The Rise Of Triple Leveraged ETF's

With the bull in full effect, I thought it was apropo to revisit my intro brief on
3X ETFs

I work with a niche fund of funds and hedge fund advisory business. We are always on the outlook for new managers and strategies that provide the edge our clients demand in this difficult environment. Earlier in the year, several managers approached me with complex arbitrage strategies with ETFs.

One stated that the new triple leveraged funds from Direxion will work amazingly well with his rocket science type tactics. After the initial surprise of learning that these products even existed wore off, I decided to look a little deeper into these ultra leveraged ETFs.

If cutting edge fund managers were looking at them, perhaps opportunities exist within these esoteric products for the average trader. Let's take a closer look at these aggressive leveraged animals and see how they can be used to boost your portfolio returns.

Are you new to exchange-traded funds (ETFs)? Be sure to read our ETF primer, ETF Basics: What You Need to Know About Exchange-Traded Funds.

Direxion is the primary firm that offers the tripled leverage ETF products. They have been operating for 11 years and first introduced the so called triple leverage index fund in 2006. However, just in May of this year, they rolled out an entire suite of these products across a wide range of underlying indexes. I stated "so called" due to the fact that these ETFs are leveraged within 50 basis points of the 300X leverage, therefore the common name is a bit of a misnomer.

However, it's a good marketing tool for the products, and they are the highest levered ETFs available to investors. What this means is for every point the underlying instrument/index moves, these products move 2.5 to 3.5 times that amount. For example, if the S&P 500 moves one point up, the ETF moves 2.5 to 3.5% points. As you can imagine this leads to wild gains and losses for traders speculating with these tools. They are becoming very popular among traders with the most traded ones approaching 10 million per day.

The heaviest traded ones include the Direxion Large Cap Bear 3x Shares ( BGZ | Quote | Chart | News | PowerRating), the Direxion Large Cap Bull 3X Shares ( BGU | Quote | Chart | News | PowerRating) and the Direxion Financial Bull 3x Shares ( FAS | Quote | Chart | News | PowerRating). This final one is appropriate ticker name with the first 3 letters of the word FAST! Direxion classifies the ETFs as Bull or Bear. They further break the categories down into Domestic Bull, Domestic Bear, International Bull, International Bear, Commodity, Currency Bull, Currency Bear, Fixed Income Bull, Fixed Income Bear, and finally the basic Money Market fund. There are several funds under each of these categories, except the Money Market fund, of course. As you can see, there is something for almost every trader in this fund family. Not all of the funds are 250 times levered; here is a screen shot of the Direxion page showing the exact funds, their symbols and leverage amount: http://www.direxionfunds.com/products.html.

Why would a trader use these types of products? As you can imagine, the returns have been shocking in both directions this year. One of the bullish domestic index funds is down over 80% this year and, as you can expect, the bearish domestic names are up over 100%. The simplest reason traders would add these products to their portfolio of tools are to magnify gains when speculating in the market. Less capital goes further, more bangs for your buck, so to speak. However, it's critical to ALWAYS keep in mind that this kind of leverage, or any leverage for that matter, is a two edged sword. You can lose just as fast as you can win when trading these volatile products. Several of the other reasons tripled leveraged ETFs make sense include:

Hedging - Purchasing tripled leverage ETFs inversely correlated to your holdings will allow you to correctly hedge against adverse moves with less capital outlay than hedging with less levered instruments.
Portable Alpha - This hedge fund sounding strategy is simply adding diversification while maintaining the same exposure. Leverage is utilized to free up capital with the proceeds invested in non correlated investments to decrease volatility. The tripled Levered ETFs are ideal tools for this goal.
Long Short Relative Value - A great tactic to use to smooth volatility in your portfolio. The concept is similar to pair trading where a long position is taken in the ETF that is believed to be headed up, and a short position placed in an ETF thought to be heading downward. The tripled leverage ETFs allow this strategy with less cash outlay for the same exposure.
As I mentioned, at the start of this article, there are many sophisticated strategies that can be utilized with these tools. Tripled leveraged ETFs can enhance your portfolio but they can easily destroy it, if used in the wrong way. Every trader should look closely at these offerings but do so with caution!

Leveraged ETF's: Triple Pleasure Or Triple Pain ?

Much has changed in the world of leveraged ETF’s since my last piece on the topic, Leveraged ETF’s: Portfolio Salvation or Damnation. First the number of leveraged and inverse products has exploded to over 120 with $30 billion in assets as of October, 2009. They have become among the highest traded securities in history. For example, The Wall Street Journal reported that Direxion’s Financial Bear 3X traded 23 million shares on February 25th 2009 with only 2 million shares issued at the time. One can extrapolate that the holding time averaged just 34 minutes. Major problems arose during 2009 with these new products. Several produced returns the opposite of what they were designed to do while others greatly disappointed investors with lack luster performance over the longer term. Basically, many investors did not read the fine print stating that the returns are daily based on the underlying instruments. As in any leveraged instrument, daily rebalancing is required to keep the product tracking the underlying. It is due to this rebalancing that the cumulative returns do not match the daily returns. In other words, if you hold leveraged ETF’s for more than a day, some unexpected and even crazy things can happen.

As you could expect with such a popular product, the regulators quickly began to issue warnings about the suitability of these volatile shares for retail investors who plan on holding for more than one day. In June, 2009, FINRA issued a notice stating that they are generally unsuitable for retail investors. However, they quickly refined this broad statement in July, 2009 stating, in part, that some sophisticated trading strategies may require leveraged or inverse ETF’s to be held longer than a day. In fact, regulators have ramped up their investigation to such a degree that four large financial institutions have been subpoenaed to reveal their leveraged/inverse ETF marketing material. In August, the SEC and FINRA issued an alert warning investors that the daily return objectives do not match the longer term returns of the products. Steps were taken in December of 2009 to increase the margin requirements for investors using margin to buy leveraged or inverse ETF’s. Whenever there is some confusion and money involved, lawsuits can be expected. More than a few class actions suits have been filed due to the misleading marketing of these securities.

Academics and regulators are still debating the suitability of leveraged or inverse ETF’s for retail investors. Some are of the opinion that they are far inferior to other leveraged tools such as derivatives. While others insist they are a solid product for informed, sophisticated investors.

Regardless of the disparity of opinion, these products remain ultra popular among investors. Studies have been done seeming to indicate that these instruments can be held profitably over the time. One method suggested that longer term investors need to monitor both the cumulative underlying return and the funds return. If these returns start to diverge, portfolio alterations need to take place once a certain percentage of separation occurs.

Despite the issues, some exciting changes are on the near horizon. For instance, Direxion is looking to market leveraged ETF’s that rebalance monthly instead of daily.
The fact remains that these instruments have their place but need to be fully understood or the pleasure of investing will quickly turn to the pain of loss.

Rogue Economist Martin Armstrong Warns From Prison

Rogue econonomist or criminal? Martin Armstrong issues another dire warning from deep inside a federal prison. What if.......?









http://www.martinarmstrong.org/economic_projections.htm

Beware Of The White Swan

Ever since Nassim Taleb popularized the term Black Swan to refer to an unexpected, surprising event; it has become a must use phrase in the investment lexicon. However, not many talk about the Black Swan's potentially more insideous cousin, the White Swan. The White Swan is an economic event that everyone sees coming, there is no surprise, however few do anything to properly prepare. Interest rate hikes is the near term White Swan event. India just raised rates sending shivers throughout the world's bullish stock community. Simply put, rates have no where to go but up. Despite the recent inflation quashing data, the Fed will find another reason to raise rates. It's going to happen, it's just a question of when.

Trading Is Miserable, Give It Up Now: A Chat With James Altucher

Dave: I see you did not come from a trading background, but rather from high tech. Do you believe this enabled you to gain an edge on the traditional trader?

James: In the mid 90s I started a web services firm called Reset which made websites for mostly entertainment companies. We made websites for, among others, Warner Brothers, Sony, HBO, New Line Cinema, Bad Boy Records, Interscope Records, and others. Before that, I went to both undergrad and grad school in Computer Science and also spent some time working at HBO.
The tech background helped when developing the software to model different market conditions quickly. Any situation or idea I had to model was easy to prototype with software. None of this stuff is rocket science and even a slight background in software is enough to help one model almost any situation.
The business background is more important. When starting a business, as with trading, you have to deal with pain, stress, and failure, in a variety of unpredictable situations. A friend once told me the quote, “if you only make 51% correct decisions when starting a business then you will be wildly successful.” The same holds true for trading.

Dave: OK, so your computer background led you to develop data models for the markets. These models enabled you to properly test multiple assumptions and beliefs about trading. What was the most surprising thing you found out from this testing?

James: I went through a phase where my eyes were filled with dollar signs like in a comic book. The first system I ever played with was Larry Williams' OOPS system. At first it seemed like a money machine to me. But then reality hits and although the OOPS system (buying gap downs on assets when they breach the prior day low to the upside) is a great system, it’s better as a starting point for exploring your own ideas. I guess the main idea I found is that countertrend trading is a lot better than going with the trend. Philosophically, “the trend is your friend” is very pleasing almost from a Zen perspective but doesn’t really work well in practice. That said, I always find myself feeling oddly relaxed when reading interviews with trend-followers like in the Covel book. But perhaps that’s the problem with it.

Dave: Are there any technical indicators that stood up to your rigorous testing, and if so, what are they?

James: The problem with any technical indicator is that they are all nice little packages that look very simple on the outside but when you dig deeper you find that they are made up a lot of assumptions and parameters that lead to the curve-fitting accusations. In general, all back testing is curve fitting but anything you can do to avoid this (i.e. don’t use technical indicators) helps deal with this.
Dave: What I found most interesting from your research is the fact that there is very little predictive qualities in candlestick patterns. This flies in the face of conventional trading wisdom. They simply do not work anymore. What do you attribute this to?

James: Too much money thrown into trading the markets. There are about 10,000 smart people at least (most likely much more) testing and trading for themselves, for hedge funds, for prop firms, for mutual funds, for market makers, etc). The basics are done.

Dave: What software do you use for testing market assumptions?

James: Wealth-Lab

Dave: How difficult is it to write the code for Wealth Lab. Is it something a non-programmer trader can do?

James: When I was in 6th grade I once answered a question the teacher posed by starting off saying “that’s easy” and she slapped me right in the face and called on someone else to answer. She said, “Never say that.” That said, “it's easy.” A lot of people shy away from WL because they use a Pascal-like language to build their chart scripts. However, the language they use wouldn’t even qualify to be a prequel to Computer Science 101 in high school. Its easy to learn, particularly when modifying any of the thousands of chart scripts posted to their site. I have no financial relationship with their company although I’m kicking myself for not trying harder to invest my wife’s hard-earned money in their company before they were bought by Fidelity.

Dave: Ok, lets jump into the meat of this interview. In your book, Trade Like A Hedge Fund, you go over 20 primary hedge fund trading strategies. I am going to focus on 4 of these strategies that I found most fascinating. The first one, Buying Bankruptcies, really opened my eyes to the potential in this method. Please tell our members about this strategy and why it works.

James: Typically, when a company declares bankruptcy, the stock is halted by the exchanges so the company has time to disseminate the news of their downfall. Note that it’s NEVER a surprise when a company declares bankruptcy. It's not like Worldcom was a $50 stock and then they whipped out a Chapter 11 filing while everyone was asleep. By that point Worldcom was the subject of dozens of lawsuits, headlines every day about corruption, all executives being fired, and the debt was trading for pennies on the dollar. The stock itself was around 10 cents on bankruptcy day.
Everyone who was going to bet on this bankruptcy was already short the stock. Not only were they short, but probably almost every executive was short the stock in order to hedge their worthless shares. And everyone who was long the stock as an investment had already most likely sold the stock by this point. Certainly all mutual funds were out of it by this time (they never hold a 10 cent stock).
So what happens, when a stock declares bankruptcy, it’s halted, and then the halt is lifted later that day. Well, nobody is selling (because they all already sold) and everyone is covering their shorts (the worst has already happened and it's not going to get any worse). So these stocks tend to double or triple in value within 2-3 days, as happened in the case of Worldcom, Enron, FAO Schwartz, and countless other mega-cap bankruptcies.

Dave: Along the same lines, you also suggest trading stocks that are going to be deleted from the indexes. Most people trade stocks that are being added to the index, as do the index funds. This deletion concept seems odd to me. How do you play deletions from the indexes?

James: We buy the day the stock is deleted, right (we hope) when all the irrational selling pressure being placed on the stock by index funds selling, is over. The same concepts apply as in the bankruptcy system.

Dave: The 200-day moving average is one of the most talked about and utilized technical indicator. Does the 200-day MA work in the traditional manner and what is the best way to use the 200-day MA?
James: So many media pundits use the 200-day MA to make a meaningless point to fill up airtime that its lost all value as a technical indicator.
Dave: What can you tell our members about trading gaps ? Does the traditional wisdom that gaps fill stand up to testing?
James: Gaps are the physical representation in the markets of the concepts of “fear” and “greed”. When there is fear, a stock gaps down. When there is greed, a stock gaps up. Most books talk about exhaustion gaps, continuation gaps, etc without ever demonstrating how to determine which gaps are which. Testing is the way to determine this and take advantage of the fear and greed associated with these moves. Normally I only like to trade gap downs. Gap ups tend to keep going. And who am I to get in the way of people’s passion?

Dave: Interesting, so going short is not the opposite of going long. Can you elaborate on this concept?

James: Let's look at the basic facts. Short selling doesn’t even work in a bear market. If you look over the past 15 years, almost any time the Nasdaq 100 index moved up over 4% or more in a day occurred during the bear market years of 2000-2002.
Another example is to look at the CSFB Dedicated Short Bias index made up of hedge funds that only short stocks. As a group they had a negative return in 2001. So the best short sellers ever, guys who spend 25 hours a day trying to short stocks and make people’s lives miserable, had a negative return in one of the worst bear market years ever. They stink.

Dave: The extreme convertible arbitrage certainly has the sexiest name. What is ECA and how can a trader utilize this complex sounding technique?

James: I love this strategy personally and it works great in bear market years such as 2002. It combines the concepts of mean reversion with ideas in convert arbitrage. The basic idea is that you find a stock that has been tanking (for instance, all the energy stocks in 2002) and you go long the preferred of that stock (if it exists) and short the stock. For instance, AES-C, the preferred of AES, was offering a 20% yield while AES was diving on fears of bankruptcy. A deeper dive on the stock showed that all of AES’s operations in other countries has debt that was non-recourse to the parent company, meaning that the preferred wouldn’t be effected and AES was most likely safe from bankruptcy, securing the 20% yield. That said, if AES went bankrupt then the stock would continue to plummet, making the short work out. The key is determining the proper ratio between the preferred and the common and for that you need a combination of backtesting and an understanding of the fundamentals.

Dave: Are there any final words you would like to leave us with?

James: Trading is the most miserable thing you can ever do with your life. Give it up now.

Dave: Wow, this has really been an insightful discussion. Thank you for joining us !
James: Dave, good luck with your venture and thanks for letting me do this.

What Bernie Madoff Couldn't Steal

A refreshing and uplifting change of pace:

Taming The Runaway Bull & 3 HOT Stocks

http://www.tradingmarkets.com/stocks/commentary/taming-the-runaway-bull-3-powerratings-stocks-853037.html


Talk about overextended! We have now witnessed 14 trading days in a row without a significant pullback. The DJIA is surging toward its yearly high of 10729 with 10700 being the only significant resistance level on the cash Dow between here and there.

It's very likely the upper figure will be taken out today, judging by the early trading action. Some market technicians are expecting this giant double top pattern to play out as the longer term high. This would occur right around the 10729 area as price can not make it much higher than the previous high prior to a significant pullback.

Other market analysts are expecting stocks to break right above this double top technical level, moving ever higher. Interestingly, the DJIA remains 451 points below its 200 day Simple Moving Average.

Fundamentally, I don't think things could be much more bullish. The FOMC statement was almost a mirror copy of the previous one. In fact, if you place the statements side by side, most of the words are even the same, give and take several specific actions.

The important thing to understand is that the Fed had a positive tone about the economy. In other words the government is happy with the progress thus far in the recovery. If any lessons were learned over the last several years, it would be one should not fight Fed sentiment. A positive, market friendly Federal Reserve will win the day over many perceived market bearish issues.

How do you go about profiting and taming this runaway bull market in the short term? It's important to remember that individual stocks do not follow the overall market tic for tic.

In fact, some follow the overall trend, others buck the trend. The key is to locate those companies showing short term weakness, yet still in a longer term uptrend. We have developed an easy to use, 3 step system to help you locate shares ready for short term gains regardless of overall market conditions.

The first and most critical step is to only look at stocks trading above their 200-day Simple Moving Average. This assures that a strong, long term up trend is in place, increasing the odds that you are not buying into a falling knife or catching a stock in a death spiral.

The second step is to drill deeper into the list locating stocks that have fallen 5 or more days in a row or experienced 5 plus consecutive lower lows. Yes, you heard me right, fallen 5 or more days in a row. I know this is counter-intuitive of conventional wisdom of buying stocks as they climb higher. However, our studies have clearly proven that stocks are more likely to increase in value after a period of down days than after a period of up days.

The third and final step is a combination of whittling the list down even further by looking for names whose 2-period RSI (RSI(2)) is less than 3 (for additional information on this proven indicator click here) and the Stock PowerRating is 8 or higher.

The Stock PowerRatings are a statistically based tool that is built upon 14 years of studies into the inner nature of stock prices. It ranks stocks on a scale of 1 to 10 with one being the most volatile and least likely for short term gains and 10 proven to be the most probable for gains over the next 5 days. In fact, 10 rated stocks have shown to have a 14.7 to 1 margin of outperforming the average stock in the short term.

The stocks that fulfill each of the above steps have proven in extensive, statistically valid studies to possess solid odds of increasing in value over the 1 day, 2 day and 1 week time frame.

Here are 3 companies fitting each and every of the above steps:

Sonic Solutions ( SNIC | Quote | Chart | News | PowerRating)



Sequenom Inc ( SQNM | Quote | Chart | News | PowerRating)

Cytori Therapeutics Inc ( CYTX | Quote | Chart | News | PowerRating)

High Probability Trading: The VIX Does Not Work Except When it Does | TradingMarkets.com

High Probability Trading: The VIX Does Not Work Except When it Does | TradingMarkets.com

Sold Short With Manuel Asensio

The following is a transcript of a chat I had with short seller extraordinire, Manuel Asensio

We are truly privileged to be joined today by short seller extraordinaire and corporate fraud buster, Manuel Asensio. In 1996, he started the internet's first private internet site devoted to investor advocacy and critical commentary on publicly traded stocks. This site's 8 year public record is the best, fully audited recommendation record ever compiled by a Wall Street firm. His mission is to hunt down and expose companies that he believes are defrauding investors. Manuel has great lessons to teach us concerning short selling, corporate fraud, and the future of the financial markets… Let's get started!

Dave: Great to meet you, Manny.

Manuel: Thank you for having me here.

Dave: Let's begin with a little history about yourself. Can you give me a brief background, where you are from, education, what first sparked your interest in the markets-those kind of things.

Manuel: The thing many people enjoy mentioning, both the press and the many stakeholders in our transactions, is that I am Cuban. Well, that I am. In fact, all of my family is Cuban except my wife and she's from St. Maarten in the Caribbean, so that is close. I got my undergraduate degree at Wharton and graduate degree from Harvard. I began trading stocks in my first year at Harvard in 1979. I started as a way to earn money on my savings while I was at school full time. 17 years later, in 1996, I initiated my first investor advocacy (what some call "short sell") transaction in the market for General Nutrition stock. We went on to do 26 other highly successful investor advocacy transactions, back-to-back in a row, all of them extremely well documented in the press, on the wires and live on the Internet.

Dave: Very interesting. Was there a specific event or happening that caused you to focus on short selling?

Manuel: I did not participate in the great bull market that began essentially right after I graduated Harvard Business School in 1982 up through 1996. I was an investment banker during this time, and did not invest actively in stock. Asensio & Company, Inc., the former NASD member firm I ran for 10 years, was formed in 1992. During the first 4 years we were not short selling. I saw a great opportunity to profit from mis-priced overvalued securities, which we called "grossly overvalued". We published a definition of what we called a "grossly overvalued" security in early 1997 just after we got started. I read it recently and was impressed that every one of the 27 securities in our transactions conformed to that definition. Before we started, no other investor, much less an NASD member firm, had ever questioned public companies disclosures and their stock promotions that way we did. When the profits rolled in, we merely expanded. We put more and more money into research and developing extremely structured research methods. The result, I think, we proved that hard, smart, honest work, and adherence to principles of fundamental values, pays well, even on Wall Street.

Dave: Can you explain your definition of "grossly overvalued" securities?

Manuel: There are occasions when a stock can trade for prolonged periods of time at valuations that are far in excess of any economically justifiable level. Some of these stocks are what we called "grossly overvalued." For us to label a stock grossly overvalued, we must be unable to find any remotely possible outcome that can provide an investor with a non-risk adjusted return. In other words, even ignoring risk in assuming that the best possible outcome will occur, the stock's present price does not allow investors to realize positive return. When we believe investor's returns is undisputably negative, we label a stock grossly overvalued.

Dave: Many investors have ethical issues with the concept of short selling, thinking it's bad for the economy. How do you answer these critics?

Manuel: Americans are becoming aware of the great cost to their economy of excessive stock promotion. Look at the 2000 recession. Investors are rightfully beginning to question whose side the securities industries self-regulators are on. But I am still surprised when I speak to people about the meaning of Dick Grasso and Eliot Spitzer. After all, Eliot's job is to chase state criminals not Wall Street bandits, he doesn't have the specialized staff of the SEC, NYSE or NASD-so why was he able to break the mutual fund and Internet scandals and not them? Even the media has begun to understand that they can not blindly trust public companies and their stock promoters. Things changed somewhat after Enron, Winstar, Global Crossing, and WorldCom and Eliot's successful Internet fraud prosecution. There is a lot of work to do. But I am no longer the right person to ask. People know me and my work now. However, I still run into the same old "well you are a short seller, so why would I listen to you?" when I call on local papers about some hometown stock scam. These days, I just smile and remind myself that it's part of the job.

Dave: You call your style "Activist Short Selling." What do you mean by this?

Manuel: We talk to the press, we issue reports, we respond to company statements. And we know the subject matter to great depths. It's hard to imagine the number of analysts, brokers, bankers, members of the press, and even regulators, AMEX Richard Syron, who were stakeholders and sore losers in those 27 transactions we did from 1996 to 2003. These are the people who called the shots. They buy cheap, create the game and sell before it's over. Our opponents were large. Before we invented the term "Activist Short Selling" these people called us "hostile and adversarial" and they insisted the short sellers had no right to promote their positions. Stock promoters like and want to protect their monopoly. They get to tell stories and short sellers have to be silent. Activist short selling is the exact opposite. I am glad that we were successful enough to be the first short sellers to challenge the status quo.

You know I like to say that there are two things that are certain. One is that man has faults and can always do better. The second is that the status quo is always wrong.

Dave: When one shorts a stock, aren't they theoretically taking on unlimited risk? Most of our members are active traders, how would you suggest they protect themselves from this potential unlimited risk while shorting?

Manuel: No. it is absolutely NOT true that short selling has unlimited risk. That is an excellent example of the regulatory bias towards stock promoters. You can not lose more than the value to the account. And that's the same risk you take in buying stock. Emotionally and psychologically being short, for many, even large, experienced professional investors, is more difficult. I understand that. But the risk is no different. Do your work, know your risk. Manage your positions and your money-but above all know the value of your holdings.

Dave: Those are excellent points. Is there a simple way our members can "know the value of their holdings"?

Manuel: We calculate intrinsic value, not the market value. There is a difference between these two figures. Many people would say that this is contrary to the efficient markets theory. However, that is not accurate. It reinforces the efficient market theory. It is important that your members judge their equity holdings based on the intrinsic value and not the market value.

Dave: When evaluating a potential company to short, what specifically do you look for?

Manuel: We seek a comfortable margin of safety and a well defined end point. An outcome that we can predict with great certainty. A company and group of stock promoters who are saying the wrong things about that outcome. A stock price that shows signs that most people believe the story is also very important.

Dave: You use the term "stock promoter" often. Just to clarify, you are not just talking about the archetypical boiler room type promoter, but rather the Morgan Stanleys, Paine Webbers, and Legg Mason's of the world---is this correct?

Manuel: I use the term stock promoter to refer to underwriters, analysts, and sell side firms. They lump all of us together as short sellers so I feel comfortable referring to all of them as stock promoters.

Dave: Do you use technical factors at all when determine what to short?

Manuel: Yes

Dave: Can you be more specific, what technical indicators do you use?

Manuel: We will sometimes select a target for research based on technical sell signals. We find Technical Analysis a good starting point. However, we WILL NOT trade or select a target based on technicals. Our best performers (shorts) have looked very strong technically. We are always driven by fundamentals.

Dave: You started your investor advocacy and short selling at the beginning of the internet bubble, most short sellers got wiped out during this period. 25 out of the 26 stocks you placed strong sells on declined dramatically. Your record is incredible--- are there still opportunities like this in the market?

Manuel: Absolutely. Our record is unique and remarkable. Our one loss is PolyMedica. It is the only one of our trades that relied on politicians and we learned that politicians don't care about protecting Medicare. PolyMedica is a shameful situation.

Of course the same biases that caused us problems also created our opportunities. After all, regulatory barriers to short selling limited competition and regulatory support of questionable public companies, when was the last time you heard of an NASD action against a company for misrepresentation, expanded our target market.

Dave: Are you able to share one or several companies you are looking at presently to short?

Manuel: Absolutely. Energy Conversion Devices, Inc. (NasdaqNM:ENER - News) and KFX Inc. (NYSE:KFX - News). These are very questionable companies. They are using higher oil prices in their promotions.

Dave: Are you still strictly a short seller or have you balanced your approach since 2000?

Manuel: We have always been heavily invested in risk arb deals with wide spreads and distress. We manage these investments in the same way we manage our short investments-with intensive, deep fundamental research efforts.

Dave: What do you mean when you say "risk arb"? Please explain this tactic.

Manuel: We mean event-driven investing. Companies engaged in corporate events, including takeover bids, is what we mean by risk arb.

Dave: You have interesting views on the recent presidential campaign. You look at it as a phony stock promotion. Can you explain this idea?

Manuel: The similarities in tactics used to get people to buy your stock and vote for you are endless. In both, the game is sell the promise and to get people to believe you despite the facts. Many Americans believe Bush will do a better job-for them. It doesn't matter whether he does or does not. Nor does it matter how he did it. He got elected. This race looked to me just like a battle between a short seller and a stock promoter.

Dave: Perception is more important in politics and the stock market than reality?

Manuel: Yes.

Dave: I find your views on how easily how easily the media can be manipulated by phony stock promoters fascinating. What do you attribute this to? Do you think it is desperation for a good story or what?

Manuel: It's a function of economic interest and raw numbers. Short sellers don't buy ads. Newspapers don't have a problem with helping a company promote itself but always feel used, and at risk, if they take a short story. Even the best editor writing about the worse company will allow the company to tell its story no matter how bogus. They believe it's in the interest of fairness and that the public will be able to make their own judgments. But in practice they always tilt heavily toward the public company and its many stakeholders.

The media bias against shorting will be difficult to change. There is no short selling lobby group. There is no short selling trade organization or public relations effort. The new asensio.com web site is using my past work to foster awareness and to lobby congress to eliminate the regulatory bias against short sellers. I am a realist, expansionary economic policies will always foster speculation. The Fed created money but doesn't watch who gets the goodies. Stock promotion is a very legitimate and essential business. Without it there would be no short sellers.

Dave: You recently provided a specific example of the NY times being scammed. It was a mining company. Can you elaborate?

Manuel: I have a great deal of respect for The New York Times. I understand what they were trying to do. It involved the cause of a bankruptcy and the loss of employee benefits. It's hard. It takes time and experience. The Times certainly has both. But on this one they didn't do their homework.

Dave: I know you like the having a revolutionary public persona--Che Guevara is one of your heroes. How does Che and his revolutionaries relate to what you do in the market?

Manuel: Did you see the Motorcycle Diaries? I have had a set of experiences that few business people enjoin. I have had some very big fights and not just with the companies we've shorted. But with their big time investors and brokers, and with conflicted regulators, who also happened to have been my own regulators. That's tough. And the media was no cake walk either. There were many reporters who used our information for their benefit and then sided with their big boy friends against us without blinking an eye. There are far more profitable, easier businesses. Did I choose it or did it choose me?

Dave: I will make it a point to see the Motorcycle Diaries. Thank you for the recommendation, Give us a brief synopsis of the movie plot and how it relates to what you do.

Manuel: It's a story of a young Che Guevara. Che turned down positions of power to do what he thought was right. He could of easily been a limousine revolutionary but instead suffered tremendously for what he believed was the correct and proper thing to do.

Dave: Wow, some of your investor advocacy has landed you in hot water. You expose' on Hemispherx caused you to face more than $1 billion in legal liability. That is HUGE! Perhaps one of the largest cases ever against an individual. What happened in this case?

Manuel: We won all seven of our cases. Never paid a single cent to settle any of them. Only Hemipherx, the most fraudulent of the 27, had the audacity to push the matter to trial-twice. And they lost, twice.

Dave: Do you forsee the US economy improving or declining and why?

Manuel: There is more risk in the U. S. economy than there has ever been in my career. I had never been bearish on the economy since I graduated from Harvard in 1982. The 2002 recovery was fueled by the largest, most rapidly expanding budget deficit ever created by a government. America's deficit is the largest its ever been as a percentage of GNP and in absolute dollar terms. And the trade deficit, despite the drop in the dollar, is widening. These are all important issues.

Dave: I know you are presenting a 3 step deregulation plan to Congress as an attempt to better the US equity markets. What are the 3 steps and what do you hope to accomplish with this plan?

Manuel: The securities and legal systems in the US contain numerous provisions that create liability for investment advocate positions. The opposite is true for public companies and their stock promoters. Our plan is simply to level the playing field. Regulations are rarely the answer in securities matters. By eliminating the borrowing requirement and down tick rules, which are the single most questionable and most harmful regulation. These regulations cause harmful excessive stock prices and must be eliminated. We want to provide coverage under rule 10b to investor advocates and eliminate limits on first amendment protection related to value of US securities. The US markets would be far fairer for investors and far less susceptible to industry abuses. I believe that if the US public, not just investors, were to become aware of the benefits of the Asensio 3 step plan, it would become law. However, it is difficult since the industry effectively controls both congressional committees that oversee the SEC.

Dave: Are you working on any current projects? What is your focus in 2004?

Manuel: We are always working on research, early stage right through maintenance. We are concerned about the dollar. So we are working with hard assets. This is new to us. We are working with coal, propane and heating oil distribution, lumber and energy technology.

Dave: Do you have any final words for our members?

Manuel: Always enjoy yourselves and have lots and lots of fun!!

Dave: Thank you for joining us, it has been a pleasure

Seven Critical Stocks For Monday

A wet and windy weekend on the isle of Nantucket. Time to get back to work.

We have the Long Term Purchases reading as well as several T Bill Auctions to observe on Monday. Several earnings announcement will wrap up the session. Friday witnessed stocks flowing gently between positive and negative readings through out the day. Opposing currents of a decline in Consumer Confidence and an increase in Retail Sales resulted in a bull bear stalemate. Finally, the session ended mixed with the DJIA up 12.85, the tech heavy Nasdaq given back .80 and the broad based S&P 500 easing lower by .25.


Here are 7 stocks you need to know for Monday




37 cents is the expected figure for AAON Inc AAON prior to the open

Internet retailer, Overstock.com OSTK, has forecasters awaiting an EPS of 45 cents before the bell

Banking kingpin, UBS AG UBS, expects to see an EPS of 25 cents before trading starts

Pfizer Inc PFE disappointed investors when its new cancer drug failed function as expected

Positive retail sales lifted shares of luxury retailer, Tiffany’s TIF

Potash Corp POT raised its first quarter earnings forecast

Friday Recap

It's a rainy day here on the banks of the Hudson River overlooking Midtown. Some are saying up to 4 inches of the wet stuff is on the way. Being in the high 40's, it sure is better than another snow attack. It's raining on the US Dollar as well. We caught a very nice move higher from 1.3666, when longs were triggered for the first time since early January 2010. Holding longs at this time in the EUR/USD, expectating additional weakness in the USD due to a variety of fundmental and technical reasons. A convergence that triggered the longs shows no signs of abating. Made a little trading the DJIA but failed to catch any big waves. Currently flat the DJIA at this time. Flattened out the SIRI short with a small profit. I have a cool chat with short seller extraordinaire, Manny Assensio coming up soon for the weekend. Enjoy !!!

The New Short Selling Rules

Short selling is the practice of borrowing shares from ones broker with the goal of price dropping then selling the borrowed shares, capturing the difference in price as profit. The practice has always had its supporters and detractors. Supporters believe that shorting adds liquidity, provides more opportunity for investors and lowers trading costs. Detractors state that unfettered short selling causes volatility spikes, market panics and crashes.

As late as 2007, the SEC moved to eliminate the depression era uptick rule providing greater freedom to short to short selling traders. The uptick rule only allowed you to short a stock after an uptick, or upward move in price. Although savvy traders had methods called conversions or bullets to legally work around this rule, the elimination of the rule opened up shorting to many more traders and stock situations.

The more rabid among the anti-short selling tribe draws correlations between the squashing of the uptick rule and the fall of Bear Sterns and Lehman Brothers. In the new rule, the SEC attempts to placate the anti-short sellers without causing too much adverse effect on the stock market.

Fortunately, the SEC is finally stating that it understand the true benefits of short selling. The new regulation prohibits short selling of any stock after it has experienced a 10% or greater decline. The rule would go into effect the day of the decline and last until one day after the drop. Why did they choose 10% as the threshold? My research can’t find any studies or empirical data that support this figure.

The new regulation will go into law in 60 days and the exchanges have 6 months to implement it. While I don’t support any governmental interference into the functioning of the free market, this regulation appears to be the least onerous of the possibilities. Given the fact that there is a loud, vocal minority within the government calling for the total elimination of short selling, traders and the free market itself got off the hook easy this time.

This rule will not affect most traders, even those who short regularly. As you know, we believe in shorting into strength, not weakness. In fact, empirical studies have found time and time again that odds are better for successful shorting when a stock is overbought showing strength. If you follow the basic rule of shorting into strength, the new regulations should have zero effect on your day to day trading activities.

Surf Alert: SHORT THE USD NOW !!

US Dollar shorts have been triggered. We are long the EUR/USD pair at 1.3666.

Trend Following: A Fast Way To The Poor House?

The concept of trend following is often one of the first strategies new traders learn when discovering the financial markets. Several well written and convincing mass market books preach strongly about the superiority of the trend following method. On the surface it appears that nothing could be easier than catching a trend. The basic premise of trend following is that stock strength begets strength and stock weakness leads to more weakness. A series of higher highs and higher lows identifies an up trend. A series of lower highs and lower lows is a sure sign of a downtrend. The strategy, as defined in the books by the same name, teaches that once the investor identifies the trend, trades are placed in the direction of the trend. In other words, one would buy a stock that has exhibited an uptrend on the price chart. A stock downtrending would be shorted. While this is definitely a feel good investing method and it appears to work for some large, well diversified hedge funds, trend following can spell disaster for the investor. First, it is a non quantified, unspecific trading system. For example, just how many up moves increase the odds that the next move will be in the same direction? My personal favorite example of why trend following makes little sense when examined is as follows. If you flip a coin and heads comes up 6 times in a row, are you in heads trend? Secondly, when the trend following criteria is tested it fails miserably. We tested the S&P 500 over a 15 year period to determine if an edge actually exists going with the perceived trend. What was discovered is quite the opposite of what the proponents of trend following teach. The SPY and NDX were used as the test vehicles. The market actually lost money within one week after 3 or more consecutive days of higher highs. The opposite was also proven true. 3, 4, and 5 days in a row of lower lows leads to outperformance over 1 day, 2 days and 1 week time frames. In fact, multiple day lows FAR outperformed multiple day highs. Similar results were found when the Nasdaq 100 was tested. In other words, we clearly discovered that there is no edge whatsoever to trend following when trading stocks. Remember its often the ideas that make the least sense at first glance that are proven edge providers when investing.

Managing The Profits: More To Come ??

A nice downwave was caught in the DJIA yesterday and pre-open this morning. However the 10500 area in the YM contract acted as support triggering a bounce. Stops are at 10543 with the 3 minute break rule in full effect. If the support at 10500 breaks , we may get a scenerio similar to the posted chart from 2007--- much wealth was made on that day by shorts. It's a tough call here if the support will hold on the secondary test. The plan for today, if stopped out, is to trade the following channel 10497 to 10563--- untill then STAY SHORT !!

Some fishy business may be going on between Obama and the Greeks regarding regulation of hedge funds. It seems all populist Obama needs is a reason to clamp down across the board. Let's hope this isnt the impetus......

The Bears Are Back In Town: Shorting DJIA

The Bears Are Back In Town.....

It couldn't have happened on a nicer day weatherwise.

I am stepping outside of the standard system trades. Short the YM at 10560. Very very bearish sentiment inside the street. Taking this extremely seriously here.
Closing SIRI long at 92 cents. Will reenter after this potential storm passes.
Good luck!!

7 Critical Stocks For Monday

Looks like the perfect day in Manhattan. Central Park is full of early morning joggers and the birds are chirping happily. There is a peaceful spring feeling in the air from the center of the known universe. Let's go do what happens!

Monday is a sparse day for economic announcements but investors can anticipate several T Bill auctions with a small serving of earnings news. The Non Farm Payroll figure pleasantly surprised the bulls today triggering an across the board buying frenzy. Stocks surged higher on the better than expected employment news and decent consumer credit figures. The VIX or fear index reacted in kind plummeting ever lower on the session. The DJIA surged 122.06, the tech heavy Nasdaq advanced 34.04, and the broad based S&P 500 climbed 15.72.


Here are 7 stocks you need to know for Monday

H&R Block HRB announces its EPS after the close with a forecast number of 15 cents

A 27 cent loss awaits investors in MAKO Surgical MAKO after the close

TiVo TIVO is looking at a 12 cent loss after the days last trade

Apple APPL releases its iPad device in the United States on April 3rd

Google GOOG bought DocVerse an application that allows the sharing of Microsoft MSFT Office programs over the internet

Staffing companies such as Monster Worldwide MWW benefited positively from the employment news

Nailed It !

Euro Killer NFP Release


The 3rd system entry was the charm. We rode a nice upwave in the YM today and are looking to close the position by the 4:00PM close. Holding SIRI long awaiting the expected impetus. The NFP gave some life to the USD this morning and provided a bullish tenor for the day. Have a great weekend!!

Long DJIA, Long SIRI--Bullish Friday??

The Non Farm Payroll report surprised positively this morning pushing the YM above the upper neo surf line of 10463. The system has triggered long with entry at 10471. Interestingly, and unfortunately for the longs, the round figure of 10500 stopped the YM advance cold. Remaining long SIRI. Good luck!!

7 Critical Stocks For Friday

The much anticipated Non Farm Payroll report hits the wire Friday with an expected figure of negative 56 thousand. A few earnings announcements will cap off the generally lack luster investment week. Stocks climbed higher in a lazy, low volume trading day Thursday. Financials led the advance while the US Dollar gained against the Euro. Precious metals fell on the USD’s strength while the Volatility Index dropped lower as melancholy settled on stocks. The DJIA advanced 47.38. the tech heavy Nasdaq climbed 11.63 and the broad based S&P 500 gained 4.18

Assisted Living Concepts ALC expects to see an EPS of 34 cents before the bell

18 cents is the forecast EPS for Eagle Rock Energy Partners EROC after the close

New Gold Inc NGD has analysts awaiting an EPS of 6 cents prior to the opening bell

UBS upgraded Coca Cola KO to Buy


Capital One COF was downgraded to neutral at Sun Trust Robinson Humprey

TiVo TIVO won a critical patent suit against Dish Network DISH

Steven Schonfeld: Millionaire Maker

The following is a chat I had with Steven Schonfeld in 2005---- the founder of Schonfeld Securities. His firm was/is the premiment proprietary trading firms of all time. Many multi millionaires were bred by trading for this firm in the 1990's. Guys that started with nothing and by using the firms technology and leverage changed their lives forever. This is an inspiring interview from the man who started it all.

Photo courtesy of Forbes

Today I am privileged to be
joined by Steven Schonfeld. Steven is the founder and CEO of the Schonfeld
Group. His firm trades over 150 million shares and completes over 500,000 transactions
daily. He is a true revolutionary and innovator in the world of day trading.
Dave:
Welcome, Steven, thank you for joining me today.

Steven: Hello Dave.

Dave:
Let's start the very beginning. What first sparked your interest in the market?

Steven:
Well, I was a teenager when I first got interested. We had a stock market
class in high school and I had always been into strategies, like gambling at the
casinos, race tracks, or poker. I felt that the market was a bigger and better
game. After college, I became a stockbroker at around 23 years old.

Dave:
I know you were one of the top brokers, at Pru Bache, for about seven years. You
must have been making a serious salary and bonus. What made you want to go out
on your own?

Steven:
Growing up, I always felt that I was very entrepreneurial. When working at the
brokerage, I got to build up my capital base, but part of my goal in life was I
wanted to be an owner and see the other side and do actual trading in the
market. The electronic method of trading stocks had just recently been
introduced in the ‘80s, and things were becoming more electronic overall.
Computer power to assess and analyze market data was coming into its early
stages. Since I always loved reading percentages and statistics, I saw a
natural fit with trading. In addition to that, after the crash of ‘87 I felt
that proprietary trading could be pretty big for the next few years and I gave
that a shot.


Dave:
You really got started at the ground floor of proprietary trading?

Steven:
Yes.


Dave: What’s the difference between a proprietary
firm, a professional firm and a retail direct access firm?

Steven: A
proprietary trading firm backs its traders 100% with its own capital. Retail
trading firms house customers who are trading their own personal capital. At
Schonfeld Group, we support both types of traders. Professional trading is a
broad term that generally defines any trader, whether proprietary or retail who
earns his or her living as a trader. Schonfeld Group aims to be a place where
both types of professional traders can have a successful, profitable career.


Dave:
Did Level II data exist back then?

Steven:
We did mostly New York stocks, but there was also level II at the time for
over-the-counter stocks.


Dave:
Did Schonfeld grow steadily through the 1990s, or did growth fluctuate at times?



Steven: Very
steadily. From 1988 on for years we grew very steadily. We always tried to make
it not too fast, not too slow, but moderately strong growth.


Dave:
At your peak, how many traders worked for Schonfeld?

Steven:
I think it was about 1100 proprietary traders. We have had about 4000-4500
traders come through the doors in the last 17 years.


Dave:
Is it strictly in the office trading, or are there remote traders as well?

Steven:
We have remote and also office. We are looking to grow our remote trading. It
is setup for the traders to be in office for a while, at least 6-7 months and
then go back to trade out of their home or another office.


Dave:
You basically start everyone out in the office for a couple months?

Steven:
For the most part, yes. But if someone has some sort of a track record they can
by all means start out remote.


Dave:
I am personally friends with several of your traders during the late 1990’s.
Some of the stories they tell are simply amazing. Are you able to share any of
these stories?

Steven: From 1999, 2000,and the first quarter of 2000, which was 2 1/4 years of trading. In that
period, the trader compensation, how much I paid my traders was $685 million.
That’s the best way I can illustrate those times.

Dave:
Wow, that is truly mind boggling! Were you guys the first proprietary firm of
the modern era?

Steven:
As far as I know, yes.


Dave:
I know we witnessed a shake-up in trading firms after 2000, but now there seems
to be a new boom starting. Do you think this relates to anything in particular?

Steven: I guess
part of it is from the number of years of trading. Through time, weaker firms
fell apart from the tough trading and there were very few firms left. Now new
players are going back in. Possibly, there is a bull market, or at least one
coming in the next few years, people are preparing for it. The newer crop of
people are trying to get in now that weren’t around back then.

Dave:
Is there a difference between a daytrader today, and a daytrader in the late
90s?

Steven:
Not that different. Maybe some are more computer literate, maybe more
mathematical.


Dave:
How about strategy and tactics. How have they changed?

Steven:
In relation to strategy, it’s a whole new ball game. There use to be tons of
volatility and many volatile stocks. Nowadays, you have to really have to
narrow in on the really volatile stocks of the day, instead of trading the same
stock over and over again.


Dave:
How do your traders locate these volatile “stocks of the day”?

Steven:
We provide all of our traders with a proprietary technology we’ve developed
called SchonSite. It’s a filtering tool that uses Schonfeld Group’s own
proprietary variables to help our retail and proprietary traders research and
identify stocks and trends that will support the strategies they’re using.


Dave: Are traders today holding the trade longer
then they did back in the 1990’s, or is the time frame pretty much the same?

Steven:
When we talk about holding time, we have an enormous amount of studies of all
the trades that have been done in our firm, and it really depends on the stock.
Scalping can be within seconds, and yet some scalpers are holding for 5 to 15
minutes today.


Dave:
I know Schonfeld has put a lot of effort behind training traders, can you tell
me a bit about your training program?

Steven:
The program is very different for a new trader than it is for an experienced
trader. What we have is statistics, studies, report cards, video broadcasting,
and, a quant group who gives out enormous amounts of information about
strategies.


Dave: Do you prefer someone who is new and knows
nothing, or do you prefer someone who is experienced?



Steven:
Really, I would take both



Dave:
Does the banning of bullets change your trading tactics at all?

Steven:
Not materially, or too involved, but there were some scalpers that got affected more
than other traders.


Dave:
Do you have an opinion on the new threshold rule ?

Steve:

There are a lot of variables and its too early to tell how it will effect traders.

Dave:
What is your view of the day trading industry as of today?

Steven:

I still think we are in the doldrums. Volatility is unbelievably low, and in low
volatility its tough to make a lot of money. On the other hand, its also tough
to lose a lot of money. Unfortunately, many traders aren’t making what they use
to make in the past. The most important thing right now is to stay in the game
and work on honing their skills like control, discipline, and strategies.


Dave:

What do you think is responsible for this low volatility?

Steven:

Volatility is low because of a lack of retail volume in the market as a
percentage of overall volume. Also, the influx of competing black boxes in the
market is resulting in fewer big swings.


Dave:

Judging from what I witnessed at the 2005
NYC traders expo, some of the larger, full service firms like Fidelity are
courting the lagging retail market. Seems like someone is predicting retail
coming back in a big way. What’s your opinion?

Steven:

I think the retail market will grow slowly until there is another bull market.
Then we will see it take off in a much bigger way.


Dave:

If retail comes back, leading to an increase in volatility, do you foresee a new
‘golden era” in daytrading?

Steven:

More like a silver era. I think we will see another good chapter for active
trading, though not as golden as before. Retail will come back with the next
bull market. However, the black boxes that trade against retail volume are here
to stay. This is a big change in the environment since the last golden era of
active trading.

Dave:

I can't wait for those days again! We are out of time. Thank you for joining
me today, Steven.

Steven:

Thank you, Dave.

Stopped Out YM Flat Holding SIRI Long

The second false system entry in a row for the YM system. Stopped out with a 20 point loss. The channel is still in full effect. I am expecting a down day today in the market and the system should fire short once again. However, I am not going to anticipatory trade and will wait for the entry signal. Remember the lower Neo Surf Channel line is 10363 in the YM. Continuing to hold SIRI long from 88 cents with a stop now at 90 cents. Best Wishes!!

7 Must Know Stocks For Thursday

Jobless Claims and Factory Orders will liven things up on Thursday for investors. Several major names reporting earnings will add to the volatile nature of the session. Stocks got off to a strong start this morning. The Fed’s Beige Book cast a quick pale on the day indicating less growth than expected in most Federal regions. Speculation ran rampant of the Fed being forced to keep interest rates low due to the muted growth picture. Shares closed mixed on the session with the DJIA falling 9.22 , the Nasdaq easing lower by .11 and the S&P 500 gaining just .48.

Here are 7 stocks you need to know for Thursday

Teekay Tankers TNK float their EPS before the open with an expected figure of 17 cents

Edgy retailer, Urban Outfitters URBN, has analysts expecting an EPS of 40 cents prior to the trading day

Hot and juicy burger chain, Wendys International WEN, reports before the bell with a forecast EPS of 3 cents

21 cents is the expected EPS for Del Monte Foods Company DLM prior to trading

Muffler kings, Midas Inc MDS, reports before the opening bell with a forecast EPS of 8 cents

Joy Global JOYG reported earnings beating most estimates today

Orders are up big for furniture retailer, Ethan Allen Interiors ETH, who reported a 25% increase

Follow Us On Stocktwits !!

10363 YM: Touched Not Broken Staying FLAT

Wow, another super close call with the YM Neo Surf Death Channel. Uncannily, the lower line at 10363 acted nicely as support. Some of you trade the bounces off the channel lines. This method of channel trading would have yielded a nice reward thus far today. We are FLAT YM presently. LONG SIRI

Holding SIRI Long: $1.00 Breaks Today?

Our SIRI entry yesterday at 88 cents is performing nicely. I am expecting Sirius Radio to break the survival critical $1.00 market today or very soon. Time will tell, stay tuned!

7 Critical Stocks For Today

The ADP Employment Report will hit the wire first thing Wednesday morning potentially setting the tone for the day. A multitude of important earnings announcements including several from big box retail discount chains will add to the midweek flavor. Positive international news emanating from Greece combined with strong US merger activity led to a modest up close. The DJIA was the laggard due to selling in Microsoft, International Business Machines and Hewlett Packard. The DJIA added 1.81, the tech heavy Nasdaq climbed 7.22 and the broad based S&P 500 eased higher by 2.59.


Here are 7 stocks you need to know for Wednesday

An expected loss of 64 cents/share is awaiting investors in Take-Two Interactive Software, Inc TTWO after the close

Long time pet supply retailer, PETsMart Inc PETM reports after the final trade with a forecast EPS of 56 cents

Athletic shoe retail purveyor, Foot Locker inc FL, has analysts looking for 25 cents after the closing bell

8 cents/share is the consensus for rib eatery, Famous Dave’s DAVE upon the close

Insurance company, Progressive Corp PGR, reports during the trading day forecasting an EPS of 37 cents

Costco COST is looking at 71 cents/share prior to the trading day

96 cents/share is the expected figure for big box retail discount club BJ’s Wholesale Club BJ prior to trading

Neo Surf YM Death Channel

Tne Neo Surf Death Channel has emerged on the YM 10463 to 10363. Long above, short below and FLAT in the channel.

Flat YM

Long SIRI

Out & Flat YM

Stopped out of the YM longs with loss. Can't win them all!

Will recalculate neo surf channel this evening and jump back into the fray.

SIRI-- Long Now !! Unique Opportunity

We rarely make stock picks on this blog. However, this is a unique exception. Entered SiriusXM Radio long at 88 cents. There are a multitude of reasons, both fundamental and technical. I am expecting this trade to be a longer term hold. Very confident at this time. Stay tuned!

Long And Strong Dow-- March 2nd

The Neo Surf system triggered Long in the YM at 10407 with an entry at 10411. Almost perfect! The stops are at 10393. Remember, when we trade the system, the goal is to catch the BIG WAVES with no time frame on the trade. Looking for at least 100 points in the YM with this entry. I am confident fundamentally in the bullish nature of the trade. Strong European and Asian data should continue to add to the optimism. LONG AND STRONG !!

Trading The DJIA

The current NEO SURF channel in the DJIA YM futures is 10407 to 10323. Long above, short below entering only after a 3 minute break of the channel line.