Decision Point®: Equity Guardian Group -- Mark Young

After Market Close Jan 8, 2010

Top of the Channel, Top of the Bands <

This is just a strong market. Sure, we're overbought, and sure we've got a lot of Bulls, but there are just no signs of weakness. And now, we're crawling along the top of the channel on many indices if not the top of the Bollinger Bands. That's a sign of strength. Sure, it can end at any time, but it can also contrinue for some time.

DJIA: The Dow is right at the top of the channel.

SPX: The S&P is just riding the top of the Bolligner Bands.

NDX: The Naz is grinding along the top of the channel too.

RUT: The Rut is just a spit away from its target zone.

HUI: The Miners may be in for some trouble this week if the Buck will come on.

DXY: The Dollar went nowhere on the week but the recover on Friday was impressive.

DJT: The Trannies look VERY Bullish and that has Bullish implications for both the economy and the market, near term. Longer term, it's a hint of a problem (watch rates), but for now, it's good.

RTH: Retailers were down but they came back.

XLF: The financials may be gathering steam.

SMH: The Semi's look strong. There's little more Bullish than breaking up out of a rising wedge.

GERN: Geron recovered nicely. Bullish.

NE: Noble looks higher and we like that.

CMED: China Med tried to decline but no go. Off it runs higher for us. Nice test of the break-out.

BARE: Bare is strong and that's the naked truth.

GWW: WW Grainger got us in. As Hermione would say, "Wingardium Leviosa!"

DISH: Dish looks poised to do something.

SMRT: Stein Mart is breaking up, it seems.

EL: Estee Lauder broke up and looks higher.

KR: Kroger is our local grocery. They're putting a lot of pressure on the competition in our market.

Summary:

I've been looking for a pullback and it really hasn't been forthcoming. Of course, we've had a lot of longs so that's probably OK. The market looks strong, but I caution readers that this is options expiration week and often there can be a day or so of weakness. Also, in recent years, the first Op-Ex of the year has typically been down. I'm not seeing that, but you never know. They love to hit you with the unexpected sometimes.

Be Well, and Trade Smarter Than the Average Bear!
-The ChartSmarts Team

Current Positions:

Long 25% GERN at 5.86, stop at 5.86

Long 25% NE at 42.11, stop at 42.87

Long 25% CMED at 14.76, stop at 13.58

Long 25% BARE at 12.97, stop at 12.27

Long 50% GWW at 99.41, stop at 96.08

Watch List:

DISH: Short 25% on a print of 20.38, stop at 21.57 -OR-
DISH: Buy 25% on a print of 21.57, stop at 20.38

SMRT: Buy 25% on a print of 10.93, stop at 10.06

EL: Buy 50% on a print of 49.64, stop at 47.63

KR: Buy on a print of 20.77, stop at 19.86

Changes in Current Positions:

Move the stop up on BARE to 12.27

We are now 50% long GWW at 99.41

*30 Minute Trading Rule:

In order to prevent whipsaws, we use a 30 minute trading rule. This means that, as a general rule, we are going to "sit on our hands" during the first 30 minutes of trading, this includes the lifting of stops during this 30 minute period as well. Additionally, if after the first 30 minutes of trading the range of the stock pick is within the stop and buy/short boundaries presented, the trade recommendation is valid. If the stock's range is outside of the buy/short and stop boundary, the trade recommendation is VOID. E.g. if the recommendation is "Buy a print of 10.25, with a stop of 9.95," and the stock trades up to 10.50 during the first 30 minutes, we would pass on the trade. Similarly, if that stock were to trade down to 9.90 before 10:11, the trade would also be void.

In addition, due to Market Makers, programmers, and market miscreants targeting our stops, a long pick must trade at a stop or below for a full 5 minute bar before actually triggering the stop. For a short pick, the stop must trade at or above the stop for a full five minutes before triggering a stop. This should have the effect of reducing the risk of 'gunning for our stops', though it will subject us to more technical risk. At this point, we believe it is a worthwhile trade off.

There is no 30mn rule on limit orders, but if price gaps out of the buy/stop range the trade is void.

Rule on stops:

As a general rule for the model portfolio, we will lift all stops on existing positions for the first 30 minutes of trading. As a practical matter, subscribers may wish to leave their stops in place if they expect to be incommunicado or unavailable during that time to monitor positions.

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