Decision Point®: Top Advisor's Corner: Equity Guardian Group

After Market Close November 11, 2008

Bear Market and WWW

"WWW" = "Weird Wolly Wednesday". This is a term coined by the legendary Don Wolanchuk. It's a reference to the often wild trading on the Wednesday prior to options expiration week. Usually this wild trading is a function of or an integral part of some options strategy or another. If devised properly, a big money player can put a strategy into play that dramatically enhances returns in a virtually risk-free manner. To the rest of us, it can feel a bit like market manipulation. My approach is to just be aware. There's a good chance that they'll take them down today, but with premiums so high, they'll try to generate at least one good rally between today's close and next Friday's expiration. Since this is a Bear market, respect what weakness you may see, but don't be sanguine about the short side.

DJIA: The Dow was off, but not too badly.

SPX: The S&P couldn't make it down to my support. It's still in play until we get a high volume turn.

NDX: The Nasdaq looks weak still, but it's not dead yet.

RUT: The Russell may have further downside, but there's another leg higher dead ahead, too. Short covering here could be wild.

HUI: Miners were weak, which wasn't too surprising.

DXY: The Buck broke up.

DJT: The Trannies were down, but not badly at all.

DJUSHB: Home Builders NEED to go down further in order for real estate to recover. We need less homes and that means many of these guys will go away.

XLF: The financials really took a hit over the past two months. I don't like the look of this. I'd bet on a panic break down, and then a spike back. Not much of a bet, though.

SOXX: The Semi's continue weak, but they may still be building a base.

PPH: The pharms continue in the pattern.

TFSL: Third Federal put in an odd stick.

WMZ: Williams was down and nearly got us.

AXYS: Axsys was down, but it still could be just correcting.

ABM: ABM got us.

RRI: Reliant looks pretty good here.

ATI: Allegheny Tech was down but the action looks corrective.

CMS: CMS Energy continues to intrigue.

IDU: Ute's hold a special charm in this market.

SO: Southern looks ready to break out.

DISH: Dish collapsed, as predicted. This isn't market related; it's a bad business model in a very tough environment with very tough competition. If it bounces, short it again.

Summary:

I'm a Bull, but I'm fairly confident of some weakness near term. Be ready for volatility. Big picture, I believe we're making a base for a big, powerful rally. It is unprecedented to have all the major monetary powers in the world pulling in the same direction at the same time. Sooner or later this is going to bite and we're going to see a heck of a rally. Inflation may be on it's heels, but not until things look much better.

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

Current Positions:

TSFL: Long 25% at 13.04, stop at 12.54

WMZ: Long 25% at 14.04, stop at 14.67

AXYS: Long 25% at 59.02, stop at 59.02

PPH: Long 25% at 60.89, stop at 55.97

RRI: Long at 5.73, no stop in place

ATI: Long 25% at 29.54, no stop in place

Watch List:

CMS: Buy 25% on a print of 10.77, stop at 9.54

IDU: Buy 25% on a print of 72.12, stop at 66.33

SO: Buy 25% on a print of 35.57, stop at 33.16

Changes in Current Positions:

We are stopped out of ABM at 15.06

*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 stop 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 10:00, the trade would also be void.

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.

Past Performance is not a guarantee of future returns.

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