NEWSLETTERS & RECOMMENDATIONS - July 24, 2011

Dear Friends & Fellow Traders,

The EU and IMF just kicked the can so far down the road that our Greek friends won't have to go to the bond markets until 2016 or 2017. Investors and traders can now exhale. Now if only our leaders can punt as well as the Germans. We don't need any short-term fixes that only prolongs the agony. If Washington gets its act together soon our market can breakout through the top of my expected trading range and just maybe challenge 1400 for the S&P.

Normally we'd expect some seasonal weakness into Sep/Oct but this time it won't be so deep. I'm assuming the "Boys" can get their act together this week.

I thought you'd enjoy the comments below from someone who was one of the best bears out there for a long time before coming over from the dark side a few years ago. He feels the marketplace has almost become a random walk.

As an example, Bill Fleckenstein succinctly describes "the overriding game theory at present relating to the Washington, D.C., circus":

• Debt ceiling debate matters and is resolved one way or another: It gets raised, stocks knee-jerk rally, bonds tank as the slosh ebbs and flows. Or maybe the reverse happens.
• Debt ceiling does not get raised on time, stocks tank, bonds rally, dollar goes nuts in some fashion, or maybe everything tanks.
• While all the debt ceiling hype churns around, jerking players back and forth, Europe implodes and various parts of the "circus" go nuts in assorted directions.

Not quite my thoughts but you get the idea just how hard it has become for investors out there.

Surprisingly good earnings have helped lift the markets back to near the yearly highs. I can remember analysts falling all over themselves lowering expectations just weeks ago. So far so good but there is always another wall of worry to climb. I'm happy to say the worst things get economically the longer interest rates stay down and the Fed will have to implement QE3. Say hello to $1,800 gold and higher stock prices.

A Quick Review of YHOO, BTX and CIGX
First Yahoo got crushed and is now trading back near $13.50 where I recommended selling the deep in the money puts and out of the money calls. The premiums have greatly eroded and the idea is still profitable but barely. However, the more screwed-up the company gets the more likely someone will put this sucker out of its misery. The bad news is that I no longer think the price will be over $22, more like $18. I will get out a new strategy shortly along the same lines.

BTX will present at the Agora Conference this week. Again the stock rallied back to the $5.75 where I took some profits. Someone didn't like the price that high and in the last 10 minutes of Friday's trading closed the stock near $5.20ish. I think you know my thoughts.

And, CIGX is the lead stock recommendation from the Agora Conference.

Trade of the Week in Review
We have an early buy put Alert Email to own the OEX 600Ws under $0.75. We purchased them as low as $0.60 yet they hit $1.90 in less than an hour on news that there was no debt agreement. This was not the surprise I was looking for. I really wanted to be long E-minis for what I thought was going to be an up day. The market refused to follow through on the downside. I exited all my puts. However, the long E-mini hedge, if puts were held could have earned almost $250 with a 75% hedge nearly a 300% return on this 1 trade alone.

I quickly sent another Alert Email to buy the 600W calls under $1.40. These calls traded down to $1.15. The calls hit a high of $3.20 by 1:30 and closed at $2.60. The market traded in a 2-point range pretty much the last 3 hours limiting E-mini hedging profits. Overall it was another Good Friday expiration day. See Friday's 5 Minute C chart, NET Weekly Money Chart 2011-07-22.

Keep all those cards and letters coming.

Good trading,

Stan Moore
702.558.1814