PANIC returns to Wall Street...MARKET BOTTOM DUE THIS WEEK (at least short term)

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CHART AU COURANT: Following up on the headline from last post, at least a short term low is due this week for the stock markets in the US of A. This chart of VIX is how the "street" measures panic. It's the price of buying insurance against the worst case scenario. So, when VIX is low, the street is NOT fearful of things they don't know about. When it's high, they are very, very worried about disasters they don't know about. However, it's like child psychology: when you want your child to do something, you tell them not to. Here, the street (which is all of us put together) never buys the panic insurance until the disaster they didn't know about happened. That would be like finally buying your earthquake insurance after the big one hits. Stupid, right? So, we use VIX to tell us when the disaster is over or nearly so. Look above...you see the spikes in the past above the 30 level are rare, and above 35 are very rare. In fact, VIX has never closed above 35, and only closed above 30 a handful of times in its history. When it's up this high, it's telling us that street is paying too much for insurance against disaster, and it's time for a reversal in the next day or two! In addition, the stochastics are extremely extended above 90, which is also rare. Finally, the VIX is approaching the 4 standard deviation band. The only time in history that the VIX closed above this band was in August 2007, when it actually rose to the 6 standard deviation band for a few minutes. That panic low led to a 1700 point Dow rally (13%) and 200 point S&P rally (14%) in the following two months. Don't get me wrong. Nothing is for sure, but I point out that this is what short term bottoms often look like, at least in the past several years. On the other hand, very rarely, panic like this is actually ahead of the actual disaster. If that is the case this time, imagine what the disaster will be, considering what we know so far.

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INTERESTING PLAYS TO LIGHTEN UP ON OR SHORT SELL: Currently, there are no open short positions, which usually happens close to market lows. But, stay tuned. We took amazing profits into the Freddie/Fannie failure and will re-short on a reasonable rally.

INTERESTING PLAYS TO ACCUMULATE OR BUY (if you have to in a dangerous environment): See August 11 posting for profit taking on a lot of former trades. MSFT under 23, adding under 18, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG on break back above 475 or under 461 (entered 460.99 at 9a on 9/3, exited at breakeven premarket 9/19) and adding under 400, EBAY on break back above 22 (lower from 24 on 9/15) (entered 21.99 on 9/15) and adding under 17, SNDK under 12 or above 15 (entered 15.01 on 9/5, using 13.48 stop as of 9/10, exited 24 premarket 9/19, +8.99 or 59%), GRMN under 30 or above 35 (down from 36 on 9/16, entered 35.01 on 9/18, using breakeven stop as of 9/19), DELL under 17 (entered 16.50 9/16) and adding under 10, SMH (entered @ 25 on 9/15 at market open) adding under 21, SLV entered 10.75 and adding twice this amount at 7.75. GS under 118 (entered 117.48 on 9/16 6:09 am, exited 139.80 premarket 9/19 +22.32 or 18.9%) or above 130 and adding under 88 (lowered from 95 on 9/17), C which is riskier than most below 15 (entered 14.99 on 9/17, exited premarket 9/19 @21.99 +7 or 46%). GE under 23 (entered 22.99 9/16, exited 29.49 premarket 9/19 +6.50 or 28%), MS under 18 (lowered from 24 on 9/17) (entered 17.99 on 9/17, exited premarket 9/19 @34, +16.01 or 88% ), JEF under 14 or above 19 (entered 19.01 9/17, exited 28 premarket on 9/19, +9, or 47%), SBUX under 13 or above 17, UWM under 43 or above 46 (entered 46.01 9/16, exited premarket 9/19 @ 55, +8.99, or 19.5%), RIMM under 95 (entered 94.99 9/16) or above 100, AAPL under 135 (entered 134.99 9/16) or above 140, INTC under 19 (entered 18.99 9/16) or above 21.

In Crude, I will buy any test of 100 +/-2 or a break above 112 now (entered $101.78 on 9/10) adding near $90 (added $90.98 on 9/16 @4:30am PST, exited this second position only $96.98 on 9/17 11:28a PST, +6 handles or $3000 per contract). I'll add it back under $89.

Re-entered the Euro at 1.4439 @ 8a on 9/3 (exited 1.4539 on 9/18, +1 handle or $1250 per contract) and I'll add second entry back if under 1.4050 (added 1.4049 on 9/15 @ 4am PST, stop on this second position only at 1.4000 entered 11am PST, exited this position only 1.4359 on 9/17 @11:44a PST, +3.1 handles or $3875 per contract), standing aside now to see how things shake out.

For what it's worth,

Ken

WHEN THE MIGHTLY FALL, the meek will inherit! Russian Meltdown! MARKET LOW DUE THIS WEEK IN USA...

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CHART AU COURANT: Check out this chart of the 30 year Treasury Bond Yield, spiking to 3.9% Tuesday, then reversing. It was anticipating a FOMC rate lowering, but didn't get it, so reversed. This will likely be the lowest yield seen in many years, which also hasn't ever been seen before! You can see the spike touched the 4 standard deviation band (red line), a very rare phenomenon, in addition to having its stochastic turning up from extreme oversold levels. RATES JUST BOTTOMED OR ARE SO CLOSE TO BOTTOMING, THE BET HAS BE MADE THAT THEY HAVE. Waiting for further decline would be gambling, not risk-adjusted decision making. If you snooze, you lose...
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MARKETS: The "Reserve Primary Fund", a supposedly "value stable" money market, just "broke the buck" as we say when their price drops under $1.00 per share. This should NEVER happen if the fund does the thing it is supposed to do, which is act conservatively to safe guard your money. This IS what happens when your fund tries to be something its not in order to attract attention and new money. SHAME ON THEM !!! The leaders of the fund should be put in jail for fraud! If you think this is bad, the Russian Stock and Bond Markets (that's right, the whole market) was shut down today, for the second day in a row, for no other reason than "prices were down too much"! There logic for you. So, if you were thinking about avoiding the turmoil in the US by going overseas, think again. At least we keep our casinos open (usually, that is. If needed, they'll close ours too!).

The only safe funds are those that ONLY invest in US Treasury Securities, nothing else but T-bonds, T-notes, and T-bills. I highlighted one several weeks ago and here it is again: The safest money market in the country remains the AMERICAN CENTURY CAPITAL PRESERVATION FUND 1 (http://www.americancentury.com/ or 800-345-2021). The expense ratio is extremely low at .48%, they don't use a custodial bank, which means they know where the money is at all times, and they ONLY buy treasuries! Remember, cash has outperformed stocks for the last eight years!

Bear Stearns, Fannie, Freddie, IndyMac, Lehman, Merrill Lynch, and Countrywide are all gone in the last nine months. AIG, the largest insurance company on the planet was just bailed out by the Fed, with the issuance of an $85 billion facility to provide them the liquidity for an orderly shutdown. Is Washington Mutual next? Then who? Citigroup? Both are somewhere between possible and probable. Want to be safe? Put your funds in the money market above and sleep well knowing they do it the right way and barely charge you while they are doing it.

This is happening due to very bad judgement, greed, and fraud by our elected officials (mainly Congress). The damage is so severe that major banks and brokers are failing, as listed above. Next will be the hedge funds that have laughingly walked to the bank for the last 10 years, believing their poop didn't stink and they were beyond rules of prudence and fiduciary responsibility. Guess what guys, what went around is coming back around, and if your karma isn't in order, you should be looking for a foreign country without extradition to get to quickly!

Crude: as I've said for the months of mania into the $148 price peak, it wouldn't last and sub $100 is around the corner (see past posts for exact wording if you don't remember). Here we are with $90 oil this morning. I've been buying into this support zone lately, chronicled in these pages, and expect a bounce anytime now into the $110-$130 area, prior to another liquidation wave under $90, perhaps into the $50-$80 range. Impossible you say? Well, you probably didn't believe me either when at $140, I said watch for $100.

Euro: Yes, here too, my system called many opportunities to short the euro and buy the dollar in the past six months, even recommending those with foreign currency exposure to stop avoiding the dollar and begin being dollar friendly in transactions (see past posts for exact wording if you don't remember). Since then, the Euro has fallen from 1.6000 to 1.3900, a 13% simple gain. Again, at the time of my forecast, everyone else was calling for the death of the dollar.

Housing: you know where I stand, as I have forecast the destruction of this market for over a year and a half. It's early in the liquidation, so wait to buy. And, if you haven't sold what you're not living in...hmmm...I'm sorry for you.

Precious Metals: Peaked and going lower, but a bounce is due now. Gold will be very attractive closer to $600 in coming weeks to months.

INTERESTING PLAYS TO LIGHTEN UP ON OR SHORT SELL: Currently, there are no open short positions. But, stay tuned. We took amazing profits last week into the Freddie/Fannie failure volatility.

INTERESTING PLAYS TO ACCUMULATE OR BUY (if you have to in a dangerous environment): See August 11 posting for profit taking on a lot of former trades. MSFT under 23, adding under 18, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG on break back above 475 or under 461 (entered 460.99 at 9a on 9/3) and adding under 400, EBAY on break back above 22 (lower from 24 on 9/15) (entered 21.99 on 9/15) and adding under 17, SNDK under 12 or above 15 (entered 15.01 on 9/5, using 13.48 stop as of 9/10), GRMN under 30 or above 35 (down from 36 on 9/16), DELL under 17 and adding under 10, SMH (entered @ 25 on 9/15 at market open) adding under 21, SLV entered 10.75 and adding twice this amount at 7.75. GS under 118 (entered 117.48 on 9/16 6:09 am) or above 130 and adding under 88 (lowered from 95 on 9/17), C which is riskier than most below 15 (entered 14.99 on 9/17). GE under 23 (entered 22.99 9/16), MS under 18 (lowered from 24 on 9/17) (entered 17.99 on 9/17), WGO under 9 or above 13, JEF under 14 or above 19 (entered 19.01 9 17), SBUX under 13 or above 17, UWM under 43 or above 46 (entered 46.01 9/16), RIMM under 95 (entered 94.99 9/16) or above 100, AAPL under 135 (entered 134.99 9/16) or above 140, INTC under 19 (entered 18.99 9/16) or above 21.

In Crude, I will buy any test of 100 +/-2 or a break above 112 now (entered $101.78 on 9/10) adding near $90 (added $90.98 on 9/16 @4:30am PST). Again, this bounce is a relief rally, and we see a certain test of the 80 area coming in the next 3-8 months. Re-entered the Euro at 1.4439 @ 8a on 9/3 and I'll add second entry back if under 1.4050 (added 1.4049 on 9/15 @ 4am PST, stop on this second position only at 1.4000 entered 11am PST), and I will exit above 1.5000. If stopped out on second, I'll add second back above 1.4439 or under 1.3999.


For what it's worth,

Ken

FED and FDIC not designed to operate in CHAOS, which is what we have NOW!

Update on last post: This weekend, Lehman Brothers, a 150 year old investment bank declared bankruptsy, BofA bought Merrill Lynch out of the abyss, AIG, a trillion dollar balance sheet company, is in full blown panic to save themselves, and Washington Mutual teeters closer to closure.

IT IS NOT OVER, SO DON'T ACT LIKE IT IS. CAUTION IS IMPERATIVE! Guard what you have.


For what it's worth,

Ken

WAMU...Live or Die?

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CHART AU COURANT: This is it, with WAMU trading under $2 for the first time ever. Will they fail this weekend and be taken over, or will the Hail Mary firing of Kerry Killinger bounce the stock and bank out of likely doom? There is a reasonable chance that they will fail, and completely exhaust the FDIC insurance fund (Wamu's insured deposits of $200 billion are three times the size of the total FDIC fund), leaving all other bank deposits at risk. I'll be at the door of my local branch as they open today asking for most of my cash, just in case. It's your money, so take the action that you need to and sleep and live well.
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INTERESTING PLAYS TO LIGHTEN UP ON OR SHORT SELL: Currently, there are no open short positions. But, stay tuned. We took amazing profits last week into the Freddie/Fannie volatility.

INTERESTING PLAYS TO ACCUMULATE OR BUY (if you have to in a dangerous environment): See August 11 posting for profit taking on a lot of former trades. MSFT under 23, adding under 18, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG on break back above 475 or under 461 (entered 460.99 at 9a on 9/3) and adding under 400, EBAY on break back above 22 (lower from 24 on 9/15) (entered 21.99 on 9/15) and adding under 17, SNDK under 12 or above 15 (entered 15.01 on 9/5, using 13.48 stop as of 9/10), GRMN under 30 or above 36, DELL under 17 and adding under 10, SMH (entered @ 25 on 9/15 at market open) adding under 21, SLV entered 10.75 and adding twice this amount at 7.75. GS under 118 (entered 117.48 on 9/16 6:09 am) or above 130 and adding under 95. GE under 23, MS under 24 or above 28, WGO under 9 or above 13, JEF under 14 or above 19, SBUX under 13 or above 17, UWM under 43 or above 46, RIMM under 95 or above 100, AAPL under 135 or above 140, INTC under 19 or above 21,

In Crude, I will buy any test of 100 +/-2 or a break above 112 now (entered $101.78 on 9/10) adding near $90 (added $90.98 on 9/16 @4:30am PST). Again, this bounce is a relief rally, and we see a certain test of the 80 area coming in the next 3-8 months. Re-entered the Euro at 1.4439 @ 8a on 9/3 and I'll add second entry back if under 1.4050 (added 1.4049 on 9/15 @ 4am PST, stop on this second position only at breakeven entered 11am PST), and I will exit above 1.5000. If stopped out on second, I'll add second back above 1.4439 or under 1.3999.

For what it's worth,

Ken

SILVER Lining? The time is right!

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CHART AU COURANT: This chart of SLV, the silver tracking stock, shows several compelling reasons to buy it in this price range. 1) stochastics are extremely oversold on this daily chart, as well as equally oversold on the weekly chart (not shown). 2) there is an elliott wave labeling that can count the entire decline from the $21 peak in March as complete or nearly so. And 3) the price is plunging under the 3 standard deviation band, which last happened in Aug 07 and launched a doubling in price in 8 months. I'm taking a buying long position here at 10.75 and adding at 7.75, which will require further plunge under the 4 standard deviation band, which is very, very rare. I'll look to sell between 14 and 16 in the next 6 months, which would result in a gain of 25%-45%. If 7.75 is reached, I'll triple my position. So, if I buy 100 shares now, I'd buy 200 additional at the lower price. That is how rare this situation is.

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MARKETS: The government takeover of Freddie and Fannie is the latest attempt to act "too little, too late", and will NOT bottom the economy or the market as is hoped. By definition, the government NEVER enters into a bailout trade at the low. If you check the last 100 years, they have been early each time. Therefore, there is NO reason to think they got it right this time, especially considering their mistakes of the past 5-25 years are what got us into this mess. Expect lower stock, housing, crude, and euro prices eventually, even if each of these has a very temporary bounce.

INTERESTING PLAYS TO LIGHTEN UP ON OR SHORT SELL (this list is about to get very large): IBM above 130 or below 126 (entered 125.99 on 8/11, exited 115.40 9/10, +8.4%), GE above 30 or below 27 (entered 30.18 on August 11, exited 27.98 9/10, +7.2%), AMGN above 55 (entered 62.08 on July 28, exited 59.64 on 9/9, +3.8%), RIMM above 130 or below 114 (entered 132 on August 11, exited 116.98 on Sept.2, +11.3%), AMZN above 90 (entered 90.18 on August 11, exited 76.70 on 9/10, + 16%), AAPL above 174 (entered 174.18 on August 11 exited 150.44 9/10, +13.6%), CSCO above 24 or below 21 (entered 24.18 on August 11, exited 22.18 on 9/4, +8.2%), INTC above 26 or below 24.19 (entered 24.18 on 8/18, exited 20.18 on 9/10, +16.5%). As suggested above, "buy TWM at 68.50 or better" (entered 63.90 on 8/14, using breakeven stop as of 9/10. Exited 72.50 on 9/11, +5.8%...didn't like pattern) is a negative bet, or short side play, on the Russell. As the Russell falls, TWM's price will increase. Therefore, I'll track it here in the "sell or short" section.

INTERESTING PLAYS TO ACCUMULATE OR BUY (if you have to in a dangerous environment): See August 11 posting for profit taking on a lot of former trades. MSFT under 23, adding under 18, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG on break back above 475 or under 461 (entered 460.99 at 9a on 9/3) and adding under 400 (added 407.50 on 9/11, exited 437 on 9/12, +7.3% still adding under 400), EBAY on break back above 22 (lower from 24 on 9/15) (entered 21.99 on 9/15) and adding under 17, SNDK under 12 or above 15 (entered 15.01 on 9/5, using breakeven stop as of 9/10), GRMN under 30 or above 36, DELL under 13 and adding under 8.50. Entered crude at $112.99 on Aug. 12, adding into $98 (we exited on a stop at 120.99 after crude spiked to $122 on Aug.21, +$8, or 7%). We'll buy again on move above 122 or back below 114 (re-entered 113.99 on 8/24 and stop raised to 117.99 on 8/27, exited 117.99 same day +$4, 3.5%). Our exit last week was precient, and we remain out. We will buy any test of 100 +/-2 or a break above 112 now (entered $101.78 on 9/10). Again, this bounce is a relief rally, and we see a certain test in the 80's coming in the coming 3-8 months. OPEC issued a small production cut, so the battle is on. Last issue we showed a long Euro "gamble" at 1.4680 or better. I took a fill at 1.4650 while using a stop at 1.4550. Any print above 1.5050 will cause us to cash out, perhaps lower, depending on the pattern. Exited 8/28 at 1.4784, +1.34 handles or $1675. Re-entered 1.4439 @ 8a on 9/3 and will add between 1.4100 and 1.3700 (added second entry 1.3899 on 9/11, exited second entry only 1.4189 on 9/12, +2.9 handles or $3625 per contract). I'll add second entry back if under 1.4050, and I will exit above 1.5000. SMH (entered @ 25 on 9/15 at market open) adding under 21, using 43 as my initial exit.

For what it's worth,

Ken

WHEN IT RAINS, IT POURS...Drowning in Crude?

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CHART AU COURANT: How can I not talk Crude, with the hype around the landing of Gustav? Think back several months ago when I forecast that the manic spike toward the $140 area was a classic blowoff, that historically has ALWAYS ended in a dramatic, unexplained (except we did it in advance) reversal. Further, I said that gas prices would likely peak for the year by July 4th. In fact, that spike DID mark the top, so far, in price, and gas prices peaked a week or two after July 4th. In fact, AAA reported that gas prices fell EVERY day for the 40 days prior to Labor Day. I'll take that as a bullseye, thank you very much! Even better than using our system to make these forecasts, is being able to take advantage of these movements as I've narrated in these comments. I'm showing the weekly bar chart of Crude, with a now fully oversold stochastic analysis at the bottom of the window, meaning crude is as oversold, basis the stochastics, as its been since late September 2006. This alone doesn't guarantee a rally, in fact nothing every does, but it does tell us that selling has reached an extreme, which is usually hard to maintain without a period of relief. From its high to today's low, crude fell $43, or 29%, in two months. As I said then, when the hedgies and banks that were too leveraged "needed" so sell, due to capital calls on their assets that "have no liquid market", the price would plunge. Although a bounce is needed, the ultimate low has not likely been seen. I'm still targeting a much better low surrounding the $80 area. That said, I'll take and track a new trade here, buying on a break above $114 (adjusted to $108 on 9/3 at 8aPST, entered $108.01 at 8:16a PST. Placed trailing stop at breakeven on 9/8 when spiked to $110. Exited 108.01 on 9/8), will re-enter long on break above $105 (lowered from $110 on 9/10 at 8a PST) or on a break below $101. If the higher entry is filled, the $101 will be cancelled and visa versa, but a second entry will be taken around $88 no matter what. I expect to see a rally back up into the $122 to $132 range, where I'll exit and reverse directions with a short. The chart also shows Fibonacci support at $95 and again at $79, each in the vicinity of my entries. Isn't is interesting that the car companies are closing and selling product lines like Hummer "after" crude/gas prices peaked and have declined? The fact that the price of crude and gasoline are falling with a string of hurricanes lined up from Florida to Africa, tells us that the world is awash with oil, and the hedgies and banks are on the wrong side of the trade, and want OUT.
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MARKETS: First, like crude, our system has been very good at forecasting the movements of the Euro. Again, reviewing the blog in the past few months reveals several uncanny predictions, as well as trades that took advantage of the moves, with plenty of time in advance to take the positions. Per the last entry, we are looking for a long after a break of 1.4500, which we got today. However, the pattern doesn't quite look complete. I will enter a buy once the price moves back above 1.4550 (adjusted to above 1.4475 or below 1.4440 on 9/3 at 6a PST...entered 1.4439 @ 8a on 9/3 and will add between 1.4100 and 1.3700) I will exit above 1.5000. The weekly chart of the Euro (not shown) has a stochastic extreme similar to crude, but the Euro hasn't been this extremely oversold since October 2005. With price quickly approaching the lower standard deviation band at 1.4260, a bounce is imminent, but the final low has NOT been recorded. After an relief rally for a few weeks, probing the 1.30's is highly likely.

Stocks opened dramatically higher Tuesday on the relief of little damage from Gustav, but within hours, reversed into a steep slide, after the crowd realized that "things are amiss" with or without hurricane damage. I usually discuss the market in terms of the S&P 500 Index, but like recently, use others if their pattern appears more clear. CLARITY IS EVERYTHING in this business. In fact, I put on a bearish trade in the Russell 2000 inverse 200% tracking stock called TWM at 68.50. If the market falls, this stock will increase in value twice the percentage of the Index's decline. Yes, if wrong, it'll hurt twice as much.

Anyway, the S&P 500 is poised to begin the largest decline since the Dec/Jan slide of late last year. This one should be twice as nasty, so closer to 400 points, rather than 250 during the slide just mentioned. This would target the 850 area, give of take a few percent. Get ready. If wrong, the rally of the last week will extend and peak in mid September, then cascade into late Fall. Either way, there is serious potential for portfolio pain during the remaining months of 2008.

Hide in Gold and Silver you say? Well, again, if you check the past blog entries, when Gold topped 1000, I said in these pages that the 800 level was the target for the next 'major' move, with 600 being the better longer term terminus of the imminent decline. If you didn't see, gold closed at 801 today! 700 should be seen in short order, and I'm saving some shekels for 600.

No sector will be untouched by the upcoming selling wave, but some are much closer to their final lows than others. Housing stocks are NOT one of the good sectors, with another round of serious liquidation by the end of the year. The semiconductors actually are shaping up for a serious rally in the next 3-18 months. You can place individual bets, or take them all by betting on the sector tracking stock, symbol SMH. More soon as this sector could still decline 20-30% by year end. If SMH rises above 26.5 (lowered from 28 on 9/10 at 7a PST) or falls under 25, I'll buy it and add under 21, using 43 as my initial exit.

Rates on the 30 year Treasury Bond have likely bottomed, so mortgages are unlikely to decline in rate anytime soon. Lock in those ARM's N O W under 6%, cause they could go much higher than you or your biased mortgage professional (and I use "professional" generously) can imagine. If you are looking for a house to buy to live in, there is still NO hurry, as the prices around the country are decline as the supply increases, and most sales are foreclosures, so under market.

Cash remains king, and t-bills or treasury-only money markets are the ONLY safe place (safe means without risk) to wait out the perfect storm that has just begun. The safest money market in the country remains the AMERICAN CENTURY CAPITAL PRESERVATION FUND 1 (http://www.americancentury.com/ or 800-345-2021). The expense ratio is extremely low at .48%, they don't use a custodial bank, which means they know where the money is at all times, and they ONLY buy treasuries! Remember, cash has outperformed stocks for the last eight years.

POPULAR STOCKS TO LIGHTEN UP ON OR SHORT SELL (this list is about to get very large): IBM above 130 or below 126 (entered 125.99 on 8/11), GE above 30 or below 27 (entered 30.18 on August 11), AMGN above 55 (entered 62.08 on July 28), RIMM above 130 or below 114 (entered 132 on August 11, exited 116.98 on Sept.2, +11.3%), AMZN above 90 (entered 90.18 on August 11), AAPL above 174 (entered 174.18 on August 11), CSCO above 24 or below 21 (entered 24.18 on August 11), INTC above 26 or below 24.19. As suggested above, "buy TWM at 68.50 or better" (entered 63.90 on 8/14) is a negative bet, or short side play, on the Russell. As the Russell falls, TWM's price will increase. Therefore, I'll track it here in the "sell or short" section.
INTERESTING STOCKS TO ACCUMULATE OR BUY (if you have to in a dangerous environment): See August 11 posting for profit taking on a lot of former trades. MSFT under 23, adding under 18, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG on break back above 475 or under 461 (entered 460.99 at 9a on 9/3) and adding under 400, EBAY on break back above 25.50 or under 21 and adding under 18, SNDK under 12 or above 15 (entered 15.01 on 9/5), GRMN under 30 or above 36. Per last post, entered crude under $113 at $112.99 on Aug. 12, adding into $98 (we exited on a stop at 120.99 after crude spiked to $122 on Aug.21, +$8, or 7%). We'll buy again on move above 122 or back below 114 (re-entered 113.99 on 8/24 and stop raised to 117.99 on 8/27, exited 117.99 same day +$4, 3.5%). If stopped out, we'll buy again on a break above 122 for a Gustav pop toward 130. Our exit last week was precient, and we remain out. With Gustav over, and several more lined up, it's going to be wild for the rest of the year. We will buy any test of 100 +/-2 or a break above 112 now. Again, this bounce is a relief rally, and we see a certain test in the 80's coming in the coming 3-8 months. OPEC is warning that they'll cut production, so the rhetoric begins. Last issue we showed a long Euro "gamble" at 1.4680 or better. I took a fill at 1.4650 while using a stop at 1.4550. Any print above 1.5050 will cause us to cash out, perhaps lower, depending on the pattern. Exited 8/28 at 1.4784, +1.34 handles. Will re-enter on break above 1.4800 or under 1.4500, whichever comes first (entered 8am on 9/3 per updates at top of "markets" section at 1.4439 and will exit above 1.5100 or on 1.4100 stop.

For what it's worth,

Risk vs Reward in the RUSSELL 2000

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CHART AU COURANT: These are pictures of the daily Russell 2000 Index (top chart) back to the November'07 high, and the weekly Russell 2000 Index back to the low after the September 11 Terror Attacks. There appears to be a completed rally into the 2007 peak (bottom chart), and a series of wave 1s and 2s down since then. If the recent June peak is surpassed, the '2 pattern would be more complex than originally marked. If unbroken, and the July low is broken under, then wave '3 (the panic wave) would be in force. You can see the weekly stochastics are approaching overbought (shown in bottom window), and the daily stochastics have already crossed down, giving a sell signal. In addition, the decline from the June high to the July low shows a clean 5 wave Elliott Wave decline (better seen on the daily chart), with the rally since then taking on a classic, corrective pattern. This sets up a dramatic selling cycle for the remainder of the year +/- a month. Bottom Line: I'm going to show an aggressive play that takes advantage of the downside. It has 2:1 negative leverage built in. That is, if the Russell 2000 declines 10%, this trade will show a profit of +20%, and so on. I'd buy the TWM at 68.50 or better, adding if it dropped ten dollars from whatever entry I got. I'd initially target 93.50, but would evaluate that along the way. If the Russell 2000 gets to 600 (currently 740), that would be a decline of 19% in the index, but a profit of approximately 38% in this TWM play. This is a high risk play, but the reward appears to justify it.

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POPULAR STOCKS TO LIGHTEN UP ON OR SHORT SELL (this list is about to get very large): IBM above 130 or below 126 (entered 125.99 on 8/11), GE above 30 or below 27 (entered 30.18 on August 11), AMGN above 55 (entered 62.08 on July 28), GS above 211 or below 170 (entered 169.99 on 8/12, exited 160.18 on 8/18, +5.8%) , RIMM above 130 or below 114 (entered 132 on August 11), AMZN above 90 (entered 90.18 on August 11), AAPL above 174 (entered 174.18 on August 11), CSCO above 24 or below 21 (entered 24.18 on August 11), INTC above 26 or below 24.19. As suggested above, "buy TWM at 68.50 or better" (entered 63.90 on 8/14) is a negative bet, or short side play, on the Russell. As the Russell falls, TWM's price will increase. Therefore, I'll track it here in the "sell or short" section.

INTERESTING STOCKS TO ACCUMULATE OR BUY (if you have to in a dangerous environment): See August 11 posting for profit taking on a lot of former trades. MSFT under 23, adding under 18, EBAY under 18, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), SCHN under 67 (entered 66.95 on August 11 and entered breakeven stop on Aug 13, and exited on breakeven stop Aug 13). Per last post, entered crude under $113 at $112.99 on Aug. 12, adding into $98 (we exited on a stop at 120.99 after crude spiked to $122 on Aug.21, +$8, or 7%). We'll buy again on move above 122 or back below 114 (re-entered 113.99 on 8/24 and stop raised to 117.99 on 8/27, exited 117.99 same day +$4, 3.5%). If stopped out, we'll buy again on a break above 122 for a Gustav pop toward 130. Our exit last week was precient, and we remain out. With Gustav over, and several more lined up, it's going to be wild for the rest of the year. We will buy any test of 100 +/-2 or a break above 112 now. Again, this bounce is a relief rally, and we see a certain test in the 80's coming in the coming 3-8 months. OPEC is warning that they'll cut production, so the rhetoric begins. Last issue we showed a long Euro "gamble" at 1.4680 or better. We'll took a fill at 1.4650 while using a stop at 1.4550. Any print above 1.5050 will cause us to cash out, perhaps lower, depending on the pattern. Exited 8/28 at 1.4784, +1.34 handles. Will re-enter on break above 1.4800 or under 1.4500, whichever comes first (entered 9/2 1.4499 and will exit above 1.5100 or on 1.4100 stop. Will add to today's fill if under 1.4200).

For what it's worth,

Ken