What Difference a Day Makes

What a difference a day makes:) Oil retreated, and financials made a comeback, and the market took back all of Monday's downturn.

It was great news for our traders with the August580C, which hit highs of 11.30, and hit our projections.

The Dow moved to 11,440. Study our new Dow projections well, as whipsaw is likely to continue.

Thirty years ago the U.S. total outstanding mortgage debt was 30% of our GDP. At that time homeowners held 70% equity. Today.....mortgage debt is 80% of our GDP, and the equity positions are 50% and less, and falling.

Fannie and Freddie made this possible as reams of Democrats and Republicans allowed these companies to finance more than 80% of new mortgages in this country. Released from capital ratio requirement and backed with a line of credit at the Treasury, they were able to buy a nearly unlimited amount of mortgages.

Now, Senator Chris Dodd, a true idiot, leads a mortgage bailout program for Bush and the boys. This bailout is perfectly wrong:

1. Written by Bank of America

2. Developed by Dodd, who personally received a half million in mortgage benefits with Countrywide Mtge personally, and leads to now tax Fannie and Freddie for $600 million.

Republicans will discuss how Obama is going to raise taxes (not true) while neglecting this bail out alone is entirely financed by the American taxpayer.

Floyd believes that Fannie and Freddie are truly liable for 5 trillion in mortgages and real facts will finally come out in falsified values and books to force them to insolvency. This will occur after we have funded a bail out, increased taxes, and put money through HUD to pay Fannie and Freddie.

These are REAL facts. In the papers you read "Congress to provide financial incentive to strengthen Government mortgages".

I Trust You Did Well

It is hard to fathom just how sick this market is, and how much FEAR pervades day to day trading. In our Dow projections for Monday we noted potential downsides that could occur and recommended an OTM put.

The August 540P was available as low as 1.80, and could have sold to highs of 3.40. Many traders bought on this one, and were able to sell for 30% and more profits.

Second buys were made on our open August580C, also, as traders watched the day begin with some trepidation, only to blast to the bottom with a 239 point drop, again on FEAR.

Our Dow projections listed a strong potential of another bottom test for yesterday, and the market did not hesitate in falling like a knife. Again, if the market is able to hold at 10,800 and higher we risk a true bear market. If the market does not hold at these support lines, 10,500 and lower are very possible.

Elect smartly. All of this could have been avoided.

Level 3 trader MP had a great testimonial, as he's learning to watch the market breathe:

"Hey Floyd...

Though the market slowly tumbled today...I was able to make some money and put myself in a good position...at least I think I did...let me hear your thoughts....

Here is what I did today...

First of all....I was holding (1) AUG 580 call contract from last Friday at 10.70

I was very patient and waited for the OEX to get to about S3...I bought 5 more calls for 7.50 to give me a total of 6 calls for an average of about 8.00...I was able to sell them a short while later to break even.

Shortly after that I bought 5 more calls for 7.20 and sold them quickly for 7.70...A $250 profit.

A few minutes later I bought for 5 more calls for 7.10 only to sell them minutes later for 7.40...made another $150...

Bottom line...I got rid of my large losing contract from last week by breaking even and I made two smaller trades today which allowed me to walk away with $400. If I make $400/day...that's 80K on the year!!! NOT BAD for a stay at home Dad!!

All the while, I did not try to chase the put...I just played the call signal off of the support lines and took quick profits.

Since the AUG 580 call was still the signal for the day...I ended up purchasing 2 more contracts at the end of the day at 6.30 looking for a bounce up tomorrow...if not...I can still make a 2nd purchase.

What do you think?

I trust you did well yourself"

More Banks Fail

More banks fail. Oil begins a slow break to the downside. American investors simply wait now to hear what bad news will come.

Much is said about the mental recession the country is in, and that the financial impact we are "reeling from" may, in fact, be more the emotions of the American investor than the reality of the situation. This means: we may have created much of our own fervor, and over reacting to market conditions.

Floyd believes this is very much true, as the downturn that so dramatically began a few weeks ago was so severe that "sell off" became much of the mix. This is just as true as when Indymac failed, partly because a member of Congress (yet again a guy that has never had a real job or owned a business) expressed concern about their ability to stay in business.

Fear, often irrational, now grips the market.

Study our Dow projections carefully. We are within a new trading range, with a market that needs a strong 100 point upside that holds to break the bear pattern, entirely dependent upon news and how we interpret the most recent "facts".

Who is Paying Off the Debt We Have Created

Just a few days ago the bulls were in heaven, and the end was never to come. Smiles. It came.

Our August600P sold to a high of 25.50 for some whopping one day returns, and we issued a new alert for a contrarian call in late afternoon trading, as we believe the sell off may potentially hold at OEX 580.

The week's gains were totally wiped out, after oil began rising, and Ford "lessened its reliance on SUV's and pick up trucks" and reported 8 billion in losses.

As Floyd says, "well deserved losses", just as the ongoing banking bubble is. While the Republicans discuss how the Democrats will raise taxes, I'll ask just one question:

Who is paying off the debt that we've created?

Reality is composed of separate things and events, and you are one of those things. When reality goes to separate bits it is actually an illusion created by the mind, and that in actuality everything goes together and exists in relation to everything else.

It all one continuous thing and one continuous event. For the awakened person this isn't a way of thinking about the world, a theory, but rather an experience of the way things are.

This includes the realization that all pairs of seeming opposites are really one, that they arise together and depend upon each other, and that the supposed conflict between opposites is also an illusion created by the mind.

Metaphysicians and transperson psychologists call this The Game of Black and White. This is the idea that life, for instance, must or could win over death, that good must win over evil, that having must win over not having, or in general that what you want must (or could) win over what you don't want.

Smart traders see things as they are, not should be, or "because they are". Smart trades do not believe in black and white, but only grey, and are suspicious of ANY absolutism.

This Floydian babble is key to understanding you, and thusly how to trade.

Increased Awareness

Increased awareness actually affects your life. Most of us spend our days "living" and "dealing with the situation", and not living. Thusly as we "prozac" America, multi tasking cell phones and email in hand (literally), eat and guzzle gas (Floyd's sad American portrait) the babblers will tell us "family values" and the doomsters that the "end is near", while the rich get richer, and the middle class poorer. Many of these are historical by pattern, and without gain, we are repeating.

For the trader it's wiser to see reality for what it isn't, and for what it is. Not what you are not noticing. Most of us do not notice reality, as we are living within it. The calm trader is "watching the moment", not participating in it, and can see his/herself from the outside.

This is clearly metaphysical talk, and it works in trading.

Yesterday we did not issue for a new signal, seeing the market at potential tops. In morning trading, on a reduction to oil pricing, the market hit a theoretical Dow top of 11,738 and the OEX topped at 596.

This MAY be a top.

An interesting email from a subscriber on Floyd's "waiting the day out":


I do hope this does not come across as gushing!! How does a man tell another man - in this day and age especially - that he he truly admires the other? The trouble with email is tone of voice is missing, so I do hope you can plug that in yourself :-)

I have always admired not only your skill but your wisdom. Today that reached its height...... as follows.........

I "knew" best potential market top and, as you did not write it off yesterday despite the way down Futures before the market and despite sending out the Put recommendation, which I read as more of hedge, I admired your wisdom more than the skill. The market went ahead and did its stuff. It probably would have topped yesterday were it not for the setback start.

OK - so today there was no other view for me to take than the Dow would touch 11635 - 11640. If it winced back at this point it could be top and if it satyed below for "a while" then it was top. If it goes on through then its next halt is 11750 (all actual figures used). As it happened the Dow did wince at 11635 then surged up to 11700 before turning down to play at 11640, to be expected, then down to the next playground 11600, yesterday's close, but all trending down.

Around there somewhere I expected a mid-day Alert to confirm your view that the top had been reached. Radio silence - OK, good, THIS is what we learners need, no matter what grip we have on the technical study it is wisdom we need to develop - this makes me smile......... you are waiting for something, you are watching and there is a trigger, a confirmation that top was or was not reached, a.... dunno what to call it. Teach me all the technicals you like, it is the silent wisdom that I seek, and if it takes years then........ so be it of course!!

You stay silent when you watch and this is what I personally admire the most....... may I please ask your thoughts on today. I'm not asking for the message to trade or the signal or any of that stuff, I'm asking "as you watch, what is it that is going to make you sit forward in your chair and break silence?"

The Market in a Nutshell

This is the market in a nutshell:

1. The Dow moved to tops of 11,646.

2. FEAR on earnings led the first downside steps, to lows of 11,347.

Our open August 600C, two buys made, hit profits of to a top of 5.70. We had provide a top market sell to 6.40. Two buys could have been made on this, and profits are established.

In morning futures we saw a negative downside and recommended a high risk trade to the Aug525P. This position was available at up to 2.15, and hit no profits, only to lose value as the market moved higher later in the day.

The market now is at a count of 9 to the call. This shows an over extension to upside, and we consider the risk rising for the upside, as we've now hit market tops. Not yet time to recommend to the put, we'll open the market without a new signal, and advise intraday on market conditions.

Sorry, but I'd rather tell you not to trade than to trade just to "get in the market"

From trader BD:


"I added to my put position yesterday at the market open, 560 and 520, which I will exit today. Scalped profits on partial puts yesterday.

Opened call position yesterday at 3.60, will look to add to today."

This trader USES our alerts, and understands the market. Signals, not a key part of our work, he understands.....and uses for the parameters in which we build our trading education.
Next, Larry Berg tells us what could happen:

" Due to the current inaction to the world energy crisis by our U.S. Congress and its current President Bush . . . this is what happens . . .


Now, probably the most dangerous period in World History ---

Obama is elected President along with an overwhelmingly Democratic Congress. He immediately starts removing troops from Iraq. The price of oil starts to move up again and world stock markets continue to fall. Al Qaeda begins to re-establish itself in Iraq. Terrorists commit public mass murder of Iraqi citizens and government officials. Iran issues statement sympathizing with insurgents, considers the region 'theirs for the taking', steps up its nuclear enrichment program and ignores all United Nations sanctions.

Obama, at the urging of the public and press, has to insert troops again into Iraq to regain control. Too late. It fails. Insurgents take full control of major Iraqi cities and Iraqi oil fields. Oil prices increase dramatically from $140 to $200.

Iran increases it's infiltration of Iraq, supporting terrorists with supplies and weapons for anyone who may want to destabilize Iraq. Obama warns Iran to stay out of Iraq (ala Nixon's threat to China and U.S.S.R. to stay out of Vietnam). Iran warns of destruction of Israel if U.S. attacks Iran.

Obama warns Iran it will pursue air strikes against Iran (with the approval of a strongly Democratic Congress) if Iran does not stop assisting terrorists in Iraq. Iran responds by threatening to attack Persian Gulf shipping. Oil pushes up to $300. Obama submits to U.N. proposal to divide Jerusalem into two sections, one Christian one Moslem, fulfilling Biblical prophecy that Jerusalem will be divided at the 'end time'.

Iran attacks and sinks a Persian Gulf oil tanker. Obama has no choice but to defend oil transportation. Obama moves aircraft carrier group into the Persian Gulf and issues air strikes against Iranian coastal missile sites and Iranian Patrol Boats responsible for the attacks. Oil hits $500 overnight. World economies and markets tailspin. Obama insists that everything is "under control".

In the mean time Obama and Democratic Congress restrict all U.S. communications companies from monitoring overseas communications. Al Qaeda communicates to U.S. terrorist cells and implements terrorist attack in Chicago. 500 people die in car bombing of the World Trade Center.

Russia issues message of its support for Iran. Obama warns Russia not to insert itself into the confrontation. Russia moves hardware to support Iran. Oil hits $800. Transportation of world goods and services comes to a halt. World economies crash.

Russia supports Iranian ground-to-air missile attacks against U.S. aircraft. Oil hits $1,000. You can take it from there . . .

As the Boy Scout motto says, 'Be Prepared'. Brazil is the only country in the world which is energy independent, America friendly, Christian and able to survive the coming world political and economic crisis. Bill Gates is now buying up as much Brazilian ranch land as he can, investing in Brazilian sugarcane ethanol. I wonder . . . is it simply an investment or a means of survival?"

And Floyd give us his:

What happens if McCain comes in, using the same scenario above? War is good to John boy, "take no prisoners" thinking. Environmentally about as far right as can be imagined, McCain would bring the bravado to the frey, the same bravado that has built our fear, built our "we can get em" Bush attitude.

Elect smart.

Floydian thinking:

If a trader believes, in the market that we are experiencing, that each signal will be profitable it's time to close the bank.
Market conditions are simply extraordinary, frightening, and not clearly chartable. 2000 point drops to 500 point rises, to whipsaw that occurs almost hourly at this point. Each of our signals was profitable last week.
One trade has been profitable this week, but expect to lose on some trades. This is NOT negative thinking, just facing the facts of the type of market we are dealing with.

False Information in the Marketplace

Last week a six week downside streak was broken. This is the longest losing streak since the Great Depresssion. All five of our signals were profitable.

11,540 tops were hit Friday, a strong resistance area. The count is still biased to the call, but the upside may soon be slowed oil price rises, or earnings.

We'll not yet offer dual trades, but recommend a tight trade to the call, noting futures and morning news should influence your decisions further.

A variety of quoted tidbits I've pulled out of my readings, all relevant to your understanding of the world economic view:

"Market intervention by the Treasury and Federal Reserve over last weekend again confounded short sellers and the markets trended upwards on strong volume. The S&P 500 and NASDAQ Composite reversed a 5 week losing streak. This looks very much like the reversal that occured in March following the Bear Sterns rescue and will likely result in a similar short term bounce. In March we were told Bear Sterns was too big to fail and now, more convincingly, the same is said of Fannie Mae and Freddie Mac. The Congress is likely to pass legislation bailing out the share and bond holders and the markets have heaved a sigh of relief. In our opinion it is another bear market rally that will ultimately fail because the underlying fundamentals have not changed.

Financial institutions have so far acknowledged only about a quarter of the losses they are ultimately expected to bear. The failure of IndyMac Bank is likely to be followed by further bank failures as home prices continue to fall and bad mortgage loans continue to accumulate. The housing market will continue to fall into next year, and possibly beyond, leaving many homeowners and ex-homeowners feeling impoverished. Energy prices will remain high although they will fall slightly as demand falls and if middle east tensions ease, but higher energy costs will hurt Detroit car makers further and sap consumer discretionary spending.

The demise of IndyMac, coming on the heels of Bear Stearns desperate sale to JP Morgan Chase, is a sure sign of the fragility of today's markets. What's needed now, more than ever, is reliable information for investors and confidence that trading can be conducted without the illegal influence of manipulation.

When an irrational panic is fueled by a sense of urgency, false rumors that must be acted on immediately and the FEAR that everyone may get out first, market integrity is threatened. It is the job of market cops to provide a measure of confidence that financial information about public companies is accurate and reliable-and when it is not, to punish those responsible.

There is a great deal of intentionally false information in the marketplace."