Issue 301
Posted: April 11th, 2010 | Author: WMS
Market Strategies
Covering Investing Success Strategies For
Stocks – Bonds – Interest Rates – Natural Resources – Currencies – Venture Capital – Gold
A Publication of Princeton Research, Inc. (www.PrincetonResearch.com)
Contributing Staff: Michael King and Dr. Jan Vandersande
April12, 2010; Market Strategies Guide To Successful Trading
We give great entries
Trading Options are a timely event , Since we can only report weekly, Your Own Money Management on Options Trading may be more timely to Take your Profits/Losses
FUNDAMENTAL NEWS
Both the Dow and S&P 500 posted solid gains for the eighth week consecutively while the Transportation index, in gaining 2.62%, achieved the highest prices since October 2008.
Some of the best gains seemingly came on or just following the close Friday; perhaps some in the after-market which was firm.
Financials led all ten Dow Industrial Groups gaining 2.86% followed by Consumer Services up 2.33% and then Oil and Gas strong at + 2.33%. Technology was fourth best gaining 2.03% followed by Basic materials up 1.96%. Rounding out the seven winners were Industrials + 1.43% and then Utilities gaining 0.53%. Three groups were in the red: Health Care was down the most, -0.50% followed by Telecommunications, minus 0.15% and then Consumer goods, off 0.04%.
The Indexes are still influenced by the dollar which was very weak although getting some minor short coverage late in the day, remaining near the week lows as a settlement to the Greek drama, sent the Euro higher early in the day. Depending on how European politics shake out, the index may make a run at the low end of its recent range early next week, going after the 80.50/54 area, beyond which 80.35 should be support.
Market Laboratory – Weekly Changes
( Prices taken from Barrons and may be incorrect )
New Stock Recommendations
TBT- Inverse Long Bond ETF- 48.70- goes up when the long bond goes down (i.e. rates go up) and vice versa. We expect rates to go up so this ETF should go up. Take half profits when the ETF is at 51. Place a stop at 46.
Model STOCK PORTFOLIO
- Each stock is allocated a $ 5,000 share of the portfolio unless otherwise indicated. We recommend a double position in ENZ and MTBR.
Note: Previous closed out positions can be found in the April 20, 2009 letter.
Model Portfolio Comments/Changes:
LEI had a big move this past week and we will take half profits (the remaining half position bought at 0.47) at the open on Monday. We will try to buy it back when it pulls back to the 0.80-0.90 area. We will hold all portfolio stocks into our expected cycle top in May (we will sit out any pullback in April). If you have some nice profits in some of these stocks then you can raise your stops to protect your profits.
Economic Data
THIS WEEKS ECONOMIC NUMBERS and Media DATA
The Consumer Credit figure for February was a disaster ( – $ 11.5bln vs -$ 0.7bln consensus ) and chairman Bernanke made some sobering remarks in his testimony, both on Wednesday afternoon, but as always the markets quickly rebounded from bearish news. On Thursday it was announced that the nation’s retailers enjoyed record same-store sales growth up 8.7% vs a year ago, as the early Easter and higher confidence drove shoppers to spend more on spring fashions and assorted goods. 86% of retailers beat views. It was the seventh straight monthly same-store sales gain. The S&P Retail index rose 1.3% to its best level since October 2007.
INDEX OPTION RECOMMENDATIONS
Last week we recommended the April DIA 112 Put when the DOW traded at 10,950 which happened last Monday. We bought the option at 2.70. It looks like this week could be higher (into our cycle high) so we will sell our April 112 put and buy the May DIA 112 Put on Monday at the open. That will give us more time.
For investors it has continually been recommended that some puts are held to protect one’s portfolio (portfolio insurance) against sharp market sell-offs. For those who have no put options to protect your portfolio we recommended the following options, especially on any rally: the DOW (DIA) July 108 put and the QQQQ July 48 put.
For those of you who do not buy puts to protect your portfolio, there is an ETF that is the inverse of the DOW. The symbol is DOG and goes up when the DOW goes down and down when the DOW goes up.
All options count for a $2500 position each for model portfolio calculations. The cost of the option is the asking price (or the price between the bid and ask, whichever is more realistic) at the close the previous Friday or at the open on Monday if the option opens higher or lower (by a reasonable amount) than the Friday closing price. The options will be followed until closed out.
OPTION SYMBOLS HAVE CHANGED. WE WILL NOW USE THE NEW TERMINOLOGY (stock symbol with expiration month and strike price)
Stock Option Recommendations
New Recommendations
SCO- Inverse Crude Oil ETF- 11.72- goes up when crude oil goes down and vice versa. Has dropped from 17 to 11 in 2 months so is very oversold and should now bounce. Buy the SCO May 10 Call- 1.95- for a move back to 13.50 and then possibly higher. Place a stop loss on the option when the ETF closes below 10.50. Take half profits when the ETF is at 13.50.
LINC- Lincoln Educational Services- 25.70- after rallying from 19 to 28 has now pulled back to support at 24-25 and is turning back up again. Buy the LINC May 25 Call- 1.70 – for a move to 28 and then higher. Place a stop loss on the option when the stock closes below 24. Take half profits when the stock is at 28.
AMZN- Amazon.com- 140.60- we have played this one before and made money so we will try again. Has rallied back to resistance in the 140 area so should now pullback. Buy the AMZN May 140 Put- 8.00 – for a move back to 130 and then lower. Place a stop loss on the option when the stock closes over 147. Take half profits when the stock is at 130.
Option Comments
Half profits were taken in the IDCC May call option when the stock hit its initial target. Nine (9) of our options expire on Friday and we will hold them until expiration.
Previous Week’s Recommendations
- All options count for 5% each for model portfolio calculations.
- When the option has doubled sell half the position.
- Stop Loss protection is offered with each trade.
- The cost of the option is the asking price (or the price between the bid and ask, whichever is more realistic)
- at the close the previous Friday or at the open on Monday.
- The options will be followed until closed out.
- Option Symbols have changed. We will now use a new terminology. (stock symbol with expiration month and strike price)
Note: Previous closed out option positions can be found in the January 25, 2010, November 23, October 23, August 24, July 20, newsletters.
Technical Information
We wrote in last week’s letter that based on the bearish technicals and on the extended condition of the market we should have a pullback which could be a sharp (and possibly short) to make the recent buyers and recently converted bulls to doubt/question their bullishness. We also wrote that portfolio “window dressing” by the institutions and the buying the first few days of the new month (because of 401k and pension money coming into the market) would likely hold up the market or even make it go up. That is what happened, but those end of the quarter/beginning of the new month bullish biases are now behind us. The market can now finally react to the bearish technicals such divergences (e.g. fewer new highs when the indices made higher highs), a clear loss of upside momentum (exhaustion) when the new highs were made, some put/call ratios are at very low levels (the CBOE equity put/call ratio is at 6-year lows-which is bearish) and the short term advance/decline oscillator is still on a sell signal. All these technicals will eventually matter. A pullback is thus still expected. This week is option expiration week when the shorts and option writers are often squeezed so the market might still hold up this week or even go higher. The next cycles we have are several longer term cycles now in early-mid April (plus or minus a week) and some in May and we expect both to be highs with an intervening low. An important high (whether short, intermediate or long term remains to be seen) during this time frame is likely.
We are in a secular bear in a cyclical bull market that could last another few weeks. A sell-off is likely soon, April – May, but could expect a bearish surprise anytime. Be prepared with some shorts, or Long ETF’s geared to benefit from a sell-off such as the SDS ( triple inverse S&P 500 ) which goes up as the S&P goes down. You must be prepared with a “ balanced portfolio.” You will never know when it is going to happen. Every bear market has several good rallies that can last from a few weeks to many months and are definitely worth playing. We are/were in one of those rallies (which is called a cyclical bull market in a secular bear market) now which could last through April (possibly May) based on longer term cycles.
Support Levels: S&P 500 1161, 1152 Resistance S&P 500: 1182
DOW 10,810, 10,695 Resistance DOW 10,956
QQQQ 47.74 Resistance 48.70
CYCLES
We had a short term cycle in early-mid February which ended up being a low that came in at the intraday lows made on February 5. It now looks like the late-January/early-February cycles combined to form a low on February 5. The next intermediate cycle was in early-mid March (plus or minus a week) which clearly was a high (which finally came in on Thursday March 25). The next cycles we have are several longer term cycles now in early-mid April (plus or minus a week) and some in May and we expect both to be highs with an intervening low. An important high (whether short, intermediate or long term remains to be seen) during this time frame is likely. The next intermediate term cycle is in late-July and we expect it to be a low.
Hypothetical Trading Results showed a Gain last week of $699.00 improving gains for the year to $ 8430.00
Legal DISCLOSURE
Rule 17B requires disclosure of payment for investor relations
Princeton Research has received about $ 2,500 per month from Metabolic MTBR and Lucas LEI both marked with an asterisk. MTBR is reviewing a contract which would pay $ 2,500 per month plus some restricted shares. The main principal of Princeton Research has obtained his own shares amounting to 2,700,000 shares.
CONTACT
Please Direct All Inquires To:
Mike King
Princeton Research
3887 Pacific Street, Las Vegas, Nevada 89121
Phone: (702) 650-3000
Fax: (702) 697-8944