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.

March 31, 2008
Note to Subscribers: Because market conditions so notably show the need to re-calculate support and resistance at least one time during the trading day we are adjusting how our daily alert reads, providing a link to our website, and instructing subscribers day trading to re-calculate support/resistance and pivot points at least once during the trading day.

Market conditions of now typical 100 plus point moves necessitate this re-calculation to catch the shifting of the market.

First trading day in April, Dow up 10 of last 13, 6 straight 1995-2000

Market conditions Friday allowed top profits for all put traders, with the April610P hitting market tops of 14.00. All puts were profitable. Near day end we recommended a first buy high risk call trade to the April620C.

As the Dow bounced to near our lower Dow projections our call entry and new signal hope to see a key reversal shift in bias in a market we see soon ripe for upside, short term. If we are and have hit bottoms, 12,780 area as a new resistance zone is quite possible, in whipsaw stages. If we have NOT hit bottom, and this trade was noted as higher risk, market downturns are possible to 12,150 to 12,020, with any negative news yet again taking the market to below 11,900.

Chartists can see patterns right now that would indicate the rally to be over:
"It is clear now though that supporting the markets is a secondary goal and that the primary objective is to save the financial system from systemic collapse. In its support for the Bear Sterns takeover, and the unprecedented decision to open the discount window to non-bank primary dealers (who previously could not borrow Fed funds directly, but must deal with large banks) the Fed has signaled that no large brokerage institution will be allowed to fail. This immediately stopped the short selling of Lehman Brothers (LEH) and triggered a market rally that many pundits said was the turning point. LEH received another boost when it announced quarterly results that beat expectations. But as we know, accounting is an art, not a science and it seems a Michelangelo was at work in the preparation of the Lehman results. Through careful interpretation of the SEC's 'tangible equity' rule they were actually able to count their debt as equity!!! (see portfolio.com). In other words, their results are suspect and may hide more than they reveal. Confidence in the markets can only be maintained through transparency, and as we shall see in a moment, the confidence that we have seen the market bottom is now fading as another down-leg begins.

Another confidence issue: while asset write-downs so far have been large (Morgan Stanley estimate of $400 billion), they have the potential to be much larger. The balance sheets of the banks and brokerages are benefiting from an accounting rule that says they do not have to 'mark-to-market' if the assets are triple-A rated and they can carry them on their balance sheets at par. As long as the monoline insurance brokers (Ambac, MBIA, etc) maintain their triple-A rating, the assets they insure are triple-A rated also. If the monolines get down-rated, more blood will flow. Some observers believe more losses are inevitable (Nouriel Roubini: " The losses that we're facing at this point — $1 trillion — is the floor, not the ceiling").
We can now see why confidence that we have seen the bottom is fading and that brings us to the 'Gravestone Doji'. Both the NASDAQ and the Russell 2000 weekly charts show a near perfect 'Gravestone Doji' pattern. The tall shadow implies that the bulls drove prices higher but lost almost all their gains by week's end. This implies these indexes will open lower next week and that the rally is in jeopardy."-Mike Gibbons

Study economic calendars and futures carefully this week. All of our trades were profitable last week and some several times over.

We have an open buy to the call, in a market that is hesitating in its downside.

March 28, 2008
Last trading day of March, Dow down 10 of last 13 with major losses

Like a clock, the market wound up, and opened up, only to allow option traders a chance for a new buy on the April610P at 9.50 or less, and sale again to 11.60 highs several times in the day and up to 12.60 near day end. The market dropped just close enough to our theoretical Dow low that puts may be soon be waning. We are proud to say that the market went right to our theoretical Dow low at 12,253.!!! Further downside tomorrow may be limited, or this support line may hold.
With this said it's a key reversal period and there is just enough hope in the spring air for a rise to the Dow 12,890 area on ANY news that can be construed positively. No new signal prior to market opening. We'll watch futures, and advise of any intraday signal.
What has recently occurred in the market, as the correction began in January, is a general unfolding of information with the potential for real long term harm. It is also a classic example of a greed cycle. We have seen a general unravelling. Here is how we see the economic reality of the situation the U.S. faces:
*Bush is a strong believer in the free markets. To a free market economic President regulation of financial institutions would breed "involvement" to the free market. Wrong or right, during this time the overleveraged hedge funds began massive growth, and the free market supply and demand prevailed.
*Prior to Bush we had a balanced budget, BUT we also had Greenspan, who led the bubble with his king of easy money formula of lowering interest rates and proposing more unique ways of mortgage financing. Greenspan did this during a stock bubble, and fall., the reverse of what we have now.
*During this entire time period, and worsening in the past few years, the mortgage companies figured out they could get Rich on this, and promoted insanity. We just began lapping it up,and the housing bubble was there.
*Home equity became the prime mode lender, and credit card debt took off. No one watched it or stopped it.
*The game got bigger, and the investment bankers began really funding the games, and the financial statements for these conglomerates got even better at increasing appreciations, and what Floyd calls false facts. No one stopped it, and everyone in the know knew it was a deck of cards. Everyone.
*In all this the average Joe investor went for the big returns, saw his home go up in value, and could even buy a bigger and better home.
We played upon one another.
Would regulation help this? Probably, for a time, but soon the regulation would become corrupt, would not work, and the circle would return. Someone would get elected on "cutting the red tape" and deregulating the financials.
With this said it's a key reversal period and there is just enough hope in the spring air for a rise to the Dow 12,890 area on ANY news that can be construed positively.
As you watch this market study the story above, as we will yet again repeat another cycle that has historically occurred, again, and the market will reflect our group psychology.

March 27, 2008
"Although the cheetah is the fastest animal in the world and can catch any animal on the plain, it will wait until it is absolutely sure it can catch its prey. It may hide in the bush for a week, waiting for just the right moment. It will wait for a baby antelope, and not just any baby antelope, but preferably one that is also sick or lame. Only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of professional trading." (Mark Weinstein)
Market moves yesterday allowed all puts to hit profits, and the April610P going right to our 10.90 top. Early afternoon, for risk traders, we listed the April610P for new buys, as we continue to see potential downside to the 12,250 area, before a much stronger upside. If there truly is bad news the 12,250 could lead to a tighter next bottom. This trade was also available for day trading for quick 1.00 profits in afternoon trading.
Although we will continue to show an entire spectrum of potential Dow moves in our projections listed below, yesterdays first drop to the 12,340 theoretical Dow area was a first bottom, and a healthy sell off to the next support line could provide the springboard to stronger euphoric upside, to 12,840.
You will see more commentary coming from me on upcoming regulation, and what it really means, but it's clearly starting:
"WASHINGTON -- Treasury Secretary Henry Paulson called Wednesday for "some type" of additional oversight of investment banks by the Federal Reserve in connection with the recent decision to give them access to the central bank's credit.
Separately, The top two members of the U.S. Senate Finance Committee have asked the Federal Reserve and Treasury Department for extensive details on J.P. Morgan Chase & Co.'s deal to acquire Bear Stearns Cos."

March 26, 2008
March historically weak later in the month

Housing starts dropped 10.7%, and economic data was much iffier, and through 3 p.m. the market had dropped enough for our April610P to hit highs of 10.50. The market struggled at support lines throughout much of the early afternoon, as bulls continued to fight for upside.
Floyd's favorite: consumer confidence fell. And Merrill Lynch was downgraded...please remember, these are the idiots that do the "upgrades" and downgrades, and the ones that allowed Bear Stearns to be worthless. Do NOT trust these people.

JP Morgan's rebid at 10.00 for slimey Bear Stearns was enough to help the market doldrums short term, and our count bias diminished slightly to the call. We continue to see the market as high risk, and ready/ripe for a bit more downside. Scalping was possible on both put and call yesterday, but only for traders watching by the minute. The market moves are too minute to successfully trend project, and much as we want daily signals, we continue to see not a strong enough bias for clear signals.

Many blame the Democratic contenders for a populism babble on the outsourcing of U.S. jobs, but it is the current U.S. administration that supports U.S. tax codes that treat profits earned overseas differently. Profits earned in the U.S. are subject to the 35% corporate tax. But multinational corporations can defer paying U.S. taxes until they return them to the U.S., and these transfers can be planned to not happen for years. GE, for example, has 62 billion in "undistributed earnings" parked offshore, drug slime Pfizer has 60 billion, and ExxonMobil has 56 billion. These are all filings with the SEC, yet we as citizens are discussing the silly things.

And, "the surge" is working. Are any of us really even asking for this to be "proven". Is the "surge" not really just getting us back to where we started, which was nowhere?

Where do we get the money for what we do? Could interest rates that Bernanke has dropped turn, and rise? Most Americans do not even know who Bear Stearns, the firth largest investment bank in the world, failed from false financials, and the FEDS bailed it out, and stopped a run on the banks. With what money?

Where does the money for our never ending war in Iraq come from? When we elect do we think "Republican-cut taxes, smaller government" or Democrat "social programs and raise taxes", both "facts" that are absolutely not true, or do we continue to argue what Clinton did wrong, or whether Hilllary is a "dyke".

March 25, 2008
Times of market uncertainty often show an inflection point for stocks, and it is also relevant that large market moves up (like the recent 400 point moves) typically occur in clusters (there have been two 400 point moves up in the last 9 sessions) and have also typically occurred at market bottoms. With the massive whipsaws we've been experiencing, part of the Floydian Dow projection methodology is to watch cluster rallies, with suspicion around historical perspective.
For example, cluster rallies occurred in October 1974 at the end of a two year bear market. This occurred again at the end of the 1987 stock market crash, and again at the market bottom in October 2002.
With these facts investors with a three to five year time horizon could view our current turmoil as a bullish sign.
So...another fact, just to show you how deep the confusion reigns: back in the same 2002 October "fact" the Dow fell 17% more before bottoming after the price volatility peaked.
And...back in 2002 oil was cheap, there were no mortgage foreclosures, Gold was several hundred dollars cheaper, and the dollar was much stronger.
Floyd believes it's far too early to truly predict a bottom, and that very little "true facts" have even begun to emerge.
What we saw yesterday was another good run to the top, and the Dow moved just above our secondary Dow projections, to highs of 12,642. Traders were able to exit any existing call positions profitably, but no need call trades were possible.
Intraday yesterday we recommended a new buy to the April610P, which was immediately available at 8.20 and less, and could have sold to 9.50 within one hour. We continue to hold this put open,and some traders may have taken a two buy inventory to our OTM put.
Home sales had an unexpected rise, sparking a bit more of euphoria, and JP Morgan raised their fire sale bid for slimey old Bear Stearns to $10.00 a share. This was coupled with the most recent and latest conjecture:
Fed May Buy Mortgages Next, Treasury Investors Bet (Update2)

March 24 (Bloomberg) -- Forget lower interest rates. For the Federal Reserve to keep the financial markets from imploding it needs to buy troubled mortgage bonds from banks and securities firms, say the world's biggest Treasury investors.

Even after cutting rates by 3 percentage points since September, expanding the range of securities it accepts as collateral for loans and giving dealers access to its discount window, the Fed has been unable to promote confidence. The difference between what the government and banks pay for three- month loans doubled in the past month to 1.92 percentage points.

The only tool left may be for the Fed to help facilitate a Resolution Trust Corp.-type agency that would buy bonds backed by home loans, said Bill Gross,manager of the world's biggest bond fund at Pacific Investment Management Co. While purchasing some of the $6 trillion mortgage securities outstanding would take problem debt off the balance sheets of banks and alleviate the cause of the credit crunch, it would put taxpayers at risk.

``An RTC-type structure is interesting, and it may not be that much of a burden on taxpayers in the long run,'' said Barr Segal, a managing director at Los Angeles-based TCW Group Inc. who helps oversee $80 billion in fixed-income assets. The government should purchase the mortgages and reissue ``debt that's backed by the U.S. government and there you go, you've unclogged the drain,'' he said.

Bill Rates Plunge

New York Life Investment Management is considering buying ``high-quality mortgages,'' said Thomas Girard, a money manager at the New York-based insurer. ``At some point here you've got to increase your allocation to non-Treasury securities.''

Mortgage bonds rallied last week. Yields on the securities fell to an average of 1.25 percentage points more than Treasuries from 1.57 percentage points on March 14, according to Merrill Lynch & Co.'s Mortgage Master Index. The so-called spread is still twice as wide as the average for all of 2007.

Investors, averse to holding most any debt except Treasuries, drove rates on three-month bills to 0.387 percent on March 20, the lowest since 1954. Rates on the securities, the safest assets next to cash, tumbled 0.59 percentage point last week to 0.57 percent. They were as high as 4.29 percent as recently as Oct. 15. The rate was 0.68 percent as of 1:59 p.m. in Tokyo.

`Very Helpful'

``Something like that would be very helpful, but the Fed was not designed to and shouldn't assume a huge amount of risk on behalf of taxpayers,'' said Alan Blinder, a Princeton University professor and former vice chairman of the central bank. ``That should come out of the elected parts of the government, which means the administration and Congress.''

President George W. Bush and Treasury Secretary Henry Paulson have resisted calls urging the use of government funds or guarantees to stem a record amount of mortgage foreclosures, the root of the financial crisis, preferring that the markets resolve the trouble. Bush said March 15 he wanted to avoid ``bad policy decisions'' that would do more harm than good.

President George H.W. Bush, the current president's father, signed the 1989 law which created the RTC to dispose of the assets of insolvent savings and loans banks. From 1986 through 1995, 1,043 savings banks with over $500 billion in assets failed, costing taxpayers $75.6 billion, according to a Federal Deposit Insurance Corp. analysis.

Joint Action

The Fed, the Bank of England and the European Central Bank are exploring the feasibility of using taxpayers' money to shore up the mortgage-backed securities market, the Financial Times reported on March 22, without saying where it obtained the information. A Fed official denied to Bloomberg News that day that it's in discussions to buy mortgage debt.

Smaller steps are already being taken. The Bush administration reduced the amount of capital Fannie Mae and Freddie Mac are required to hold as a cushion against losses. The March 19 agreement allows the government-chartered companies, the largest sources of money for U.S. home loans, to expand their purchases of mortgages by as much as $200 billion.

The Fed has also lowered borrowing costs, opened the so- called discount window to investment banks and arranged the sale of Bear Stearns Cos. since March 16 to ease financial-market turmoil. The world's biggest financial companies have posted at least $195 billion in writedowns and credit losses tied to subprime mortgages and collateralized debt obligations as of March 20, according to data compiled by Bloomberg.

`Done That Already'

JPMorgan Chase & Co. agreed to pay about $240 million for the fifth-largest securities firm in a transaction that includes as much as $30 billion of financing provided by the Fed for Bear Stearns's ``less-liquid'' assets.

``In a sense they've done that already with Bear Stearns,'' Michael Materasso, senior portfolio manager and co-chairman of the fixed-income policy committee at Franklin Templeton Investments, said of the government taking on the risk of owning mortgage securities. ``This was not just a temporary situation. The process has begun, the question is how far can it go?''

Franklin Templeton manages $110 billion of bonds. Materasso is based in New York.

A March 13 proposal by Senator Christopher Dodd and Congressman Barney Frank that the Federal Housing Administration insure refinanced mortgages after lenders reduce the loan principal to make payments more affordable to homeowners ``is the next step,'' Senator Charles Schumer, a New York Democrat, said in a Bloomberg Television interview on March 19. It's a ``broader step, but not as broad as RTC,'' he said.

For Pimco's Gross that's not enough. ``If Washington gets off its high `moral hazard' horse and moves to support housing prices, investors will return in a rush,'' he wrote in a note to investors published Feb. 26. Gross, who runs the $122 billion Total Return Fund from Newport Beach, California, didn't return calls seeking additional comment.

An RTC-like entity may not be ``the best idea, but maybe it's the idea that gets us through this,'' said New York Life's Girard. ``The likelihood of it happening has certainly increased.''

Here, however, are some sobering facts:
*48% of Americans surveyed believe "we are making progress in Iraq".
*28% of those same American surveyed do not know how many Americans have been killed in Iraq to date. (4000)

"My method is to take the utmost trouble to find the right thing to say, and then to say it with the utmost levity."
- George Bernard Shaw

March 24, 2008
Day after Easter, worst post-holiday, S&P down 10 of last 14, up 3 of last 4

The first trading day of April the Dow was up 10 of the last 13, and has been up 6 straight 1995-2000. We lead with this information, also noting that April has been the best month for the Dow, averaging 1.8% since 1950. With market moves up 262 points Thursday we yet again hit our Dow projections to a T, and our call, purchased Wednesday, was profitable to highs of 7.20. This means we hit every signal this past week for top profits :)
Study our Dow projections carefully, as they are more complex than normal, and show a continuation of whipsaw potential. Both call and put show strength, and both are high risk.
So far this year the S&P500 has had daily changes of 1% 53% of the time. Think of this...1% moves like this have not occurred since 1938, an omen we don't see as positive in any way.
The average intraday price range of the DJIA has mushroomed 264 points, and the past three sessions last week the Dow soared 420 points, plunged 293 points, and then rallied 262 points.
We read every one of these move rights, but whipsaws like we are seeing are not chartable, nor predictable long term. "One day the market is ecstatic, and the next day it wants to kill itself". Take prudent risk.

Lipstick sales are weaker when the economy is strong.

Skirt hemlines rise, and corrugated cardboard sales increase when the economy is strong.

Thick eyebrows are in vogue when the economy is strong.

March 20, 2008
Day before Good Friday worse in March --- S&P down 4 of last 5, Average –0.4%, March Triple Witching, Dow down 7 of last 12

Tomorrow is Good Friday, and the markets are closed. Today is quadruple witching, and option expiry. It is also a historical pattern period for key reversal although the U.S. often "plays" up the holidays, and lets the "happiness of the holiday" take over, only to bloody the market. No matter what the market does, or what false government game takes place, this is NOT a healthy economy, and all is NOT well.

Pre-market yesterday we issued two alerts to traders, for both put and call, with note as to the higher risk, and that we did not recommend holding over the holiday weekend.

The great American bail out is not working. Even the FEDS drop Tuesday didn't work, and Wednesday the market fell over 293 points. It matters not the "reason why", what matters is the upsurge bail out could not hold.

The April 550P was profitable to highs of 4.70.

From a trader after the biggest run up of years on Tuesday:
"Great job with the projections, My trading account is up 40% 18 days in March. I've been able to settle into a trading pattern and be more patient. I'm learning not to be greedy settling for smaller profits. I still tend to have positions go more negative than what I ultimately sell for, I'm entering positions to quickly or to late, getting better.

Today was classic; I sold most of my April 640 call position before 1:30 pm @ up to 5.80. I had another buy order in for 4.60; that got filled when the market backed up. I flipped it for a buck in 10 or 15 minutes”

From another trader today:
"I have learned from you most when not to trade, and when to trade, and more importantly, who to listen to. A year ago I moved my portfolio from Merrill Lynch when you proved to us in your Blue Chip service that the typical "analyst" was a 26 year old kid with a Masters degree who never had a real "job". I returned over 30% that first year, and began trading more of your options.
Your Advanced Mentoring service I fought like a dog at first, thinking half of what you gave me was "silly", and that I should study more things. Then, I sold out all my positions last year with you in December 2007, right before the "top", and sat back. I've been up over 35% year to date in option trading. And, I've learned that most of the political information I had believed is really not even true. I look forward to reading you every day"
And we heard this from a few others…

“Floyd, Nice profit right off of pivot at 610 area. Nice five minute trade for a reasonable profit. Hope you had a fine day off (fishing) counting all that money!” – SK

“Well I started yesterday with a 20 percent profit on PUTS, heehaw. Today I went for 35 percent, all on the 580's. Its all in the PnF as you told me almost a year ago. Thanks Floyd!” - TP

A Hatteras yacht cost $214,700 in 1976, and sold for 5.1 million in 2007. The upsurge in pricing is not just raw materials, but the opulence and greed that took this country over.
At the same time a face lift cost $4000, and has only risen to $17,000.

“It costs a lot of money to be rich” - Peter Boyle

March 19, 2008
The FEDS to the rescue, and everything is now okay. We are often not a smart people, and yet again, the "easy" makes us feel good.
The Dow moved to tops of 12,432, and our calls were profitable well above our top projections. The April610C hit 23.40, and the April640C hit 7.50. We closed the day with no inventory.
During the market run many traders wrote to know "when to buy puts", anxious to see the next move, and as we hit a top, and the 2.15 announcement, we could see the GREED of our own traders, already profiting hugely to the call, wanting the "next edge". Sorry, traders, but it's too risky a market, I said, and we hit yet again another top.

The FED bail out is just that, and what it does to the USD will not materialize for a few days. What is more important is what is next, and how the bail out will be perceived.
Bear Stearns is a lesson we have not learned, and important, around the euphoria, to understand.

1. One year ago Bear had a market valuation of 20 billion
2. Last Sunday it "sold" to JP Morgan for 236 million
3. Commercial banks have more complete and "open" books (so it is said) so that financials can be more easily scrutinized, while investment banks, of which Bear was the 5th largest in the world. These are the financial gurus that help companies sell themselves to go public, and handle mergers and acquisitions. Quite simply, without investment banks there would be no ability for a company or a municipality (thru bonds) to raise money.
4. The FEDS were not concerned that Bear might go bankrupt, as that their condition could cause a meltdown.
5. It is difficult to tell with an investment bank precisely what assets they have on their books, and more importantly, what REAL conditions those assets might be in.
6. The easy money began with former President Bill Clinton years ago, as Bubbles Greenspan cut interest rates, the great internet boom built, easy money was available, the dollar was rising, imports were still controlled, and the economy was good. What Clinton did right was understand economics during that time period, and worked to pay off our national debt. Republicans can argue it was their Congress and Senate that did so during this time, but historical analysis of when and what occurred clearly shows this was the FEDS work on eliminating our national debt during a time of exuberance.
7. In comes the Emperor. Off to war we go, and the spending just doesn't stop. This same thing occurred under Bushy #1, and oil also rose. My redundancy here is on purpose, as the Bear crisis came because of greed, false books, and the administrations (and prior) inability to recognize that their actions created much of the GREED. Be SMART as you elect this time, don't fall for FEAR, or false facts. Think it out.

With this said, if we see a strong market bias, we'll alert intraday, but will not provide a new signal for opening, and will "stay out of the market". Profits have been too good:)
In 1976 it cost $5900.00 for one year tuition, room board and insurance at Harvard.
In 2007 it cost $45,620.00

March 18, 2008
Tiger Woods will play your golf tournament for $500,000.00

Paris Hilton will ring in the New Year with you for $500,000.00

Today is the day the government gives more money away. The bet is on just how far the FEDS will drop rates, and just how much more will be found wrong.

As always, no one will truly analyze what and how we handle this, same as the 400 billion bail out last week, and the tax cuts to all are just beginning to go out. It's as likely now that the Democrats will in fight with one another so badly between Clinton and Obama that more will shift away from the Democrats, and just as likely that we will next elect a war haw with no economic background or understand that sings songs like "Bomb, bomb, bomb Iran" and sees nothing wrong with it.

The first largest investment bank in the world is effectively gone. More will follow. Whatever the money shifts, and FEDS intervention, we are effectively now printing money to keep investment banks afloat. Always remember, these are the "analysts" we listen to that tell us "undervalued", "moving from a buy to a hold" and that influence the market.

Watching the market yesterday should have made one ill. One of the largest investment banks of all time is effectively "gone" and more could follow. What the FEDS do today is already so much conjecture, and so possibly priced into the market, that you can read 14 opinions, all of whom are partly right.

Remember as you do this that the very analysts we've been following for years are those at Bear Stearns, which sold for 236 million.
Yesterday we saw market highs of 12,116 to 12,716, in one day. Traders that bought the April610C intraday at 11.40 or less could have sold to highs of 14.80 within two hours.

Risk traders that bought the April640C would have required two buys, and could have also profited. We'll list both as open positions, and continue to hold calls through the FEDS announcement.

What occurred in the bail out yesterday is truly historic in nature, and a bail out that could lead to more. Anything you read is clear in one thing: no one knows what this really means.

Remember this as you study news, experts, and analysts. Bear Stearns could not even be sold as a real company. The lies are exposed.

Two studies have also concluded that biofuels are worse for global warming than conventional oil fuels. Harvesting grass for fuel creates 93 times more carbon emissions than are saved by the production of cleaner fuel.

March 17, 2008
Over 400 billion in FED financing support, and a bail out for Bear Stearns, who came close to insolvency last Friday, and the market reacted with more and more fear Friday. Traders reported both profits to put and call, but the market moves were extraordinary.
One trader wrote Thursday advising that our recent alerts have been more "unclear" and "do you not know what the market is going to do right now". Another trader wrote: "Is anyone else making money other you and your subscribers? LOL. Unbelievable. I know of no other traders outside of your service that are making money. Great work, Floyd." "Floyd, made money on the calls, despite almost vomiting all morning....have hit every position trade for profits all week"
The April 640C moved from 3.50 to 5.90; the April 520P moved from 1.60 to 4.30
The market itself Friday showed a theoretical Dow low of 11, 792 to a high of 12,233, for an averaged move of 261 points in the day. Two days earlier Bear Stearns had reported only "good news", but by midday 3/13 they realized their own liquidity issues. This means: they were lying outright earlier in the week, and came to terms with their margin calls days later.
Just as Societe Generale blames a "rogue trader" for billions in losses, and just as Thornburg Mortgage, Merrill Lynch and others could begin to fall apart. Investment banks are the first to tumble, and commercial banks will be next, as the credit card frauds in the books are exposed. Stockholders have obviously been lied to, just as the American people have on our "costs" to government.
Read the following commentaries carefully:
NEW YORK (MarketWatch) -- U.S. stocks plunged Friday after Bear Stearns Cos. had to be bailed out by the Federal Reserve, shocking Wall Street and ending a week that saw one of the best trading days in five years wiped out by the biggest scare yet in the ongoing credit crisis.

"People realized that Bear Stearns just came out the other day saying everything was fine," said Paul Nolte, director of investments at Hinsdale Associates. "So, two days later, why would they need this funding from the Fed and J.P. Morgan? If it's like that for them, what is it like for Merrill Lynch or for Thornburg Mortgage?"
Poised for a starting rise in the wake of tame inflation data, the major stock indexes quickly shed opening gains after Bear Stearns (BSC:30.00, -27.00, -47.4%) said its liquidity had "significantly deteriorated" during the past 24 hours."
_____

March 15 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke is being forced to throw out four decades of monetary history by a financial system choking on miscalculated risks and a deepening recession.

Bernanke and the four Fed governors voted yesterday to become creditors toBear Stearns Cos., a securities firm that isn't a bank, by invoking a law that hasn't been used since the 1960s. Three days earlier, the Fed said it would swap Treasury notes on its balance sheet for privately issued mortgage-backed securities held by Wall Street firms.

``It's a re-drawing of the relationship of the Federal Reserve with the rest of the financial system,'' said Vincent Reinhart, former director of the Division of Monetary Affairs at the Board. Risks of so-called moral hazard, where firms will now come to count on bailouts by a federal agency, ``are considerable,'' he said.

The cost of doing nothing may have been even greater, say other former Fed officials. Bernanke is attempting to keep the nation's financial machinery working as record home foreclosures make investors reluctant to hold even bonds backed by Fannie Mae and Freddie Mac, government-chartered firms. The 54-year-old Fed chairman is also trying to contend with a worsening economic slump: Reports this week showed that retail sales unexpectedly fell andconsumer confidence slid to a 16-year low

_____

Bears believe the beginning is really just beginning, and it will all truly collapse, with 20% and deeper corrections in the near offing.

Bulls believe that stocks are now undervalued, and that the market could move up an additional 1000 points.

Both are right. We believe a major shift is occurring, and that the market will react with massive whipsaws, especially around the upcoming FED announcements Tuesday.

No chartist can predict, and the trader that asked Floyd earlier in the week "your analysis is more unsure and general" was dead right. Trading these markets takes a recession proof thinking, which means TRUSTING no fact, and is why we've been ranting for months on "elect smartly", as the "false facts" we've been dealt for so long are now truly all coming to the surface.

We continue to believe the market will struggle in ranges, and that Wall Street could be short term "saved", for moves back to a 13,340 area. But, much blood will be let along the way.

In advance of the FEDS, and whatever truth is uncovered from the mortgage and banking industry this week, we'll provide a higher dual risk trade opportunity, noting to all subscribers that trading this market does take regular intraday review, re-calculation of pivots and support lines regularly throughout the trading day, and the ability to make two buys on any open option, with the second buy a "drawdown" second buy of at least twice the amount of the first buy. Nerves of steel.

We are bullish short term, for all the wrong reasons. We do not believe anything we are currently doing, from tax cuts to FED bailouts, is the right thing to do, and that the country needs to be slapped, needs a recession to deeply debilitate us, and that we must suffer deeply, and all deserve it.

But, a bailout and false optimism will occur and the stack of cards we've built, that is falling fast, will be quickly re-built, for the short term. With this said, for those of you that often ask Floyd what he is trading, it is longer term to the call, and not as often. The market is simply too ill, and our country frozen in confusion.

March 14, 2008
Market much luckier day before St. Patrick’s Day.

Dan Turov, editor of Turov on Timing, notes gains the day before Saint Patrick’s Day have proved best, outperforming the days before many legal holidays for an average gain of .30% on the S&P. Irish luck, or coincidence?

During the past 55 years, Saint Patrick’s Day itself has posted just a wee gain of 0.16%. The day before Saint Patrick’s Day 2007 landed on Triple-Witching Friday and suffered a loss as the market started a new rally.

Saint Patrick’s Day 2008 falls on Monday before Triple-Witching. However, Fridays before March Triple-Witching have been down 5 of the last 6 election years and down over 1% twice and more than 2% thrice Monday of the Triple-Witching Week has been much stronger. March has been volatile in election years, so we would not press our luck, but going long the day before may prove fortunate in 2008.

Yesterday morning we wrote pre-market as follows: "It is very likely a large whipsaw move could occur, with the market now bottoming at 11,910 again. If the market cannot stabilize the market could hit our softer or likely bottoms again, but it is likely to hold at 11,910. Puts were then profitable as the market moved to a low 11,875. In the morning we then issued an alert intraday for a buy on the April 640C at 4.00 or less, which was available as low as 3.50 within minutes, and moved to highs of 6.40 within hours. Traders were able to sell right to our profit tops of 5.90.
Without boring you on the testimonials, we were profitable for two way trades in the day.
In the end the market only closed up 35 points, but upside did hold.
Last Sunday, Dr. Doom, Mark Faber, had commentary we thought so appropriate that we would wait a "market week" before sharing it. During that week Bush has explained we are not in a recession, oil has hit all time highs, and Bernanke led a 200 billion bail out. The market, following strong historical patterns, made massive 400 point moves up in a short time, only to begin to falter. It is typically in bear markets that we see bullish short term and highly volatile moves. So, on Dr. Doom below, Floyd has highlighted and commented:):
LOS ANGELES (MarketWatch) -- "Dr. Doom" sure is living up to his name these days.
Speaking to a packed room of financial planners here on Friday, the famed money manager and newsletter editor Mark Faber literally brought down the house with talk of a worthless dollar, a helpless U.S. central bank and a dire situation in which investors have just a few avenues left to turn to.
"We may now have a hostile environment for all asset classes, with the exception of some real estate and commodities," said the editor of The Gloom, Doom and Boom Report, pointing out that since 2002 all asset classes have been rising -- a phenomenon that hasn't been seen for 200 years.

"The current synchronized global economic boom and universal all-encompassing asset bubble will lead to a colossal bust," he said.
Financial markets, currently in the grips of a credit bubble that worsens by the day, will see a protracted period of high volatility, in which 20% movements either up or down become common and the chances of making a lot of money become very difficult, he said.
He heaps much of the blame for global troubles on years of expansionary U.S. monetary policy that had a flawed fixation on U.S. consumption rather than boosting capital infrastructure and spending. Federal Reserve Chairman Ben Bernanke and his colleagues are clearly backed into a corner now as they cannot tighten money policy without causing a collapse of the entire financial system, he said.
"Easy money and debt growth has had a diminishing aspect on U.S. economic growth -- 'zero hour' may have already arrived," Faber said, adding that he thinks the U.S. is in the throes of recession and has been there for the past four to five months.
___
A survey in USA Today showed that fully 40% of our voting population, if this survey shows any averages, believes that "now that we are in Iraq, we must stay the course".

March 13, 2008
When Bush was elected President, I bought three foreign made hybrid cars, almost 7 years ago. Last year I bought another hybrid car. My opinion on the Bush dynasty has proven sadly right, and in his first years I knew that oil would become the game. When we entered Iraq under Hussein gas for Iraqi citizens cost .5. Now it is over 6.00 per gallon, and is imported from other countries. It's almost hard to believe.

7.5 years ago hybrid cars offered up to $3000.00 tax rebates from the Government. This year these tax credits will be less than $1000 on average.

It is more cost effective to buy a Hummer than a Hybrid under the oil administration.

Yesterday, when oil hit $109.00 I was out to lunch with a client who said "What a shame. All that oil in Alaska ready to drill and the stupid environmentalists won't let it happen. Frozen tundra with more resources than we imagine".

I'm sure many of our subscribers may agree with this thinking, as our citizenry and our Government is not good at proactive thinking, only reactive responses. Oil in Alaska does reduce our dependence on the Middle Eastern oil, to be sure, but also does not release us from fossil fuel thinking, and the invasion of the earth.

Oil is up because of worldwide demand, and our own U.S. consumption. Prices are up because lobbyists have worked miracles playing the supply/demand and refinery game, and OPEC knows what it has.

Hybrid vehicles are NOT the answer, but the logic of using sources that can limit fossil fuel consumption are. Tax credits should not be given to the few and rich, as we've done, but to the companies that support solar, hydro, fuel cell and alternative energy options to both save our planet, and reduce our oil consumption.

A small child could figure this out.

The above rant is part of what is happening. Citizens are now tapping 401k's to keep their homes. Spitzer, the ethics Governor, gets caught with his pants down at a whorehouse. America lives in a kind of "fear" of what "not fighting terrorism" will do. Simpletons say "explore Alaska, that will solve it" or better yet, "waterboarding is okay because they are bad people", and "we must protect our nation", and we buy Hostess Twinkies, drive SUV's and worry about our ever expanding weight. We do not accept consequences for our actions well.

With this said, the FEDS move that has so stimulated the market will have consequences. Serious ones. Yet again, we may not see these consequences for some time period, just as it is the next administration, and our grandchildren, that will be dealing with the Republican debt that has been created, and will now be hugely increased. No where does anyone ever explain to old Floyd how we pay for this, especially if we are cutting taxes. Upside will be sobered up.

Dollar Declines on Speculation Fed Rescue Package Won't Succeed

-------------------------
March 12 (Bloomberg) -- The dollar fell on speculation the Federal Reserve's plan to provide funds to banks won't be enough to break the gridlock in money-market lending and stem credit losses.

``Read the need for such new measures as being a symptom of what ails the world and not a panacea for its problems,'' said David Simmonds, the London-based global head of currency research at Royal Bank of Scotland Plc, the world's fourth-biggest foreign-exchange trader. ``Stay short dollars.''

A short position is one where traders bet on a drop in the price of an asset.

The U.S. currency also declined as traders wagered the Fed will cut rates by as much as three quarters of a percentage point to prevent a recession, while the European Central Bank keeps borrowing costs unchanged. The yen advanced against the dollar and the euro after Japan's economy grew faster than forecast in the fourth quarter.

The dollar fell to $1.5446 per euro by 10:18 a.m. in London, from $1.5338 yesterday, when it declined to $1.5495, the weakest level since the European single currency's debut in 1999. It slipped to 102.97 per yen from 103.42 yen. The euro was at 159.07 yen from 158.61.

The U.S. currency also dropped to $2.0191 against the U.K. pound from $2.0064 before Chancellor of the Exchequer Alistair Darling delivers his first budget statement to Parliament at noon in London today.

The yen climbed as a revised Japanese government report showed gross domestic product increased an annualized 3.5 percent in the three months through December, faster than the 2.3 percent median forecast of 27 economists surveyed by Bloomberg News.

Dollar Peg

The U.S. currency was also weighed down by speculation that Gulf central bankers will consider dropping the dollar peg when they meet next week. A Qatari official denied in a telephone interview that the meeting will discuss currency revaluation.

The euro extended its gains against the dollar after an European Union report showed industrial production in the region increased for the first time in three months in January, rising 0.9 percent from January, more than twice the rate forecast by economists surveyed by Bloomberg.

The euro earlier gained on speculation ECB President Jean- Claude Trichetwill highlight inflation risks today at a press conference with fellow policy maker Axel Weber.

The ECB's key interest rate is 1 percentage point more than the Fed's 3 percent target rate for overnight loans between banks.

Policy makers in the U.S., U.K., Canada, Switzerland and the euro region agreed yesterday on a second round of emergency-loans to curb rising money-market rates. The Fed said it will lend as much as $200 billion of Treasuries through a new lending tool and widen the collateral it accepts to include mortgage-backed securities.

The euro interbank offered rate, or Euribor, for three month euro loans increased 4 basis points to 4.60 percent yesterday, the highest since Jan. 9, the European Banking Federation said before the Fed's announcement.

This is ``not a panacea, more like an aspirin for the dollar,'' analysts led by Daniel Tenengauzer, New York-based head of global currency strategy at Merrill Lynch & Co., wrote in a research note today. ``There is a reasonable risk that this Fed move reflects the depth of their concern with U.S. asset markets, not a Fed formula to resolve U.S. asset-market difficulties.''

The collapse of the U.S. subprime mortgage market has caused losses and writedowns of $190 billion at the world's biggest financial institutions. Concerted action announced Dec. 12 temporarily eased the shortage of cash in money markets at the end of last year.
-------------------------

Yesterday the March 620C hit highs of 7.60, for yet another profitable trading day as the market hesitated and ground around. The best news of the day was Governor Spitzer resigning, another pompous fool lecturing from his government pulpit, and doing the same thing. One slime down.

By the end of the day the market was showing a bit or realism, as perhaps a bit of reality on the bail out set in, and oil continued it's rise. We saw a market high of 13,343 on the theoretical Dow, RIGHT to our top, and s a shift back to 12,050, our first top.

March 12, 2008
Yesterday morning, pre-market, we alerted:
"The market is RIPE for euphoria. It is so over extended that even bears are hesitating, and we believe some government idiot, or false fact, will be announced or "provided" as a panacea, that there will be a trigger, and the market has potential this week to hit our second and third tops, and even to move to 12,540 area in reversal.

Because we have seen a market that seemed to take no breaks in its establishing of fear and bearish behavior the "count' has become so extreme that the length of downside moves itself, no matter what the news, is simply TOO long. All trends have "breaks, breathing room, or light reversals". Futures point up today partly because "it is simply time" that they do. And....the FEDS gave it away...200 billion.

With any good news we could see a general short term shift to the market, in a week that has historical reversal periods. This may be short lived, but should allow some call profits.

Risk traders that took entry to the call on Monday should have sell orders in place at all time. Despite any shifts to the market intraday, including downside, consider a March call (short issue) at up to prior day close, using our Dow projections as potential selling ranges. Remember, the market itself is much more high risk than normal. We suggest any new buys to the March calls be sold no later than Friday of this week."

With this, the FEDS came for the great mortgage bail out with 200 billion more Bushy dollars (printed as IOUs to China), and the market moved up points.
All calls that we owned were profitable, for such good and tremendous returns we wont' even bother with the many subscriber testimonials.

Near the end of the day yesterday we recommended another risk buy to the March620C, as upside could easily continue in the euphoric run up that "it's all okay now".

Prior to this morning's announcement (note which came only after the market hit new lows, prompting the final lame duck play) we had begun writing our alert for today, which the opening dialogue on now seems even more timely:
"Why should I pay my mortgage when there is no equity in the home?" Many borrowers are asking this, and are just walking away. They can't refinance without equity, and they can't sell because values have dropped. Consumer logic is then "why pay"...give it to the bank.
Banks, in turn, have been using inflated equities to borrow on their own loan portfolios, or to utilize in their financials, and are now having their "margins" called on their own leveraging. Every government bail out, because of our massive spending of the last 7 years, is done with "printed" money, or IOU's. Every interest rate cut that Wall Street and consumers hanker for simply cuts the value of the USD.
Politicians argue that our "outsourcing of jobs" has hurt the economy. This is only a bit true, as the same "outsourcing" has created products at lower prices (that we require in our demands) and boosted our import. As we rant about imports and illegals remember this: We as a country buy the imports, and use the illegals. We "think like WalMart shoppers" and as a nation, have ALWAYS used the poorest of people to build our infrastructures. Nothing is NEW, it is simply that it is "larger" and immigrants are now using our "system" more than before.
It's not as simple as "we should not do it". As traders study the export/import ratio let's not yet again let the horse out of the barn, and then lock the door. Much of our export comes in the commodities and manufactured products to help third world countries expand and manufacture. Many of the companies that have done well on Wall Street in recent years have done so because they have cut labor costs by overseas outsourcing. This lowers the price of the product, raises the company's profits, and allows these companies to stay in business, and to hire others.
What is at issue is not how much CEO's are paid, but if the U.S. companies have the "services, ideas, or products" to successfully compete in the marketplace. As an example, stupid old GM, who no longer even makes money and will (Floyd projects) be bought by Toyota this year, now has idled many of its' plants with their suppliers on strike for higher prices.
If the suppliers win, the consumer will get higher car prices, as GM is incapable of cutting its' own costs well, or manufacturing new products that excite the buyer.
"We have a deeply divided nation, driven apart by economic policies that have deliberately created the largest income disparities in our history, with stunning tax breaks for the wealthiest and subsidies for giant industries. The income of the average citizen is stagnant, and his quality of life continues to slowly erode from inflation.
We are embittered and hobbled by the unnecessary and failed war in Iraq. We have been worn down by fear and long years of fear and hate filled political strategies, assaults on constitutional freedoms, and levels of greed and cynicism, that-once seen for what they are-no people of moral values or ethics can tolerate.
A new President must heal these divides, must at long last face the hypocrisy and inequity of unprecedented government handouts to oil giants, hedge fund barons, agricultural and drug companies. At the same time our new President must transform our lethal energy economy-replacing oil, coal and the ethanol Fraud with green alternatives and strict rain-forest preservation and tough international standards-before the planet becomes inhospitable to most human life. We need to recover the spiritual and moral direction that should describe our country and ourselves, not simpleton evangelical Christian "my way or you are a sinner", and with a true and final separation of church and state, as our forebears so well planned, and we've so sadly changed." -Jann S. Wenner
Oil when Bushy took office, before the "surge" succeeded and Hussein was decided to be behind 9/11, gas was 1.42 a gallon. Today it hovers towards 4.00 a gallon. It would appear he has succeeded, as his largest lobbyist donations have been from oil companies.
Does this mean that Hillary, if President, would find a good health care that supported her lobbyists, the drug companies?
In McCain's case it's easy...we'll be at war for 100 years, and there is time to learn about economics:)
What we are seeing occur right now is our fault. Study REAL facts
And, just to help us "forget" the reality of our situation.....
READ our Dow projections very carefully. We believe the market is now RIPE for an up move, just enough to let all the bulls find "good news" to trigger upside.
Traders were able to buy our March620C at 4.20 within minutes of our trade recommendation yesterday, and sold to a high of 5.90 by day end.
Open traders, consider tighter profits to 6.90

March 11, 2008
The present volatility in the market is caused by the subslime mortgage crisis. False facts continue to show up each day, as the truth is uncovered.
Back in December we had a good unemployment report, which Floyd wrote "Historically the Bush Administration falsifies the unemployment report during times that "good news" is necessary, only to "correct" the report the following month."
You may take offense at this statement, but check it historically in comparison with the 8 year period before, and with the Bush period before that.
You'll find historically unemployment figures are "corrected" within 60 days during the Bush administrations.
Last Friday December's unemployment report, which helped lead a rally, was "corrected" downward (cut in half:))
This last unemployment did come out with bad news, and we think will be even corrected again in future months to show worsening conditions.
As we told Blue Chip Option subscribers today: Elliott Wave Chartists are babbling about the Konatieff Wave Chart, which shows the current downtrend could last until 2012. Under Konatieff logic "years of hard times, low prices. Good prices to buy stocks, goods, etc and hold until the years of good times, and then unload". This same K-Wave did predict the 1999-2005 meltdown well.
K Wavers will see bottoms first at 11,913 area, where we did close on Friday. RSI readings will now show potentially upward trends short term, and MACD shows weakness continuing.
This makes us consider whipsaw to 13,340 as a market HIGH for the year, and trade ranges that average at a Dow at 12,464, with 11,558 area as a potential low.
Friday the FEDS boosted liquidity by loan auctions of 100 billion, up from 60 billion, to try to spur lending. It will also lend 100 billion in exchange for collateral, including mortgage backed securities.
Perhaps we could sell our 250 million new embassy in Iraq to help?
Government payrolls were up by 38,000 last month, builders cut for the 8th month straight 39,000. Did all the people that left the building industry perhaps go to work for the government now to help bail us out?
Elect Smartly. Please study facts:
"NEW YORK (MarketWatch) -- George W. Bush reportedly thinks he can rally conservatives to the presidential campaign of GOP maverick Sen. John McCain. But looking at budget trends in the Bush years, it's hard to see what his conservative credentials are.

In fact, George II looks pretty much like what George I -- his father President George H. W. Bush -- once said he was: "A government guy."

The federal deficit, abolished under his Democratic predecessor (perhaps with a little help from a Republican Congress and the resulting gridlock) reappeared under George II. And, after closing somewhat after the 2000-2001 recession ended and the economy expanded, the deficit is opening up again, to a projected 2.9% of GDP in fiscal 2008, which ends in October.
But the federal deficit not the true measure of Washington's burden on the economy.

The true measure is the overall share of economic output that the federal government consumes. This was a point insistently made by Nobel Laureate economist Milton Friedman, who died just over a year ago.

Under George W. Bush, federal tax receipts did continue the sharp decline they began in the last years of the Clinton Administration. Most of the decline was the result of a recession-bound economy, both pre- and (especially) post-9/11. But Bush's celebrated tax cuts had an effect too. On a static basis, they are estimated to have reduced federal receipts by about 1% of GDP in 2001 and 2002, with the loss expanding to about 2% today.

Theoretically, the increased incentives should have had a dynamic supply-side effect, inspiring increased economic activity and more tax receipts, but economists generally think the effect was not enough to compensate for the revenue loss.

On the other hand, raising taxes in what seems to be an impending recession is usually considered a recipe for economic disaster. Basically, Bush hasn't left his successor any good budget options.

After 2004, however, federal receipts did tick up again, reflecting the economic expansion, peaking at 18.8% of GDP in 2007. Now federal receipts are falling as the economy slows, to a projected 17.6% in fiscal 2008.

Federal spending, however, has increased quite relentlessly.
It was 19.4% in 2002 Bush's first full fiscal year in office, up from 18.5% in fiscal 2001 (which began in October 2000 and reflected President Bill Clinton's last budget).
Federal spending is projected to be 20.5% of GDP in fiscal 2008. That's the highest level of federal spending since 1995.

Remarkably, we've been here before. A very similar reversal of the positive trends developing under the Reagan administration occurred once George H.W. Bush succeeded to the White House in 1989. It seems to be a family tradition. It just isn't particularly conservative."

Again, let's make sure we all understand that oil at $107.00 is there for very clear reasons. Something caused this. No, drilling in Alaska is NOT the answer.

Subslime will not be resolved with another interest rate cut, although Wall Street may yet again force it. It's actually quite likely that the FEDS may step in prior to March 19th with more "save the day" games, to stop the now bloody fall.

Puts were profitable yesterday for up to $1.00 per contract. Calls a first buy would have been made, but we again note that all trades themselves are high risk. With a stronger bias to the put we'll continue to recommend put positions, noting the extended market.

March 10, 2008
Friday the market entered new lows, and reversed a trend of upside strongly. Unemployment data, as always, was "corrected" for December, and payroll came in horribly, proving recession. REITS suffered most, and Floyd will lead these news leads, with "now the mortgage bankers are having their margins called. The house of cards is blowing in the wind.

"Carlyle Capital invested in a $21.7 billion portfolio of mortgage-backed securities issued by Fannie and Freddie. The investment fund paid for most of those purchases through repurchase agreements, which are a type of short-term collateralized loan. But despite focusing on agency securities, Carlyle Capital has still been hit with multiple margin calls. That's sparked concerns that the fund will have to sell agency assets to meet demands for more cash. Investors are also worried that other similarly leveraged agency investors have got margin calls, too, and may have to sell agency securities to meet their obligations."

"The disruption in the agency mortgage market is a symptom of broader de-leveraging across the financial system, Chow explained. "As a national economy, we went through 10 years of increasing leverage because of the wide availability of capital," he said. "That means the de-leveraging is going to take more than one quarter."

Real-estate investment trusts that hold agency mortgage securities swooned after the Carlyle news. Shares of Annaly Capital Management (NLY: 15.81, -3.47, -18.0%) dropped 18%, while Anworth Mortgage Asset Corp.(ANH: 6.23, -2.62,-29.6%), Capstead Mortgage (CMO: 11.30, -5.00, -30.7%) and MFA Mortgage Investments (MFA: 6.76, -1.93, -22.2%) all slumped more than 20%.

"What's happening now in the markets is a rolling de-leveraging where individual asset classes de-lever one at a time," said Andrew Chow, portfolio manager at SCM Advisers, a $14 billion San Francisco-based investment firm specializing in fixed-income and structured-finance markets. "They won't de-leverage at the same time, but they all will in the end.
Short term Dow projections on this downside are projected for the next several days below. How the market moves today, at the beginning of a week to be filled with data, and subprime and mortgage defaults now just being uncovered, facts suddenly changing, just as the unemployment report for December was adjusted. Now Countrywide is being questioned on how they valued books for their sale.

It's also time to begin to pick on the Democrats. Many traders think old Floyd just hates Republicans. Heavens, no. I hate false facts, and action games that benefit only the few.
We might be concerned if Hillary gets the nod that she is the largest recipient of drug company donations in the Senate.
We have certainly seen just what a government can do, as evidenced by 7.5 years of Bush neoconservatism hell that has set our country back many years. We need a government that can heal the country's rifts, and truly get things done, for the majority, not a minority.

March 07, 2008
A week ago real consumer spending data came in "flat", the weakest in five years. Banks have written off 150 billion in bad subslime debt, and now some serious experts are projecting write offs as high as 600 billion. Floyd believes that all banks are liars, financial wizards of false financials (second only to insurance companies), poor investors, and the slime of finance, only preempted by the investment boys that prime the markets with electronic trades that influence commodities.

Factories are beginning to retreat.

All the political talk on "end NAFTA", "move jobs back to America", and "punish companies that outsource overseas" forget something very simple:

The computer you are using was not made in the U.S. You could not afford it if it was. It is likely that over 50% of the clothing you are wearing is also not American made, as you are not willing to pay 50% more for basic products.

Time to begin to pick on the Democrats. Both Clinton and Obama babble endlessly about NAFTA, how wrong it has been for our country, and "bring jobs back". Pure rhetoric to get the American people, who do NOT READ or study, just watch TV it appears, to believe that they will adjust NAFTA and all will get better.

Surely, NAFTA is not the issue. Huge gains in worker productivity have enable companies to churn out more products with fewer workers. And, government policies lead to the decline. The U.S. has the second highest corporate tax rate among the 30 countries in the Organization for Economic Cooperation and Development. Companies open shop where tax costs are lower. People and jobs, for example, are fleeing Michigan in droves. HIGH taxes, NO jobs. Low taxes and light regulation keep states and nations strong. High taxes and heavy regulation make them weak. A child could figure this out.
On billboards in Michigan Indiana has billboards that say "Come on IN for lower taxes, business and housing costs".

If you owned a manufacturing plant and you could buy a finished widget for 1.00 in Mexico, versus 2.50 to make it in the U.S., and the product only had a top sell ability of $3.00, what would you do? A child could figure this out also.

Years ago it took five teenagers to gather up the hay in the farmer's fields. Today it's rolled and picked up with a tractor equipped with a fork lift.

NAFTA may indeed need "tweaking", but it is not the "advantage" provided to overseas manufacture in any way, it is the RAW cost of the labor, and we in America are NOT willing to pay the higher price that higher wages and strict regulation do to products.

And before you argue, but look at all the "bad products" that come in from China, be reminded that much of this is due to our own specification. Japan builds better cars than the U.S.

Don't fall for babbling rhetoric. Investigate WHY, and analyze WHAT will occur if something changes. As an example....our famed interest rate tax cuts.

At this point even the most optimistic of Keynesian economists is beginning to question if more FED interest rate cuts will really work.

Now, read the TRUTH, as what is noted below we at OEX and Blue Chip Options believe this to be 100% true, and part of what we must think out as a nation as we elect smartly:
March 5 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke will “destroy the U.S. dollar'' by cutting interest rates, investor Marc Faber said.
Bernanke's reduction in the target rate for overnight loans between banks to 3 percent has spurred a rout in U.S. stocks and gains in oil and gold prices, said Faber, the Gloom, Boom & Doom report publisher who told investors to buy gold at the start of its six-year rally.
The U.S. is now in a ``de-leveraging'' phase where banks make fewer loans, stunting economic growth, Faber said. He estimated that a U.S. recession began two or three months ago. (Right when Floyd told you :)

“In the U.S., they pursue essentially economic policies that target consumption, which in my opinion is misguided,'' Faber said in an interview with Bloomberg Television from Chicago. “They should pursue economic policies that stimulate capital investment and capital formation.''

The Standard & Poor's 500 Index is down 9.7 percent since Sept. 18, when the Fed began cutting the fed funds target to 3 percent from 5.25 percent. The dollar has lost 9.2 percent of its value versus the euro, crude oil futures gained more than 29 percent and gold added 34 percent during that time.

Further interest-rate cuts may spur inflation and reduce the value of 10- and 30-year Treasuries, Faber said, calling the bonds “a disaster waiting to happen.'' Ten-year notes fell to a four-year low of 3.44 on Jan. 22. Faber said sugar is inexpensive relative to other commodities and said stocks in emerging markets are more vulnerable than U.S. equities because speculation has created larger asset bubbles. He predicted shares in India and China could lose 30 to 40 percent of their value as markets decline worldwide. (Totally right to Floyd, although China may continue to falsely expand through the Olympics. The U.S. demand could also less as we have less money from the Bushy oil drive.

We thought it appropriate we share the kind of information above before we discuss a market yesterday that dropped to 12,026 as a low. Yet again, another bottom test. The few traders that still owned the March580P could have hit highs of 13.30.

For traders that did not sell out the March620C on 3/5 profitably we are now at our stop loss day, and do not plan to hold this issue over the weekend.

Only risk traders would consider doing so. With a count bias now completely also skewed and a market that is beyond reason, it's too high risk to hold March issues, and we do not want to hold inventory over the weekend.

March 06, 2008
The Midwest Factory Activity Index sank 7 points last week, and other regional factory reports have been weak. This type of "fact" is quite alarming to us, as it shows the "real stuff"....we are now making less, because we are selling less. It's data like this, like Citigroup needing another infusion of cash, that took the market off it's first moves up yesterday. And, the infamous Beige Book "hints at stagflation". Sigh. The market did not hold 100 point plus gains yesterday, what we need to push to the bulls for the short term. But...nicely profitable for all:) as the whipsaw allowed a market top right at 12,349. Calls were profitable to 11.20.
Following the upside the market then corrected again, and traders with our open put hit tops of 10.20.
Two way trades profitable again:)
We continue to keep and recommend open inventory to the March620C, believing upside bias will begin to build, FOR THE SHORT TERM.
There are now 1.5 million in the U.S. prisons, representing nearly 1% of the adult population. If in the Christian right you would tell us "family values" have been destroyed. Liberals will tell you that the aggressive "3 strike" rules, and massive drug raids/laws lead to a classic recidivism.
Considering that evangelicals have the highest divorce rate in the country (true fact) perhaps we might analyze what the real facts are?

Floyd will tell you that the guards are often simply "inmates in uniforms" and if you truly explored our correctional system, you would find we spent 49 billion alone on corrections, growing at a real rate of 6% for the past 20 years. Over the same time period, real spending on prisons has risen 127% compared with a 21% increase in spending on higher education. This is a REAL fact.

Logic would infer that for all the money spent on corrections today public safety has not actually increased.

It is this kind of fact we must also begin to infer the "whys" of our economic demise, and the "catch up" that is occurring. Go overseas to 15 countries and see if America is still even considered a "world power". You would be surprised to see and hear that we are not. What and WHO caused this?
Why is our country now mocked more than revered?

How did all this occur?

“Floyd: I'm all out of inventory, sold all calls today, 620 Calls @ high of 11.00, 630 Calls @ 6.00 high. Skimmed some for 50 cent profit, (always feels good putting money in the bank), some 25% and some 40%. Guess I'll sit back pour a cold one and wait for the next signal. Last 2 weeks all trades were winners. Managing risk better too. Patience, patience, patience....Cheers,” - BD

March 05, 2008
"The economy is a bit soft right now, and we are aggressively watching it. It's why I recommended the FED stimulus package. This is just a soft period" -President George W. Bush

"Advisors have assured me that our current economic situation is short term, and that the tax cuts will be extraordinarily helpful" -Senator John McCain

“The U.S. economy has been, and is, in a true economic recession and stocks are still "not cheap" despite the recent decline. By any common sense definition we are in a recession, and business is slowing down. Tax cuts are simple fodder to calm hysteria, and will only add to our devalued dollar and rising national debt" -Warren Buffett, billionaire and regarded by many as the world's greatest investor

Nixon believed that inflation would not cause anyone to lose an election, but that economic recession will. Using this as an example, Nixon kept pumping up the money supplies (what we are doing now) as the 1972 election approached, and won by a landslide. Then, in 1973 Nixon took the U.S. off the gold standard, easy money just kept flowing, and when Jimmy Carter came in office Paul Volcker was appointed the Fed chairman, because the bond market was in free fall, and inflation was raging at an annualized rate of 20%.

Volcker stopped the easy money stuff, interest rates soared to up to 20%, and good old American voters said "Oh, my God!" and Actor Ronald Reagan became President.

The average American than began to believe that Reagan "saved" the U.S., when in actuality Volcker's smart anti inflationary (and unpopular moves) were finally taking affect, and solving the easy money policies of Nixon and his Fed Chairman, Burns.

The 1970's was rampant with "stagflation".

Reagan then did his famed "tax cuts", and the prosperity soared. Economists know that prosperity soared NOT because of tax cuts and "smaller government" (which did not even occur, but is "sold as having occurred"), but did occur because of the strong anti inflationary stance that had been taken.

And, historically if you were to check, you'll find that the economy had to suddenly "pay off" the tax cuts in the following election.

Reagan and his "selling" talked the American people, gullible that we are, into believing that much of his tax cut methodology is what led the country out of recession.

We are with the same liars in the same sinking boat today.

Making historical comparisons is not just good so that I can spew off on all the idiot politicians, but so traders can see clues of future economic trends.

Two years ago Floyd began falling off his soapbox on rants on Bush and the falling USD, and constant lowering of interest rates has helped drive the USD to new lows against the Euro.

Like idiots we continue often to believe this is just the "daily" value; it really means that the dollars' buying value has dropped ALMOST in half.

Two years ago Floyd also began lecturing on our mounting national debt, conjunctively analyzed with our dollar devaluation, and the "no bid" contracts for Iraq, the never ending budget overruns, and no real plan of what to do (in war, economically, or environmentally). At that time I saw a nation being run by Republican lobbyists representing big business, and a FED that was bound to support the few.
Historically EVERY time this happens the economy is dramatically affected.

We are seeing it now in what is just ONE reason for our demise, the idiocy of sublime mortgages and false financials. We also saw the investment banker game of mergers and acquisitions hitting us in 07, and stock buy backs, making us yet again believe we were infallible.

Historically the market has been caught in range bound levels, making trading much more difficult than even normal, but using last week as an example, extremely profitable. Chartists would call this period a horizontal triangle, where the bottom has been rising, and the top (in the Dow) has been flat, but the bottom has been rising, and the top in the S&P has been declining. Chartists typically argue this occurs most when a "trend" is ending.

With this said, the market has not be able to penetrate the February 4th highs. Chartists will also argue that it is possible to repeatedly re-test the January 22nd and 23rd lows.

And....the market moved right down to 12,032 (our bottom at 12,050) before beginning a rise up. Our morning recommendation on the April put was available below prior day close, and sold to highs of 12.20.

The March620C was also available for either a second buy, or for tight day trading (several times) with ranges from lows of 5.90 to 9.40. We continue to hold only open inventory to the call, believing the market is now far over extended, and ripe for a bit of "Super Tuesday" rah rah over the next few days.

"Floyd, bought and sold at s3 on the call. Your Dow projections are scary....it held at OEX 605 or 12,050 and began moving right back up. I think I want to elect you. Your political ranting of late has been quite educational to me, as I never truly understood the economics well. The book you recommended, Economics in One Lesson, should be must reading before anyone votes! Thanks. I"m profitable 8 for 9 of the last trades!" -MEK, Dallas

"Whew, today was exhausting. Profited twice on the call, once on the put, and simply sat back and was amazed on how you predicted the Dow. I'm trying hard to slow down my trading:)" -GLP, Baltimore

March 04, 2008
Despite the normally strong start to the market in March, take careful note that in 2001 the Dow dropped 1469 points between March 9th and March 22nd.

Last week Bernanke told the House that he saw banking failures coming from the housing crisis, and that the housing market could get much worse.

He admitted his concern for a weakening economy; this is the same inflation hawk babbling just a few months ago. We believe the FEDS are much part of actually creating inflation, and that inflation is not so much cyclical as "led" by government interaction.

We are very concerned with the rising price of commodities worldwide. Wheat, corn, oil.....when the "stuff we breathe and use" begins to hit the supply and demand roller coaster.

Bernanke is a government boy, and it's his job to get incumbents re-elected. Walking a careful line he is also dealing with some of the most challenging economic problems in generations.

And politics is fully at play in all of our current mistakes and confusions. As an example:

Ethanol represents one of the most political boondoggles of all time. In the lobbyists race to improve the price of grain (all it was) two new studies now show that biofuels don't just suck up billions of dollars in federal subsidies and inflate food prices in the Third World (to hell with them, FILL those Hummers), oops...they also speed of global warming.

Planting crops destroys rainforests, and thusly release double the amount of carbon dioxide compared to conventional gasoline, and release huge amounts of carbon in the atmosphere.

Oops. And corn and wheat now reach all time highs.

In Brazil they have found sugar cane biofuel, however, and it works. Of course, our Congress followed the lobbyists, passed a five fold increase in ethanol by 2022, and thanks to protective tariffs and fat subsidies, ethanol may well be a fuel of our future, but yet again with just another way to cook the planet. Lobbyists, or proactive thinking?

Everything we do, EVERYTHING, has consequences. It's certainly showing in our markets, with the subslime mess really just beginning to open up the extreme personal debt the average consumer has, and that our "wealth" has been tied to our inflated real estate prices.

Monday we saw an almost perfect downside move to a 12,121 bottom, midway between both our bottoms, and a hesitant move up. Traders should have taken first inventory to the March620C which we will now hold for a renewal upside. The market needs a 100 point move upward to solidify upswing, which could then lead, IN STAGES, back up in the same trading range. Good news, some "freebie" from the Gov't, earnings, anything.....the market is ripe for a trigger.

"Well, that was sure an interesting day. Thanks for your help towards the end of the day. After we talked, I got in at 8.50 and sold at 9.90. I was in and out of three different OEX trades today - all for profits - using the dow projections and S1 level. Sometimes I wonder why I spend so much time researching other stocks and not just focus on the OEX (where the real money is made). Like you have said, there is no stock options really worth investing in right now. Anyhow, thanks again."-SK, Advanced Mentoring

"Nice. Bought at 9.00, sold at 10.00, twice, on the 620C. I kept some "inventory" too. I like that you call this inventory, Floyd, as it really is just that. That's helped me a lot. Perfect work again on your Dow projections."- BCV-Level 3

March 03, 2008
This next three-day period could be charted as a market reversal.

The first trading day in March the Dow has been up 9 of the last 12, and historically the beginning of March has been "strong". Obviously the average American citizen has at last finally seen through George Bush, who Friday a.m. shared his thinking on the economy, yet again with superb oratory skills, and "explaining the economy is complex". The market promptly erased the entire week's gains and dropped over 300 points.

For 8 long years old Floyd has stood back astounded we would be so silly as to fall for the neoconservative tomfoolery, the end of our rights, and those of our prisoners, the falsified "war on terror", and the sheer imbecility of our economic direction. I love this country, but we are not a smart, but an arrogant people, thinking only we are right. Elect smartly. Nothing that is being done is good for our country. There is much more to "fix" than we may even begin to imagine.

I say this, as the market is now so caught in our Dow projections that it's a bit scary, and a trading range has developed. On Friday the Dow moved to lows of 12,183. We projected a first bottom at 12,340, and a potential second bottom at 12,160, which the market came right to on Friday. Note the next potential low, and it is still possible, is a move to 12,050 area.

There is now a 28% chance the market could continue free fall and move to prior lows at 11,558. It's unlikely, but any more falsified financials coming to light could easily trigger more reality.

This is Floyd's favorite news blast, conveniently Floydian translated for you throughout:
"Mortgage losses, compounded by contemporary risk-management and accounting practices, could prompt banks and other lenders to shrink their lending and other assets by $2 trillion, a study concludes. (This means the banks cheated and lied, and the books were FALSE)
The resulting withdrawal of credit could knock one to 1.5 percentage points off economic growth, compounding the impact of collapsing home construction and softer consumer spending due to lower home wealth, the study said. It was presented Friday at a forum in New York on the Federal Reserve organized by the Brandeis International Business School and the University of Chicago Graduate School of Business. (This is stuff Bushey and the boys ignores, as he believes Government facts that his cronies create. Just like Iraq, he has created his own fantasy about our conditions, and moves forward with blinders on. Be sure the candidate you vote for has "real facts" and, REAL solutions.)
We believe this coming election could indeed be a true turning point in our nation, and respect all points of views. Please STUDY the candidates, and do not fall for "less taxes", "change", "this is a war that could last centuries", or any of the rhetoric news bites being fed to us. Your children and grandchildren's lives are at stake.
"Floyd, I love when I mess up. I bought the put Thursday at 10.70 and put an order in for Friday at 15.90 and left the office. Thing is, I forgot to actually place the order, so when I got back in 4 hours and saw the option had hit 23.00, I sold. 115% return in one day! I know this was just luck on my part, but I was profitable on all trades this week, and broke even on one. I traded 7 times! I paid for Level 3 6 times over this week. Thanks." LBD-Cincinnati

To view our Blog entries for February 2008, click here.

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