ORIGINAL ARTICLE

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Original Article

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Excerpt:

“…the same manager that runs the USO fund runs another exchange traded security thats custom designed to benefit from situations like the crude oil contango. Its called the United States 12 Month Oil Fund (NYSE: USL). It uses a 12-month average of futures prices that will lessen the losses caused by a contango market…”

Full Article

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http://www.optionetics.com/education/

Now that Harry S. Dent’s book “The great Depression Ahead” is available… we suggest you read it. We will be doing more extensive coverage in the future, but for now here is a summary of some of his predictions. We also posted 2 short videos at

http://stockcapitalist.com/?p=1026

PREDICTION SUMMARY

The economy appears to recover from the subprime crisis and minor recession by mid-2009 — “the calm before the real storm.”

Stock prices start to crash again between mid- and late 2009 into late 2010, and likely finally bottom around mid-2012 — between Dow 3,800 and 7,200.

The economy enters a deeper depression between mid-2010 and early 2011, likely extending off and on into late 2012 or mid-2013.

Asian markets may bottom by late 2010, along with health care, and be the first great buy opportunities in stocks.

Gold and precious metals will appear to be a hedge at first, but will ultimately collapse as well after mid- to late 2010.

A first major stock rally, likely between mid-2012 and mid-2017, will be followed by a final setdback around late 2019/early 2020.

The next broad-based global bull market will be from 2020-2023 into 2035-2036.

return, or jump back into equities and risk losing even more money if the market retests the November lows as some analysts expect? I can’t tell you what the market is going to do in 2009, but I can restate what I have said since beginning this E-Letter in 2002 — it’s wise to have at least part of your portfolio in an investment program that can switch to a defensive posture (cash or hedged) in uncertain markets, in my opinion”

Original Article:

http://www.investorsinsight.com/blogs/forecasts_trends/archive/2009/01/06/economic-amp-investment-outlook-for-2009.aspx

Stock gumshoe has spent a tonne of time tracking all of these stock market investment teasers, and displays their performance. I am just as

unimpressed by 2007 as I was with 2008.

Check it out… and don’t forget to sign up for their FREE newsletter.

http://www.stockgumshoe.com/2008/12/the-year-in-teasers.html

Spreadsheets of results can be found here:

http://www.stockgumshoe.com/tracking

10 New Year’s Resolutions for Every Stock Trader
Stockscores.com Perspectives for the week ending December 28, 2008

I can’t stress enough how important all these points are. A couple of excerpts that stand out to me:

I Will Remember that Public Information is Useless Information
If information is known by the general public, then it is priced in to the stock. The stock market moves on what will happen in the future, not on what has already happened.
I Must Limit Losses
A big loss in your portfolio can outweigh the gains made on 10 other trades. Limit the size of your losses and stick to the limits. If a trade does not work out, take a small loss and move on.

Check out the full article at:

http://www.stockscores.com/newsletters.asp?subpage=viewnewsletter&id=22411

click the link, scroll down to the bottom and watch Harry Dent’s 2 youtube videos. Then read the article.

THIS IS URGENT INFORMATION

http://stockcapitalist.com/?p=1026

“This week I am really delighted to be able to give you a condensed version of Gary Shilling’s latest INSIGHT newsletter for your Outside the Box. Each month I really look forward to getting Gary’s latest thoughts on the economy and investing. Last year in his forecast issue he suggested 13 investment ideas, all of which were profitable by the end of the year. It is not unusual for Gary to give us over 75 charts and tables in his monthly letters along with his commentary, which makes his thinking unusually clear and accessible.

Gary was among the first to point out the problems with the subprime market and predict the housing and credit crises. You can learn more about his letter at http://www.agaryshilling.com. If you want to subscribe, you can call 888-346-7444. Tell them that you read about it in Outside the Box and you will get not only his 2009 forecast issue but an extra issue with his 2010 forecast (of course, that one will not come out for a year. Gary is good but not that good!)

I trust you are enjoying the holidays. And enjoy this week’s Outside the Box…”

Complete Article:

http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2008/12/15/semi-annual-u-s-economic-outlook-collapsing-on-schedule.aspx

(sign up for the newsletter for FREE at www.stockscores.com)

enjoy!

Have you ever thought about breaking your trading decision down the way a doctor looks at a problem? Imagine if a doctor made decisions on your health using the same process as you use to make trading decision. I am quite sure that many people make “instinctive” trading decisions that hurt their financial health, so let’s consider a series of steps that should be taken in the trading process.

Diagnosis
The first thing you need to do is figure out what the situation is. Are the buyers or sellers in control? You answer that question by looking at the stock chart and whether there are rising bottoms on the chart or falling tops. Rising bottoms means the buyers are in control while falling tops show the sellers are strong. Look at six month time frame to judge the near term sentiment but also look at a two year chart to get a feel for the longer term sentiment.

Have they just taken control or are we nearing the end of their reign? For this, check the two year chart and see how long one side or the other has been in control of the market. Keep in mind that one side could be in control in the relative short term while the other side could be dominant in the longer term. This can set up a good opportunity since the longer term time frame will usually win over the shorter, providing a trading opportunity for someone who times the reversal back in favor of the longer term time frame.

Is the stock trading rationally or emotionally? A rational market will be in a linear trend. An emotional market will be much steeper, more of a curve. Emotional markets usually regress back to the linear trend line, setting up another type of trading opportunity.

Finally, is the stock trading in a way that provides opportunity? Most stocks, most of the time do, not provide a good trading opportunity because they are efficiently priced. However, a great trading opportunity may exist in cases where the market is trading emotionally or where there is important new information coming in to the market.

Prognosis
With diagnosis you can make a prognosis, a telling of what will happen in the future. A stock that has gone up with emotional buying will eventually correct. A stock breaking down from a pessimistic trading pattern will likely go in to a downward trend. Abnormal buying on strong volume out of a period of sideways trading often leads to a strong upward trend.

Verification
Correct Prognosis is only profitable if it is well timed and it is the timing of trade entry that is the most difficult. You can go broke by making the correct diagnosis and prognosis if you don’t time the entry correctly. I always look for a trigger to prove my Prognosis correct. If I am considering shorting a stock that has gone up with emotional buying, I want to see a break of the upward trend line as the trigger to take the short. For me to take a trade, the market has to show a little hint that I am right. This means I will get in just slightly late but it also dramatically increases the probability that I am right.

Execution
With Verification comes the cue to execute the trade. With good diagnosis and prognosis, this is a simple matter of completing the transaction. However, with every execution you must also know under what conditions your diagnosis or prognosis has been proven wrong. This is the stop loss point, the price level where the market has told you to exit the trade and go back in to diagnosis mode. You must know your stop loss point at the time you execute the entry for your emotional self will change your interpretation of what the market is telling you once you are in the trade.

Evaluation
As the market evolves and prices change, always evaluate. Remember that the market is not a perfect pricing mechanism, there is a lot of uncertainty and that causes price fluctuations around the general price move. Buying a stock with the correct diagnosis, prognosis and verification does not mean that it will instantly go in to an upward trend and a failure to do so means you were wrong in some way. Expect and accept some deviation from the plan but if the stock goes off course to the point that you have been proven wrong, get out of the trade.

Completion
If everything works out and you make the right trade, the winning trade, then there will come a time when the trade will have played itself out and it is time to exit. The completion is the most difficult step in the process because it requires the patience to wait for the play to develop. You must work to maximize profit when you are right and minimize loss when you are wrong.

Take these trading elements to heart and work through them individually every time you trade. Whether I am doing a day trade to hold for the next 10 minutes or a position trade to hold for the next 10 months, I always break the trade down in to these steps. Actually, there are times when I make mistakes and don’t do each step, and when I do, it always seems to cost me money.

Powerful stuff. Enjoy.

Excerpt:

“The human mind is amazingly powerful. It has put a man on the moon, created pieces of silicone that can do billions of calculations a second, organized millions of people to follow red, yellow and green lights and, ironically, found ways to look inside itself. All amazing feats but there remains one thing that is more powerful than even the human mind.

That one thing motivates 100,000 people in a football stadium to cheer at the very same time. It has given one person the ability to kill millions. It gives two people the ability to create one new life. It can push a person to great power while many others languish in despair. Human emotion has had a greater impact on the world than even the products of the human mind.

You might say that they are the same thing, that it is the mind which guides the madness of men just as it creates a new way to power the automobile. I believe they are two very different things, one acts with rational precision while the other works with an unexplainable energy.

For the stock investor, they need to be understood as two very different forces. Your mind is capable of beating the stock market but it is your emotions that will lead you to mistakes.

Two people can have very difficult emotional reactions to the same thing. When faced with a loss in the stock market, one person might feel rage, yelling and screaming and looking for someone, anyone, to blame for the loss. Another might calmly accept the loss and resolve to learn something from it and push forward. One has learned to be angry while the other has learned to be calm. It is our lifelong conditioning that determines our emotional response and changing that conditioning can be a very difficult thing, something that even our powerful mind can not achieve.

Does it matter? Is one right and another response wrong? Any emotional response you have is only wrong if it works against your quest for some achievement. In the game of making money from the stock market, there are responses that are very wrong that must be overcome.

I could give you a trading system that, if followed exactly, should consistently make you money. Its rules may be easy to understand and its application well within your ability. Does this guarantee you would make money from it?

Sadly, the answer is no. There could be nothing wrong with the trading system you are using but if you do not have the right conditioning, if your learned responses to what happens in the stock market work against the rules of the system, you will fail in its application. Two people trading the exact same set of trading rules can have very different results because of their powerful emotions.

The question now is, do you want to let your emotions get the better of you?

The answer for most people is “yes, I do want my emotions to get the better of me.” Most people won’t admit it, but their actions indicate this is the answer. Most people do not take action against their emotions. When they make a mistake, they do not blame their emotions. They do not work to understand their emotions. They do not make a plan to overcome their emotions.

Traders spend countless hours analyzing the market, using their mind to develop a set of trading rules that work. They spend all of their time working on a plan to beat the market instead of putting in the effort necessary to teach themselves how to follow their plan.

I can not think of a successful trader that I have met who has a sophisticated set of trading rules. Oddly, the best methods for beating the market are simple. What separates the great trader from the loser is the ability to follow the plan. Some successful traders have just been conditioned to have the right emotional responses for making money in the market. Other successful traders have had to work very hard to overcome the lifelong conditioning that works against them in the market.

The point is, stop working so hard on trying to find the miracle trading system that will make you money. Start exploring the emotional reasons for why you suffer losses. Figure out why you sell your winners too early. Determine why you hold your losses so long. Understand why you take bigger risks after you take a loss. Know why you sit and do nothing when market conditions are ripe for profits.

Mastery of self will lead to mastery of the markets. You must also think positively about the market and your goals. It is better to say, “I am going to make money in the market” than it is to say “I am going to avoid losing money in the market.” Your focus has to be on the positive outcome if you are to succeed. Golfers know all about this, the player who says “I am not going to hit in the water” often has a worse result than the player who says “I am going to land my ball in the middle of the island green.”

Stop analyzing the market and start analyzing yourself. Find the solution to overcoming your mistakes through positive thinking and hard work and give your powerful mind a chance to figure out the right stocks to buy and sell.”

enjoy!

Excerpt: ” It turns out that really successful people seem to have a common denominator of 10,000 hours of practice.”

http://www.iitm.com/Weekly_update/Weekly_402_Dec_10_2008.htm

CRITICAL POINT #1…Tharp’s Thoughts Weekly Newsletter (EXCERPT)

November 25, 2008 Issue #400

“What about the advice that I keep hearing that stocks are now bargains and I should hold on if I dont need my investment soon?

Interesting, I heard that advice at the beginning of this year when we were clearly in a downturn. Now you have to make 100% on your money to break even from those levels. You are not likely to make 100% any time soon. In fact, the stock market to the best of my knowledge has never been up 100% in one year. Thats why 25% trailing stops are the intelligent alternative to buy and hold. When those are broken, and they were broken a long time ago, you need to get out.

Nothing is a bargain now and I would not consider buying until my market type switches from bear volatile to bullish. And thats probably at least three to six months away. And even that is not indicative of a long term buy. We could still have another very nasty leg down to this market.

Short term traders (day and swing traders) who have mastered themselves are doing quite well in this market. Most are not at that level.

How bad can it get?

Well the average American family (who had some wealth) has probably seen their net worth drop by about 50% in the last 12 months. Part of that is due to the drop in real estate prices and part of that is due to the drop in equities.

However, U.S. banks are in fairly good shape now compared to some European banks with huge exposure to emerging markets in East Europe. I expect many countries to have a huge problem because they are in worse condition than the U.S., but they cannot borrow. And many banks in Europe have lent money to those countries. Right now, in contrast, the U.S. can and is printing all the money it needs and that money is still the worlds reserve currency.

Steel mills are cutting back to 50% capacity or more. International shipping has dropped 80% or more. Those effects have not been felt in the economy and in the market yet. What if the revenues of the major U.S. companies drop 50%? Then we could see a DOW at 1000-2000. And at that point, pension funds will be saying they will never again invest in the stock market.”

CRITICAL POINT #2… Tharp’s Thoughts Weekly Newsletter (Excerpt)

December 03, 2008 Issue #401

Part II: The Current Stock Market Type Is Volatile Bear

“I have now substituted my new market type for the 1-2-3 model (which is still red light) The reason Ive done that is that the 1-2-3 model has now gone below a certain PE ratio (that has turned Steve Sjuggerud quite bullish) and that automatically turns one of the three signals to “go.” However, I expect us to be in a secular bear market until the PE ratios of the S&P 500 reach single digits. Thus, the 1-2-3 doesnt really fit my current beliefs.

My advice is that secular bear markets usually end when the PE ratios of the S&P 500 hit around 6-8for example, 1932, 1942, and 1982. Were in the worst crisis since the Great Depression and perhaps in one that is worse. Are you willing to risk the PE ratio of the S&P 500 dropping to single digits? My advice is to get in the market when prices are above the 200 day moving average and get out when they are below (or at least stay out until our market type turns to bullish for at least two weeks). That would have kept you out of this market all year.

Ive now changed how we measure volatility. Using the ATR, as I had planned, did not work because the ATR gets bigger as the price of the S&P 500 goes up. Thus, the market, based upon historical ATRs has been nearly 100% volatile since 1996. As a result, we now look at the ATR as a percentage of the close and that does the trick on a historical basis. In the table below, notice that every week in 2008 is volatile on a historical basis. The quiet markets do not start until August 2007.

I now have the historical ATR (over 13 weeks) as a percentage of the close since 1950. The historical average is 2.88% and the standard deviation has been 1.33%. The last two weeks have been over 14%. This means that we are experiencing volatility that is 9 standard deviations above the mean. If I had data going back to the end of 1929, which I dont, I suspect that there might be some precedence for it.

Some of the largest daily gains ever in the stock market occurred during the huge plunge of 90% after the 1929 crash. So far, weve only had a 40% plunge this yearwith perhaps a 50% plunge since the 2007 highs. However, to get to the kind of area in which bear markets endwith a PE of less than 10, we probably need to go down another 50 to 75%. After last week (according to my friend Chris Weber), the PE ratio of the S&P 500 was 19.44 and the dividend was 3.06%. Bear markets typically end with a PE in the single digits (i.e., about 6 or 7) and a dividend yield of 6-7%. That suggests that this market decline is about half over.but then again earnings could go down from here.

I find it interesting that the last two months have ended on large up weeks. The S&P 500 was up over 19% last week, which is typically a good yearnot just a good week. But remember what I said about this being a 9 standard deviation market. Those large weekly gains dont come close to getting us out of “volatile bear” territory. Were still down 35% over the last 13 weeks as of Mondays close. We would have to move up nearly 30% to get into a volatile sideways mode. And in my opinion, we need to form a base for quite a while before we can begin to shift to sideways.”

This is a really interesting one. A great market commentary, list of retailers in huge trouble, and ideas to possibly short specific companies (or use PUT option strategies). Check it out!

http://www.iitm.com/Weekly_update/Weekly_401_Dec_03_2008.htm