New 3X Leveraged ETFs Becoming More Popular

Early in November, Direxion launched their new 3X leveraged ETF funds available to be traded on the NYSE. With the huge increase in popularity in the 2X Proshares funds that we discuss frequently on this site, it will most certainly be the same fate for these new 3X funds, even though volume still remains rather low. However, everyday they are trading more and more. These funds, played the right way, can bring significant gains especially as we grow closer to finding a bottom. So, I thought I would go through the different funds and let you know what is now available, for you risky traders.

FAS - Financials 3X Bull
FAZ - Financials 3X Bear
TNA - Small Cap 3X Bull
TZA - Small Cap 3X Bear
BGU - Large Cap 3X Bull
BGZ - Large Cap 3X Bear
ERX - Energy 3X Bull
ERY - Energy 3X Bear

As I have said before, in relation to these funds, I am still hesitant to trade them, because of their low volume. Also, they are on the riskier side that I am usually comfortable with. However, FAZ, being under $60, with the increase in volume of trading it has been receiving, is beginning to become more and more appealing to me. I am going to wait out this next week to see how we deal with GM, but this could be a pick up for me in the future.

Look for these ETFs to pick up in popularity as time goes on and our volatility continues to go up. The Proshares funds started out in a similar way, and have grown immensely in popularity in the recent months. So here they are. Watch and trade at with caution, for these funds can make or break you in one day. We should see some other 3X funds hit the market shortly as well. The expense ratios on these are anywhere from .94-1.02. This is comparable to Proshares, considering the increased 3X leverage. I hope everyone had a good holiday weekend and is ready for the new week. It should be an interesting one. We'll see everyone tomorrow. Happy Trading.

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Dow Early Close Reaps More Gains


Despite it being Black Friday and the short trading day due to the holiday, we were still able to see some gains, closing at 8829. So as a whole, we ended the week pretty strongly, thanks to some pretty influencing announcements, the bullish season, and some global support. We could see this rally continue into next week, considering the momentum behind it, especially if we begin to see some resolve with the GM fiasco. With that, it could even be a strong rally, despite the state of our economy. Those like me in some long options, should see some big gains in them if we see this aggressive bear market rally aggressively push towards 9500.

However, a new month brings new economic data, which as recent months have shown us, can be very depressing. Also, we may find some pretty disappointing numbers from Black Friday, even with the enormous price slashes we have seen this year. In any case, I believe this rally will be short lived.

China experienced some hiccups today, dealing with their central bank. As a result, FXP and EEV ended up with the bunch, which hopefully they will make a trend of. I still make my case that it doesn't matter what announcement anybody makes, if the banks aren't lending money, our markets and economy are frozen. And there are no signs of any relief anytime soon.

This bear market rally offers a great opportunity to buy into some short positions if you haven't already. It is when people believe that the worst is over and we are hit with devastating news that causes true panic. Like a thief in the night. Some people feel that we have "factored" in the bad news to our current market, so that now there is nowhere to go but up. I couldn't disagree more. I believe a lot of people are naive to the problems going on across the world. It is easy to forget, especially during this time of holiday cheer. Things that happen in the corporate and business world, usually do not effect the consumer until 4-6 months later. The news out there should not frighten us, but instead prompt us to prepare ourselves. Not only by altering our stock positions, which I talk of mostly on this site, but also altering our lifestyles, to not fall victim to this crisis. One of my goals of this site is to incorporate all aspects of being financially prepared and balanced to hopefully help you as it has helped me to find gain and stability during a tough market. You will see more of these tips as time goes on.

I did begin a new position in SRS at $120. I did not buy in too much, as I feel we may still rally into December, giving me more opportunity to load up on SRS at lower prices. In my opinion, the retail disaster that will come in 2009 will be something we haven't seen in most people's lifetime. With the housing growth bubble, many national retailers leveraged themselves very highly to try and keep up, opening numerous locations in sub par markets. Heck, haven't you seen the Starbucks right across the street from each other? What were they thinking? In doing so, many retailer's cash liquidity has been reduced to almost nothing. Having no cash in this market is a straight road to bankruptcy. As a result, SRS should continue to grow back to high numbers in my opinion. I think these effects will have strong influences on EEV and FXP as well.

Another thing to consider when dealing with EEV and FXP is the goal the US will have for the next few years to stimulate job growth. Expect Obama to give many to incentives to businesses and manufacturers for keeping their production and laborers with the US, in attempt to lower our net imports from other nations and stimulate job growth within the US. Other nations should follow suit, especially big players like Germany, Great Britain, and Russia. For nations like India and China, this could cause big problems. Much of their business comes from their exports to other nations. Due to the size of their population, this has been essential for them to continue to grow and expand. I can't see them recovering very quickly with having been involved in so many other economies. This is why I choose to short emerging markets and China. While their growth was 2 times the normal during good times, I believe it will be the same for th bad times. These are just my thoughts on the issue. Take it as you will.

In any case, we ended the week up, which we haven't seen us do in a while. Like I've said before, this may continue into next week and even into most of December, as holiday shopping usually brings out the bulls. However, try to remind yourself of our economic conditions and the things we discuss on this site when thinking of what to buy. This market is still vulnerable to quick movement swings, so try not to get greedy. For me, I finally just have to force myself to sell and take profits even though my conscience may prod me to leave it in longer. Many times I am grateful I did so. I hope everyone has had a good Thanksgiving weekend and we will see what the new month will bring us on Monday. Thank you for the donations, it is much appreciated and thanks to those that participate in the site. I always enjoy others insights and comments. Happy Trading.

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Planning For The Future - What To Buy For My IRA?

For this Thanksgiving day, I thought I would take a break from the woes of our current market and discuss some ideas that we can take advantage of in this market for our future well being. One of the biggest issues on The President's agenda is how to deal with the retirement of the baby boomer generation. I have had many analysts say to me, "Don't expect social security to be there for you when you get old." This can be scary if you're banking on it, but if you plan the right way, you don't have to worry about it. So today I just wanted to talk about setting up an IRA account and, in my eyes, some great buys on discount in this market to consider for your IRA. By the way, if you have not set up an IRA account and are interested, TradeKing is having a promotion where they will give you $50 credit for signing up before December. Pretty good deal and that can be your first deposit! To find out more, go to www.TradeKing.com.

IRA, or Individual Retirement Account is an account that has been set up to allow people to begin their retirement savings at a young age. One thing you will find, is that if you are on the right side of Time Value of Money, it can work to your favor! To help promote these accounts, the Government has set up some incentives for people using them.

There are two main types of IRA accounts, Roth and Traditional. Traditional IRA accounts are accounts that you contribute to, to where you can deduct your contributions on your tax statement. Your gains from this account are tax deferred to when you withdraw from the account. Roth IRA accounts are non-deductible but also are exempt from tax gains. It is up to you to decide which account works for you and which one you are more comfortable with.

There is a maximum amount which you can contribute to this account on an annual basis. Recently the max was bumped up to $5000 from $4000 in 2007. It is usually good to be able to max this out annually if you can to take advantage of the tax protection, at least I do anyway. The point is to leave the money in the account, until the appropriated age of 591/2 to avoid the bad 10% penalty of early withdrawal. However, there are certain things that have been approved for early withdrawal, such as house purchases and education funds. Check with your accountant for more information about that.

So what should go in this account? Many people have a variety of investments in their own account, depending on risk strategy. Here are stocks I have purchased for my own account that I have found to be great buys for the long haul. Please understand, I still believe there will still be more loss in the short term, but for my IRA, I think these stocks have reached low enough.

VZ
Verizon has shown it's ability to hold strong in this tough market. I also find it to be pretty recession proof. Cell phones have almost become a priority in the US household and Verizon's coverage area gives them competitive edge against competitors. To top it off, they have a 6% annual dividend, which is what puts this stock over the edge for me.

GE
Even though General Electric has taken a beating in the recent months with everything else, I still find it at a steal for the long haul. People have their doubts of GE's ability to compete in this modern market, but come one. It's GE, the All American company. Plus, you have backing from Mr. Buffett himself. At $16, with a very strong 7.9% dividend, I don't see how you can go wrong with this one.

COP
Conoco Phillips - I believe oil is the air of the future. The more tech savvy other nations get, the more consumption will occur. Even though we saw the bubble pop recently, I think Oil belongs close to $90-$100 a barrel in the long run. I also think Conoco has good leadership and is ahead of the game with competitors. At $54 with a 3.7% dividend, this one is in my IRA.

STP
Suntech Power - This stock has taken a beating recently with the demise of oil prices. As oil prices go down, people feel that there is no need for alternative energy, including solar. However, this is not on Obama's agenda. He has already approved an alternative energy bill for when he is in office, that gives a lot love to solar. In fact, STP already took a big bounce this last week from the announcement. As soon as oil is back up, solar will be leading resource for alternative energy, and Suntech is a big player in that market. It may struggle here in the short term, but this stock is at least a $40-$50 stock in a stable market. Its 52 week high is $90. So you see just how high it can climb. Plus it diversifies my portfolio.

AAPL
My tech pick, Apple. I think they are the new standard for computers, handheld media and phones. Sure Microsoft owns the PC market and software, but Apple is so well diversified they make me very comfortable, even in a shaky market like we're in currently. With there creative innovation, I believe they will continue to lead us into new avenues of technology. I believe they will once again return to a $200 stock price in the future. Plus they have 24 billion dollars in sitting in cash. That always helps!

So these are my main picks, for the current bottom. I try to stay diversified and stick with companies with low debt, high market caps, and a strong player in their market. Remember, IRA's are untouchable for a while, so it shouldn't worry you as much what will happen in the next 1-2 years as much as where it will be in 30 years. I hope this gives you some good insights in planning your retirement strategy. In any case, everyone should strive to plan their own retirement and start now! The earlier you start, the more you will have to retire with! Have a great Thanksgiving everyone, we'll see you tomorrow!

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Five Reasons I am Thankful To Be Short In This Market

Kermit The Frog said it best when he said, "it's not easy being green." Christmas came early today for the bulls, as we saw government intervention all across the world. It must be everyone's holiday cheer. Even with some of the worst economic data we have received all year, we were still able to close at 8726. We expected this rally, however, I personally felt that it would come more aggressively in a smaller time frame, than spread out into more days. This was the exact reason why I held on to most of my long options, and good thing. The November and December months have a history of ignoring outside data and bulling forward. The big question is, will it last? My thoughts, even after today, are NOT A CHANCE!



By now, many of you may think I am just a pessimist, and I'm not, I swear. I have made just as much money on the long side than I have short. There are just too many reasons that exist to make me feel comfortable with going long again. Sure, we had some great rallies this week, and you know what, I think it will continue for a bit. But there is too much hype derived by speculative announcements and mythical figures to be anything solid.

China made a HUGE rate cut, which of course is going to send them flying a day or two. Europe also joined in the cheer by adding more money to the bailout pile. These two announcements of course killed FXP and EEV for today. Which with those two, I just have to sit back and wait. It could be December; it could be January. But I'm still backing them 100%. Cheers to the people that are just starting to buy these at their low rates!

Many agree this rally may continue for another 1000 points or so, so those of you skeptical about shorting, you may want to wait another week. However, if you miss the boat, don't blame it on me. However, most also agree that we have not hit bottom and that the rally will end with an even worse sell off. So I will just utilize this time to make even more money on my long options until we see it come down again. In the midst of all this green, I'd like to give my five reasons I am thankful I'm short on this Thanksgiving week.

1) This Is A Global Recession
These days we're in aren't like the recessions of the 70's-90's, where we are feeling an isolated recession, and we can look to other flourishing countries to help bail us out. It's everyone for themselves right now. With our economy now being a global economy, this does not give us many to people to go to for temporary relief. All nations are feeling pain right now. Although, most people may seem optimistic of China, China is struggling. Several Chinese toy companies, which is a prominent trade for China, have either shut down or have laid off several employees. Yesterday, there was a huge riot of employees claiming they had been wronged. Get use to seeing that.

2) The Warren Buffett Farm Analogy
A couple months ago, the all wise Warren Buffett gave a great analogy to what is going on with our nation's economic position. He said, "We're like a very rich family; we own a farm the size of Texas but want to consume more" than the farm generates, he said. "Every day, we sell off or mortgage a piece of the farm."

If the policy continues, over time, the rest of the world "will own more of our farm" and future generations will resent that they spend part of their workweek paying off those costs of consumption, he said. We have been mortgaging off our "farm" for years now and our national debt proves it. There is no way the government can conjure up all the money needed to free Americans from our debt dilemma. Pretty soon, us as Americans are going to be feeling this first hand.

3) Housing Market Leads The Way
Today's housing announcement should have shown everyone just how bad of a position we are still in and should be in for quite some time. The point is, even if it turned into a buyers market tomorrow, it would take us 6 years just to buy all the inventory that is currently on the market, without bringing in new inventory. Housing prices have a direct correlation with consumer sentiment. No one likes to know the value of their house (usually people's main source of equity) has been cut in half. Everyone now feels they are invincible to foreclosure and bills, thanks to Uncle Sam. This is not the case. A majority of people will not be bailed out of their mortgages and credit card bills. Once this sets in and creditors come knocking, this sediment will charge downward. The housing market led us into this crisis and I believe it will lead us out.

4) Many Hedge Funds Not In The Market
There is a lot of money still sitting on the sidelines. In fact, most hedge funds still are sitting on the sidelines. Despite the rally today, the volume was very low. This is not the sign of a turnaround. A lot of the market is being dictated by uneducated yahoos, feeding off emotion. It is no wonder there is no correlation in the market right now. So why are hedge funds sitting on the sidelines or staying very conservative? I think because they know we've still got a ways to go.

5) No Banks and No Money
Last, but probably most important, No money! Nobody can get money right now. Most American business buy their inventory on margin (or on loan). With the big drop in sales, many retailers cannot make their margins to buy new inventory. This is what exactly happened to Mervyn's. This is also the problem with small business owners, real estate owners, joint venture funds, commercial REITS, Insurance and pension funds and others. When the financial markets went away, these all went away. If you talk to any banks, especially in their underwriting department, you will find that they don't plan on giving out many loans for a while now. This lack of liquidity will continue to hammer down on our economy.

These are the main reason I cannot jump on the green band wagon. Even though I am hurting in my shorts, I will just wait. I am making great money in my long positions and will look to liquidate those, probably next week. I was able to begin my SRS purchasing today. I will continue to buy SRS if it continues to go down. Q1 2009 should be a horrible quarter for retail sales and real estate owners. If you want to be long, for comfort, I like VMW, VZ, DIG, and GDX (these are most that I am in). We will continue to get more "Obama promises", but as conditions continue to get worse in the US, and these problems begin to hit people's homes, we as a county will become a lot more skeptical. I hope everyone has a good Thanksgiving and has something to be thankful for. Have a good rest of the week and Happy Trading.

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Consumer Confidence Up - Market Reacts With Mixed Emotions

You know times are getting bad when banks are offering trading accounts with free commissions attached. I thought I would never see the day. In my research today, I found Zecco, an online brokerage company, offering free trades for new account sign ups. I think you get 10 free trades every month and then it's only $4.50 per trade, wow. There platform was pretty solid too. I am highly considering switching over from my rip off platform! Anyway, if you're interested you can find more info at Zecco.com


I think it was only two days ago you couldn't go to any financial related site without seeing the words, DEPRESSION, MARKET CRASH, FINANCIAL CRISIS, etc. Today, it seems as if everyone is back to normal, like the past 6 months haven't even existed. Today, we're seeing, THE WORST IS OVER, WE'VE REACHED THE BOTTOM, WELCOME BACK BULLS. Oh how quick we are to forget. I compare this time much like the eye of a hurricane, except that the back part of the storm is a category 5, compared to the category 3 we just weathered. Historically, holiday season is the bull time of the season. So I don't find it that shocking that our markets are holding up relatively stable (only for the past 3 days!). Also, considering that we actually increased in consumer confidence this past month (the market expected a loss), and we still barely made it into the green today, makes me still incredibly skeptical about the market and a strong believer that the worst is still very much to come.

To increase the good fluff, Secretary Paulson discussed the continued efforts of lowering mortgage rates by purchasing mortgage debt, hoping to unfreeze the very frozen financial markets. Obama has also discussed his plans to cut spending to help balance the budget after the spending of the huge expected dollars needed to help fund this multiple trillion dollar effort. I also woke up with a gold nugget under my pillow. Words are words, and although they sound inciting and persuasive (especially out of the mouths of politicians), it is a lot harder than people think to get all these problems fixed. Even if we made the perfect move, every time, it would still take over year to get everything sorted out. Once again, we find ourselves in a false reality with talks of good news to try and over power reality. Holiday cheer helps with keeping spirits high, but I believe we are in for a mess in or even before first quarter '09.

Nobody talks of inflation (in fact everyone talks of deflation worries), however when we bounce from this thing, I see us bouncing right into hyper inflation. I mean the discount rate is almost down to 0! Sure the Fed can quickly meet to tighten money supply, but I still see interest rates heading back toward the teens, at least for a short period. There has also been a severe over correction on commodity prices. We could see a quick jump back up with commodities as we regain some of our footing. This could also lead to a quick inflation. This is why I have been extremely bullish on Gold.

I don't believe, aside from mortgage debt from houses, much of this credit crisis has hit the actual "consumer" yet. Sure, many have lost their jobs and may be living off of severance or unemployment right now, or maybe even an emergency fund. Try being jobless for a year, unable to open any lines of credit, with unemployment checks running out, 3-4 mouths to feed and nowhere to work. I think we are headed for these types of times for Americans. As much as I want to rebound from this crisis, and make some money on the long side again, I just can't find the will to believe the worst is done. So believe what you want to, I personally feel that the worst is still yet to come.

Overall, it was a pretty good day for me. I saw green in almost everything. Both FXP and EEV ended in the green, while UYG and DIG also continued to receive. Even though I remain very bullish on gold, I sold a lot of my GDX options today (more than doubling my investment), only because I think I can catch it again on another dip. Anytime I can double on the long side, I take it! I just think even gold will get brought down with the rest of the market again before it pops good. China continued to show weakness yesterday with doubt creeping in and many feeling like their gains the past few weeks have been a little too optimistic. I believe that perspective will continue for a while.

I am continuing to hold on to my UYG and DIG. Even though I believe our woes with oil is still not over, OPEC meets on Friday to discuss the possibility of maybe yet another cut in supply. This usually causes a nice little pop. What I have noticed, though, is to usually sell out of these "anticipation pops" the day before the news is announced, especially in this market. Usually, after the announcement we are finding a lot of "over anticipation" and correction in value and can sometime eat into your profits anywhere from 3-6%.

SRS was almost in purchasing position. If it gets below $120, my round of buying will begin once more. Also, for you day traders, SRS is a great intra-day trading fund. Today, the spread on SRS was from $125 to $152. That's a 21% spread. Time the bumps right, and you can make a pretty healthy 1 day profit. This goes the same for SKF. It should be interesting to see how the market reacts tomorrow, being a day before a holiday. It's almost like a mini Friday. I think we have been itching for a pretty strong sell off, so don't be surprised if we spend most the day in the red. However, we are in a state of "bailout fluff" again, so more news could still bring some gains. I just think people want to pocket some of these recent gains and go and buy their turkey. So expect to probably see us teeter tottering back in forth from red to green, like we saw today.

I think the resistance we're seeing during this "bull season" is showing that we are definitely not out of the hole yet. Not even close. This year's black Friday has to compete with BK Friday, who are all the retailers liquidating their inventory for Chapter 7. Housing sales got killed today, which was expected, but was barely noted behind all the noise Paulson was making from the podium. While volatility still remains high, and volume is still higher than average, we continue to be in a vulnerable state for market failure. Stay on your toes, and watch out for investing in retailers for the holidays. Their usual holiday bumps they receive, could be replaced with losses this year. Have a good evening everyone and Happy Trading.

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Citigroup Bailout Spawns Monday Dow Rally

Well, it wasn't the announcement I expected (thinking it would be the GM bailout), but its resulted outcome is similar to what I expected. The government announced that they would back up Citi's assets which was a sight for sore eyes for financials. Financials took one of the nastiest beatings of history last week as we saw several banks heading below the $5 stock range.

The announcement caused, once again, another one of these aggressive, emotional rallies which sent prices flying. Goldman, Morgan and Citi were all up over 30%, while UYG was also up close to 30%. This drive in financials brought the rest of the market up while people began to see some optimism in trading. Talks of what I like to call "The Obama Bush" stimulated some confidence, as people feel they are united in providing another band aid, I mean bailout before the end of the year. However, I still believe we are no where near the bottom.

Sometimes I find days like this comparable to an acid trip or some other form of distorted reality. Off of speculative news, people are able to forget all the problems and failures going on across the country (and world) and believe we are all well again. This is why you should not mix emotion with investing.

All the shorts took a beating today, which means one thing for me. They're almost ready to be bought again. SRS and SKF took massive beatings, which made me grateful for getting out of my SRS position on Thursday. FXP was also down with the mix, but held its own far better than most of the others. EEV took a hard beating, due to the strong week opener in Europe yesterday. I did pick up some more EEV at $80. Even if it continues to go down in the short term, I think this is a steal for this fund. Even though the shorts have been beaten hard, it only takes 2 to 3 days for them to bounce back. I probably should have sold more on Thursday just to get the gains and re-lower my basis, but hey, you can't always get it right.

On the bright side, my long options went off once again today. I made 30-40% in every single one of my long options. GDX remained resilient as did DIG. Also, I finally got the love I was looking for from UYG. See, in one day you can see your options soar. Having these options actually kept me in the green today, despite FXP being down. This is exactly why I hedge with them.

I was very close to pulling the trigger with some of my long options and selling off some of my profits. I just don't think this rally will last for very long. However, these options are what is keeping me in the green right now, so I would rather take the loss on a down day tomorrow, than risk not being hedged for another rally. I may regret it tomorrow, but I still think this bailout hasn't completely fizzled yet. People believe just because Citi gets bailed out, all of the other banks are saved. That's impossible. All it will take is another big bank going under to tank financials again.

We do have a lot of forces pointing to a down day tomorrow. We have the consumer confidence report, which could shake things up a bit. Coupled with that, we could also see some healthy profit taking from the last two days of gains. We saw some sell off hit towards the last few minutes of trading today and on into after hours. If so, I will probably sell out of my UYG options (as that one worries me most) and maybe my DIG options. I plan on holding onto GDX(as well as my Apple), because I still think we have a ways to go with Gold. If we are indeed up another day, I will definitely sell out of my DIG and UYG options, while holding onto Apple and GDX.

The market is just getting more and more volatile, which makes me more and more nervous. It is amazing how quickly people's outlook changes. If you continue to look at the fundamentals and see what is to come in 2009, I don't know how you believe the worst is over. These short term bumps just set us up more and more for a crash. I may have to hang out with my inverse ETFs for a bit, but I remain VERY bullish on them. In fact, if I can see SRS get below $120, I will be back in that Rock Star.

China showed weakness yesterday, especially in their banks, which is why we saw less losses from FXP today. I believe there is a lot more of this to come. World markets should respond pretty well to our jump today, so EEV may struggle again tomorrow. However, keep an eye on these key economic data announcements that come out, because they can put a quick halt to this joyride we're on. I feel very happy about today, considering I have now made a very healthy profit on my call options and hopefully get deeper into some shorts for the downfall. I hope everyone had a good weekend. I will see you tomorrow.

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Call Options Trading - How To Buy and Sell Option Contracts

A frequent question I have been receiving in emails have been dealing with my decision to trade options for my long positions. I understand option trading can be confusing, but I thought I would dedicate a post to give a quick definition of options trading, more particularly call options rather than puts, considering that calls are mostly what I have been doing lately. Hopefully I can shed some light on why I choose to trade them. If you are currently having grief with your trading platform or are looking for a new platform to trade options with, I recommend TradeKing. Good platform, some of the lowest commissions I have seen, and they are running a $50 credit promotion for sign up before December. You can sign up here: Open an account at TradeKing and get $50.


First, an Option is a leveraged contract purchased at a premium, representing the control of 100 shares of a given stock. In other words, when buying an option, you are buying a contract with the "option" to purchase 100 shares per contract at any time within the contract period. Below is an example of a Call Option table for Apple. First notice that this is an option expiring Fri, Dec 19, 2008 as it says in the upper right corner. This means that the terms of this contract are valid until the given date. You can buy contracts years in advance of expiration. We will use this Dec 19 ending contract as an example. Lets brake it down.



Strike - This is the price per share that, if executed, the buyer of the option contract is able to purchase the stock. For example, circled in red is $90. This means no matter how high apple goes before the expiration date, I have the option to execute my contract for $90 per share.

Symbol - Every option contract has a unique symbol, much like a stock ticker. This just identifies the actual contract. You can track these in your portfolio traders much like regular stocks using these ticker symbols.

Last/Chg/Bid/Ask/Vol - These are all symbols that I am sure most of you will recognize, because they are found in the trading of normal stocks. They trade much like normal stocks. However, lets dive into the pricing of options.

Buying Call Options
You will notice on the $90 option, the Bid is $4.90 per contract. Now be careful, because this does not mean that each contract is $4.90 each. This means that your paying a $4.90 premium per every share you buy. Having 1 option contract representing 100 shares, this means that 1 option contract for this contract would cost you (4.90 * 100 shares) or $490. This represents your cost basis, as well as your maximum loss if Apple decides to tank. Remember, this does not give you ownership of 100 shares, just the right to purchase 100 shares at the "strike price." If you do decide to exercise the contract, you will have to pay the additional (100*90) or $9000 to own the shares.

So lets say we purchase this contract and pay our $490+commission. To do this, we select the "Buy to Open", which means we are opening this contract. As Apple stock continues to move, so will its option price. The only difference is that the option price will move with much more volatility, because of it's 100/1 leverage. This gives buyers a good opportunity to receive bigger gains as they choose to buy stocks at the right bumps. From now until the expiration date, we are now able to resell this contract. So if Apple ends up going up to $95, its option price will go up considerably more on a percentage basis. If we were to turn around and sell it, we would select the "Sell to Close." This would then free us from this contract. Many times you are able to flip an option contract within a few days and double your money. This means you are able to make a nice healthy profit without ever having owned the stock! However, this can get you both ways. It can go down just as fast as it goes up.

As time moves closer to the expiration date, demand will go down for the contract, especially if you haven't reached your "strike price." It is best to try and resell your contract with some time left before expiration. Anytime your option is "in the money", this means that the price of the stock is over the strike price you purchased it for. This usually will give you a good profit if you can get your options in the money.

When you buy an option contract, you are not obligated to exercise it. In fact, I rarely exercise an option contract. My goal is always to be able to flip the contract before it even gets close to its expiration date. However, if you wish to control the shares at the strike price, you're more than welcome to. I would just rather make my profits on the option appreciation, rather than forking up more money to purchase the actual shares. It's less of a hassle for me. If you choose never to resell the contract for whatever reason, your contract would then automatically expire (unless it was in the money, where sometimes banks will automatically exercise them) after the expiration date, freeing you from the contract.

The reason I choose to trade options, especially in this market, are for a few reasons. First, I like the volatility. If I time the bumps right, I will be rewarded far more on my options, than if I were to own stock shares for the same cost basis. Second, the ability it gives me to control hundreds of shares for a minimal basis. Options minimize my downside risk considerably rather than if I chose to own the actual shares. This makes me a lot more comfortable, especially in this market. Options have also been in more demand with the uncertainty of the market. On up days, options can be trading considerably higher, just from the premium people are willing to pay for the security.

Another side to trading options, are playing the short side, or Puts. This usually requires margin trading (which essentially means borrowing from your bank) and can be very risky if the market doesn't go the way you want it to. Sure, you can make a lot of money off of naked shorts, but I choose not to play them as often.

Most every Investment Bank allows for option trading. For some banks, a new application is sometimes required to be approved for option trading. Even with that, many times you are limited to what kind of trading you can do, depending on your experience. They will usually start you off of non-margin option trading to help you learn the ropes. If you can't trade options, check with your bank you trade with. I use Zecco.com a lot as I have found they have some of the most competitive prices for commissions.


I hope this helped those of you that have been wondering how to trade options to see if it's something for you. I have found options to be very profitable for me in this market and a great hedge for my short position. Covered calls can also be a great way to make extra profits on a long position you may be holding. By doing so, you can continue to lower your cost basis.

I hope everyone has a good week and holiday. See you tomorrow.

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Crash Market Stocks With A New Look

YES, YOU ARE ON THE RIGHT PAGE. I recently updated the site to a new look to maximize my writing space. Sorry to anyone who was fond of the leprechaun green, I was just too claustrophobic. I apologize in advance for any broken links or errors there may be. I will be working to fix out all the bugs over the weekend. We should be in for one heck of a week this week.

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Bull Wins Today - End Of Week Rally Brings Dow Over 8000 Again

There we have it, The Bull wins today. It was a hard battle up until the last hour. With the help of Obama's cabinet picks, especially the new Secretary of Treasury (Timothy Geithner, the New York Governor), the market made a dash for green and far beyond. Once again we see the sensitivity of the market in action. The speculation of the new Secretary of Treasury ignites a 500 point rally? Really? These are the times we're in. Wow.

I discussed the probably of a strong short term rally, based on a new band aide fix that temporarily numbed our current pain. Which is why I keep my long options as a hedge. Even the guy's hamburger shop that's about to go out of business got a bump today with this rally. However, unfortunately, I remain a realist. Our volatility increased more today, as well as our volume. In my opinion, this just keeps pushing us closer to capitulation. The more this market sets up emotional traders to play in the market, the more vulnerable it is for a downfall. In a recession, people are far more inclined to sell during a down day, then to buy during an up day. This is why you usually see the down days hurt more and last longer. That is exactly what caused Black Tuesday.

The bad news. I know, I should have sold out of FXP yesterday, right? Although I did expect a strong rally today, I did not expect FXP to take this much of a beating. Still, no worries for me as I have said before, I plan on holding this time around for a couple of months. We just have to start over again, ugh! China is experiencing some serious Government intervention, which is causing people to think that it could still be a profitable place to invest money. I don't buy it one bit. We're talking about the country that lied to the world to get a gymnast into the Olympics. In my opinion, pretty soon we will see very bad days in China as more and more businesses are shut down and the poverty level increases. I remain VERY BULLISH on FXP, even more so on the low price.

I did not buy more of FXP, as I am already heavily into it. I did, however, pick up some more EEV shares. Not much, but enough to earn back some of the losses that happened today. So yes, my shorts got killed today, but let's not forget how great they were this whole week. 4 days for 1? I'll take it.

The good news, were my long options shot out of the park. My GDX options were up 133%! Gold has been waiting to launch, it just needed some market support. I continue to be bullish with GDX. With a rate cut approaching, I think gold will be in high demand. My DIG option was up 40%, and my other options were up about 20% combined. So even on a day where I should have gotten killed, my losses were severally less, because of these options I hedged with. This is exactly why I choose to buy them, even in this crappy economy. These bear market rallies can be fierce!

I chose not to sell any of my options today, despite the very large gains. There is still one variable that hangs and could potentially spawn another big rally like the one we saw today. That is the GM bailout. Expectations have been lowered, dealing with the possible bailout of the autos. If next week or over the weekend they were to announce a bailout plan for them, we would most likely have another rocket of a day. In case of that, I want to be hedged with my shorts on a day like that, where we could see a big potential for green. So I will hang on to them for a bit.

Fundamentally, nothing changed today that wasn't there yesterday. What did happen is that there was no news announced (which is a good thing for the market these days). Also, there was the new Secretary announced. This does not change our daily increasing jobless numbers, broken down banking system, failures of small business, and a holiday spending season that should be a record low. When you mix emotions with trading, it may feel like the worst is over on a day like today. However, when you look at the facts, it's easy to see that the worst is yet to come.

For next week, I will look to see how the market is established on Monday. We have some key announcements next week. The one I am especially eyeballing is Consumer Confidence on November 25th. Confidence has been thrown out the door this past month and should be devastating. Existing home sales should also be a doozy on Monday, so we could see this rally put to a quick halt with some of our REAL economic data. Thanks for all the comments and to those that have donated! It is much appreciated. I enjoy the comments as well. Have a good weekend and we'll see you Monday. Happy Trading.

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What Is An Inverse ETF?

I have been receiving several emails asking to know more about these inverse ETFs that I talk about so frequently on this site. So I thought I would do a little mid day bonus to discuss them, and dive into them into a little more detail. Sorry, if this is elementary for some of you guys out there, I just thought it would be a worthwhile reference to many out there.

First, lets start with the basics. What is an ETF? ETF or Exchange Traded Funds, are a portfolio of different stocks, industries, or bonds that are traded much like a regular stock is. ETFs are very similar to index mutual funds, but I prefer playing ETFs more than mutual funds. The biggest reason is that you can trade an ETF at any time during the day, much like a stock. Mutual Funds you buy into, most likely doesn't process until the following day(same with selling it). Also, usually the expense fees are smaller with ETFs, so I prefer to stick with them.

With ETFs you are able to buy into sector or industry by buying only 1 fund. You can buy into the Nasdaq, Dow, or even foreign markets. ETFs started in the 90's (SPDR's) and have grown tremendously in poularity the past few years. It is a great way to ride the bumps with more volatility rather than just trading stocks.

In this market I like to stick with Proshares ETFS. By looking at their ETFS, you can see they have several options to choose from. One of the options you will see is their list for Short Proshares, which are known on Wall Street as Inverse ETFS (analysts don't like using the word "short", it's like Voldermort in Harry Potter). These short proshares perform well as their focused benchmark goes down. For instance the short proshare DOG shorts the Dow 30. So as that sector goes down, DOG goes up.

There are also proshares called Ultra Proshares (which I usually like to trade), which are doubled leveraged ETFs that are more volatile. So an ultra short proshare like DXD, which shorts the Dow at double leverage will most likely be double the inverse of the Dow 30. They now even have triple leveraged shares, which I do not deal with much. Too risky for my blood and the volume isn't their for me yet. Just remember, the leverage is a two edged short. It goes up twice as much and then goes down twice as much.

Here are some Top ETFs I like to track and play on the bumps in this market.

SRS -
My favorite Ultra Short Proshare. This is an ultra short to the real estate index. Having the Real Estate market a big part of my life, I find this as one of my niches. I was trading SRS 6 months ago, when I saw early signs of real estate failure for the next few years. SRS shorts big REITS, retailers, brokerage companies and others which most are all struggling right now. It is no coincidence that this has been a rock star ETF.

SKF - Another fabulous one. SKF is an ultra short for the DOW financial indexes. You can probably guess that it has been performing quite well that last couple months (almost hit $300 today).

FXP - An ultra short to the China FTSE/Xinhua China 25 Index, which consists mostly of Chinese financials, energy, and communications. I believe this one is pretty undervalued, considering what China's growth rate was and what the inverse of that looks like.

EEV - An ultra short for Emerging Markets. Being a "global crisis" now, many other countries, along with US, will be hurting the next couple of years.

Other short proshares to note that I like are SDS and QID. As of now, there are only a few on the long side that I trade.

GDX - A gold miners ultra long fund. This tracks the gold sector and gets strong gains when it's up. With the almost sure thing of another rate cut, look for gold to keep getting stronger.

DIG - An ultra long oil fund. Oil has been hammered the past few months. With a cold winter months ahead, I can't see oil staying at these values for very long, no matter how many people car pool in a Prius.

UYG - Ultra long financials (opposite of SKF). This one will be a great buy in a few months to come when banks begin to get their act together. Keep your eye on it for the long haul for the ride back up.

Here are a few that I like to keep my eye on for the time being being. I thought it would be good to get this post out, for those that have been incquiring of what ETFs are and which ones I look at. It's been another volatile day again today and it looks to be unsure where we'll end at. I believe we will get a pretty strong run, which ever way we decide to go (up or down), towards the end of the day. I will give the weekly wrap up later.

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Panic Remains In Wall Street - Dow Flirts With 7500 Mark

I thought it was going to happen. Today, during what I like to now call "The Countdown" (last five minutes before close), the Dow was dangerously flirting with the 7500 line, which many believe is another threshold. We saw it get to 7506 and then quickly retreat, settling at 7552 at the close. If you were to turn your computer off at 9:30 (PST) and came back to check it after the close, you would not have believed it. Today, we had almost a 700 point swing, with an ending volume of about 528M (Avg being about 333M). So we are continuing to see an increase in volatility and an increase in volume, which mixture can ultimately be poison for the market.

Earlier, it looked as though we were going to rally. But at about 11, it all began to crumble. Then it really kicked into gear the last 30 minutes before close. Even though we look at awe at the close, is it really all that surprising? In fact, even in my post from last Friday, I talked about the very good possibility of reaching 6500-7500 range by tomorrow. Everywhere we look, even globally, there is no good news. The jobless count continues to go up, and financial markets continue to go away. The government is like two rival gangs trying to get along, and our retailers have no access to money to buy new inventory, even though the consumer probably wouldn't be buying it. The bad thing about it all is that I believe we, as the consumer, haven't even felt the effects of this crisis all that much. 2009 will be a tough year for most Americans and many other countries.

Well, not to be a Debbie downer, as I am sure many of you, like me, had a pretty successful day today. Sure, my options took a bath. Oil has just been crushed. Once it got under $50 a barrel, it was a free fall. I think oil will continue to struggle for the next bit, but I am still confident I should get a healthy bounce back up before my options expire. Apple and UYG was down with everything else. GDX remained down, but held well against the turmoil. In fact it was up close to 6% earlier in the day. Gold is just waiting to take off, it just needs some support from the rest of the market. This is why I play the options on the long side. As much as all of them got killed today, my losses were pretty minimal.

In the midst of all my down long options, I still came up very strong, because the bulk of my positions are in FXP, SRS, and EEV. I finally shaved a majority of my SRS, I mean how greedy can I get with that stock? We saw it get to $269. What can I say, Rock Star. FXP continued to rise, pushing its way towards $100. FXP was held back slightly today with rumors of China investing in their own agriculture market (only being up 8%, boo hoo, right?). These are all head fakes. FXP should be over $100 in no time. EEV was up a strong 13.5%, which gave me some good profits today.

Tomorrow will be interesting. After the close today, Dell beat market expectations with their earnings, which shot their stock up over 5% in after hour trading. Apple and Google are also getting some love in after hours. News like this could be just enough to propel a nice bear market rally tomorrow, especially for tech. However, we shouldn't underestimate the devastation of what happened during today's trading and also the downward pressure from options expiring tomorrow. All the news will be talking about tonight will be the Dow Disaster. This should bring down consumer confidence, especially in the stock market. However, my gut tells me we will probably rally tomorrow and it could be strong. We may see a new resistance at around 7500, temporarily, unless that is beaten tomorrow. In that case, we could see ourselves heading to 7000 real quickly.

Days like today are why I like to wait until right before close to make my move. The market's momentum was totally different earlier in the day, and could have fooled people into thinking that we were going to end in a strong green. Heck, I was fooled. But with our recent volatility levels, I can't pull myself to make any trades before 12:45pm (PST), unless it's at the open (which I don't do much). As much as I wanted to pick up some more long options before close, I couldn't bring myself to go anymore long than I am already. I may regret it tomorrow, but I will still make profits elsewhere. Playing the options on the long side has really paid off for me. I do not feel nearly as much pain on days like today.

These next few days and weeks could be real defining moments for the market. Days like today may send a wake up call to Washington to put their differences aside and grind down and find some temporary relief. Whatever the case, it will probably not last. There are too many pieces of the puzzle missing, and too many cooks in the kitchen to fix the mess we're in. Take some Advil when you wake up, because it could be another doozy of a day. Expect to see similar volatility and volume that we have seen the last few days. Happy Trading everyone and I will see you tomorrow.

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Dow Closes Under 8000 For First Time In 5 Years - Still More Pain To Come

It looks like reality is beginning to settle in for traders around the world as we continue to be caught up in a whirl wind of havoc and bad news. Today we saw that the market has little patience or mercy for the doubts and fears going on in the world. Wow, there's a lot to talk about today...

Today is the first time the Dow has closed under 8000 in 5 years. It dipped below 8000 last month but came back above before the end of the day. Another historical number we saw today was our CPI numbers. We fell 1% for the month of October, which was far greater than expectations and is the single biggest monthly loss in CPI since the index began tracking in 1947. Housing starts fell 4.5%, which was near market expectation (but still depressing). Coupled with that we had a slew of bad earnings report from retailers as well as the auto bailout fiasco which still continues. Overall, it was a bad day for your average stock trader.

These are the things we have been discussing for a month now. No matter what new bailout news we receive, or little light given by government regulators, nature will take its course. And until the government allows it, unfortunately, I believe we will be in this continual roller coaster that can give traders a splitting headache. Not to say that I am a pessimist and wish the economy to crumble. I just saw the signs a while back and know that's what needs to happen in order to get things back on track, so why not make some money on the way, right?

So lets talk auto bailout. I still believe a lack of intervention from the government and the auto companies going under could be the shove the market needs to capitulate, especially now. I don't know if the government is ready to deal with that. I think we will see some agreement happen, even though I disagree with it. But until it does, it leaves uncertainty, which the market hates. Uncertainty and fear are key signs to capitulation.

So what else led to the downfall today? The FOMC minutes were released today from their prior meeting from a few weeks ago. In it they discussed of the probability of negative GDP growth for the next 4 quarters. Even though many of us have already expected at least that, to hear it come out of "The Fed's" mouth causes even more concern. Their suppose to be our super heroes right? You can see their minutes here.

In the midst of all this turmoil, I am still a believer of the good possibility of a rather strong rally in this bear market. In fact, call me crazy, but I picked up some UYG options (.UUFLF), considering UYG was down over 20% today. Financials have taken the worst beating of them all, and probably will continue to, but I just felt like it was low enough to give me some good profits for the next rally. These are those "defining days" I talk about that I like to wait for to buy. That was my only move today. Our "Rock Stars" looked great today. SRS and SKF were both were over $220, impressive. EEV is up to $110, and FXP is closing in on $88 (All were up anywhere from 15-25%).

My long options were down today, but not by much, surprisingly. GDX and Apple are weathering through the storm pretty well. DIG was hit hard do to demand uncertainty. Gold futures were up today and it's only a matter of time when oil is creaching back towards $90. When the next rally comes, they should perform pretty well. Plus, my positions in these are significantly lower than my short positions.

Tomorrow is a critical day. We have seen a lot of resistance at around 7800. If we punch through that bottom tomorrow, watch out. However, being in this fragile state, with a bailout announcement or some positive news, we could see a pretty strong bear market rally. It will take something pretty significant though, I would think. Which ever way we turn, expect some serious volatility and strong moves in whatever direction we're headed. Remember, this is options week, which usually entails some manipulation, so we could see some interesting moves before Friday. Either way, I believe FXP should be at $100 shortly, as China is sure to be dragged down with us in our bad news. If we do indeed rally strong Thursday or Friday, I will look to get out of most of my options and putting them right into EEV.

I hope everyone survived today and that your bleeding green. No one can be 100% right in this market. If you are, give me your contact information. Thanks for the insights with your comments. Happy Trading and have a good night.

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DOW: Higher Volume + Higher Volaitility = Scary Market

Well, as we discussed yesterday, we saw another similar day today that we did yesterday, except for much higher volume and much more volatility. These signs just reinforce my feelings of a near capitulation for the market. We saw the market get off to an uncertain start as everyone tried to digest the earnings report for HP and Home Depot. At first, we saw the market react negatively to the missed earnings, but later in the day, the better than expected report as well with their 4th quarter outlook helped fuel the market back into green.

I also don't find much coincidence that the market pulled a 180 degree turn with about a half hour until close. Some people thought the earnings report fueled it all, or some said hedge funds came in. Looking at the volume influx at the end of the day and the degree of turnaround (as you can see from the chart below), my thinking is that it was good ole Uncle Sam and the PPT. With their current congressional meetings going on discussing the bailout disbursement, we can't afford to have these continual downward days. This little bump at the end of the day and showing that we ended green will do a lot for the global economy tonight. Europe and Asia could not afford back to back days like we saw last night. Also, talks of bailing out the auto industry is becoming more and more difficult. If the government passes on bailing GM out, I don't see them hesitating very long to file Chapter 11. This would be World War III for Wall Street. Speaking of bankruptcy, Circuit City's current Chapter 11 filing will become a Chapter 7 by January. Wait and see.

As you can see from the chart above, notice the steeper and longer slopes toward the close of the market. This represents a higher influx of volume as well as much stronger support on the buy side. This usually represents either a mass rally (which I doubt) or some market manipulation. The way we were heading we could have easily reached 8000 by the end of the day.

With that said, overall it was a pretty strong day for me. Almost everything made me some money. Like I expected from the horror of a day for China yesterday, FXP remained very strong throughout all times of the day. We saw it almost touch 80 today at one point. It did die down with the rally towards the end, but overall held its own pretty strongly. SKF broke 200 today, while SRS was just under it. I also saw some pretty strong gains in my Apple and DIG options. I did not choose to sell out of any of my long options yet, because I didn't feel like this was the "bear rally" I am looking for. I still feel there is potential for a pretty strong bear rally before capitulation. So overall it was a pretty strong day for me.

For tomorrow, I think we have a chance to see this rally extend. Foreign markets should react pretty positively to the momentum swing we saw today, whether it was real or not. This could tee us up for a relatively strong day tomorrow. However, with the GM woes still lingering as well as more retailers that are to announce earnings tomorrow, we could also see a down day. Whatever the case, expect higher volume and even more volatility. With China showing its vulnerability last night, this should now make FXP a stronger performer for me the next few weeks.

Also, keep in mind, we do have CPI and housing starts economic data announced tomorrow. If these announcements are worse than expected, expect a pretty negative response, and vice versa. Either way, my portfolio should benefit on both ends. If we do indeed rally strong, I can sell out of my options and throw them back into EEV and SRS. The market is becoming more and more unstable, which makes me wonder how on earth the few analysts out there that are calling this a market to buy in can justify that. I think we have a bit more defining to do. Have a good night everyone, thanks for the comments and Happy Trading. See you tomorrow.

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More Bad News In Wall Street Means More Bad Days To Come

You have to love Mondays. Everyday, more and more, we see the market struggle to find stability. This makes us more and more vulnerable for capitulation, which is why I have been slightly adjusting my portfolio to be ready. We continued to see 3-400 point swings throughout the whole day of trading. The market was never satisfied wherever it was at. Unfortunately, for those looking for rescue from their portfolio losses, may not find rescue anytime soon.

Today we had some more great news. Citigroup plans to cut 50,000 jobs and Japan joined the club by officially declaring their entrance into a recession. Who needs doom and gloom to bring down the market when the standard, normal announcements are doing just that. The market still wants to do another bear market rally, but can't manage to pull it off. You can see the tendencies throughout the day. The sell off is just too powerful. All in all, it was a pretty non eventful day for me as I wait to see where we head this week.

FXP continued to struggle today, mostly still due to the stimulus money that was announced last week. There is a lot of speculation of where the money will be spent, that is giving a lot of Chinese stocks undue stock appreciation. However, FXP was still able to fight into the green and close at $70. I am more than fine with FXP, as I still am expecting slow gains for another week or so, until this bailout high begins to fizzle. I did pick up some long options. Even though I believe we will net red this week, I think we will have a pretty strong bear market rally one day this week. So I bulked up on some GDX, DIG, and APPLE options, mostly expiring next year, to help give me a little pop during those rallies.

I would like to see a rally either tomorrow or Wednesday to lower EEV and SRS, so I feel better about getting into them. I just think all these inverse ETF's are going to be the money makers from Dec-April. It is funny how some speculate China to not be that bad off, because their consumer savings are much better off than Europe and the US. However, when your #1 lender (The US) shuts down, and your #1 customer (The US) goes away, then you will stumble. Everyone around them is experiencing pain, they just have been covering it up the past two weeks with this stimulus package. So don't fret about FXP. It is ROCK STAR status.

Tomorrow should be another day like today. Everyday now is a possibility for capitulation. News such as GM going under, or another bank failure, or more recession/depression news could put the market into an unstoppable tail spin. We are walking on ice and it is slowly beginning to crack. And everyday that goes by with uncertainty, like today, the market gets that much more closer to a downfall. However, the littlest good news, could send us flying into another short term bear rally. Whatever the case, we will be trending downward. If we do indeed get a rally tomorrow, I will try and get out of most of my options. Long options act as a great hedge for a strong short position, because you have more time flexibility, less downside risk, and more volatility. It has worked great for me while buying short. Whenever/If we have this rally this week, I believe the next day will be BAD, so I want to be completely short, that's right, COMPLETELY by that time. I think after this next rally, we are prime for capitulation.

Even if we don't rally, a majority of my positions are short and I will perform very well. For December QID, SDS, FXP, SRS, SKF, and EEV will all be Rock Stars. I just want to be in as many of them, at a good basis, as I can. So, stay on your toes this week and watch the bumps. It is a dangerous market to "day trade" in because of the volatility. Every five minutes looks like the market is either going to tank or take off. Either way, you get the most definition of the day within the last 5 minutes of trading. I would try to be in your short position by now, because any day could be the day. Remember, until Januray 20, 2009, we will not see very many changes in policy with the current division of the law makers. This also gives momentum to a pesimistic outlook. Happy Trading and we'll see you tomorrow.

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Volatility Returns To Wall Street - Capitulation Could Be Near

Just when everyone thought the market was finding its footing and becoming more stable, once again we see aggressive volatility back in the market. The lead up is much similar to the one we saw leading up to our lowest point back in mid October. This causes me to speculate a little and discuss some interesting concepts.

As we know, there is a lot of technical analysis that goes into analyzing market trends and movements and determining bottoms and capitulation. The vertical rebound we experienced Thursday, and the volatility of Friday has set up the perfect scenario for what many believe are the gates to capitulation. So I thought I would share what I have learned.

The "G20", consisting of major global emerging markets leaders, are meeting this weekend to discuss the global crisis and maybe some possible resolutions to slow the bleeding. Some expect a small band aide announcement will be made, causing a strong emotional rally on Monday. From there, many technical analysts feel that this is where we will see the bottom fall out. Some expect it to drop like a tank. By analyzing graphical trends, some believe we could reach anywhere from 6500-7500 by the end of next week and experience our first capitulation of this recession/depression. Bear in mind these are technical analytics that may not apply to this crazy market we're currently in, but it's good food for thought.

So what did I do with this news? Obviously, I am keeping my shorts. Thankfully, we saw FXP gain back a lot of ground it loss from Thursday. As expected, we saw a massive sell off the last 5 minutes before the market closed (probably from the mass hedge fund liquidations). All the other usual suspects for inverse ETFs did great as well. One new one I am adding to my list that I have been eyeing (probably picking some up on Monday) is EEV. EEV is an inverse ETF shorting the emerging markets sector. Now, with the "G20", involving many of these emerging market leaders, we should be seeing some good gains out of this as we continue to see these quick fixes fail. We see similar trends with this ETF as we do with FXP, but it seems to be holding up slightly stronger.

Considering that I feel we could be in for a short term rally on Monday, I picked up some DIG options on Friday, expiring in December as well as some more of my .QAADB April expiring Apple options. With this volatility coming back, I'm looking to play both sides a little bit more. I am not 100% sold of this technical prediction, but I feel good about picking up these options at these prices anyway. If we do indeed get this rally on Monday, I will look to liquidate all of my long positions, with the exception of maybe my GDX options and throw my profits into EEV and some SKF or SRS. I believe next week will be a pretty monumental week. I think we will see A LOT of activity go on. So stay on your toes and try and catch the openings and closings of the market. That is usually when the deals are. Thanks to those that commented, I enjoy your insights. I hope everyone has a good weekend and Happy Trading. We will see you Monday.

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Dow Up 550...REALLY?!

* Economic Summit: Major Problems, Modest Hopes
* More Americans Struggle With Loans, Credit Cards
* Kohl's, Nordstrom Cut Year Views As Holidays Loom
* Why Should You Worry About Weak Holiday Sales
*Obama Bounce Is Crushed By Worries About Economy

These are the headlines you will see on the front page of cnbc.com. Yet, we see the Dow close over 550 today. Amazingly classic. Well, lets discuss the facts. Since last Friday's unemployment announcement, there has been nothing but bad news looming on the economy, and the past few days we have seen the market react to that, but not by much. GM is border line bankrupt. Almost every retailer posted bad earnings. Then today, we started to see another down trending day, until about 10 AM, PST (see the regression difference at the turn around point below). At that point there was a huge dump of buying into the market. I couldn't believe my eyes looking at all of the sectors turn green. Then we see us close above 8800 with the volume far greater than the average. What does this mean to me? Market manipulation.

It is days like today why I went in and bought my Apple, DIG and GDX options yesterday and this morning. Even though it didn't kill the pain for me, it numbed it a bit. Plus, if I can get a quick return by playing long, I'm happy. Even though I have zero confidence in wall street right now, we still experience these aggressive bear market rallies with the help of some market movers once in a while. Do you think it is any coincidence that the big deadline for people to redeem their hedge funds is this Saturday? For some hedge funds, this is the last day until the following November. Think how many people are taking their money out this weekend. Are you? Are your friends? Next week, I believe the amount of money needed from the hedge funds to liquidate will be very large. In turn, they will then have to liquidate several of their positions, as we have seen some do already.

So, Yes, I took a bath today with my FXP. But, I'm honestly not worried (some of you may think I'm crazy). Like I said when I first bought it, FXP is very volatile. It can give you a heart attack, but I've been playing it enough and know enough about both our markets to feel very comfortable holding it for a while. This go around, I was planning on a 2 month ride. So if we hit January or February and we are still lingering around these prices, I can start sweating. China won the lottery this week, with their $600 billion bailout and this nice, strong, hedge fund driven rally we had today. We saw a similar trend with SKF back in September, when it was hovering under $100 and continually being beaten down below $100, only to shoot up close to $200 within a month. Remember, I said in previous posts that there was a good chance of seeing a rally before this weekend. I just thought if it hadn't started by Wednesday, it probably wasn't going to happen.

The good news. We may see SRS and SKF get back into buying position again. Either of these below $110 gives me confidence in buying them. Both have reached "rock star" status in my book. The bad news, we are probably going to see another strong rally tomorrow. Expect Asia and other foreign markets to go off tonight. Look for FXP to probably take another beating. If it gets near the low $50's, I'm loading up more. Hedge funds want the market as high as it can be in case of forced liquidations. If that is the case, tomorrow, I will probably begin selling off most, if not all of my long options I bought yesterday. I already saw big gains from them today (Apple Option up 34%, DIG up 20%, and GDX option up 50%), and I never like to push my luck going long. From there, I will put a lot of my gains into SRS, SKF and FXP. I attended a conference today where Bank of America doesn't see the lending markets BOTTOMING OUT for 2-3 years! Real Estate REITS loss half their value in the month of October! This is why I don't get nervous going short. Call me a pessimist, I like the term realist.

I've been expecting a day like today all week, but I was starting to think that maybe the hedge funds didn't have the muscle to pull it off, but it looks like they did. After 10, volume shot up and kept darting up into after hours trading. The higher they hike, the harder they fall. For the bearers of the inverse ETF's, cheer up and lick your wounds, because there should be a lot more up days like this for us then down. Just maybe not turn on your computer tomorrow. Have a good night and Happy Trading.

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Reality Begins To Set In - Market Down Over 400 Points

Every day that goes by we are seeing America slowly realizing just how bad it may get the next year. Today, only 1 stock was positive in the Dow and it was GM, solely based on the expectation of a government bailout. And I still believe the worse is yet to come.

Today, Secretary Paulson had a press conference to tell the country they are "revamping" the way they're going to spend the $700 billion bailout funds. Instead of focusing on troubled mortgage assets, they're going to focus on consumer credit debt. So now it sounds like they want to bailout people's credit card debt so that credit card companies can start lending to the same people again. What a great plan. This will somehow "unfreeze" the lending markets again. It sounds like full circle to me.

Well, the market didn't respond to well to Paulson's address. Following his remarks, we saw the Dow plunge another 100 points (300 more by the end of the day). The point is, even with hedge funds liquidating, most traders are realizing that we probably have some bad days ahead. These current market trends and volatility we are seeing are frightening close to the trends we saw in the market leading up to Black Tuesday. It's days like these, I'm glad I'm short.

FXP fought a hard fought battle today. It opened up in the red as a response to China's relatively strong performance last night. However, today's raging storm of bad news eventually brought it back up, closing a bit above $82. This is very encouraging for me, considering China had a strong day yesterday. China showed slow retail sales growth for the last month, which should shake things up. Most likely, Asia will take a bath this evening in response to our own bath. I'm looking for FXP to take a strong pop tomorrow.

On a different note, I actually bought long today. That's right, long. GDX has been so beaten up, I picked up some January expiring options at $22. So this gives me plenty of time for Gold to get a bit of a bounce from its recent slaughtering. I felt the need to hold something long as a hedge. If we go red again tomorrow, I am looking to buy back into the .QAADB Apple option (being below $10). Apple in the $90 range is a pretty good short term buy for me. I am enjoying the gains from SRS, SDS, and QID as well. Those should continue to run strong as we test a new bottom in the coming weeks/months.

There is still debate whether or not GM will be bailed out. My guess is they will. I don't think the government wants to send this market down the 6000 range (although I'm not sure if I agree with the bailout). Oil is another one to watch. It continues to get slaughtered as demand keeps going down. However, OPEC is considering another "emergency meeting" to cut supply again. This usually does well to give a nice 10-15% bump in DIG. I would wait to see how this week plays out before buying it. But if DIG goes below $25, it's a buy in my book.

Tomorrow, should be another good day for me, unless we wake up with a surprise from the government. There is still a chance of some manipulation from hedge funds, Friday being the deadline. Keep in mind, we still have the doozy of an announcement Friday, when they announce US retail sales. Once again, keep your eye on China tonight, that usually gives a good preview of where to expect FXP for tomorrow. Happy Trading everyone, and we'll see you tomorrow. Feel free to drop some comments, I'd like to hear other's thoughts.

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Sellers Win Despite Hard Fought Battle With Hedge Funds

They fought, and they fought hard. For any of you that have level two and three trading capabilities probably know what I'm talking about. Several times throughout the day we saw strong influxes of buying (my guess from Hedge Funds) trying to get the market in the green...And they almost succeeded. The fact that we are continuing to remain in the red during redemptions week should show the lack of consumer optimism for today's market.

We saw a good bounce in FXP today, closing over 10%. That should at least give some breath of life back to those like me that bought some shares in the low 90's. Just remember, this is a volatile, risky ETF. PLAY AT YOUR OWN RISK! I personally, having played and tracked this ETF for a while now, have a lot of confidence in it. One thing to keep in mind is there are talks of the Chinese government to begin to take stakes in certain Chinese companies. Announcements like these would most likely attract another emotional push in the Chinese markets, but as I have said before, they usually don't last long. This is all just talk, but it is something to keep in mind for those contemplating trading this ETF. I have accepted that we will most likely be up and down for the next couple of months, and then we should see FXP hopefully kick it into gear in December or January. All you have to do is turn on the news to hear the next bad thing happening.

I am straying away from energy stocks at the moment. Two of Tontine's larger hedge funds will be liquidated, which consist mostly of energy and coal. This should provide a saturation of the energy markets for the next while. These are just a taste of the many hedge funds we will probably see liquidated in the near future.

TJ Max was the lucky recipient of lower than expected earnings today, however, they didn't move much today. Congress meets next week to discuss the GM dilemma. I believe there is no way the government will let GM go bankrupt. If they were to allow them go under, this could be something that would cause the market to capitulate. Many analysts believe GM bonds are a good buy for this reason. If they end up getting help, we could see strength back to their stock. I don't plan on playing GM, because I would rather play stocks that rally as a result of a lack of government intervention.

For Tomorrow, it's kind of a toss up. I could see us having a green day as a result of some major hedge fund buying. If Asia reacts negatively to today's market than we could see another day in the red, so keep your eye on that. If we are indeed down again, I am going to look at buying some GDX options around $22 or $23, expiring in April. UYG has also taken a beating and I may go in and buy some $10 or $11 options expiring in April. I have been looking for enough red days to buy up some long options just as a short term hedge for this weird November. My goal is to completely be out of long by mid December. I would like to see FXP reach $100-$110 here shortly to pocket some profits, but I am also ok with being in it for a longer term. I'm sure all the FXPers had a good day today. I don't see a lot of green in the near future, but with government always looking to make a new bailout announcement, you never know. Happy Trading and we'll see you tomorrow.

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Crash Market Stock Back Up and Running

This weekend and most of today, crashmarketstocks.com was down due to server maintenance. I am sorry for any inconveniences this may have caused you and are glad to be back to help make some money. Thanks again.

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Stocks Fall Despite Large China Bailout, More FXP

Last night I went to check the China Index and noticed Hong Kong was up 9.5%, which made me a bit nervous, considering a large stake of my investment is currently in FXP. After investigating, I found that China had executed a close to 600 billion dollar bailout for their market. Well, no wonder. Another emotional stimulate to get people's buying anxiety back...For now, at least. With this week being a critical week for redemptions and with the outlook of retail earnings not looking so good, I believe China saw this as a must for them to try and stimulate the US market.

After realizing the cause of the large increase in China markets, I became excited to be able to buy yet some more FXP. I thought for sure it would have to be down another 20-25% today. When I woke up, I was very surprised to see the little affect the bailout had made on the market. FXP was trading down, but only at around $65. I was hoping for the $50's! Still, this was low enough for me to pick up another large stake. I know, some of you may think I'm crazy, and although this is not my usual tactic to investing, these times bring about different strategies and I don't see a lot of downside in this ETF.

The fact that China just injected $600 billion into the market and we were still down today should show where we're headed. Starbucks has already announced their lack to make earnings today after the close and there will be many more to follow. Kohls, JC Penney, and Wal-Mart are still to come this week, although I believe Wal-Mart will weather pretty good. Having FXP hover in the low $70's for most of the day should show this ETF's resilience. More and more people are beginning to recognize the value of these ETF's as we are seeing trading volume shoot up.

Circuit City made their official "Chapter 11" announcement today, that we knew was coming six months ago. Like I said a week ago, there will be many more of those to come. As for longs, to be honest, there is not many I like at this point. You have your safe bets, Proctor & Gamble, Verizon, Wal-Mart, which will be fine, but are boring, in my opinion. But these next few months, I do not see a lot of green for most companies. I do still like GDX (was up 6% today), SLV and DIG, since I believe commodities have taken too much of a beating recently. Plus, with Obama coming in and shutting down all of the domestic drilling, oil should gain some ground again.

I felt like we could maybe have a rally this week with redemptions on Friday, but today's resistance has made me think otherwise. I believe there is still a lot of market manipulation going on with the hedge funds, so don't rule out a rally yet, but that should lessen after this week. All the inverse ETFs look good. SRS was up 20% and SKF up 10%. SDS and QID are both great buys right now. If you have to go long, right now I would suggest cash, or short term treasury funds (CPFXX or WEOXX). And if you still want to play with Apple or Rim (which are still great companies with good fundamentals), try to at least buy April or May options to give you some flexibility, because there is still good volatility with them, but I would wait until after the holidays for buying retailers.

I am guessing that my FXP buying days are done. Like I've said in previous posts (and I'm sticking by my word), I believe FXP is a $140+ ETF by December/January. It will continue to have its ups and downs until after the holidays. China businesses are struggling, worse than the US. Once the bailout high dies down, they will have a hard reality check. The Government cannot bail out everyone. If GM goes BK, we could see the market hit a new bottom in one day. Unemployment is still on the rise and so is deflation. This mixture was a big contribution to the Great Depression.

You don't have to be depressed and lose money during this financial crisis. Play the bumps right and right now, it's hard to lose going short. Happy Trading and we will see you tomorrow.

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