Floyd's Trading Blog - Insightful Rational for an Irrational Market

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Floyd's Trading Blog -
Insightful Rational for an Irrational Market
The following blog is compiled from the daily OEX commentary sent out by our lead trader and mentor, Floyd. This will give you a good idea for the type of information you will receive everyday along with our specific trading recommendations.

Janurary 31, 2008
As predicted, the FEDS caved to Wall Street and dropped the interest rates .50%. Promptly the market, which had been hesitating all morning, ran up in euphoria that all is good, and the Dow topped at 12,681. Our Dow projections, we're so proud of, were: 12,680 highest top/12,540 first top/ 12,150 first low/ 12,050 low.

Read our Dow projections carefully, as we now see more potential lows to come, as the market begins to realize that most of all the panaceas will not help the obvious. All is not good, and the great wait for the bail out by the FEDS may not have worked.

The Feb660C was profitable right to our top of 5.90:) For risk traders that did buy puts, the Feb620P was available for a doubling from 5.50 to 11.00.
Never fear if you missed this one, as it's again our new signal.

What would occur if we did NOT go further into debt in the name of fiscal stimulus? Would it be possible for the U.S. to not daily sell off parts of itself to foreign interests (and even stop blaming the foreigners for all of our problems :).....China imports are created by OUR demand, not theirs, as an example).

What would occur if we use taxing and spending to show the world that we can behave responsibility, and allow the Federal Reserve to stimulate the economy through EFFECTIVE lower interest rates, rather than bowing to the FEAR and trepidation of Wall Street?

As the Bush dynasty crumbles in financial and human blood, we as a public now look to a variety of other charlatans and actors to "lead us". McCain even tells us he is not a "manager, but a leader". Right wing radio shows (I'm not kidding) are still dominated by ads for second mortgages.

Last week I received 11 different letters offering me a new lower interest credit card. There now appear to be prescription drugs for every possible issue or disease....will we even have the money to pay for the multitudes of medications now advertised, and does anyone ever question how the pharmaceutical companies can find the demand for these products?

But the good news is, and Floyd's prayers are answered: Rudy G. has dropped out of the Presidential race!!! That we as a public could even consider this blowhard to represent us to the world, and that he traveled this far in the election process, had old Floyd almost trembling. :)

Soon, we'll make fun of our Democratic candidates, NEVER fear, as we continue to believe the economic issues our country has are NOT being faced, and that our Presidential candidates have no clear picture or solutions for what must be done.
This political commentary is relevant to trading, as you listen to the talking heads, and the ongoing babbles by Wall Street, none of whom address DEBT, or the falling USD.

None have addressed what led us to the subslime mess, and only now are a few starting to realize that perhaps all the financial statements may not be "real".

Janurary 30, 2008
"The debate is not whether we're going to have a soft landing or a hard landing in the U.S., but how hard the landing is going to be." - Nouriel Roubini, Professor of Economics, New York University

Iraqi Refugees: 750,000 in Jordan, 31,300 in Sweden, 2700 in the U.S., since 2003. We displaced Iraqi citizens, allowed world history and art from an area where much of the world began, but will not let them in the U.S.

Jan. 29 (Bloomberg) -- The Federal Bureau of Investigation is investigating 14 corporations for possible accounting fraud and other crimes related to the subprime lending crisis, officials said.

Neil Power, chief of the FBI's economic crimes unit, wouldn't identify the companies, though he said the cases involve ``valuation-type stuff.'' The probes include reviews of subprime lenders, housing developers and Wall Street firms that package loans as securities, he said.

``We're looking at the accounting fraud that goes through the securitization of these loans,'' Power said at a briefing with reporters in Washington today. ``We're dealing with the people who securitize them and then the people who hold them, such as the investment banks.''

Floyd Translation: Everyone chose to believe falsified financial statements for a long time. Most financial statements are false. Most facts are false. We only find this out when they are exposed. Remember this as you listen to our Presidential candidates discussing "economic" issues.

As the day progressed, the bets were 80% to a .50% interest rate cut by the FEDS. Analysts are now split 50/50 economically on whether the U.S. will enter a recession.
(Floyd: we entered the recession in Oct.2007 and will exit by Oct. 2008 :))

At OEX we believe by the time Congress and the Lame Ducky can ACT on getting checks out (June or July) the recession will be close to ending. And, that although perhaps a psychological boost, the "money back" is meaningless dribble that will not influence the economy, but increase our national debt.

We also believe any strong upside reaction to any FED interest rate cut may not be a lasting one, as we must see real improvement in the credit markets, housing, and employment to have a meaningful impact. It is a lose/lose for Bernanke....any small rate cut will not satisfy the market, and any larger rate cut the market may worry the economy is worse than it was thought.

Monday investors took the dismal housing report as a sign that the FEDS would aggressively lower rates this week, and this sent the market soaring.

Tuesday the hesitancy began and the market struggled and obsessed with "just what would happen". Market speculation became rampant, and soon, by 3.00 p.m., the market had moved up over 100 points alone in anticipation of today's announcement.

We anticipate the FEDS announcing after 2 p.m. today. Conjecture is rampant, and we will list DUAL trades for subscribers as a hedge against a market that is 50% pre-bought already to what the FEDS could do.

Janurary 29, 2008
Tomorrow ends the "best 3 months of the market" historically each winter trading period.

Whew.

As we watch these exceptional market volatility moves, study the economic overview:

*5.6% of all mortgages are delinquent, higher than any time since 1986

*2.5% of all mortgages are in the foreclosure process, the highest rate ever

*Gasoline is up 29% just in the past year

*Food is up 4.8% in the last year, and milk (how Floyd studies inflation), is up 19%

*Housing starts are down 56% from their peak in January 2006

"The correction of the world economy is to some extent for a good thing for China, so we can calm down"-Yu Yongding, Director General of Institute of World Economics and Politics

"We need a fiscally conservative Republican President to make this all work". - The dream of a great many American people, with the hopes that "tax cuts" are what we should do, because "the government doesn't spend our money well, and tax cuts help ME".

"Are you at all suspicious? Does it sound too good to be true? Here we are, plunging into recession. The proximate cause is irresponsible mortgage loans made to people who can't pay the money back. The deeper cause is, at least in part, years of too much borrowing and spending by Americans, both as individuals and collectively through the government. But behold: there is- oh, joy!-bipartisan agreement on a solution. Although quibbling over the details, everyone-Republicans and Democrats, the White House and Congress, all the presidential candidates-agree that what we need is a "fiscal stimulus"--
"In other words, the government should go out and borrow even more money and pass it around for us to spend. The experts caution that for maximum stimulus effect, we must be sure to spend it immediately. No squirreling it away for a rainy day. In drinking circles, they call this the hair of the dog: to cure a hangover, you have to have another drink."

What is occurring to an economic point of view is classic Keynesian stimulus, the whole purpose of that is to increase demand in the economy.

Whatever your political bent, this is a clear review how completely Republican thinking now dominates discussions, and that the only economic stimulus plan being discussed increases federal spending.

Here's the logic:
"I get laid off and can't pay my mortgage, so the bank fires you and you don't buy a new TV, but the government issues refund checks to stimulate growth, so now I go buy a TV, Best Buy has the money to hire people as salesman, you can then buy a house and take out a mortgage. Using this Keynesian supply side economics the government now prints 145 billion dollars (not having any real money, all of it spent on Iraq, and the last tax cuts), and they put this into the economy. Americans immediately take the 145 billion and spend it, flowing cash through the economy, and allowing the economic cycle to upturn".

The lack of logic here is obvious, or should be.

Another way to review this, as the FEDS begin their meetings today:

"The Federal Reserve Bank created the sub prime mortgage market with unrealistic, low interest loans for too long a period. This evolved into the housing bubble, which the FED barely mentioned a couple of times because the cash flow from the mortgages was supporting an unrealistic consumer splurge, thus making everyone like a genius with the economy.
Vice President Darth Vader Dick Cheney was correct when he said "Deficits do not matter", NOT when you have monetary policy running wild supporting the largest deficits in U.s. history, and no one is looking down the tunnel for a light-of an oncoming train.

Then without consideration of the schedule for the resetting of these cheap loans, the FED foolishly began a program of increasing the interest rates at the worst possible time and thus created the sub-prime mortgage crisis. The instruments created and backed by these mortgages were bought by every top rated bank in the world as being top rated credit instruments.

As it is the FED has now succeeded in creating a worldwide credit crisis. Couple this with the vast devaluation of the USD, increase in Gold, increase in import, and we have successfully removed ourselves from the leading world power, in all ways". William Gilchrist, Jr.

Market Facts:
Volume surpassed 1.6 billion on the New York Stock Exchange, and advancing stocks outran declining issues 4 to 1. On the Nasdaq, neared 2.1 billion shares exchanged hands, and advancers beat decliners, roughly 5 to 2.
The U.S. dollar came under pressure, with the dollar index, which tracks the greenback's performance against six other major currencies, dropping 0.5% to 75.590
President Bush, thank God, will make his last State of the Union address the evening of 1/28, and certainly tell us how much good is going on with the war on terror.
America is just beginning to see through this classic bull headed ruse. It will be interesting if Bush brings up the value of the Dollar, or the amount of the deficit:)

Yesterday's moves were a perfect summation of an oversold market reacting in advance to the potential FOMC rate cut. It's now the bet that Bernanke will lower again by 1/2 of percent, and the market allowed great profits on all calls we recommended, with the Feb660C moving from 1.80 to 3.50 intraday, and potentially more room for upside.

We'll list dual trades today. Watch futures carefully. It's very likely for a whipsaw and "fear" to enter in, or full blown euphoria.

Janurary 28, 2008
The must ballyhooed, bet, and prayed for FOMC meetings begin on the 29th. How much is our expectation built into the market?

Friday we saw a continued euphoric initial upside, allowing calls profits to a high of 5.90, and a Microsoft gained on news, helping to build on confirmation. And then, the unraveling began. News came up that Fortis, Belgium's largest financial service company, is up for the weekly "oh my, we forgot to write down 2 billion more" in subslime built fear in the market and caused investors to sell off positions ahead of the weekend. Europe opens ahead of New York, of course, on Monday, and investors fear again a potentially collapsing market.

Lamey Duckey Bush unveiled the "Great American Bailout" economic stimulus plan, and it will promptly now roll through Congress, with free money being printed for us all, and with the speed of the Government, available for arriving to us in July, long after the immediate need. As always, there is no discussion on how we pay off this mounting debt.

Bush also discussed moving Social Security to stock privatization again, announcing that where else could an investor have lost over 10% of their retirement funds in a month or less if he had set in the place the privatization that Wall Street bankers had so lobbied him for :)

(Sorry couldn't help it...how soon we forget, and just think what this would have done to our economy if privatization of funds had occurred)

McCain, leading the Republican rank, also was quoted "Economics is not something I've studied much and will need to spend more time on" (2006 quote).
Hillary and Obama are still arguing about who will "change" more.
Sigh. Perhaps Brittany for President, we now know she is bipolar, and is at least entertaining without damage to the world.

With the earlier interest bail out this last week, will Bernanke and boys deepen the cuts? Will the Bushy stimulation package get yawns, or build euphoria. We continue to see two way trades around a bracketed "range" area, and a market that is massively high risk.

Due to the nature of the market we have also been experimenting with another stop loss methodology for days of such massive whipsaw:

Stop Loss Methodology: In case of a 40% average drop on the first day, from opening to the day low, consider stop loss sell 42% above the low. If the drop was 55% or larger, exit at the second day's opening. If the drop, however, is 50% or greater the second day consider a stop loss or goal to sell at up to 72% above the second day's low. Allow the third day of holding the option for the option to "re-birth", but sell on 4th day at opening.

Janurary 25, 2008
Gold hit $900.00 an ounce. The market continued upswing, in it's long overdue "release" from massive fear, but only after the market hit historical lows support lines again and again.

And Floyd's absolute favorite is the bank in France that suffered 7.1 billion in losses from a hedge trader fraud. Please smile with me as the "bankers" that run the world try to explain away how they "missed" 7.1 billion.

The market got a bit healthier yesterday. Don't trust it yet.

There are several reasons for the market moves:

1. The market hit a double bottom on Tuesday. Investors were watching carefully to see if the market would "hold," right when panic selling was at its' highest pitch, but held.
It was from this that something then triggered the upside (the catalyst).

2. Financial stocks began a slow "stop" to the "end of the world". Citi was up almost 10%. A bit of "relief" took place that the financials might have hit bottom. We're not yet sure this is "real", but it appeared real.

3. Many floor traders, battled from massive losses at the beginning of the year, had been aggressively shorting the market. At one point there was almost 14 billion shares "shorted" on the NYSE this week. The catalytic "move" up created a reverse panic selling, with the "shorts" suddenly buying shares back quickly to avoid losses. This created demand in the market, and once the demand was in place, the market has held.

To truly rally we need continued upside...why we questioned if the moves were a "dead cat bounce" or a true indicator that the market was ready to stop the FEAR, for now.

Watching futures traders were able to buy the new signal, Feb660C, as low as 2.70 and sell to as high as 4.40, for up to 40% returns. During market downturn mid afternoon and earlier in market hesitancy this same call was again available for day trading profits of .50 to .75 profits several times.

"Finally got back on the horse and did not fall off, Floyd. Bought and day traded the 660C on 1/23 3 times for .50 profits, and got 35% returns on it yesterday.

I finally got smart about not wanting to just not just miss profits on the put. When I saw the 600 point move 1/23 I finally saw your point...it's not a market even capable of prediction. So, three big losses year to date, and finally back to some profits. I'm scared to trade."- Josh K

Here’s one more book for our Level 3 and Advanced Mentoring students, and that we will be adding to our library resources on the website
And, it’s time to introduce Whitman to our subscribers again. He’s a Warren Buffett conservative master investor that has written THE book on value investing, another part of Floyd’s portfolios.

Value Investing: A Balanced Approach by Marty Whitman

For the past several years we have remained invested in the Third Ave Value Fund, which Whitman runs, and before the most recent bull market Floyd actively recommended a series of the various Third Avenue funds, all which were sold from 35 to 70% returns, over an 18 to 24 month hold. We’re up substantially with the Value Fund, and continue to hold in our CORE portfolio. This one even held up in the bad times. If you would like to learn more of how we trade the market, not just the OEX, study us at www.bluechipoptions.comGold hit $900.00 an ounce. The market continued upswing, in it's long overdue "release" from massive fear, but only after the market hit historical lows support lines again and again.

And Floyd's absolute favorite is the bank in France that suffered 7.1 billion in losses from a hedge trader fraud. Please smile with me as the "bankers" that run the world try to explain away how they "missed" 7.1 billion.

The market got a bit healthier yesterday. Don't trust it yet.

There are several reasons for the market moves:

1. The market hit a double bottom on Tuesday. Investors were watching carefully to see if the market would "hold," right when panic selling was at its' highest pitch, but held.
It was from this that something then triggered the upside (the catalyst).

Gold hit $900.00 an ounce. The market continued upswing, in it's long overdue "release" from massive fear, but only after the market hit historical lows support lines again and again.

And Floyd's absolute favorite is the bank in France that suffered 7.1 billion in losses from a hedge trader fraud. Please smile with me as the "bankers" that run the world try to explain away how they "missed" 7.1 billion.

The market got a bit healthier yesterday. Don't trust it yet.

There are several reasons for the market moves:

1. The market hit a double bottom on Tuesday. Investors were watching carefully to see if the market would "hold," right when panic selling was at its' highest pitch, but held.
It was from this that something then triggered the upside (the catalyst).

Janurary 24, 2008
Two days in a row is NOT confirmation. Do NOT be optimistic, but watchful. The market moves yesterday allowed us some great profits on the DJX calls, and we'll repeat the same instructions today, for what we hope to be a confirming upside. Buy out of the money DJX calls, February issues, following futures carefully, at up to 10% above prior day close if necessary, and sell for 25 to 42% profits.
Tight stop loss of 40%. The market remains very high risk.

Gold hit $900.00, and our investments continue to move.
Both TLT and TIPS, of course, as the market moved up, slightly corrected, and remain buying opportunities.

Most chart/technical analysis methodologies in the market emphasize time, and charts are created around specific time elements of 1 minute, 5 minute, 1 day, 1 week, etc.

At OEX and BCO we believe the time element of charting has lost a great deal of validity in “fact” with the advent of 24 hour around-the-clock global trading. Experts already argue on whether some data is “day session only”, or may include both day and overnight sessions. Exchanges now “halt trades”. Over more time, we believe the “time” chart will be even less accurate. And, as advocates of Point and Figure Charting, we focus on SUPPLY and DEMAND and price.

When we analyze using P&F we are determining: The size of the box. Remember, a box is a price increment that can vary, depending on how closely you want to track the market.
How many boxes to include in a reversal.

Here’s some examples:
*The number of boxes for a reversal is typically 2 or 3. As long as price is going up, an X is added to the X column every time the price goes up X (what you choose) points higher than the prior X.

*When the market turns down by the amount you have chosen for downturn (say TWICE or THREE times what you saw for upturn, the chart then shows a new column, now of 0’s.
We teach P&F charting in our Advanced Mentoring service in detail.

*A typical method to trade P &F is to trade a breakout of a prior column, or multiple columns.

For example, if trading S&P futures if the market goes up to 1500, and down to 800, and back up to 1500 the first sell would have been on a stop at 140. You would then have added when the price dropped below the previous columns of 0’s at 1250, 1175, and 975. We did this analysis using S&P Futures and 25 points as a box size.

To exit a position like this you would have bought the breakout of the downturn at 1225, when the columns of X’s exceeded 4 previous columns of X’s.

Janurary 23, 2008
We are again sharing dual commentary with all subscribers because of the type of market we are in. We will lead this information with a simple statement:

New trades on calls and puts were all possible, and all profitable. Stop loss was hit on the Feb660C, but could now be a new signal again.

Market moves that process 631 points in a day show well the concerns of the world market, and just how volatile conditions have become. No chart can predict this type of movement.

Today's action again illustrates the difficulty of trading the current market. Fed intervention yesterday and now news of likely New York State intervention today (to save bond insurers) have reversed the bearish trend two days in succession. The S&P 500 rebounded 5.3% from today's lows to close with a gain of 2.14%. The DJI gained 2.5% and the NASDAQ Composite rose 1.05%. Today's turnaround and rebound from the support level set yesterday on higher volume represents the first day of a possible new rally. Support for the theory that this is day one of a new rally comes from Barry Ritholz (The Big Picture) who sent the following to his clients today (note the last sentence!!!):

"Last week, we noted the % of NYSE stocks trading below their 200 day moving average was about 23%. That suggested we were close, but not at a tradeable low. Today, our trusty Bloomberg terminal is showing just 13% of NYSE stocks trading above their 200-day moving averages. That is lower than anytime in the 2000-02 bear market. And lower than anytime in the 1998 and 1994 bear markets. This indicator is saying that sentiment has become excessively negative -- considering we are only 3 months off of the all time S&P500 highs. This suggests we should begin the counter-trend rally shortly. We would expect this to last anyway from 2 weeks to 2 months, run 5-15%. We also would use this upcoming lift as an opportunity to sell equities. This is a bounce, not a major shift in trend . . "

Here's how it started:
NEW YORK (MarketWatch) -- U.S. stocks remained lower Wednesday after the European Central Bank spoke of inflationary worries, dashing hopes it would follow the lead of the Federal Reserve in cutting interest rates, and as Apple Inc.'s tempered outlook weighed on the technology sector.

"We started the day hoping we'd get coordination from other central banks, but instead the ECB talked about ongoing fear of inflation," said Art Hogan, chief market strategist at Jefferies & Co. "Plus, Apple's guidance was lackluster at best, dragging the rest of technology down with it."
Hogan also noted market "buzz that one of the major foreign banks will be coming out with another big write-down. ... The combination of all of that on a tape that is already concerned about global recession is causing the sell-off we're seeing.

By early afternoon the market shifted mood, in a classically oversold environment. However, this may be a "dead cat bounce". Only if the market continues to hold an upside today will we continue to suggest longer term upside

Traders reported great dual profits yesterday, and some day traded the Feb660C for .50 cents to 1.00 several days.

***********
Trader Lisa with Advanced Mentoring has been working a very simple approach. Her goal is to make $10,000 per month gross off index options.
She trades for $500 a day profit, every trading day.

Utilizing the approach of “short term buys” for .50 to .1.00 increments of profit she has minimal risk to working capital, often less than $10,000, and can trade this successfully every month. Her average gain for the last 6 months has been $10,000.00
Thusly, her risk/reward ratio is quite interesting, and she exits same day.

Want to learn more about Advanced Mentoring, and how Lisa works.....

http://www.oexoptions.com/AdvancedMentoring/AM.html
Advanced Mentoring is on a “wait list”. There will be two openings in January 2008.

************

Blue Chip subscribers: Trade OTM DJX February issues, watching futures, paying up to 10% above prior day close, selling to 40% profits, using a stop loss of 50%, NOT # of days.

All trades.....repeat...ALL TRADES are high risk. It is now likely for more upturn, but anything can shift the sentiment of this market.
Believe nothing you read.

Janurary 22, 2008
We are again sharing a dual commentary to our Blue Chip Options subscribers (www.bluechipoptions.com) and our normal OEX Pre-Market alert, to share applicable information about the market.

“Many small traders believe that the most important part of the COT report is the change in the net positions of commercial hedgers from the prior report (the number of short contracts subtracted from number of long contracts). A positive result indicates a net-long position (more longs than shorts), while a negative result indicates a net-short position (more shorts than longs)”-Dan O’Neill

Recession is a temporary and cyclical phenomenon, and “shifting”, that sheds jobs, tightens the consumer belt, and curtails lending. They typically last 12 months or less. From 1945 to 1982 there were 9 recessions, or approximately one every 4 years. Since then, recessions have been pre-empted, and 1991 and 2001 were the last recessions by definition.

Greenspan kept lowering interest rates in 2001 and Floyd was writing commentary about “Bubbles Greenspan” for years, because consumer spending kept rising, taking on more and more debt, based on inflated prices and values based on euphoric housing prices.
During the Clinton White House years, stocks at first rose euphorically, created their own giant bubble, and housing became our next “we’ll retire rich”....

So, by the time the crackheads in Washington agree we are in a recession, Floyd bets it will be over, and perhaps just in time for the new President to come in, to a mountain of debt (and more from the next recessionary move made by Congress and Bush), Iraq will continue it’s flow of blood and money...

The key question now is not when it will end, or if it will end, but this:
Will the world shrug off the American economic downturn, and continue to “move”. If it does, the U.S. has been effectively downgraded by the Bush Administration to NOT being a global superpower.

Recession is a healthy part of an economic cycle. It’s when we attempt to fight the cycle, with false triggers to jumpstart, that even more mistakes can be made.
It is critical now that the U.S. does not repeat what happened to Japan in the 1990's. This became the "lost decade" for Japan as they kept considering "rebound imminent", but by the dependence from Japanese corporations on banks for commercial credit is now being argued and studied by economists and Washington.

Yesterday morning the market dropped 450 plus points at opening, only to shift back by 10.15 a.m. to a 55 point drop. Whew. Talk about volatility.

And, what caused it? A buy out on interest rates by the FEDS: We do NOT believe this is a long term healthy move for our economy, but was done simply because the sell off had taken on pure depression FEAR mentality. Wall Street yet again forced the hand of the politicians.

"WASHINGTON (MarketWatch) -- Hoping to halt a market meltdown and prevent a recession, the Federal Reserve lowered its overnight lending rate by three quarters of a percentage point to 3.50% on Tuesday in a rare move between formal meetings.

The 75 basis-point surprise cut came after global financial markets sold off in dramatic fashion on Monday on fears that bad bets in credit markets could spread further and drive the U.S. economy into recession"
Traders should note that Apple declared earnings, and that many believed this might be a catalyst to the market. The market has no mercy, it appears, as:
Apple reports 58% profit increase
APPLE SHARES SINK 13% AFTER HOURS; EARNINGS OUTLOOK OVERSHADOWS QUARTERLY RESULTS
(AAPL: 155.64, -5.72, -3.5%) on Tuesday reported a first-quarter profit of $1.58 billion, or $1.76 a share, on revenue of $9.6 billion. During the same period a year ago, Apple earned $1 billion, or $1.14 a share, on $7.12 billion in sales. Analysts surveyed by Thomson Financial had forecast Apple to earn $1.62 a share on revenue of $9.47 billion. Apple said that during the quarter ended Dec. 31 it sold 22.1 million iPods and 2.3 million Macintosh PCs. For its second quarter, the company estimates it will earn 94 cents a share on $6.8 billion in revenue.

A number of Advanced Mentoring clients http://www.oexoptions.com/AdvancedMentoring/AM.html
own short front month, 6 month, and one year options on Apple, and many floor traders had been hopeful that a few good tech company earnings might, and still could, trigger the market. Yet again, the very same "analysts" that have just lost billions in subprime (Merrill Lunkheads, etc) are the ones that had the lofty projections for Apple, that Apple lowballed....at a time the market wants and need euphoria.

Watch futures carefully as market moves are now in the struggle of "will the FED cut" lead the change, or do we all know now that the lake is deep, and we are tired from the swim.

Janurary 21, 2008
Today's commentary is being sent to all of our subscribers at Blue Chip Options (www.bluechipoptions.com) and OEX Options, as the situation itself we are experiencing precludes effective option trading, and puts the market itself at higher risk than in many months.

From Mike Gibbons:
"Friday's further fall in the markets on huge volume after an initial bounce following the announcement of an up to only $150 Billion economic stimulus package shows the market's have lost confidence in the Administration's ability to act quickly enough to ward-off the recession (which an increasing number of analysts believe began in December). With no specific measures in the announcement there was little to get enthusiastic about and the decline will continue next week until some concrete proposals which can have a short term stimulus effect appear. The rumored tax rebates of $800 for individuals and $1600 for families are already being laughed at. Handouts may make the Administration and Congress feel good but will not deal with the systemic problems that weak oversight have created.
In reality, there are no measures that can solve the housing crisis and also avoid huge losses by banks and financial houses in the next few months. Housing prices have to fall until there is a new demand and supply balance and they have not even begun to fall sufficiently yet to meet even the existing record supply. Mortgage resets, which will peak in the spring, and subsequent foreclosures will further exacerbate the situation. Unfortunately, rate cuts only affect short term rates. We need a sharp fall in long term rates to provide a stimulus to the housing market which the Fed is powerless to provide.
The most likely short term action is a rate cut of 0.75% by the Federal Reserve. This could come sooner than the January 29 meeting of the FOMC if the market plummets before hand. There is increasing pessimism about the strength of the financial system with the expected failure of many bond insurers so we may be facing a 'Black Tuesday' when the market opens after Monday's holiday (European and Asian markets, which are open on Monday, will likely be the harbingers of doom). This could bring forward the rate cut announcement and we can expect a market bounce when it does. The rate cut will only have a short term effect, however, because the underlying problem is one of insolvency rather than liquidity. The bear market truly begins after the next bounce."
Last year as our Blue Chip stock and option service returned over 39% by year end on stocks alone we were selling issues at near market highs through and up to December.
In our OEX Alerts Floyd has been ranting for two years on the idiocy of our DEBT, our lack of Federal concern on the devaluing USD, and our militaristic faux pas that no one seems to stop. Friday the U.S. proudly joined Saudi Arabia, Iran, Egypt, Afghanistan, Israel, China and Syria as nations that Canada list for torture and abuse.
These are all indicators of the situation we are in. Floyd ranting in recent weeks that our various Presidential candidates, aptly dubbed "the change kids" and the "pray, bomb, and protect us from our enemies" kids were not even addressing economic woes or this situation. As the market approaches 12,000 it's been fun to watch the "talking" start.
Again, here's what we wrote Friday, pre-market:
"Puts should not be traded, and sell orders for any open calls should be in place at all times. Market moves up could be fleeting and short lived, and NOTHING is different today than it was yesterday.

With this said, as we watch to defensively build CORE positions, open yourself three key questions with each "economic stimulus" package you read and hear about, Republican or Democrat:

1. Who will pay for the bail out? 2. Where does the money come from? 3. Does the stimulation package actually pay off, or just postpone?

Stimulus and incentive are greatly needed, and the times are truly concerning. Hopefully we will not again let the horse out of the barn, and then lock the door:)"

We missed the put again as the market skyrocketed 161 points in early gap up trading, only to fall below 12,000 on the theoretical Dow (hitting our Dow projected bottoms).
Volatility like this is nerve racking, and option traders cannot follow normal methodologies of taking second buys and extended days of stop loss. No chartist can keep up with the "two minute" 120 point shifts we're experiencing. After Bush spoke yesterday the market reaction was swift and ugly, only to slightly climb back by day end.

Initially, Floyd had projected a strong start to 2008, and another euphoric run up. If you'll remember we have been haranguing that these moves to 14,100 in recent months were NOT healthy, and built purely on GREED, just as the moves now have become pure FEAR.

Stock buy backs in recent years have helped fuel the market, as have a series of fraudulent Wall Street Mergers and Acquisitions that helped fuel great profits for the brokerages. After the massive write offs, however, of each of our major brokerages (those that invest our money) perhaps a few of us that have listened to these experts will now think twice about these "astute" money managers.

In Floyd's initial (and wrong) projection of UP first for 2008 we saw a peaking before a much more sizeable decline to 11,500 by mid July. We had it backwards. The market, unless now "helped and cushioned" could easily move to the 11,500 area, and lower. We believe any strong upside around interest rate bail out could be very short lived.

Elect smartly. This country is at a serious crossroads. We do not have time for rhetoric. Other countries now own part of our banking. We are a global country. Separate church and state.

Floydian Economics:

Is there inflation? (Gas, food, clothing, travel, etc.) are all UP dramatically.
Is there recession? (Stock Market and Real estate are both DOWN dramatically-
Is there DEBT? (All time highs, and no end in sight?)

A small child could figure this out.

With this said, the opposite may take place. Recession is now predicted (thusly may soon be over :), and gloom and doom pervade us.
Bernanke said it right in his hedge last Thursday: " Do not underestimate the resiliency of our economy, despite our actions".

Janurary 18th, 2008
January expiration day; Dow down 8 of last 9 with big losses

From trader RC I both cried and laughed as he wrote yesterday:
"I believe the subscriber to your service who has made the most money the first 17 days of 2008 was your subscriber that wrote he would not be communicating with you until later in the spring because he was going on a several month vacation."

Sadly RC is right both in "Floyd has been dead wrong" and "its best to close your eyes and go hide".....

RC also wrote that we need a "fiscally conservative Republican" to get in there and fix this. Floyd would agree with fiscally conservative, and argue if any Republicans or Democrats that we are listening to, are that. This is part of the problem.

Perhaps we may soon realize that our tax cuts accomplished little, our deficit at all time highs, our dollar devaluing, and economic stimulation must be to the consumer and middle class, NOT the Warren Buffets currently paying less than 1%, and as a Democrat, who questions our deficit and dollar regularly.

I often wonder why we do not listen to this man, but listen to other men?

Bernanke did something brave yesterday in his government testimony. He said to Congress...be careful you idiots.
Denying a recession is part of the delicate balance Bernanke has....defend Bubbles Greenspan who created the housing bubble, protect the USD that has been devastated by our elected bodies, and calmly analyze how the deficit plays in. As he said "tax cuts do not necessarily reflect wide economic policy".

Wall Street did not at first hear that Bernanke is ready to lower interest rates, and Bernanke's comments that any Congressional economic stimulus package must be "quick" to be effective. Lowering interest rates is only so much of a panacea, and may actually be bad for us. Doom theorists think the market may well have already priced in the FEDS announcement. It appeared to be true as more support lines were broken yesterday.

The market continued to roil. At new boundaries, OEX 625 is the next strong support, and it is option expiry today.

We thought we would share with all subscribers the following:

*At OEX 645 we stop lossed all open call inventory for 2008.
*At OEX 690 we began buying Gold and Silver, and have continued to recommend it.
*U.S. Treausry Inflation Bonds (TIPS or ViPSX) have been our largest portfolio holding in our Blue Chip service, since inception.
*Floyd's regular "rants" about interest rates, the USD, the lack of understanding of our economic mess, has been ongoing, and it was last year there were the most concerns that market rises to over 14,100 (remember those days:)) concerned us for the lack of the logic to the meteoric rises.

The U. S. markets will be closed on Monday, January 21 in observance of the Martin Luther King, Jr. holiday. The next Fed meeting is scheduled for January 29 and 30, with an interest-rate announcement expected on January 30, shortly after 2 p.m. Eastern Time.

Market highs, hard as that is to believe, may soon occur. It is AFTER those market highs, when the market slows it's oversold conditions, that our concerns really deepen.

Recent Floyd "rants" have asked our subscribers to really study these Presidential candidates not for their "cute sound bites" ("we will change the world", or Do NOT Vote for terrorism", or "I will give us 100 million of tax cuts"), but for realistic and intelligent review of economic conditions and a focused plan to show our country that IT is the economy, stupid.

This past week it appears the candidates all read my alerts of prior weeks, and have now come out with their versions of economic packages:)

Here's what Bernanke really thought and said. Perhaps he didn't have time to talk to Rudy G, down here in Florida telling us we need tax cuts to spur relief:)

"Bernanke endorses quick, temporary fiscal stimulus
Fed chief not predicting recession, but urges preventive actionWASHINGTON (MarketWatch) -- Congress could help steer the economy away from recession if it adopted a quick, efficient and temporary fiscal stimulus plan, Federal Reserve Chairman Ben Bernanke told Congress on Thursday.

Bernanke made it clear he wasn't forecasting a recession, but said action by Congress, along with more interest-rate cuts from the Fed, could help prevent one.

"Fiscal action could be helpful in principle, as fiscal and monetary stimulus together may provide broader support for the economy than monetary policies alone," he said in prepared testimony to the House Budget Committee. Quick action would be necessary.

"You know central bankers are concerned about the economy when they condone stimulative fiscal policy," wrote Michael Gregory, an economist for BMO Capital Markets.

"To be useful, a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible within the next 12 months or so," Bernanke said. "Any fiscal package should be efficient... Finally, any program should be explicitly temporary."

In a speech that closely resembled one he gave last week that suggested the Fed stood ready to continue to cut rates aggressively, the Fed chairman advised Congress to think carefully before cutting taxes or boosting spending to stimulate economic growth.

As Bernanke spoke, the White House also endorsed some extra stimulus to help the economy, but gave no details about its plans or the timing of its announcement. President Bush is expected to offer specific proposals for a stimulus at his annual State of the Union address on January 28.

All the major actors now agree on the need for something to be done, but there is no agreement, even in principle, on what the details would be.
Fed chief appears to side with Democratic proposals
The differences between the two political parties make it very unlikely that anything substantial could be approved in time, wrote David Greenlaw, an economist for Morgan Stanley. "We suspect that things may get bogged down when the discussion inevitably turns to the specific measures that will be included in the final package."

Without endorsing any specific ideas, Bernanke's comments appeared to favor Democratic proposals to quickly pass a temporary stimulus plan targeted at low- and middle-income families. "Getting money to low- and moderate-income families is good in terms of getting the most bang for the buck," Bernanke said.

Democratic stimulus proposals favor tax rebates and additional funds
for unemployment benefits, food stamps, Medicaid and heating assistance.

Republicans, by contrast, have said they believe a longer view of the economy's potential is needed, not a temporary feel-good boost. Republicans have said extending the 2001 and 2003 tax cuts beyond their scheduled expiration in 2011 must be part of any fiscal package this year.

Bernanke, who is a Republican appointed by President Bush, said longer-run tax measures could actually hurt the economy. "A fiscal program that increased the structural budget deficit would only make confronting those challenges more difficult," Bernanke said.
It would be better for any cuts in business taxes to be temporary measures designed to quickly increase investment, rather than cutting marginal tax rates, he said.

In his remarks on the economy and on monetary policy, Bernanke provided little that was new. He repeated much of his speech from last week, which left markets and analysts expecting a larger-than-usual half percentage point cut in the federal funds target rate at the conclusion of the Fed's two-day meeting on Jan. 29 and 30. See earlier story.

He said the Fed would remain "exceptionally alert and flexible."

The bottom line:
1. Today is January expiry.
It has been down 8 of the 9 last years, with some heavy losses. It is as likely this could continue, as it is that the market should shift sentiment for the short term.
2. We exited all open call positions in all services at OEX 645, or on 1/17. We have not issued sell alerts for any of our CORE or speculative stocks, nor have we issued new buy alerts, YET, except in Gold, Silver, and TIPS.
3. We will continue to list both put and call in our daily alerts, noting that the put is higher risk from such oversold conditions, and that the call will lose value by the minute with the type of 200 point moves we've had intraday.
There are very few traders both on Wall Street, and on the computer trading floors that are making money right now.
Do not trade because you think you should. This is now a serious situation.

Janurary 17th, 2008
What we saw in sell off yesterday around Intel led the market to lower lows. A new support appeared at 642 on the OEX and by early afternoon the market had begun a gap up to approach the August lows. Chartists know we are at a crossroads.

If the market shows any healthy economic resiliency, especially in the massive and ongoing bank subslime write offs and bad news, we are experiencing a typical 10% market correction, and NOT a bear market that takes over.

If the market cannot break support lines and find some good news, and lower lows continue to develop, the bears have won.

WASHINGTON (MarketWatch) -- The U.S. economy grew at a modest pace in most regions of the nation in late November and December, the Federal Reserve reported Wednesday.
In its Beige Book report on the economy, the Fed noted that labor markets remain tight in most areas despite the sharp rise in the unemployment rate to 5% reported by the Labor Department in December.

"Economic activity increased modestly during the survey period of mid-November through December, but at a slower pace compared with the previous survey," the Beige Book reported. Of 12 Fed banking districts, five reported slow or slowing activity, five reported modest or slightly increasing activity, and two said conditions were mixed.”

Traders stop lossed all open calls if trading around 645 stop loss, and new buys on our morning recommendation on the puts was profitable by 1 p.m. Day traders also reported some tight profits on the Feb660C as it fell to 642 and began rebound, but new buys to the call were a higher risk trade only for the optimistic trader. And, other traders that did hold through the 645 moves watched the market actually move back to 650 by 2.50 p.m.

By day end almost all gains were again lost, but the market DID hold at August lows, and at OEX 645 for some time. It took a bit of conjecture to bring the market up as the Beige book showed inflation as benign, and speculation began that the FEDS will lower rates even sooner. Gold dropped $20 an ounce.

Bernanke speaks today. Let's see if this is the catalyst to provide relief. Futures are UP at 4.45 a.m.

Janurary 16th, 2008
During the market downturn yesterday we issued the following alert to all subscribers:

"In the volatile whipsaw we've been advising on puts have now hit top profits, and new buys may have been made to the call. Using OEX 645 as a strong support line we suggest that if the market were to downturn further today to hit this support any prolonged hesitancy should prompt your consideration for stop loss for open short term calls.

This simply means the market is breaking down past prior lows and even the best horse better is flipping the coin on what would be next. The market, at the same time, as held at current support lines a number of times, with just a brief dip to OEX 645 earlier this year.

Take prudent risk. We would exit puts for profits, and watch support lines carefully."

"Floyd, bought and sold the 660C 1/15, and bought the OTM put as it climbed, and sold it out on the drop. Just bought the 660C again. I followed that OEX bottom very well. Let's hope the FEDS come to the rescue!”-Larry M.

"I am almost sick from the pendulum. You are covering it (w)ell, and I'm beginning to see why there are tops and bottoms, and you have me certainly thinking economics. Never thought it was all so related." - GSK

Puts were profitable, of course, and risk traders took new call entry. By mid afternoon the market appeared to hold at just under 650, caught up again in subslime horrible news on cash infusions to Merrill, and lay offs at Citi.

Calls of any type, for any of our open options in the Blue Chip service, and on the OEX, would be stop lossed at any hold below OEX 645, which we consider a breakdown to below August lows, and a sign the market cannot find news to hold at support lines.

In our Blue Chip service we have been actively recommending building positions in a specific cash instruments, and many of our subscribers are asking our longer term market projections, and/or plans for the shorter term investing.

With market conditions make note the "count" reverses almost daily. Support and resistance lines need to be re-calculated intraday to understand just how close to bottoms we are. Evening commentary added to the fuel: SAN FRANCISCO (MarketWatch) -- Intel Corp. shares fell more than 14% during Tuesday's evening trading session, following the chipmaker's fourth-quarter earnings report.

Janurary 15th, 2008
IBM, Oil, and Gold all hit new highs again Monday. Preliminary earnings on IBM acted as a morning trigger to a gap up, and allowed traders profits again on the open February660C, which hit highs of 20.10.
The next question is: Will it follow through? (Futures are down 46 points at 4.51 a.m.) If so, a resistance just below 13,000 would show a bit of good stability to the market.
Chartists have begun to see a serious breakdown:
"The NASDAQ, Dow and S & P 500 all show the perilous technical situations. Charts for the NASDAQ,DJI and S&P 500 are all bearish. Using the NASDAQ of last week, for example, shows that the index completed a Head and Shoulders Top pattern compounded from the medium term support line formed by lows for this year and a tentative rally began which was looking rather sickly by Friday. We expect the market to continue to make strong moves up and down as Fed and Treasury officials continue to make comments about the economy's strength and/or weakness but we favor the view that we are at the beginning of a bear market that could last until well into 2009. Treasury Secretary Paulson is now quite sanguine, and surprisingly frank for an administration official, about the state of the economy. Bloomberg news has released extracts from an interview with Paulson to be aired this weekend which shows his concern:

"There are signs the economy is slowing down fairly rapidly"
"We are looking at things that could be done quickly''
"Time is of the essence''
"There are risks to the downside"
Paulson said the housing market poses the biggest threat to the economy and made clear he expects home prices to continue to fall. "There's no doubt that this hasn't run its course yet''
With house prices continuing to fall, mortgage resets and foreclosures mounting, unemployment rising and credit tightening, it is easy to see how the economy and markets can falter as we come to the end of the consumer led expansion of the last few years."

When Floyd charts, however, we can see the OEX below just calmly hitting ordinary correction bottoms, and slowly, hesitantly rebuilding slightly, which a good optimist can view as a resilient market that will hold up. Greenspan teaches this well, and in his tenure often watched the market "beat it's own odds".
There is more upside potential, and just as much a complete lack of follow through and reaction to something negative. Risk traders also now have entry to the contrarian put. The count shows continued whipsaw.

Janurary 14th, 2008
First trading day of January expiration week; Dow up 11 of last 15

The market may not have yet bottomed. The bull recovery didn't hold, and Bernanke's comments of watchful guidance lasted only so long as hearing that Merrill lost 15 billion on subslime, and Bank of America is bailing out Countrywide because they already have billions invested in it. This leaves us selling open higher risk puts for good profits on Friday, and either holding or now taking a second buy on the open Feb660C that we had been able to profit on just the day before.

Two way trades are very likely and just as we wrote Friday in our alerts "do not trust ANY momentum".

As we watch the market begin recessionary thinking it's important to analyze why subslime so seriously has affected us, and how thinking like this can be occurring even right now as politicians and the American public look for answers. There are, for example, TWO very obvious reasons oil has hit all time highs, and now affects the economy. Many subscribers may write here, and many may think there are more than two reasons...but without these TWO reasons oil prices would be immaterial.

For mortgages, here's what the FED second lead Poole says are the list of mistakes that were made:
Borrowers took on mortgages they could not afford.
Mortgage brokers put too many people in unsuitable mortgages. They knew, for instance, that adjustable-rate mortgages probably wouldn't be right for many borrowers if interest rates rose as the market expected.
Investment banks jeopardized their reputations by securitizing mortgages without doing due diligence on the underlying assets, many of which were based on "inadequate or spurious information."
Rating agencies put their stamp of approval on securitized mortgages without considering whether AAA ratings could be maintained if house prices fell.
Investors scooped up those securities without doing adequate analysis first. "Investors too readily accepted the AAA ratings at face value," Poole said. "A reach for yield with inadequate attention to risk in another basic lesson that apparently cannot be relearned often enough.
"There are no new lessons here," he said. "The mistakes that brought us to this point have been made before."

At our sister site we are recommending many versions of buys on Gold, even though it is at all time highs, and continue to believe the devaluation of the USD is a key issue, much like the deficit we see involved in subslime. and wild spending of big government. How we handle the USD could affect us with recession over a longer timer period.

Friday was, quite simply, a very clear breakdown. Going below support lines of 645 would be severe bottom testing, and new ground.

Janurary 10th, 2008
A bit extended to get there, and filled with fear, but yesterday the market moved right a high of 12,931, right near our first top at 12,960, before retreating to close at 12,853.
It is now likely for continued whipsaw, two way trades, and a continuation of a very unhealthy market. Although we have only listed an OTM put for risk traders, we'll continue to hold our now profitable Feb660C, which hit highs of 25.20 Thursday. It's been a rough start to 08, but signals began rebound, and after profitable puts on Wednesday, calls on Thursday, we'll continue to hesitantly try to lock up final profits to the Feb660C. We do not suggest holding inventory over the weekend if profits can be taken. The market could very clearly TOP (note both projections), and just as easily reverse.

What was the trigger? A FED bail out, yet again. And on the soapbox again, Floyd: bail outs postpone the inevitable. Interest rate cuts do NOT address the USD, or our debt. They fuel typical American "I want what I want when I want it". Good news as it appears, it is NOT good news.

NEW YORK (MarketWatch) -- U.S. stocks on Thursday leaped in late trading to close with solid gains after Federal Reserve Chairman Ben Bernanke signaled more interest-rate cuts ahead and on reports Bank of America Corp. is in talks to buy Countrywide Financial Corp., sending shares of the troubled mortgage provider soaring 51%.

"Bernanke is giving himself some wiggle room," said Doug Roberts, chief investment strategist for Channel Capital Research.com. "What the market is looking for is that he acknowledge the situation has deteriorated and the Fed is ready to take action."

And on the political note, as we define just who is what as the election comes I ask only one thing: prove with FACTS what you read, and what you believe. For traders that truly want to understand economic principles, which few in government now seem able to even fathom, we highly recommend Henry Hazlitt's brilliant book Economics in One E Lesson. Floyd dares any politically "locked in" point of view to read this book and argue with the facts in it.

Now, to pick on the Democrats...have not heard ONE comment yet amidst the "change" rhetoric (and God knows we need it)...NOT ONE that discusses economic issues. A bit scary, hmm?

Janurary 10th, 2008
Here's how we led dialogue this morning in our Dow projections.
"1. 13,140/12,576 or
2. 12,960 to 13,025 top/ 12,420 bottom
Put traders make note. Any negativity could create a whipsaw so yet again puts are profitable, and for risk traders we've listed a put to buy.
However, this is an overextended market, vastly oversold, and it is a normal reaction to "bounce up". It's now long overdue. But, note our Dow projections are now much more muted in growth potential, at least until we see what kind of bail out the FEDS come up with."

Puts were available at opening and sold for great profits as the market hit some serious bottoms, with a test at 12,502 before renewal to 12,735.

OEX 690 and 695 are the next tests of market upside. It's possible. 11 of the last 14 Monday's prior to January expiry have been market UP days, preceding a January expiry that has been shocking in the past with new lows. We continue to see a market upside for the SHORT term. In early January Floyd had seen a strong upside FIRST, led by a dramatic decline.

The decline occurred first. The upside MAY now occur. We continue to hold open inventory to our Feb660C, and see this in ITM option as the lowest risk for the first upsides.

Although we will not list a put for opening, be suspicious and hesitant. The market is sick, and the economy sicker.

Floyd's recent rants on "figure out your politics" are a part of this, as the lack of attention to our economy have been the fodder that have led this decline.

And this from a great subscriber, PC, who preached back at me for my soapbox rantings.

First, before I comment, the rantings are important for you as traders to understand.

1. I am NOT a Democrat. I am NOT a Republican. I am proudly negative to Bush, his croney's, and his family dynasty. I believe both Bush Presidents' have dramatically and negatively influenced the U.S. economy. I do NOT believe a single candidate has yet addressed the economic issues.

2. I used the subscriber’s comments below to respond during this recessionary time period with WHY things occur. I am armed with facts, not conservative Murdoch FOX or liberal CBS News, and argue the soap box because our stock market economy will be affected long term if we do not think smartly this next time. Thusly for those of you that may argue with me, I'll respond to the subscribers comments:

PC - Well good, sounds like you will be voting for Romney then. He is the only candidate that understands how the economy works and has a successful record in turning around companies and the Olympics.

Floyd - Read this three times and not smile. What does a company turnaround have to do with the global economy? From what I remember Bush was going to bring "business practice" to the White House. He sure did:)

PC -None of the Democrats have a clue all they want to do is raise taxes and then spend it growing government.

Floyd - Are you sure here? Historically the stock market drops under Republican administrations, and historically deficits have been created under the most recent Republican "give back to the rich, take from the middle class". These are FACTS. No Republican has balanced the budget in many, many years. If you believe supply side economics works, prove it to us. The Democrats "grow government" discussion is the mainstay of the Republican argument; by the way, Bush has grown the Clinton government, and Clinton had cut it from the former Bush.

PC - That's it, the answer is to put healthcare in control of the government,

Floyd - Better yet, let's keep it in the hands of the drug and health care companies. NO where does the subscriber address the rising cost of this health care to the employers and the 40 million American s that are uninsured.

PC- appease our enemies (which by the way attacked us and continue to try to),

Floyd - Appease? Certainly looks now as if we've made enemies of much of the world?

PC - and get rid of all fossil fuels because its burning a hole in out ozone layer and causing more Hurricanes than normal (Meanwhile over a billion Chinese and Indians could care less and will continue to use it without regard for what Al Gore (Internet inventor :) ) has to say about it or make a movie about it.

Floyd - This is such a frightening statement I'll simply provide the reversing logic: "Because others do this we should. And don't worry, we won't have to get rid of fossil fuels at our current growth. Supply now can't keep up with demand. Oil companies run our world?"

PC - Like they have not botched enough yet. All they will do is pilfer the money for there own causes and cause an even bigger mess.

Floyd - All government does this, not Democrats or Republicans.

PC - By the way I think I remember Clinton starting the whole housing mess when he started his chant that everyone should own a home. Guess what the Housing mess started back then. I started appraising in 2001 and many of the programs that were in place were in place when Clinton was president.

Floyd - True. This is an example of where no controls were put in to monitor "free dates" It's fine, and we're now paying for it. Greenspan led this.

PC- Oh by the way if Clinton would have taken care of Osama when he was being handed over on a silver platter maybe 9/11 would have never happened and we would not be in this war.

Floyd – (Smiles.) The WAR in IRAQ has absolutely NOTHING to do with Osama. Bush has done a superb job creating this propaganda, and EACH commission study has proved otherwise. Facts show that Clinton warned the Bush Administration of the growing Osama issues, which were ignored.

PC - You have been on a soapbox preaching for a long time Floyd and I have bit my tongue. But until you can start giving some credit for some of our social and economic woes to both sides of the isle. Last time I checked it is a Democrat House and Senate.

Floyd - Fully agree here. I am not a advocate for the Democrats. I am an advocate for intelligent review of candidates, world knowledge, and ability to influence the world. If one went to Europe, South America or Asia today you would find the U.S. is not the world leader we were 8 years ago. Who do we blame here?

My facts are simple: We are in recession. The economy is at all time lows. We have no solution to health care. Our deficit is at all time highs. The world laughs at us. The war in Iraq has cost many thousands of lives, and where are we?
Environmentally, we are years behind where we could and should be.

Sorry, I will stick with the soapbox....WE MUST GET control of our economic issues.

There are MORE tax incentives under the Bush administration to buy a Hummer than a hybrid vehicle. Doesn't this say a great deal?

"It is an iron law of finance that valuations drive long-term returns. As testament to that fact, the S&P 500 is now behind Treasury bills on a total return basis for the 9.5 years since August 1998, and the present cycle has not even experienced a bear market."-John Maudlin

Janurary 9th, 2008
Wild speculation that Countrywide, the nations largest mortgage company, may declare bankruptcy, coupled with soft comments from ATT triggered the market to the 8th straight day of NASDAQ downside, and we've hit our worst record for picks since we began this service.

The severity of this downside shocks us. We've now hit the July and August lows, and our deepest Dow bottom. We missed puts again, thinking the risk too high, and watching a nice morning gap up that even allowed good profit taking on our new Feb660C, only to see the need to second buy the position by the massive 3 p.m sell off.

Many traders have asked Floyd personally why he thinks its occurring. From the slippery soapbox:
1. Bush is a lousy President with no concept of economics, and we've built a war-based massive super debt, and devalued our USD to smithereens. His tax cuts have accomplished the inevitable...supply side economics does NOT work. Want some other valuable thinking on this?....

http://www.marketwatch.com/news/story/politicians-blocking-stimulus-economy-needs/story.aspx?guid=%7B8588A280%2D554E%2D46C0%2D9937%2DD9EB27DB2A74%7D

2. War initially boosts economies, and typically then helps it falter. We're seeing that in evidence today.
3. Subprime mortgages were the darling of the FEDS just a year ago, who actively supported "a home for everyone," with no understanding of economic motivators and the depth the greed would go to.
4. Wall Street has manipulated the market each time to force the FEDS to lower interest rates, against the good of the overall economy, but "perceived" as the answer. The FEDS will now most assuredly have to do another bail out 1/29, and the idiotic Bush/Paulsen comments yesterday that there were "mixed signals" on the economy are now almost a dark comedy.

Please, traders, study who you vote for this next time. Get someone in there that UNDERSTANDS economics.

With this said, we will continue to not trade the put. The market is VASTLY oversold, ripe for rebound or bailout, and too high risk to even trade.
We'll continue with our open Feb660C through stop loss, and will only recommend a new put position for high risk traders. Floyd will not trade a new signal, and thinks the downside itself is now too extended.
We'll sit on the sidelines.

Janurary 8th, 2008
January’s first five days act as an “Early Warning”, says Stock Traders Almanac, and if true….we’re in trouble. Here are their facts:

“The last 36 up first five days were followed by full-year gains 31 times, for an 85.1% accuracy ratio and a 13.7% average gain in all 36 years. The five exceptions include flat 1944 and four related to war. Vietnam military spending delayed start of 1966 bear market. Ceasefire imminence early in 1973 raised stocks temporarily. Saddam Hussein turned 1990 into a bear. The war on terrorism, instability in the MidEast and corporate malfeasance shaped 2002 into one of the worst years on record. The 21 down first five days were followed by 11 up years and 10 down (less than 50% accurate).

Bullish 4-year election cycle forces have given this indicator a 12-2 record in election years. Two of four down years have been wrong, however, a bear market began in 1956 with concern over Eisenhower’s heart condition, the Suez Canal Crises, and Russia’s suppression of the Hungarian Revolution A mini-crash on the first day of 1988 felled the S&P 6.8%”
NEW YORK (MarketWatch) -- U.S. stocks wobbled Monday, with the Nasdaq extending losses into a seventh session, as equities trade fluctuated between worries about the economy and buyers swooping in to pick up shares in the wake of Friday's steep price drop.

"The drivers of last week will not be with us this week; we're not going to get the same economic data that speaks to a slowdown in the economy or a pickup in inflation," said Art Hogan, chief market strategist at Jefferies & Co.

No new signals, and not much commentary. The market did one thing very, very right yesterday. It stopped free-falling. No new support or resistance lines, not much market whipsaw, and a market that "hesitated enough" to perhaps slow the down turn. Wednesday is a key reversal day historically. It is possible that in the next several days we might see a shift in sentiment, short term, that will renew upside. Traders took a new first position to the February660C, and we'll continue to build inventory here to hopefully recoup losses from call stop losses.

This is NOT a healthy economy or stock market, and it's obvious. However, it's also now much too built on fear, and very oversold. We will continue to only buy to the call, and simply "sit on our hands" until the market stabilizes. Day trades were indeed possible for astute traders yesterday, as the market moved in a 150 point whipsaw range; however, even the trading floor is hesitant to commit.

And, to climb my soapbox to help us all vote intelligently this next time, read this dribble:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aP.q1gkg7GHU&refer=home
Floyd Translation: "If we lower interest rates too much the USD will be worth a dime”. Even Bush is figuring this out :)

Betting odds are now 70% that the FEDDIES will lower rates by .50% on January 29th.

Janurary 7th, 2008
Friday's employment figures confirmed that a recession is near, if not already at hand. The economy added only 18,000 news jobs, mostly in Government, during December and the unemployment rate rose from 4.7% to 5%. Until now, employment has been the one bright spot that optimists could point to that would sustain the economy and the markets but that prop seems to be weakening now. The markets reacted by undergoing heavy distribution and the DJI dropped 1.96%. The NASDAQ Composite fared even worse with a decline of 3.77% led downward by Intel and Apple while the S&P 500 lost 2.46%.

The market has now experienced the worst opening to January since 2000, far worse than we anticipated, and now a dire situation.

"Employment figures confirmed that a recession is near, if not already at hand. The economy added only 18,000 news jobs, mostly in Government, during December and the unemployment rate rose from 4.7% to 5%. Until now, employment has been the one bright spot that optimists could point to that would sustain the economy and the markets but that prop seems to be weakening now. The markets reacted by undergoing heavy distribution and the DJI dropped 1.96%. The NASDAQ Composite fared even worse with a decline of 3.77% led downward by Intel and Apple while the S&P 500 lost 2.46%."
The weekly charts of the NASDAQ and S&P 500 show that both have fallen below their primary support levels and may test the lows set on August 16 just prior to the Fed announcing its first cut in the discount rate. Many short sellers were taken to the cleaners that day and although it may be tempting to short the current market, we do not discount the possibility that the Administration/Fed will announce some combination of actions that will arrest the current slide in the short term. As an example, Comstock Funds reported on Thursday:

"It has been announced that tomorrow (Friday) President Bush will, for the first time, meet with members of the President’s Working Group on Financial Markets to discuss the current financial and economic situation. This is the formal name for the so-called Plunge Protection Team that was formed by President Reagan following the 1987 market crash. Its stated purpose was to prepare to deal with a serious credit or market crisis that could significantly impact financial institutions and the economy. While we understand that the team has met periodically with no announcement, we are unaware of any president ever meeting formally with the group. We think they view the current financial and economic situation with alarm—and so should you."

. An announcement of corporate tax cuts is possible. Whatever they say could give the markets a bounce on Monday, or early this coming week. The FEDS, we believe, will now step in and yet again make a stupid decision to "try to influence" economy. We are IN a recession, and Floyd believes, a recession may well be the necessary catalyst to "cleanse us of our stupidity".

My neighbor, who works for a large corporation, just drove home from the grocery store. He was driving his Hummer2, brightly painted and chromed (ready for duty in Iraq) and paused to say hello to me as I walked the dog. Out of his "war truck" he got a 24 pack of bottled water, and a bag from "Best Buy", where he had just got a special price on some X Box stuff for his 9 year old.

He commented to me "whew, what an economy, huh? Times are looking tough."

He then walked in to his vastly overpriced (still) upscale Florida home where the illegal Brazilian landscapers were just starting to cut his lawn.

This is not an example of a rich man, but rather, a mid 40's corporate boy, wife and kids, living the good life, and not "getting it.

We deserve much of what we have created.

The market moved Friday to just above 660, much lower than a strong support line at 665. Several days ago support was holding at 675, and the market just moved to lower lows.
Bears will see this as "proof" that there will be continued downside.

12,550 area is the next strong support area.

So, there is "now a hint" that the economic slump is moving to the labor market, the talking heads tell us, from the market reaction Friday to a bad unemployment report. Without standing on the soapbox too long....this report is meaningless dribble that still influences the market.
There are WMD in Iraq, 27% of the American people still believe: have I said enough :)?

Worthless though this data is, yet again we are seeing $100 oil, subslime, slowed manufacturing, and now slowed job growth, and the economists are still debating whether we have begun a recession or not.

Even a clear landslide primary victory battle in Iowa couldn't stop the pressure from building, and we've started 2008 with a loss on the calls.

Some traders may still hold Jan690C inventory, and we'll be recommending a new contrarian position to the call, continuing to see "too much reaction," moving too extremes, just as we've done with the highly volatile and always faltering "euphoric moves up" to the 14,000 range that we previously were concerned about. To answer several email questions: "No, our bias is not to a bull market, but that the market is too far oversold"

Dow projections now show what could be the next bottom and where there are three distinct tops. The odds as of Saturday were 68% from futures traders that the FEDS will announce a 50 point cut at the end of the month.

Janurary 4th, 2008
Floor trades see that there are many "shorts" to the market right now, and it held the market back again on Thursday, but declines held to 675 again.

We think it's likely now the FED and Treasury may yet again manipulate the market, and cut the rates .50%. It's likely to have TWO rally's around this, one over "anything" that can be construed positively, and the second as an FOMC announcement takes place.

Around these upsides, noted in our Dow projections, there remains much long term risk to the market. It is very interesting to note what Floyd calls his "trader survey of emotion", the best calendaring of market moves and emotions come around the emails we received daily from subscribers.

Right now our emails are weighted 80% to fear, questioning every market statement and move, and FEAR of having lost money or losing money on an open call position. This type of fear typically takes place around any prolonged downturn, and traders become less open to trading the bias (in this case still the put) if they BELIEVE OR WANT the market to do something different.

We can make ourselves believe anything.

It appears that our subscriber base is optimistic, hopeful, and needy right now....as the majority of our emails are questions about the long term trends, what to do about what position is held, etc than normal. This means more subscribers have traded only to the call and can't bear the bearish news that comes out of every news channel right now.

Regardless of whether any call is profitable, it shows the "mood of America". The public is being led in market manipulation in today's market by oil traders building price to over $100 a barrel. It now leads the world. Consumption/supply/demand....all secondary to option traders carrying a momentum.

Puts were tightly profitable. Calls bounced in a range, and remain an open position. Some traders will stop loss to the call today, based on # of days, and others, who bought later in this cycle, will stop loss on Jan 9th.

Email us with your stock option trading questions: info@oexoptions.com

Contact: info@oexoptions.com

there is always a bull market somewhere. take prudent risk.
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