Newsletter-10-26-08
Tradingourway
Volume 2, Issue 12 Oct 26, 2008		 Tradingourway Logo
Cash is still King!!  
Up-Coming events:

In the next few days, we'll be sending out information about the long awaited 2 day seminar. The site and time is set but still need to complete a few more items before making the "official" announcement. Your participation in the survey helped greatly in not only the topics but the pricing. So we are going to offer a special gift to those attending the seminar. So stay tuned.

This week:  
We saw a market in total confusion. Monday, the market open like it was going to give us that rally we are all hoping for. However, that was not to be. The rest of the week was not pleasant for the long positions anyone was holding, as the Dow made lows the last 3 days closing at a low for the week. It , also, took out the low of the previous week closing below the lower short-term trendline shown in last week's newsletter. 

My opinion has not changed, we are still in for more downside movement. Unfortunately, we did not get the little rally I thought might happen. Now I am left wondering if it may not come.

The problem I see with this market is that it isn't driven by Fundamentals or Technicals. It is being driven by panic news. It does not help that we are getting 24 hours of bad news from around the world. It is being made worse by the financial news channels trying to dramatize it. What it does show is that the World's economy is dependent on the North American economy of the U.S. and Canada.

Things do look like they will get worse before they get better. BUT! they will get better. What you and I have to do is be smart enough to not try to ride the "Bull" to hard. We need to look for "Bearish" trades. The chart below shows how the Ultra-Short ETF's have done over the last 63 days. However, only 4 of 9 made new highs. Some will look at that and say it means 4 hit double tops while other will look at it and say there are still 5 to go. One thing they all have in common is they all gapped up and then traded down most of the day. This was driven by panic because futures trading was halted. The Dow futures were frozen at a minus 550 points and Wall Street was talking about halting trading if the Dow dropped 1100 points. Is the news media to blame. NO! it's Fear and Greed at work around the world.     
ETF-Shorts
It's too bad we didn't buy these the end of September. Ain't hindsight great!

Now we are past the price we like to trade. Nor do I think buying options on them is realistic because the high volatility has driven the premium up to where its to expensive. Right now, time value of the options on these ETF's are running 15 - 20% of the ETF price.

Looking for some possible short-term long play, I did a sort of stocks over 240K in volume. Not one of the 2880 stocks had a positive move over the last 2 months. Several had positive movement over the last 5 days. These may be worth watching. Most have crossed their 20 SMA recently or are very close. All closed above the 3 short-term exponential moving averages I use the 4, 9, & 13 EMAs. This tells me they are worth putting on a watchlist and if they continue to show a positive bias then I may trade them. 
It looks like money may be flowing to the Energy and Insurance groups.
Here is the list in no particular order. This is not a recommendation it is simply an example of finding exceptions to any movement.

SPAR, VDSI, ENH, CHE, LINE, IPCR, SYNM, HK, CXG, AWH, OGE, and CB.

On the other hand if you are one that likes to bottom fish now is an excellent time to look. Gold stocks may have bottomed as several have formed bullish engulfing patterns. Remember, with bullish engulfing patterns it is suggested you wait for confirmation.

Golds Stocks with bullish engulfing pattern:
  • AEM
  • ABX
  • GG
  • KGC
  • AUY
Insurance Stocks with bullish engulfing pattern:
  • PRU
  • HIG
If you should choose to trade any of these, Please keep a tight stop in mind. We are in a major downtrend and these may not be done going down. I think it is wise to only take very short-term trades until the volatility settles.

Be cautious, be wise and be profitable,
Kermit
Previously, I talked about a fire sale for the RAMP program. Well, Andy's at it again for $99 you can get RAMP and install it on all your computers.  

Worden Brothers new StockFinder is now in BETA and available to anyone wanting to "PLAY" with it. Others may want to wait until it comes out of Beta test. 
Summary:

As always I want to hear your thoughts on these and any subjects. Please, feel free to send an email with your suggestions, complaints, and comments to    kermitp@tradingourway.com  
 
Thank You, for taking the time to read our newsletter and good trading to all,
 
           Kermit Prather