Less than 48 hours....

Thursday night we announced in class that Monday's classes will be the first to know about our most exciting, outrageous announcement in the last 6 months.  The clock is ticking.... in just under 48 hours All of our students will be aware.  Will you be in class to hear the news or will you simply be the last to know? 

Not sure if you qualify?  Monday's class is your last chance to join our current level 1 group as we will start registration for next month's class on monday.  If you want to sign up visit www.TradeSmartU.com to register and you can be one of the first to hear our most outrageous announcement YET!  

Here come the skeptics....

It's inevitable when someone comes out with such crazy notions as DOW 3000 that the critics would come out of the wood works.  My recent video comparing Dow 1929 to Dow 2009 is of course no exception.  Alas - a prophet is never welcomed in his own land.  The theory of contrary opinion is a tough position to back.  It's not popular.  That's why it's contrary.  Yet in the stock market it has been proven to very often be correct.  Even if the position is wrong but it provides a position of caution, it is still worthwhile.  

Yesterday I received a very thoughtful email from a student who was simply passing on some points of discussion from a friend.  With our student's permission I am posting excerpts from our exchange.  I figure it's easier to answer the critics as a whole rather than one by one.  So please enjoy the discussion.  

Jeremy/Josh, I have been constantly bragging about the stuff you teach in class with my friends and family. In one of these scenarios one of my friends pulled about your blog recently and has the following views about your blog write up.  I would appreciate your responses on his comments He (Jeremy) is an extreme bear, if he really believes in everything what he says.

Yes - right now it is true.  For the first time in my life I have been converted into a bear.  I have been bullish on the market for the last 15 years.  Even through the 2000-2002 downturn I was a believer in a strong recovery following the correction.  I was also strong on the economy and the market through the fall of 2008, and into 2009.  Strong in the sense I was a believer in the recovery.  I still traded the downside and in fact we made more money last sept/october than I've ever made in my life as a trader.  But I was bullish in the over all strength of the progression of the economy.  However I have come to understand some things about market swings, corrections, and macro level cause and effect that has caused me to turn bearish. I will likely remain bearish for the next several months.  At least until we see Dow 3000.  

He looks at US economy in isolation, and predicts equity markets crash (like Dow crashing to 3000) and hyper-inflation, with dollar plummeting. This scenario is worse than ‘stagflation’, which some economists believe will happen. Stagflation is ‘stagnation – no growth in economy’ plus inflation (moderate to high). The problem with his worst scenario is, when the market crashes to 3000 or a very low number, people stop spending, because their wealth has come down, and many would have lost their jobs, and the inflation cannot go too much up. These two opposites cannot merge.

Yes I'm specifically looking at/discussing the US economy.  First of all it's the economy I'm trading.  Secondly it is the largest economy in the world and all other economies ultimately in some way are affected by the US economy.  So I don't quite understand the isolation issue - but with regards to hyper-inflation and dollar plummeting....

Yes I'm concerned about hyper-inflation, but before I'm concerned about hyper-inflation I'm concerned about DEFLATION.  The biggest fallacy most economists (including Ben Bernanke) have about Inflation vs. deflation is that they confuse the cause with the effect.  Inflation is caused by too much money supply.  Deflation is caused by too little money supply.  The effect of each is that inflation causes prices to go higher, and deflation causes prices to go lower.  The reason is this... if people have a lot of money (via extra supply) they are willing to pay more for goods.  So the price of goods goes up because people can justify it, with the assumption the money flow will not stop.  When the money supply slows down people are not willing to pay as much, consequently businesses drop their prices to meet demand.  This creates the effect of falling prices.  But the cause is a smaller amount of money available to be spent. 

The last several years has been a period of economic growth based on an increase in CREDIT.  Credit is FAKE money supply.  It's money that is available to be spent, but is backed by nothing.  As the credit crisis has blown up, it has exposed the realities of the monetary market.  The effect of people who can not service (pay) their debt is one of a few things:

1) They stop spending and start paying down debt.  This causes less contribution to the consumption of goods as a whole, thus creating deflation

2) They restructure their debt - this is an okay scenario but generally the debt holder does lose some value.  The effect is still the same in that the debtor still slows spending. 

3) They default.  This is the worst case scenario as money simply disappears from the system. 

All of these scenarios create a deflationary environment.  

To counter this - the Federal Reserve (Ben Bernanke) is printing money, and creating IOUs and other forms of money to help INFLATE the market.  They are trying to counter deflation. The deflation alone is bad enough, but when they start debasing our currency through printing money the later effect is even worse - hyper inflation.  Since Dollars become easy to get people are willing to spend more of them for goods.  Hyper inflation is a worst case scenario and yet at the current rate it is a given that it will occur.  We are already experiencing deflation.  And deflation will continue until the goods fall to a fair market REAL value.  But by that time the damage will have been done and the extra printing of currency will already be setting up the scenario of Hyper Inflation.  

Before Bernanke was ever Fed chair he described how he would counter act deflation (in 2002 - speech).  Everyone made fun of him at the time because people said his actions were illegal and America would never go for it.  Here we are 7 years later and not only is he executing his plan as laid out, but America is standing by wondering what is happening.  Bernanke's speech about how he would counter Deflation, mixed with his actions which reflect his worst case scenario, is evidence alone that we are already well into a deflationary period.  I'd encourage you to read the speech but in short I'll sum up his points that the first course of action is to lower the fed rates to virtually zero - done.  The second line is to print money, buy up private assets, and bail out the banking systems - in action.  Bernanke says Deflation CAN'T happen in america because, in his own words. "The United states has a marvelous little invention called the printing press".  He really thinks he can print his way out of deflation.  And that's what he's trying to do.  The problem is Deflation is already happening.  His printing of currency is simply setting the stage for Hyper Inflation. 

They are comparing this recession with Great Depression, ignoring the many differences that exist between the two. It is possible for this recession to become another 1930s depression, but there are a whole bunch of differences. One important difference is, most of the traders at that time were like Bernie Madoff, and any regulation on trading was not even 1% strict as today’s SEC regulations. In other words, the stock market index was a number in 1920s, without any consideration to the fundamentals.

Oh but this argument assumes that regulation (or lack there of) is the problem.  It wasn't, and it isn't.  1920-1929, just like 1995-2007, was characterized by an inflation of credit, and subsequently an inflation of money supply.  The great depression was a prolonged recession for 2 reasons:

1) The recession was accompanied by deflation (as credit, and consequently money supply was contracting)

2) The government tried to regulate and spend it's way out, creating stagnation, and ultimately a prolonged recession leading to depression.  

THE WORST course of action during economic peril is regulation.  It is a fallacy to think that wall street was responsible for the great depression.  It was a symptom of the overall problem.  It's a fallacy to think "greedy wall street bankers" are the cause of our current crisis.  It is a symptom of the overall problem.   Beyond wall street and the presumed greed that drives it, is the congress passing laws that require risky lending.  THIS above all has created the credit crisis.  And now the banks are screwed from every angle.  They can't get their money, the government is telling them how to lend, and at the end of the day it is regulation that is preventing the free market from working. 

(please note I'm not defending some greedy practices and I'm certainly more ticked than anyone that AIG execs and lousy executives who screwed up and are getting bonuses with our tax dollars.  Yet my point is the same - if congress hadn't given them the bailout, they probably wouldn't have given their executives bonuses) 

As far as consideration of the stock market being a number in 1920s.... And how is that different than now?  How is that ANY different than the tech bubble of 2000?  Reality is the market IS a number.  Fundamentals are way more speculative than technicals because they "estimate" the value of a company, and never factor the emotion of the speculators who drive the market on a daily basis.  

Thanks, (name withheld for privacy)

Ultimately I hope I'm wrong.  I actually pray to God I'm wrong because I really don't believe the current work ethic in America is strong enough to survive a 1920's style depression.  America has become incredibly lazy, preferring government intervention and protection to the individual tenacity that the country was founded on.  I'm afraid for our country.  And yet I know if we could stop the government's current actions, get Bernanke out of the Fed and either abolish the Fed completely or at least appoint a true Free Market economists to the post, AND if the people would rise up and say "we're not going to let this happen" and start working their tales off.. we could stave off this crisis from being a total worst case scenario.  Unfortunately the Fed, Congress, and the President are doing everything they can to bring the worst case scenario to fruition, and the people are sitting on the sidelines assuming these political people have a clue about economics.  

As a contrarian in this situation, it is prudent to understand that my warnings may be useless.  But at least they were there.  It's better to sit in cash and wait than to be caught with your pants down as so many economists would suggest at the moment.  If  the country blindly ignores the larger problems, they will be caught with their pants down.  At least by following my logic one can be prepared for the worst, and also be educated to trade if the best case scenario comes to fruition.  The benefit of being neutral is the effect of flexibility.  

I hope this helps to answer some of your questions.  If you want to learn more I'd point you to three locations:

www.Elliottwave.com  - Prechter's book "Conquer The Crash" is an excellent discourse on deflation as well as some additional factors that are affecting the market. 

http://www.thomasewoods.com  - His book Meltdown is an excellent look at how the Fed has affected the current crisis. 

http://mises.org/  - This site as a plethora of information from the Austrian School of Economics point of view.  Austrian economics is the only primary school of thought which predicted the current crisis as it deals with cycles, not the assumption of progression.  

___

I hope this discussion gives all of you some better insight into my positions and at the very least I hope it opens up dialog for meaningful discussions.   Until next time Happy Trading.

WOULD YOU LIKE TO LEARN TO TRADE THE TOUGH MARKET TIMES?  Why not join us for the next Foundations of Stocks and Options class for Free! Next Class starts July 13th, 2009 

DOW Broke H&S Neckline Today. Bearish Reversal Likely.

Today the Dow finally made a close below the neck line of the head and shoulder's it has been forming.  Here is a current chart of the Dow.  (click the image to enlarge)

The head and shoulders pattern is a bearish reversal pattern, meaning when we see this pattern form it usually turns into a reversal.  The confirmation of the pattern and the signal to enter bearish positions comes with a close below the neck line of the pattern.  Today we finally have that close below the neck line.  See the image below (click to enlarge)

This very colorful graphic labels the parts of the H&S pattern.  This particular formation is a little unique in that there are 2 hits on the left shoulder. The Yellow line outlines the entire pattern.  The 2 left shoulders are marked, with the head being the peak in the middle, and the right shoulder is formed on the right.  The neck line is formed from the short term support after the left shoulder.  It is marked with the green line.  While yesterday we did break the line, the day closed above the neck line and did not confirm the break.  But today closed below the line, thus confirming the break. If this pattern pans out bearishness in the overall market is an appropriate trade.  

Book Review: "Meltdown"

Meltdown: A Free Market Look at Why the Stock Market Crashed, The Economy Tanked, and The Government Bailouts Will Make Things Worse.  

It's not often I run across a book which so eloquently and definitively documents what so many of us in the investment/capitalist world seem to know so well.  The reality is the last presidential administration and the current one, combined with congress, are both responsible for allowing our country's capitalistic roots and monetary polices to get out of control.  In Meltdown Thomas E. Woods does an excellent job explaining monetary policy and why government run programs destroy economies rather than help them.   

 I was particularly delighted to find another writer finally taking issue with the disaster Ben Bernanke is creating with the federal reserve by printing so much money and monetizing so much debt.  Citing Bernanke's 2002 speech "Deflation: Making Sure 'It' Doesn't Happen Here" Woods methodically describes the fallacies associated with this Keynesian type economic theory and why it not only does not work, but if left unchecked can and will ultimately destroy the US Dollar (or any fiat money system).   Woods even goes so far as to suggest doing away with the Federal Reserve completely.  Even proposing to allow a free market approach to currency as well by allowing commodity backed currencies to enter the market.  A very fascinating argument which alone makes the read worthwhile.  

One of the unique aspects of Meltdown is the central discussion of Austrian School of Economics as a competing theory of economic thought.  Woods argues, and I agree, that the Austrian school is the only theory of economics which accounts for economic cycles.  Following the Austrian School of economics a Government may minimize the affects of economic recession and even depression by simply allowing the free markets to run their course and work.  Woods does an excellent job of documenting several economic recessions in US history where the free markets were allowed to work and the affects of the recessions were so minimal economic historians have hardly mentioned them as a blip in the economic scale.  

Anybody who is interested in the financial markets (such as what we teach at TradeSmart University) would do well to read this book.  It provides a clear and distinct explanation of the causes and effects of the current crisis.  I was most delighted to find at the end of the book Woods laid out a plan for helping the US emerge victorious from this crisis that was almost identical to my own ideas which I recently laid out for a friend.  As such I would love to see every member of congress forced to read this book.  Alas I have little reason to believe they will take my suggestion, but you certainly may. 

My most pleasant delight in this book came from the referral to an excellent website of which I was previously unaware, chocked full of fantastic information related to economics and specifically Austrian School Economics.  The Ludwig von Mises Institute is a fantastic resource for anyone who cares to understand more about how free market economies work and how governments can and should act in relationship to true economic freedom.  I'm delighted to share this resource with all of our students and blog readers.  

ARE YOU PREPARED FOR THE COMING ECONOMIC CRASH?  REGISTER NOW TO PARTICIPATE IN TRADESMART UNIVERSITY'S FOUNDATIONS OF STOCKS AND OPTIONS ONLINE SEMINAR FOR FREE!  

Will The Current Jobless Numbers Do the Market In?

The numbers are in, and they don't look good.  The official unemployment rate released last  Thursday says the United States is now sporting 9.5% unemployment.  Unfortunately that number doesn't really tell the whole story.  The same report from the Department of Labor says when factoring in the number of people who are displaced from a career but still managing to find a part time job the real unemployment numbers are actually closer to twice that at 16.5%.   Translated that means if you look around out of every 10 people you see on the street, at least 1-2 of them is jobless.  In the words of The Ladies Man... "uh yea, about that...." 

The market didn't like the news one bit with the DOW selling off 223 points.  A shocker for some, but very predictable for us and our students who have been watching this market turn developing.  This little bit of news is just one more piece of the story confirming our prediction that the overall weakness in the economy mixed with lousy government policies is about to send the markets hurtling down yet again.  We just posted a video discussion of the technical reasons why the market is preparing to sell off and today's closing price may just be the impetus needed to break this lackluster sideways movement out of it's box and get it moving again... albeit down. 

This chart shows the recent head and shoulders pattern forming on the DOW.  A break and close below our line at 8261 would signal the likely completion of the pattern and would likely trigger at least some portion of a major sell off.  

Beyond technical issues alone the fundamental data which is now being released is a nail in the coffin of this current economy.  Countries around the world are scrambling to figure out if the Dollar will hold it's value and all eyes are on the upcoming G8 summit where China will be pressing hard to sure up their investment in US Dollars with some sort of non-fiat guarantee.  

The coming uncertainty will certainly mean the loss of millions in personal retirement accounts across the country.  However the coming crash also presents some incredible money making opportunities for the educated stock investor.  During the last major swing down in October 2008 we made over 400% on our trades and many of our students did the same.  

This market uncertainty and volatility is exactly why we offer the classes we do at Trade Smart University.  It is our desire to help all of our students learn to trade the market with confidence no matter what the market conditions, and no matter how high or how low the market moves.  That's why we have decided to extend the limited time offer we set up for our Foundations of Stocks and Options class for the rest of the year. 

If you want to make sure you are prepared for the coming stock market implosion sign up to take our Foundations of Stocks and Options class for free!  The class meets twice a week for four weeks starting July 13th and will give you the perspective you need to understand where the market is moving and how you should move your money accordingly.  

The Next Major Market Drop Is Coming . . . Are You Ready?

Written by: Jeremy Whaley

Recently I have been working on a new upcoming Special Report called “Delusion.” It’s a look at how the government, media, popular economists, and common discussion forums are consciously ignoring the most basic of economic principles and ushering in their worst nightmare in economic meltdown. With so many heavy thoughts on my mind I wanted to take a moment and write some blog posts to give all our readers a heads up to the coming crash.

As I begin, I want to help catch you up to speed with what our students have been learning over the last several weeks. Watch this 10 mintue video of a technical case study for why I think the dow may fall to 3,000.

The current “recovery” in the US stock market has some people believing the worst is over and the economic hardships will be ending soon. However, the wise investor who is willing to open his eyes to differing opinions knows the same people who predicted the most recent wave of market woes are expecting still lower moves in the coming weeks and months. Here are five reasons the stock market is about to continue its move lower and what you can do about it.

1. All of the informed economists are predicting a deeper crash.

Most economists missed the most recent downturn, which has been described as “the worst economic crisis since the Great Depression.” They are popular economists who pretend to be educated but rarely catch the major economic swings. However, a few informed economists did not miss the downturn of 2008. Harry Dent, Robert Prechter, Thomas Woods, and the entire Austrian School of Economics, just to name a few, saw this disaster coming years in advance. They warned, but no one listened. And they are all in agreement: the worst is yet to come. Are you ready...?

2. Market technicals reveal the current rally is over.

Since the low in March 2009, the stock market has enjoyed a decent rally. But most people fail to realize that the Dow is currently telling us a story if we know how to listen. The Dow chart reveals a classic head and shoulders pattern forming, which is indicative of an impending reversal. If the economists mentioned above are correct, the downturn will be worse than before, and this current head and shoulders reversal pattern says NOW is the turning point. Are you ready...?

3. The forms match the Great Depression.

In 1929 the stock market finished the great bull run of the 1920s with a bust—a bust that gave up 50% of the total market value. After a small six-month rally people thought the market was recovering only to be thrust into an even worse market selloff that gave back virtually all of the value of the market. More recently, since the extreme highs in 2007, the market has again lost right around 50% of its value. This was followed by the current six-month rally, which has everyone buzzing of market recovery—just like in 1929. Yet just like 1929, all indications are that the market is about to enter a horrible bearish turn that will wipe out the complete retirement of many investors. Again, just like in 1929. History has a strange way of repeating itself. Are you ready...?

4. Government spending has bankrupted the apathetic American people.

The Bush administration began a wave of spending never before seen in American history, but the Obama administration is making the previous administration look like child’s play. Yet the American people are sitting on their hands and holding their mouths in the hopes that their suspicions are wrong—that the government really does know what it’s doing. However, on a daily basis more and more non-existent tax dollars are being spent in a futile attempt to stave off what the government knows is coming...another Depression. And the people are just watching in denial—delusional bystanders, if you will, hoping what they know in their gut is not true. And all the extra spending is guaranteeing the eventual outcome the government is “trying” to avoid. This massive government progression has already bankrupted America, but no one is listening. It’s just a matter of time before the house of cards comes falling. Are you ready...?

5. The Federal Reserve has created a no-win trap that is ensuring a market collapse while setting the stage for a hyper-inflation never before seen in America.

The Federal Reserve’s job is to prevent economic meltdown, yet they created a nightmare through their controlled inflation policies, policies they are now trying to fix by extending the nightmare and hoping it ends differently. Over one hundred years ago the Austrian School of Economics predicted this eventual outcome from any central banking system. Yet the Fed believes it is better than the laws of economic nature.

Ben Bernanke, in his explanation of how the United States is immune to another Depression, announced in a speech given to the Washtington D.C., National Economists Club in 2002 his plan to take over private sectors with the Fed, take over private banking and private industry, and manage our way out of any economic troubles. No one listened and no one understood the dangers in his plans. Now people are questioning how this man took so much control, and all the while Bernanke is printing money like it’s monopoly money, trying to overcome the nightmare the Fed itself created. Meanwhile, the value of US currency is about to become worthless. This money printing is creating a situation of hyper-inflation that will in all likelihood be the demise of the US Dollar. Are you ready...?

The coming economic crash will make the last two years look like times of economic prosperity. And yet you can survive if you know how. If you want to survive the coming crash, you have to be prepared. Trade Smart University teaches students just like you how to spot and profit from both bullish and bearish market reversals. While most Americans are about to lose everything they’ve ever saved for retirement, if you know how, you can prosper from the largest stock market crash in US history. Will you be on the right side of the trade? Do you know how to make money when the market goes down? Are you ready...?

Because we truly do want people to take charge of their financial future, Trade Smart University is giving away the entire first level of our premium trading class, Foundations of Stocks and Options. This class is a $600 value, and you can sign up now to take it for FREE. Simply go here and register. Be Ready.

2009 Stock Picks Mid-Year Report Released!

Back in January we made the announcement of our top 9 stock picks for 2009.  At the time we also announced the accompanying special report which was to be released.  However, 2 days after we made the announcement I became deathly ill (well I felt like death) and a week after that all of our family crisis, which most of you students are familiar with, started up.  Long story short the report has sat there in the archives of my computer half finished for half a year now. 

The good news though is I have taken this week (which was suppose to be a week off) and updated and finished the report!  It's just become a mid-year report instead of a start of the year report.  But all of the stock charts are completely updated, complete with my lines drawn for your trading enjoyment.  As we speak the report is with our editor going through final revisions and will be available for download tomorrow!

The full report includes our 9 top stock picks plus 41 bonus picks as well as some extra bonus picks I call "dessert".   A full chart of every stock is included in the analysis as well as a full size chart of every stock included in the appendix to the report.  The entire report is over 120 pages of charts and analysis!  And it's yours for free!  And the best part is since we made these picks 6 months ago, our mid-year analysis has totally confirmed these were AWESOME picks.  

If you're new to The Financial Puzzle and would like to know how you can learn to analyze stocks on your own as well as how to trade the market in no matter the economic conditions, why not signup to take our new class starting June 1st.  We're offering the class for free even though it usually costs $600 and we've had many students say it's worth at least twice that.  But for you the class is FREE - so sign up right now.  

For the rest of you the Top 9 Picks for 2009 and 41 Bonus Picks Special Report will be available for download tomorrow.  

Book Review: "Economics In One Lesson"

Today I have decided to finally answer the call of many students who ask such inquisitive questions as "who was your mentor...?"  It's a natural question and one I would gladly answer if I had just one mentor.  Unfortunately when I learned to trade I learned the hard way... by studying my butt off.   Of course during that study I met many wonderful teachers, trainers, and dare I say mentors... it's just that most of them came in the form of books!  So to finally fulfill the answer to these persistent questions I have decided to do so by offering reviews/reports on books I have read or I am in the process of reading.  In the case of today's book... well it's an oldie but a goodie. 

I first became acquainted with this book when I was in college.  It showed up in a general education class where we were suppose to learn all about socionomics and economics... I personally only learned about Mt. Dew and Coffee.... but I digress.

  

Not long ago I whipped out this little gem and thought "I wonder what I was suppose to learn from this book".  Upon this more recent reading I confirmed that in fact my college education was there all along - it was I who was missing from college.  For this little book contains prophecies written many years before Credit Defaults, Bank Bailouts, TARP monies, and any of our current troubles began.  But these prophecies... oh somehow they knew this day would come.  

For those who haven't read it Economics in One Lesson by Henry Hazlitt is a classic book originally published in 1946 which teaches just that... the whole substance of economics in just one lesson.  The irony of this lesson is the fact that it has much less to do with the lesson than it has to do with the false thinking that leads a government to ignore the insights in the lesson.   The lesson is simple: Economics is a constant battle of cause and effect.   I believe the world of physics has brought us such insight as "every action has an equal and opposite reaction".  And yet few in our modern world have drawn the conclusion that economics also obeys the same law - for every economic action there is an equal and opposite reaction.  

Hazlitt wrote his book just after the great depression and managed to foresee 60 years ago exactly where the US Government is today.  Discussing everything from Government subsidies to state and local taxes, imports & exports to the cost of goods - Hazlitt offers an excellent discussion of basic capitalism and how free markets are destined to work so long as government does not interfere.  While I wish I could make everybody in congress read this book I know I can not.  But I can certainly encourage you to read it.  Well worth your time Economics in One Lesson will help you understand why government spending and bureaucratic control  can never by it's very nature fix the problem they set out to solve.  All government can do is prolong the natural healing of the free market cycle.  

Be careful.  This book may make you rethink your position on government and certainly any party loyalty you may hold.  But it will no doubt give you insights in to what is happening today and why the free markets are responding so negatively to this government control.  

Memorial Day: Thank You To Our Troops

Memorial Day.   In America this very special day is a day we remember those who have served our country with the highest honor - the honor of serving through military service.  Hundreds of thousands of men and women have served during our short time as a nation - many of them have given their lives for what they believed.  Those sacrifices are the very reason you and I are able to live in a world with a country like The United States of America.  A world where free enterprise is the predominant form of economy.  A world where capitalism is king.  A world with free markets that allow us to participate in the brilliant ideas of others.  Yes I believe with all my heart the sacrifice of our military is by all means one of the greatest contributions a person can make with their life.  

 I believe it not just because I'm an American but because to me it's personal.  Not because I have ever personally had the honor of serving, but my family has.  My grandfather fought with the US troops in World War II.  And this very day as I write this blog post my uncle Rodney Whaley is currently serving our country in his uniform in the nation of Kuwait.  I'm proud of these men.  They are more than family, they are heros to me.  Their core belief in what our country stands for and believes is the reason they have put their lives on the line.  And on this memorial day I choose to use the relatively small platform I have in the form of this blog to say thank you.  Thank you to to Uncle Rodney.  My Grandpa Whaley.  And thank you to everyone who has ever put on the uniform of the US military to help protect and defend our freedoms.  

 (As a side note - Financial Puzzle offers completely free or highly discounted rates to all active duty military.  Please send a private message if you qualify)

Four Profitable Trades for THIS WEEK!

Okay - I pretty much NEVER give out secret trades. The reason for this is because my anxious students always put money on the trade, rather than learning to trade first. Of course inevitably a trade slips out and someone does it. I really don't mind because they are usually great trades. Last time I did this Liz made over $14,000 on RIMM for the earnings trade I let slip out (oh yea, that was in 1 day!). Oops! So you can understand why students keep saying "give me another RIMM trade.."

Today, friends, I have heard your cry. And today I will not give you another RIMM trade. Instead I will give you 4 trades that very could make you some serious money THIS WEEK!

1) FSLR

FSLR is slated to release earnings TOMORROW after the close. FSLR, being the stock it is, tends to move far on earnings. Consequently there is a really great earnings trade set up.

First of all everything is set up perfectly for a break. A slight better chance of a bullish break than a bearish break, but with earnings coming up you don't want to risk it. Let's call it neutral.

Secondly FSLR is has a Bollinger Band squeeze play shaping up. There's two good things about this. 1) It indicates an impending move. 2) Volatility is typically a bit lower. given the extreme volatility on FSLR options any discount is a good thing.

The way this trade would set up is tomorrow buy both a CALL AND a PUT. One on each side of the stock. You do this so you can make money if the stock goes up, and you can make money if the stock goes down. It's a win win trade when you know news is coming out. The upside target is $160 minimum, and $180 on the high end. And what happens if they miss? $130 on the downside with $103 being the ultimate downside target.

This trade does have 1 small drawdown. That is the price of the options are still a bit steep. Since you know you will loose most if not all of the value of one of these options the initial investment may not be worth it for you. If you like the trade however but don't want to do it on FSLR - try the same trade on VAR!

2) C

Let's face it - all the financials are a wreck. And most people are running with all their might away from them. However if you have one (like Citi) that the governement has promised it will NOT let fail, and it's trading so cheap you can buy the stock for less than most option purchases... well it's a Covered Call trade made in heaven.

C closed today just under $3.00. Buy 1000 shares for $2.89 and turn right around and write a $3 covered call for $.25. That will bring in almost 10% immediately and you'll be out of the trade in less than 3 weeks. Plus you still own the stock. Next month you can do it again. Worst case? You get called out at $3/share and keep your .25 premium. So you cleared $3.25 on a stock you paid $2.89. That's better than 10%. Not too shabby for financials!

3) AZO

Autozone has traded into an amazing Bollinger Band squeeze with very low volatility. That means as soon as it breaks, it's going to be strong, mighty, and profitable. With earnings coming up at the end of the month I would anticipate a relatively quick break as traders anticipate the earnings announcement. If this stock moves above 167.75, consider buying some June 160 Calls. OR, if it moves below 154.75 consider buying some June 160 Puts. Either one should bring you a solid $10+/share.


4) AAPL

And my favorite strategy on my favorite stock. AAPL should continue it's bullish move on up to about 135-138. However it's doing some resting at the moment. So consider a BULL PUT SPREAD on AAPL by selling the MAY 120 Put and bringing in around $2.50/share. And buying the MAY 115 Put for about $1.20/share. It's an easy 20%+ over the next 3 weeks.


Hope these help. Don't forget our next Foundations class starts TONIGHT at 11:00 EST. We have just a few seats left. See you there.

S&P ready for a turn around?

The recent action on the S&P has produced what most would consider an Inverse Head & Shoulder pattern on the weekly chart. This pattern is typically a solid reversal signal when seen at the bottom of a downward trend. Traditional Technical Analysis wisdom would say to enter a bullish position if/when the neckline is broken to the upside. However for those who are following Elliott Wave progressions a solid bull move is not in the near future. I wonder who will win?

Really who cares? The important thing is you are prepared as an investor to profit on both sides of the trade no matter which way the market moves. If you don't have that kind of trading confidence you should consider taking this month's Foundations of Stocks & Options class which starts tomorrow night. This is a $600 class but we're waving tuition. So sign up and learn how you too can profit with any market swing.

Google Trading in Symmetrical Triangle

Check it out - Google is forming a symmetrical triangle. These triangles are technically a consolidation pattern meaning they could move either way, however there may be a slight tendency to continue bullish. However the good news for the more aggressive trader is you can enter a trade as soon as the triangle is broken. The best thing about Google is once it breaks - we've got some great profits to be made.

If you'd like to know how to make your own analysis like this sign up for our Foundations of Stocks and Options class starting TOMORROW!

Charts for Foundations Top 9

Many of our students have been asking if I would post a copy of our charts so they can see the lines we've drawn just to make sure their lines are "lining up". But after some thought I figure why limit all these lines just to the class? So I'm posting them on the blog for all to see - even adding some analysis for you! These screen shots were all taken Sunday night, April 26. The lines however have been in place for quite a while of course. To enlarge a picture just click on it.

Let's get things started with the Dow:

Of course the Dow has been in a pretty nice little rally over the last two months and most recently we've been trapped in a bit of a rectangle pattern. Very soon we should see a break one way or the other. However don't get too excited about the bull rally. While we may see a bullish break up to the 8300 area this rally is still quite weak. Expect a pull back for sure in the near term. Either a brief rest pulling back to 7500 before rallying on up to 9000, or just a flat out roll over all the way down to the 6600 range.

And now let's move on to SLB:


SLB has been in a solid trading range for the last 6 months. However finally on Friday we saw a break out of the trading range. A better than expected earnings report fueled the surge but after a full day of trading the stock managed to throw a Doji candlestick - showing great indecision. If we see a move to the upside that takes out Friday's highs a nice size bullish move is likely. Otherwise expect to see some time testing the freshly busted resistance line to see if it will hold as support.

SHLD:


We havn't looked at SHLD as much in class recently as some other stocks but it's in a very interesting spot for sure. Over the last month SHLD has moved nicely up to a solid resistance line just north of $60. However you can see the long term resistance line also coming in to play and providing some extra resistance. While this recent trend should be sustainable in the long run in the short while the stock is a bit overbought and will probably trade sideways or slightly down for a few days. We may even see a testing of the $50 support line before a new wave of bullish power comes running in.

RIMM:
RIMM has become a favorite of many of our students. It could be because of the subtle suggestion to try a option strangle over earnings which profited several students quite well. One of them showed up to class three days later with a cool $14,000 profit in her account - oops...

So what's next for this money making wonder? While the recent moves have certianly been nice they have also been a bit fast. Our resistance around $69 has proven to be a slow down but we'll have to wait a bit to see how much resistance it holds. Indicators are certainly showing a need for a brief rest, but otherwise this stock could move much higher. The next big target is the bottom of the large gap back in September around $77. We're about to see the rest of the moving average crosses complete as the 10 day is approaching the 200 day. Give it a day or two and we may well see a direction defined.

PBR:

Ahh - who doesn't want a little Brazilian Beer... or oil I mean. This has been a fun stock to trade since the bull rally starting around $15 since it's bottom back in November has been a very nice move. A young student of technical analysis would likely expect this stock to continue moving higher in what looks like a well defined stable trend. However all traders should be aware that we have a serious case of bearish divergence shaping up. When we see divergence on MACD it's usually worth taking note. However it's pretty rare to see divergence occur at the same time on all three of our indicators that can show divergence. But Stochastics, RSI and MACD are all three showing warnings. An upcoming bearish move is likely imminant.

MA:

Mastercard has spent the last month trying to break out of it's multi-month pattern. A small pull back may have just set the angle for a new bull move. And the bullish engulfing candlestick pattern on the 21st indicates a bullish move. The only thing really holding it back is some potential resistance around $176.

GOOG:
The mob boss of internet search engines has certainly taken its share of beatings over the last year. Most recently GOOG has been attempting a bullish move to return to the glory days of $700/share stock. If we can see a break of this $394 resistance this week may see that next big move. With the next big resistance showing up at $460 there's plenty of money on the table to be made with this trade. With falling volume the current price behavior closely resembles a continuation pattern so watch for a break out with good volume. If it happens this week ride that bull!

BIDU:

The Chinese Google, or so they say... Certainly a fun trade. The recent bullish move has been a great move for those who are long but running into some new resistance around $225 may be a problem. If we see a solid push through continue bullish, otherwise this stock may need to rest a few days.

AAPL:

A good Apple trade a day keeps the cash flowing your way... or so we hope. The current patterns settting up on aapl could prove very profitable depending on how they play out. If we can take out the highs a couple days ago at 127 this stock has no reason not to run on up to the long term resistance which should intersect around 135-137. That's a pretty easy $8-10 move on the table.

AZO:
And last but not least our wonder stock of the great recession. Apparently the auto industry may be dying but repairing older cars is a booming business. While it's been a great move not all things can rise forever. We could be seeing a double top form which would lead many to take on bearish positions. However the good news is this stock has traded sideways long enough to pretty much reset itself. So a move either way is certainly feasable. The best news is that move should bring an easy $15-20 profit. The current bollinger band squeeze is a perfect set up for a volatility trade. These are the things great profits are made of my friends...

And there's the charts along with some basic analysis. Don't forget Tuesday starts a whole new Foundations of stocks and options class and we still have a few scholarships available. Sign up now to secure your seat and learn how to do your own analysis of these trades.

Killer Trade Set up on AZO

AZO has set up a trading opportunity that is just too sweet to not blog about. Check out this text book Bollinger Band Squeeze play.


As the bands squeeze together it shows low volatility and also reflects the fact the stock is resting. Watch for a break above or below the bands and trade in that direction. Here's what it looks like with standard lines drawn.


A bullish entry point here would be a close above $167 and a bearish entry would be a close below $155. Both with good volume of course. All of the other indicators are beginning to reflect this breakout as well and ADX indicates it's ready for a trend to begin. A move either way should be able to profit $15-25.

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Pure Abandonment...

Okay - I confess. I've abandoned all our blog readers. I know, I know. I'm tired of hearing about it. We've got about 3600 abandoned blog readers writing me, what feels like every day, begging for more information. Gosh - demand is so hard to feed sometimes...

Well here's the deal - we've been blasted with all sorts of business issues lately. Since we really opened up Financial Puzzle to the broader market and expanded beyond our private students we have grown much faster than we ever anticipated. Consequently there's growth pains. But let's be honest... people need what we have to give them. I mean the whole country thinks they're in the greatest depression since - well since great depressions were the greatest fad in economic prognostication. And the demand of our students for more and more content is just evidence of how much people no longer trust the government and want to take control into their own hands.

So with that said, on this the twenty fourth day of April, 2009, I would like to apologize for making all of our 3600 readers feel abandoned. You're not. We've just been really busy and honestly when we're busy it's really easy to forget to blog. So please, accept my humble apology.

While we're laying out the confessions - I'm also sorry the 20/20 trade analysis isn't posted up yet even though the trades all closed a week ago. And I'm sorry the 2009 stock picks special report is 8/10 finished but not ready for publication. And I'm still sorry the Tennessee Titans lost to the Baltimore Ravens in the playoffs....I'm just sorry okay! I'm sorry! There. It's out. Wash it all away and we can start fresh, like we never forgot to blog...

So here's a quick trade for you just as a small amends for all my blog posts I failed to post. Check out AZO. It's in a text book Bollinger Band Squeeze - and did I say it's about to pop! Oh yea. Set some wise entries on this guy and you should have a cool $15-$25 move either way! And all that was for free...

20/20 Update

Sold AAPL Short Call:

As a quick update to our $20k in 20 minutes class. We sold the short side of our AAPL bear call spread this morning. We took a pretty good hit on it but expect to fully recover by holding our 120 call as the stock moves higher. More analysis will soon follow.

GS for Loren

Loren is a Level 1 Student in our current Foundations of Stocks and Options class -- so for this analysis I'm going to try and stick to the tools that we've presented to them so far.

First, you'll obviously notice that GS has been in a nice little up-trend for the last 4 months -- nothing major, but we're slowly trading a $30 channel upward. GS is typically a wonderfully disciplined stock and this trend is no exception. Amidst intense turbulence in the financial sector, GS has maintained some semblance of order here!

With that said, you can clearly see that you're trading at the top of your channel right now which could indicate that a short retracement is imminent. More significantly is the fact that you are quickly approaching your 200 day Moving Average -- which we'll be talking about in a class very shortly. The 200 deserves a lot of respect.

Although many of the other indicators still show bullishness to the trade: Increasing Volume, neither Stochs, MACD RSI have crossed over, and you're riding the top Bollinger Band -- there just isn't enough room before the 200 to get me into a bullish trade here -- in fact, there isn't a lot of room after the 200 before you meet the next resistance point! This is a perfect storm for consolidation!

We'll talk more about bracket trading (trading neutral) in class #8 -- but in short you'd want to set up a bracket to enter a trade here. Your top bracket should be past the 200 (with solid confirmation), your bottom could be a little tighter -- I'd set it right at Friday's low to trigger a bearish trade.

Jump in here with your comments Loren!

See you Wednesday

March $20k in 20 Minutes Results...

I wanted to take a minute and update the trades we made in the $20k in 20 minutes class we held on March 5th. It's a long post but certainly worth the read. We're happy to report all 11 of the trades we placed in class were closed will what basically amounted to a full profit. Here's the individual results below:

1) AAPL - $1,882 Profit (33% ROI)
- Cash Required $5,618

The first trade we'll look at is AAPL. We traded a Bull Put Spread on this trade selling the $85 put and buying the $80 put to cover our position. Apple continued to move upwards into it's current channel and we let our options expire on Friday. You can see we brought in $3,806.22 and spent $1,923.75. With all commissions factored in we cleared $1,882.47 on this trade. Total cash in tied up was the $5 spread minus profit cash out. A $5 spread times 15 contracts = $7500 minus the $1882 profit leaves a total money required for the trade of $5,618. With a $1,882 profit that equals a 33% ROI in about 3 weeks.

2) & 3) AMZN - $3,439 Combined Profit

This was a double trade because we actually placed two credit spreads to make this one happen. A person could have easily placed only one and still made a fine profit. By stacking both a Bull Put Spread and a Bear Call Spread we created what is known as an IRON CONDOR. Let's break down both trades:

Trade Leg 1: Bull Put Spread
$1,829 Profit (22% ROI)
$8,171 Cash Required

The first leg we opened was by selling the $60 put and buying the $55 put to cover our positions. We brought in $3,354 with the sell of the $60p and spent $1,525 with the purchase of the $55p. That created a net credit of $1,829. We traded 20 contracts so total cash required was $5 x 2000 (shares) = $10,000. Subtract the profit of $1,829 = $8,171 Cash Tied up for trade. That's a 22% ROI in 3 weeks.

Trade Leg 2: Bear Call Spread
$1,609 Profit (19% ROI)
$8,391 Cash Required

The second leg of this trade was created by selling the $70 Call option for $2,394 and buying the $75 call for $785. That created a net credit of $1,609. Again we traded 20 contracts so total cash required was $5 x 2000 (Shares) = $10,000 and subtract the profit of $1,609 = $8,391 cash tied up for the trade.
That's a 19% ROI in 3 weeks after commissions are paid. (for the record we weren't going to place this trade because we typically do not place trades with less than 20% ROI, but the class voted and wanted to trade it - so we did)

It's also worth noting this leg of the trade we closed about 15 minutes before the end of the closing day just to insure no after hours trading forced the stock price above $70 leaving us open to getting called out and into a position we didn't want.

4) AZO - $1,913 Profit (34% ROI)
Cash Required - $5,587

The next trade we're going to look at was with Auto Zone. Unfortunately something messed up in the computer's trade analysis so I don't have a graphic to share. But you can reference the video if you doubt we really made the trade.

For AZO we traded a Bull Put Spread by selling 15 contracts of the $150 Put for $4.20/share which gave us an immediate credit of $6,281. Then we bought the $145 Put to cover our position for $2.90/share or an expense of $4,368. That left us with a total net credit of $1,913.

The trade went as planned and options expired on Friday. As such we cleared $1,913. Total cash required was $5 x 1500 (shares) = $7500 minus our profit of $1,913 = $5,587 total cash required for the trade. That's a 34% ROI in about 3 weeks.


5) CME - $1,462 Profit (24% ROI)
Cash Required - $6,038

CME is a fun one for us. We placed a Bull Put Spread expecting this stock to continue trading sideways. However the stock took off closing Friday at $228/share. A straight buying of calls certainly would have profited us more but we're still more than content with our % ROI.

We opened the position by Selling 15 contracts of the $170 Puts for a credit of $8,381. Then we covered ourselves by Buying the $165 Puts for a total of $6,918. Final net credit was $1,462. The trade went as planned and all positions expired Friday for a full profit. Cash required was $5 x 1500 (shares) = $7500 minus net credit of $1,462 = $6,038. That's a cool 24% ROI in just 3 weeks.

6) FSLR - $1,762 Profit (30% ROI)
Cash Required - $5,738


First Solar has been a fun one to trade over the last couple years. For this trade we again opened a Bull Put Spread. We did this by Selling the $100 Put with a credit of $6,881. We then bought the $95 Puts to cover ourselves. That left us with a credit of $1,762.

Cash required was for 15 contracts so $5 x 1500 (shares) = $7500 minus cash out of $1,762 = $5,738. That gave us a return of a fine 30% - oh yea, that was in about 3 weeks.


7) GOOG - $2,418 Profit (19% ROI)
Cash Required - $12,582


Oh Google Google Google... This one gave us a scare right towards the end as it pushed up beyond $330. Fortunately we were already profitable at the point because of time value decay, but we almost unraveled this one and rode the call on up. THEN... well those google traders just decided it was a tad over priced. And sure enough we closed right under $330. You'll notice we paid $168 to close the trade. That's because it was the end of the day and Google showed some intraday signals that it may break back through $330. Since we didn't want to take the chance we paid to close the position.

This trade was a Bear Call Spread. We did it with the $330 and $340 calls. Receiving a net credit of $2,418 after commissions. We traded 15 contracts so:

$10 x 1500 (shares) = $15,000 minus cash out of $2,418 = $12,582. That's a 19% profit. We would have had greater than 20% but with the extra $168 we threw in to close the trade it pulled us under the 20% mark. Still not too bad for 3 weeks.

8) HES - $2,349 Profit (30% ROI)
Cash Required - $7,651

HES was a nice trade for us. Just like the most of the other spreads we did a Bull Put Spread on this trade. We executed it by Selling the $50p and bringing in $4,174 through 20 contracts. Then we bought the $45 puts which cost us $1,825. That left a net credit of $2,349. Everything went as planned and all positions expired on Friday.

Total cost was $5 x 2000 (shares) = $10,000 Minus the $2,349 credit. That left us with a total cost of $7,651. A smooth 30% ROI with commissions factored in.


9) ISRG - $3,149 Profit (45.9% ROI)
Cash Required - $6,851

ISRG is our highest ROI trade with nearly a 46% ROI in 3 weeks. We again did a Bull Put Spread. Sold the $90 put and bought the $85 Put. We traded 20 contracts and ended with a net gain of $3,149.

Total cost was $5 x 20 contracts = $10,000 minus net credit of $3,149 = $6,851 That gives us an ROI of 45.9%. You won't get that in too many bank CDs these days!


10) IBM - $1,849 Profit (22% ROI)
Cash Required - $8,151


IBM is a staple Blue chip stock which most people have held for years. Yet few have managed to receive the ROI we got in less than 3 weeks. Again we did a Bull Put Spread by using the $85 put and the $80 put. With all the math done we cleared $1,849 on this trade.

Cost? $5 x 2000 (shares) = $10,000 minus $1849 cash out = $8,151. It's not quite as good as our ISRG trade, but 22% isn't too bad for IBM.


11) RIMM - $1,709 Profit (20% ROI)
Cash Required - $8,291


And finally we've made it to RIMM. By now you see the pattern.. We did a Bull Put Spread using the $35 and $30 puts. Gave us a credit of $1,709. Again we traded 20 contracts.

So total cash was $5 x 2000 (shares) = $10,000 minus cash out of $1,709 = $8,291. Or a 20.6% ROI.



Conclusion:
So let's count the profits. We promised we would make at least $20,000 with $100,000. Let's see how we did:

Total cash required was $83,069
Total Profit Made was $21,932

So we made $8 short of $22,000 and only needed $83,069 invested to make it happen. That's an ROI of 26.4% across our whole portfolio between March 5 to March 20.

Now I'd like to answer some questions which have come up. The most common question is "what if I don't have $100,000 to invest?"

No problem. You can use this strategy with much smaller amounts of capital. The important part is the ROI. If you did the same trades at 1/10 the scale it would have required $8,306 and you would have profited $2,193. Not a bad month trading even for the most seasoned trader.

The second question we always get is "can I really do this?" The answer is YES! If you learn how you can do anything. This is one of the most consistent strategies you can make, allowing you to bring in around 20% or better every month.

So "How Do I Learn How?" First of all learn from someone who's experienced. We offer this $20k in 20 min class every month giving you the opportunity to watch and copy the very same trades I place in class. As you watch an experienced trader you will learn better how to place your own trades. The next class is scheduled for March 27th. Go here to sign up to take the class.

An even better way to learn to place these trades is to sign up for our Foundations of Stocks and Options class. In this comprehensive course you will not only learn how to read the market and place the credit spreads, but you will also learn several additional strategies which will allow you to trade the market profitably no matter what market conditions.


For more immediate reading be sure to check out my Free Special Report "How To Retire in One Year with only $10,000".

Until next time.... Happy Trading!