Tuesday, September 16, 2008


Lehman, Merrill, Fannie: Irony & Opportunity

Lehman, Merrill, Fannie: Irony & Opportunity

Fannie Mae. Freddie Mac. Lehman. Merrill Lynch. AIG. What's next?
You've already heard about Washington Mutual and Wachovia. Dismal, right?
Yes, but an opportunity as well!

Has the real estate market hit rock bottom? Unlikely.

Has the financial market debacle hit its low? Unlikely.

Has the stock market reached its low? Unlikely.

Is the economy at rock-bottom? Unlikely.

There was one quote we read this weekend talking about a light at the end
of the tunnel - and the answer was yes, there is but then there's a
speeding train right behind it. Makes you wonder...

It's ironic - The very same corporations that resist regulation at every
turn are now first in line for the most massive government bailouts we've
seen in our lifetimes. Suddenly the hand of government is not so bad but
the ramifications are completely unknown. With record deficits already,
the call for tax cuts during this election season and now these bailouts...
the formula looks destined to fail.

Keep in mind that smaller banks, corporations, small businesses and
individuals will not be so lucky and get bailed out - only those considered
to large to fail.

Consider for a moment that many of those institutions now in trouble were
fully supporting the privatizing of Social Security. There's no telling how
bad things could have unraveled if the losses were even further compounded!
We just might have gotten lucky with that one when Congress became
paralyzed over the issue.

So, where does that leave us as traders?

Actually and maybe surprising to some, in good shape.

Check out this short video the Netpicks' UMT Trading Team has put together:


This should act as the ultimate reminder and lesson on why you should never
listen to all of those "opinions" that are bantered about, ESPECIALLY when
it's spouted by someone who has something to gain. Remember the stock bull
market that was built upon lies and hype in the late 1990's? With all
those analysts touting all those worthless, nonsense stocks? You remember
what happened... when's the last time the NASDAQ has seen 5,000 since then,

When that fell apart, the minds of Wall Street went to work on this massive
leveraged-based set of strategies. These same strategies are now being
unraveled in a panic that is both compounding and exposing the problem -
the deceptions and the fraud.

We cannnot say this enough. Don't trust anyone with a vested interest in a
stock or a company's fortunes.

Let's instead focus on taking advantage of price. Moving up, moving down.
No opinion one way or the other.

The beauty for us using a strategy like the Universal Market Trader
is we can look at all of our trades with what we call "The Power of 10."

What's the Power of 10?

It's simple. If we look at a 1 minute chart it means all we care about are
the next 10 minutes. An hourly chart, the next 10 hours. A daily chart,
the next 10 days. A 200 tick chart the next 2,000 ticks (10x200). A
weekly chart, the next 10 weeks.

When we day traded the e-Mini index today we actually had buying
opportunities - yes, that's correct. In a day down nearly 500 Dow points
there was a place to buy and pr*ofit. However, if we look at charts in our
Universal Market Trader where the timeframe was longer, there wasn't a
single place we would care to buy.

What do we suggest you do?

1. Keep the Power of 10 at the forefront of your trading. Just look ahead
10 bars -- that's all we want to do to simply put the odds in our favor for
the next 10 bars of ANY timeframe. Nothing beyond that.

2. Forget the fundamentals. Sure, have fun after the market is closed and
see if you can correlate the fundamentals but there are very few who can
truly analyze a global economy with all of its moving parts and come up
with a relible predictor. You've seen dozens of pros on TV failing at
every turn to predict this.

3. Think 2/3rds, 1/3rds. That means strive for putting the odds in your
favor 2/3rds of the time -- completely accept the fact that you will be
wrong 1/3rd of the time.

4. Do not listen to anyone who has a vested interest in the opinion their
given. The bias is too much to overcome.

5. If you bank somewhere with exploding non-performing assets you should
be sure you fall within the coverage provided by the FDIC. There will be
more bank failures and you need to be sure your assets are safe.

6. It is the system. Your trading system. You simply have to have a
sound approach to trading in these times. The opportunities are there.
The volatility is excellent. When you can just focus on the next 10 bars
and you see the type of trading range and activity we're getting, you need
to believe that this is an opportunity. It is -- perhaps one of the best
we've experienced. If you're not locked into a direction or opinion we can
all capitalize.

Here's the video we put together just to give you an idea of why you should
empower yourself with a trading system that abides by all of these rules.
Whether you ultimately choose the Universal Market Trader or go another
direction, you will serve yourself well to follow this.

Be amazed, be shocked, be dismayed perhaps about what has taken place, then
realize that it's time to pounce on this opportunity.

P.S. "Universal Market Trader" is now Available
Trading Multiple Markets in Multiple Timeframes With Zero Subjectivity
Trading Forex, Futures & Stocks -- Day and Swing Traders



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Trading Education Tutorial
Courtesy of Nirvana Systems

Saucer Patterns

Rare Pattern Is One of the Most Predictive

One of the most predicitive chart patterns you will come across is the saucer pattern. Saucers are also referred to as "bowls" or even "rounded tops or bottoms", and one look at this pattern tells where these names are derived from. However, there is a problem with saucer patterns - they're hard to find.


Technical Indicators

Moving Average, Triple Exponential

The Triple Exponential Moving Average (TRIX) is an oscillator used to identify oversold and overbought markets as well as a momentum indicator. For use as an oscillator look for a positive value to indicate an overbought market and a negative value indicate an oversold market. When TRIX is used as a momentum indicator, a positive value suggests increasing momentum just as a negative value suggests momentum is decreasing. Some believe that the TRIX crossing above the zero line is a buy signal and a closing below the zero line is a sell signal. Divergence between price and TRIX can also indicate significant turning points in the market.


The Lowdown on Bottoms

Bottoms print as a result of market physics. Uptrends and downtrends exhibit natural wave motion as they thrust forward, and they pull back to test gains or losses. This action-reaction becomes very important at market turning points. It implies that a reversal pattern will appear at some point in each trend. In an uptrend, a lower high will eventually follow a higher high and mark a new top. In a downtrend, lower lows will finally stop when price action prints a higher low. This marks the birth of a bottom.


NASDAQ Chart of the Day
Courtesy of Nirvana Systems

EPIQ has formed a clear downward-sloping consolidation at lows, which could offer a solid breakout opportunity soon. Watch 10.45 and 11.50 for signs of a clear breakout opportunity.

Daily Trading Signals

NYSE Chart of the Day
Courtesy of Nirvana Systems

DK has gotten the initial upside break through the top of the clear consolidation pattern at 9.15. This breakout could spark much more strength ahead, especially should price remain above 8.80.

Daily Trading Signals

Daily Market Commentary
Courtesy of Nirvana Systems

Updated Monday, 9/15 for Tuesday's market.

Key DOW Levels for7/7




Below 10,800

Major Sell-Off....

- The Dow reverses from early lows, builds out within clear consolidation. The index pushed lower throughout the day and eventually closed the session with a loss of 504 points.

- The NASDAQ and S&P each opened the day with bearish movement this morning and eventually closed at the day's lows. Look for more overall weakness ahead.


The Dow ended the day sharply lower after breaking back below 11,400 en route to closing beneath 11,000 for the first time in several months. Look for a potential test of the July lows ahead.


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