traded. However, my new book "The Definitive Trading Bible" defines five different divergences, one of which should never be faded (up or down) and another divergence type that actually leads price. Now I can actually say all four of NET's Primary Indicators lead price and do not lag like most other indicators. Who else can say this - no one that I’m aware of!

Chart 3: 30" Minute Chart
On Thursday morning 11/12 we note that price opens in the "High Window" or a retest of Wednesday's high (within 3 points on the 30" chart). However, the Oscillator has only reached 71 indicating leading divergence or just “leading D".  Leading D has an 85% probability of trade success on the 30 minute chart.

Chart 4: 5" Minute Chart

At this point, an anticipated short trade has been set-up and confirmed by the monthly, daily and 30-minute charts.  While the market opens lower it does rally into our anticipated sell window. The Advance/Decline is only 3/2 positive which does not support any move to higher highs. At about 10:00 AM, the trade is triggered when the Oscillator goes overbought and price is in an 80% multi-day retracement range. NET traders can begin to scale-in with puts (or sell E-minis). The trade is exited when the Oscillator goes oversold at end of day along with a 40% multi-week Fib number.  With this 20 S&P point drop, the puts go from $0.60 to $2.80.

Conclusion

Trading with multi-time frame analysis offers greater trade confidence, higher probabilities of success and creates set-up opportunities which can use ‘bet the ranch‘-sized trades.  

If there are any questions please do not hesitate to email them to me with your phone number. I will get back shortly. As always students should feel free to call me.

General Market Commentary
This week is the 3rd Friday expiration week. The MaxPain tells us "They" want the market higher near 1100 given the huge open put positions. I'm thinking trading range unless someone has a desperate need to jam the shorts.

As always keep those cards and letter coming. I do read them all and appreciate your thoughts.

Good trading,

Stan Moore
702.267.0396

PS: Projected $1.75 trillion deficit this coming year and over $9 trillion the next 8 years and counting.

The Obama Deficit Wagon


Nov 08
2009

Is a Year end "Bonus Put" forming beneath the market?

Posted by Stan Moore in Untagged 

New Era Trader

NEWSLETTERS & RECOMMENDATIONS - Nov 8, 2009

A free trading lesson using fundamental economic information:
The referenced chart – NET Weekly Money Chart 2009-11-06.

Here’s a trading lesson for futures and option traders
who desire to make high-probability, low risk trades.

There are at least 20 market moving economic news releases a month. That's too many to trade. So how does a trader take the ones with the greatest reward and least risk? These trades can be either swing (multi day) or intraday trades depending on your trading style and desires. Traders try to game news to see if economic releases are already factored into the market price. To succeed traders should be trying to buy the rumor and sell the news or vice versa.  The best trade is to fade expected news at large support or resistance levels prior to the release.

The New Era Trader (NET) methodology likes to trade with cheap OEX expiring options now every week but we also actively trades the S&P E-minis. I've been teaching exactly this using options and/or S&Ps the last 21 years with much success. I have found out over 28 years that a trader gets 3-4 very good high probability setups a month. The probability of success is well over 80% for a double. When the trade loses it's generally less than an option point. This is all covered in the NET basic training materials.

I'll use Thursday’s (Nov 5, 2009) strong rally into the close for a put setup to trade prior to the Friday mornings expected favorable job's #'s release. The market has rallied some 34 S&P points from Mondays low into a RT/F of the 10/21 high 1064 with the 20 DMA above at 1071. Support was 1055-6 down to 1049-50. Late Thursday I suggested buying the 490W puts starting near $2.00 and scaling in lower. I believe the puts closed $1.45 bid. If the Jobs # disappointed the market would drop 10-15 points before finding support. The puts would trade north of $3.00 if the market l sold off hard and traded there for awhile. If higher we'd buy new higher strike puts into resistance.

To lessen the risk I related to the chat room members to buy any overnight weakness using the E-minis long against the puts. But traders had to sell any expected rally prior to the 8:30 AM release. There was a potential 4 point long a few traders caught for a $150-$200 profit.  This trade cut the option cost in half.

There was strong overhead resistance between 1068.00 to 1071.50.  A few traders called before the job numbers announcement. I told them since the options weren't trading we could short the S&Ps up to 1071 with a stop at 1075.50. If the market rallied there after the opening we could use cheap 495W puts to average in. The market would take profits. Remember buy the rumor sell the news. Unless the job # came in well south of 100,000 the S&P 1071 number was factored already in the market. Besides a strong # would most likely speed up the FED time table for raising rates and the market would sell off anyway.

NET traders placed scale-in S&P sells up to 1071.  For example, put trades at 1067, 1068, etc. On the news, the market rallied to a high of 1068.50 in the pre-market session where we sold about 40% of our original entry.  Then the 10.2% jobless # followed and the market sold off hard over 14 points right into 1055 area. Since we couldn't sell the puts in the pre-market session the next best thing to do was cover our shorts into support. The original strategy was to buy at least 50% E-minis against the puts, i.e. long 20 puts buy 10 E-minis long to lock-in a portion of the profit before the puts traded.  We were looking to buy more S&Ps if the market went still lower for a more balanced hedge. Traders could have made up to $600-700 profit or $300 profit per option on the additional shorts.

On Friday the market opened right into support 1055.50 identified before the market opened. Since a number of us were long E-minis I never mentioned to buy cheap calls. E-minis could have been scaled out for as much as $400 per option contract. I suggested selling puts. They opened at $1.70 but I still lost nearly a $1.00 over all selling out into the rally. In summary, NET traders could have made over $800 per contract with the E-mini hedges while losing only $100 per long put.

Additional optional Friday morning trades:
A few students bought the 495W calls under $0.80 at S&P support. The market rallied back into resistance at 1069.25. The calls could have been sold for as much as $2.45 in the first 30 minutes.

At 10:00 am, a 495W put trade could have been entered at $1.10 and then could have been sold for over $3.00 before 11:00 am.  See the chart for entry and exit specifics.

I know nobody did all these trades and I know I didn't but I'm sure you get the idea of just what is possible nearly every week. There is no one out there doing this let alone teaching it. Spend a year or so with me. Give yourself an edge. Call me.

Market and BTIM Commentary

Nearly everyone on Wall Street can't wait for '09 to end so they don’t risk losing their end of year bonuses - I've covered this many times in the Chat Room. "They" don't want the market much lower if at all possible, especially after a lousy '08.  Nearly everyone is "de-risking" portfolios.  Portfolio managers (PMs) are buying OTM puts and selling OTM calls to pay for the more expensive puts. Furthermore, I see PMs clearly favoring big caps and more liquid stocks over the smaller, less liquid and more speculative names. This clearly affects our BTIM. I now see 1 point down and 21 points up over the next 2 years!

Last week, I mentioned this past week's expected good news announcements would help sort out the investment landscape looking ahead. The economic news was surprisingly good starting with a great ISM Mfg # Monday morning. Aggressive short covering followed right into Thursday’s close. Cisco's CEO John Chambers told us he sees the start of a recovery. He's the same CEO who stated back in November '07 that he saw signs of slowing demand ahead for corporate spending. We know what happened later. Even a 10.2% unemployment number didn't stop the market for long. This puts the FED on hold now as far as the eye can see into '10.

Looking ahead to this week’s #s I see nothing that should move the market materially in either direction. However, I see the market being sold-up (to lock in gains) and then buying back lower. This should give us some great trading moves. Right now we are trading below the 20 DMA @ 1071.50 and above the1049-50 support at the 50 DMA.

This week I read and heard how a large number of the worldwide drug companies and actual countries are rapidly expanding or starting medical research operations overseas, mostly in Asia. Rich Karlgaard, a regular contributor, in Forbes writes: Singapore is willing to pay U.S. research stars in biotechnology about $715,000 in annual salary! In other stats China will surpass the U.S. in manufacturing by 2015. I expect China to lead the world in many other areas in our lifetime.

Can stem cells be just around the corner for BTIM? We can hope so. They have teamed up with the best in China. I continue to buy weakness. I just heard BTIM may never call the warrants hoping a large number expire unexercised. Remember insiders own almost 60% of the outstanding shares.
Keep those cards and notes coming.

Good trading,

Stan Moore
702.267.0396
Nov 02
2009

Has the Correction started or is this a simple "Panic Attack?"

Posted by Stan Moore in Untagged 

New Era Trader

NEWSLETTERS & RECOMMENDATIONS - Nov 1, 2009

Fellow Friends and Traders,

Before I attempt to answer this all important question let me review the past week NET trading wise:

Wednesday we had a major crack of the indexes. Arguably last week was the most significant "panic attack" we may have seen since the March lows. The selling was relentless. Volume was extremely heavy, breadth was ugly. Nearly every stock was down, even the Big MOs. This is what is known as distribution, heavy institutional selling and may indicate a change in trend.

On Monday I related we were looking for a decline by Wednesday to buy calls in front of Thursday's expected super GDP report (as the whisper # was as high as 5%) and an End of Month (EOM) markup. After the lower 1st few hours of Wednesday, I recommended buying the 495 weekly (W) calls averaging in from $2+ to under $1.50. The calls closed near $1.00. However, if you hedged the long call with a 50% short E-minis on all the rallies back to the trend sell level (an Osc 62 reading) you could have earned over $350 per call!

Near the close I mentioned both in the Chat Room and noted on the Intraday "C" chart any future call buys should be made in the 490Ws as our 495s were more than 10 S&P points OTM and would not work as well as the near the moneys would. Before Thursday's opening the very good GDP #s popped the markets into a small sell target area. I recommended sale of the 495s for a small loss and purchase of the 490s on any pull back. The 490 calls could have been purchased between $2.50 and $2.80 and reached a high of $7.00. I was wrong.  The 495s, after hitting $0.80 on the retracement, closed near $3.20, a 4 bagger! The size of the EOM markup really surprised me. Nevertheless, I still noted on the "C" we will own puts Friday for all of the above reasons.

While Thursday was almost a complete reversal of Wednesday's negative action with a plus 7/1 A/Ds Friday started out with a negative A/D reading of 1/2. For the markup to continue we needed at least a 3/1 positive reading. The market even sold off a great Chicago PMI reading. You could have owned the 490Ws put under a $1.00. Optimally, the puts hit a high of $7.70 for a 10 bagger. For more information see the two attached NET Weekly Money Charts for Thursday and Friday.

I'm hearing from a number of my Wall Street contacts that this is one of the most difficult markets to trade.  I just smile and bite my tongue. What are they thinking? We have cheap options to use every week and in the last 7 days the market has swung through 6 triple-digit moves. This is NET trading heaven. During this time we'd had at least 4 option trades for almost 20X your money and the hedging has never been better with this greater volatility. Can it get any better? Let's hope so. Right now a 30 VIX tells us to expect 20+ point daily S&P moves.

New thoughts looking ahead:

The bull market isn't dead but the S&P has reached an important inflection point at 1100. The question we should all be asking is when or has the market begun to discount when all the stimulus factors - such as low interest rates, government bailouts, tax credits etc. will be changed or withdrawn. Right now other nations are or have started to wind down some of their stimulus programs even though these countries realize the recovery remains fragile. Don't worry about our FED doing anything but staying the course for at least 6-9 months. Otherwise, politically, the FED will become a new branch of the U.S. Treasury.

We do know now the market isn't enamored by good news. However, I believe this selling was exacerbated by Mutual Fund managers anxious to lock in gains as the majority of funds have a fiscal years ending October 31st. Furthermore, investors have withdrawn over $19 billion from these Funds during the last 60 days.

Remember it was only a short while ago that I warned you that over 92% of all stocks were trading well above their 50 and 200 day moving averages. We almost always get worthwhile corrections from these extremely overbought situations. Presently only about 40% or so are selling above their 50 DMAs.  Again, let me remind you the declines in bull market are hard and fast just as rallies are in bear markets. Step back and take a deep breath. This is what we've been waiting for.

I have also focused on a coming USD rally for the last month. Primarily, because at every year end financial institutions square off their derivative positions so as not to show them in the financials for whatever reason. Their institutional USD buying forces short covering which in turn forces the USD higher. In today’s environment stocks may continue lower.

We will get a very good idea of where the market is going next week with the release of 3 important pieces of economic data. Monday we get a manufacturing report (the ISM number). Next the FOMC meets midweek. Their words will be examined under a microscope. Finally on Friday we receive the jobs number.  In my opinion all three numbers are expected to be positive.  If the market reacts poorly to the data, I expect the market may sell off into the 980 area or the 100 day moving average. Below that we have the all important 950 break out level.

Right now I'm taking a trip down memory lane to the huge rally in 2003 following the Iraq invasion. Just like now the market exploded higher sucking most stocks with it higher. After that we spent most of 2004 moving sideways in a multi-month trading range. This would be another NET trading heaven. We could call this a stock picker’s dream market. For the first time in months I am starting to sell puts on a few financial ideas from the past. No hurry. I will alert NET subscribers when I can see the light at the end of this tunnel.

I continue to own and trade BTIM on the fringes. There is one BTIM follower on the Yahoo message board who writes and I paraphrase: The upside over the next 2 years is 20 points with only 2 points down. The real discussion should be taking place as to the worth of stem cell research and their influence on the medical field. It all comes down to what investors believe the potential to be.

If you watch the annual meeting presentation by Dr. West posted at www.biotimeinc.com and believe only a fraction of what he says there the stock is a big winner. If you believe it's at all possible this stock could be anywhere some wants it to be. Use any weakness to add to your position.

My strategy of trading the cheap and highly-leveraged expiring options every week continues to make $$$.  You don't need many options to make a great return every week but you do need some specialized option trading skills.

Keep those cards and notes coming,
Good trading,

Stan Moore
Ph 702.267.0396

NET Weekly Money Chart 2009-10-30 1 of 2
NET Weekly Money Chart 2009-10-30 2 of 2
Oct 26
2009

Great trading week with some look ahead thoughts

Posted by Stan Moore in Untagged 

New Era Trader

NEWSLETTERS & RECOMMENDATIONS - OCTOBER 25, 2009

Fellow Friends and Traders,

Last week was a wild ride for NET traders to potentially obtain substantial option and BTIM profits.  BTIM sold down to $4.35 early and rallied to $6.40 Friday after announcing the company will be listed on the NYSE/Amex on 10/30. Their common was up nearly 50% while the warrants popped over 60% from the lows. Can't say I didn't alert you to the listing and what it would mean.

This week we had 2 rather good option trades. I alerted our subscribers to the call trade setup on Wednesday's "C" chart if the lows held Thursday. The lows held. The 500 weekly calls rallied from a low of $1.60 to $6.50 Thursday. Friday the S&P's opened near the highs and the 505 weekly puts traded between $0.60 and a $1.00 for the first 30 minutes. Late Friday these puts hit $6.40.  See the attached 30" chart below for option trades.

Week in Review:


Last week, I wrote, despite the outlook for great earnings reports, there would be substantial selling into S&P 1100. The S&P's hit 1098.50 and sold off hard not once but twice. Remember it's not about the earnings it's how the market reacts to those earnings. Several things are very clear. The companies continue to guide analysts lower so these companies can surprise on the upside and many stock holders have already discounted this game.


So far the market has only suffered 4 mild sell-offs. This pattern has been easy to spot. The market rallies to a new high then trades sideways for awhile. Traders become bored, rush to take profits and the S&P sells off 2-4% and then rallies to new highs. This pattern has been observed twice in August, once in September and now in October. This tells us that traders are counting on continuing good news but are not willing to tolerate bad.

One good thing to report, traders bought 3 puts for every call last week. "Protect" is still the mantra and should continue to moderate all declines for now. The advice I continue to give is sell stocks and, if you must be long, buy calls.

Potential Red Flags for stocks:


Economically we continue to face significant headwinds of higher taxes and interest rates with greater regulation into 2010.  The risk of some FED action looms closer as the FED mulls a policy change. Treasuries have now sold off 3 weeks in a row with an even larger supply of bonds coming next week. I'm guessing IRAN will get the bomb and most investors will forget this threat until it's too late.

Just a reminder all the Bush tax cuts are to sunset next year.

The FED will soon shift signals to prepare the markets for reversing their easy money policy. The FED has been rather creative in saving the system but has only transferred the debt-loaded private sector on to the public one. It remains to be seen just how creative the FED reverses course.


The regulatory risk is rather high. Unfortunately, all financial regulators seem to believe they can manage the unmanageable risk and save the world from all "systemic" risk. If current policy trend continues I can see all the abuses of the system and all the advantages regulated right out of existence. The Govt means well but the end result will not be good for any of us.


Other thoughts on the economic landscape:


As usual Barron's Alan Abelson finds a few gems - this time the source gem is from Stephanie Pomboy of MacroMavens. (I knew her father when I worked on Wall Street. She may be even better with her work.)  Stephanie believes that companies have cut costs an unprecedented $327 billion over the last year or more than 25% of total cost. Yet, corporate earnings still fell a whopping $177 billion. She believes that for revenues to match this cost savings consumer spending would have to rise more than 3% from a current decline of -0.3%. That’s a 10X increase in spending – that ain't happening any time soon. Despite such daunting numbers the consumer stocks are up over 77%!

Stephanie speculates the market may be looking to the public (Govt) sectors to hire since the government has been the one hiring these last 10 years. While the private sector shed 588,000 jobs, the government created 2 million jobs during this stretch. The trouble she sees is that 1.95 million new hires were added to state and local government payrolls. Now these public sectors are in worse shape than other sectors and have shed 178,000 workers during the last 12 months.


Abelson, in closing, muses that somehow this fact has eluded the bulls.

Yes, we can show just how bad things are out there yet when the FED throws a party it’s best not to stay home. Enjoy, stay awhile and have a drink or two but be ever watchful for the time when the FED takes away the punch bowl. I'm guessing sometime early during the second quarter ’10 1200 on the S&P doesn't seem that far away.  Be careful out there.


Trade your brains out. Look for those killer Thursday/Friday option setups. The next big BTIM shoe to fall should be the company forcing the early exercise of its 10 million warrants. I'm guessing sometime in the next 30-50 days. Any price weakness will be a gift from the Gods to buy more.

Stay well and keep those cards and letters coming.

Good trading,


Stan Moore

Ph 702.267.0396

P.S.
Look at Soros's comments below. Wall Street is celebrating like it's 2000 and Main Street is dying. This will be a big problem for Obama and the Democrats with the voters next year. However, when not if it ends, we all will suffer. Enjoy the party while it lasts.

The big profits made by some of Wall Street’s leading banks are “hidden gifts” from the state. Taxpayer resentment of such companies is justified, “Those earnings are not the achievement of risk-takers.  These are gifts, hidden gifts, from the government, so I don’t think that those monies should be used to pay bonuses. There’s a resentment which I think is justified.” - George Soros, a very influential hedge fund manager, said in an interview with the Financial Times.

NET Weekly Money Chart 2009-10-23

Oct 18
2009

Looking ahead over the next few months

Posted by Stan Moore in Untagged 

New Era Trader

NEWSLETTERS & RECOMMENDATIONS - OCTOBER 18, 2009

My Fellow Friends and Traders,

The market had every reason to sell off hard Friday with GE, BAC and IBM declining and canceling out a great GOOG beat. Every stock (AA, INTC, GS, JPM and IBM) that beat EPS expectations closed well off their highs. The market was in a mood to protect profits.

Now that we are through the two worst months of the year I know everybody is expecting a sharply higher market into early 2010. Most believe that professional money managers are under-invested and not performing well this year. Nothing could be further from the truth. We've had one of the broadest rallies in recent decades so that the average portfolio manager is beating the indexes by 5% points.  The same goes for the average long/short hedge funds according to Lipper, a fund tracking firm. I believe the majority of managers can't wait for this year to be over, collect their bonuses and go home. I can see the market going higher but protecting those gains makes sense. Sell stock and buy calls if you want to stay in the game.

Stocks continued straight up while the USD has declined to a 14 month low.  Current USD weakness has reignited a sharp rally in gold, oil and commodities. I still believe the USD’s decline and the much oversold nature of the USD cannot be sustained given the next two quarters of expected 3-4% GDP growth. Oil pushing hard through $80 won't help an already beat-up consumer. We shall see.

Furthermore, Wall Street is gearing up to offer a ton of new issues in the next 6-7 weeks. Blackstone, the "Buy Out King", alone plans 8 filings. Great for WS, bad for the markets as market money gets diverted elsewhere. The last three months tell us $11 in net cash inflows have gone into bond funds for every $1 into equity funds. This market has really gone up on fumes and lack of sellers more than anything else. The investing public is still very cautious and doesn't look to leave the safety of a fixed return to speculate just yet.

Right now I expect large sellers to emerge as we retest the 1095-1100 level. I also believe any sell-off should be well contained for now. However, there may be a slight difference this time as the October puts protection expired. Buying protection has been the mantra for the last three months and has negated any need to sell and hit bids during the brief declines. This time traders and investors are forsaking rolling over the puts and are now selling calls. Yes, the returns may be better but real downside protection is gone. Traders are much too comfortable as a 21 VIX reading tells. Just be careful out there.

I will continue to buy BTIM lower or until I run out of money first. I’m hopeful that Biotime CEO Dr. West’s new product podcast will be available shortly on their website (www.Biotimeinc.com).

Keep those cards and letters coming.

Stan Moore
Ph 702.267.0396

NET Weekly Money Chart 2009-10-16 - 2X in 5 Hrs

P.S. The new USD.

US Currency Redesigned

For now, weak USD = strong stocks.  Randall Forsyth says Obama may find it easier to bring about peace than to steady the greenback.  Quotes Barclays Capital, "Since 2003, dollar weakness has gone hand-in-hand with equity rallies" and concludes, "As long as there is no ready substitute for the dollar, Wall Street can celebrate the currency's steady decline.  This cannot go on forever.  However, the dollar's fall may not have started on Obama's watch but it may become his problem.  And, it will take more than high-minded gestures and diplomacy to solve it."

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