As we talked about yesterday, we did take down 2xs GOLD long DGP, and shorted tech with the QID.

As always, we only took an intial 1/3 position, we will add to that position once QID can close above $42, the 50 day avg. The QID seems to be trending in a defined up channel. A close below $38, would put the up trend channel in doubt.

Shares of Chiquita are do for a pop according to our probability models. We will be buyers above the $15 resistance level.

As we can see on the chart, 2007 September through May 2008 was a nice run for CQB from the levels we are at now. The bear market is still in control, so we suspect a repeat of this performance is possible.

Calculated resistance levels are $15.12, and $17.03. We predict CQB has a 40% chance of being higher then $15 by Friday Sept 19th.--Jon

Even though shares of ABK acted very well today, the broader markets did not, in paticular the Financials. Therefore, we closed out 90% of our ABK holdings, and will look to re-enter at another time.

As we will see in a minute in Brian Shannons recap, the markets continue to struggle for direction. However, the bears seem to have momentum on their side, not to mention all the news. Two things that stuck out for me today, was the fact that oil was down, yet the market dropped over 1% and the S&P short was able to take out the 50 day and hold.

We are looking to take a long position in GOLD via the ETF DGP.

If we look at both the GLD and DGP, we see that the price Standard Deviation is well above 3. We only see this occurance 1 out of every 333 trading days. As you can see on the charts, the RSI is over sold, and these levels came on heavy, panic type volume.

We belive should the market break down, GOLD represents a nice area to go long with favorable risk/reward odds. When trying to make a long case, one always needs to confirm with the short side view.

Here we see the Ultra Gold short sitting in an extended over bought position, confirmed by the high Standard Deviation from the mean.

Now, I will turn it over to Brian for market recap.--Jon

As stated prior, if we do not trade in the same direction as the broader indexs, then second in the industry indexes, making winning trades becomes very difficult. The markets come to inflection points where risk/reward analysis becomes hazy and it is in those times when cash is king, like now. While most market ETFs are at points where they could go either way, I am finding comfort for the bull case in the S&P Ultra Short.

Here we can see the stock is still locked in a nicely defined downtrend channel, confirmed last week by its inability to take out the 50 day moving average. We continue to believe this stock is most likely going to retrace down to its 200 day avg between $58 and $61.

This chart comes to us from Vector Vest, called the Market Timing Indicator Chart. On the chart we find a 40 day moving average, and up/down trend indicator lines showing when Vector Vest made either and up trend call or a down trend call. This indicator incorporates many other Vector indicators into 1 single indicator. However, the uptrend is only confirmed when this indicator is above 1, which it is now, and the Buy/Sell ratio is above 1 as well, which it is not. Currently the Buy/Sell ratio is way down at .60.

What this is tell us, which is what we suspected, right now the up movement in the market is very narrow based, very weak, and in our minds leaves the door wide open for the bears to take control once the SDS hits its 200 day avg. Unless these indicators improve by more broad based buying, we see the market changing directions within the next 35 trading days.

Stocks to watch:

Consumer discresion stocks are on the rise, thank you lower oil. Less money to spend in your gas tank, more money to buy stuff. CHS will report earnings Aug 26th. They have already reported bad sales figures.

Based on the last time the stock moved down to $4.5 dollars, we believe the same trade could be setting up. A touch at $4.5, a fast move back to $6 around earnings for %33 return. Company has no debt, plenty of cash, sector is under accumulation, etc etc.

CNB is a regional bank with bad loans, bad earnings and no reason known to us to be going higher. Wall St feels the same, as put optins for the stock traded at 8xs normal volume on Friday.

Stock has traded in the $20s this year. We can't imagine that scenario but, we can imagine Wall Sts disbelief to continue over the next month, providing some upside as the shorts, cover, short, cover, short until they are right.

This is risky, but we think this might provide just enough window to at least get the shares up to $10. We will be buyers above the 1st resistance level.-Jon

We trippled our ABK investment tonight after hours. Lets see where this takes us next week.--Jon

SAN FRANCISCO (MarketWatch) -- Shares of bond insurers Ambac Inc. (ABK:AMBAC Inc rose in after-hours activity following Standard & Poor's affirmation of ratings for the company's respective insurance units. S&P affirmed its AA financial strength ratings on both MBIA Insurance Corp. and Ambac Assurance Corp. and removed the ratings from review for a possible further downgrade. Ambac shares rose 9.2% to $4.98 and shares of MBIA rose 6.5% to $11 in after-hours activity

Briggs is set to report earnings before the bell Thursday. As we can see on the chart, the stock has the potential to break above its long down trend channel.

Wall St today cast a very dimm view on the possiblity that anything Briggs says in the morning will make the stock go higher. When I see that kind of conviction, I always get the buy button ready for the opposite direction.

Bottom line, we got this one on the watch list, and will take it down if they can deliver the shares to us above $15. If the stock tanks, no harm no foul. However, if we catch a short squeeze, might be a nice ride!--Jon

Options expiration is Friday, so the market is going to be undefinable until after Friday morning. Right now cash is king. We stopped out on USD at $50, we sold UYG premarket Tuesday after Goldman was downgraded at $23.

We are still long small initial positions in LIZ and ABK, and looking to get filled above $12 on shares of PDLI.

If one looks at the QID, it could not hold $40, and the SDS could not stay above $66. The UYG would not break below $20, so all these things keep me in the long side camp.

On the other hand, OIL found a base and moved higher as the dollar wanted to move lower. Bottom line, cash is king. To win, we have to trade in the direction of the broader indexes. Nobody wins trading against the market direction.

While we are waiting for the options contracts to settle, the direction is not clear. If oil breaks higher, market will retest the lows, if oil breaks lower, market will move higher. It really is as simple as that right now, and most likely wont be decided until next week.--Jon

When it comes to Bio Tech companies, I am a lost ball in high weeds. This is why I normally do not own them, because I don't understand them. Not to mention most of them survive simply on a wing and a prayer, that generally doesnt get answered.

However, what I do under stand is stock price action, trend patterns, and how to spot potential winners.

This first chart shows the put/call ratio for PDLI over the last 2 years. As you can see, when the blue line gets above 1.30 puts to calls, which is bearish sentiment, the stock does well. When everyone gets bullish, the stock crashes. Currently the SOIR is 1.30,the bearish high for the year.

Second piece of the puzzle is the actual chart because its price action that pays, nothing else. The greatest story and valuations in the world doesnt pay your bills if Wall St doesnt give a hoot. This fact takes a while for short timers to learn.

Looking at the chart, we see what is a 21 week trend reversal/counter trend after a lengthy decline. Now I worded that way because a standerd counter trend rally, which means the original trend is still in play, is 50-99 days.

At 21 weeks, which is a little over 100 days, this counter trend is starting to become and may be a trend reversal. Cleary by the the 1st chart, options players don't think so, and again they may well be right.

But, PDLI is set to report earnings on Monday. If those earnings are favorable, then I would say, this is a trend reversal and should be bought.

Vecotr Vest right now puts a value on the shares of $18, which they will raise as the stock moves higher. This year the stock has been as high as $23, and it was $60 eight years ago.

As stated before, I don't know anything about BioTech and I can't even tell you what drug PDLI makes, and right now don't care. If the company can deliver what Wall St needs to hear in order for the shares to go higher, then we will be buyers, and learn more about the actual product after that.--Jon

As you know at Trademechanic we use history as our crystal ball of the future. Because nothing changes in the stock market, just repeats. After a 300 point run today on the DOW, I thought that would be a good time to dig up some historical performance information that typically happens after such a move.

The above chart list the % moves since 1945, followed by the number of times said % move has happened, and the performance of the market there after.

Based on this data, which reflects the call we made last month, the bear market appears to have ended. Not scary down days have ended, the bear market has ended, there is a difference.

We added to our shares of RFMD today, as talked about yesterday. We bought back into UYG as it broke back above prior resistence at $22, and I went ahead and bought a small position in ABK on the analyst downgrade, which was techanically not correct. If you have not traded very long, recomend waiting until the stock can clear $5 before buying.--Jon

First lets look at the Pro Shares S&P Ultra short. As we have talked about before the Ultra Short made a false break pattern just after the July 4th holiday. False break patterns are confirmed when the bull trap is followed by 2 very fast down days.

False break patterns allow for 1-4 counter trend rallies within the pattern, ultimatly resulting however in a test of previous major support areas, in this case the 200 day at $60 per share. Typically we can expect this pattern of trend to run its course between 50 and 99 days to be completed.

As of today, we are at day 16. So, while the counter trend days have been scary, and come with bad news, unless the bears can get this stock back above $70, we will continue to trade with an upside bias.

Shares of RFMD made a nice move today, stopping just short of prior resistance. This is not suprising given the broader market action. We continue to believe the shares have a greater then 40% chance of reaching $5 by next Friday. However, they also have a 20% chance of topping here and finding their way back to $2.50.

A close above $3.65 would trigger us to again accumulate more shares for the 3rd time. Next major resistance level is $4.20.--Jon

We sold prior to market open shares of ABK and UYG. We placed 2% stop loss on HA and RFMD, got hit on HA, still hold RFMD. We added to our position in shares if USD.-Jon

We will be putting in a 5% trailing stop on all holdings today. We anticipate being stopped out on the majority, which is fine.

We simply re-group, lock in profits, and look under the hood for new direction. Wal Mart is the biggest reason for the trailing stops. Missed sales expectations and guided lower then forecast. If Wal Mart can not make their numbers, that is a problem as they benefit the most from a troubled consumer.--Jon

Apparel companies, like financials have gotten killed this year. We are seeing a possible set up in shares of LIZ that could provide a few dollars of up side.

LIZ is due to report earnings next Wednesday, two days before options expiration. The company is also set to pay a dividend in Sept to share holders of record on the close of Aug 22nd.

With stock trading a full $1.50 below is Book Value of $15.46, we believe a possible panic buy in could be setting up, if the bulls can take out $15, and if LIZ can provide some positives on the earnings call.

Adding fuel to the possible fire, LIZ got an analyst downgrade today, of which the shares ignored and went higher.

We believe the bulls might have the bears in a trap, and will be buyers above $15.--Jon

Before I get to ABK, I want to address the Social Pick site that looks like we sold all our stock today. We did not sell today, we still own UYD, USD, RFMD, HA and we own shares of ABK. ABK we purchased around $2 because, why not? Down side is $2, upside is $60.

I closed those stocks on Social because they don't have a away for me to put a stop loss trigger on, and I wasnt going to be available when the Fed decision came out. So, went ahead and closed the picks, but we are still long with no intention to sell at this point.

Now, ABK has been screeming up almost daily for the past few weeks. Above is a weekly chart that shows obvious resistance at $5, of which even on an up 300 day, ABK could not hold. Put options for ABK went off today at 7xs normal volume. This tells me the shorts have regrouped at $5, and plan on tomorrows earnings being their ticket to 100% profits.

The shorts might just be correct, and get the big pay day. But, if they are wrong, I have marked the potential next two target areas for the stock, $10, $20.

Right now, ABK is in a counter trend rally, not a trend reversal. ABK is 25 days into this counter trend rally. Most counter trends, last 50 to 99 trading days.

So, if the shorts are wrong, then this stock is an easy double, and could even tag $20 in the next 25 to 50 trading days.

The question of course is where to buy, and any price under $10 if the shorts are wrong is the answer. We will add to our position if ABK can deliver tomorrow.--Jon

Mr. Bernanke, we need direction! Folks this market is ready to move to Dow 12,000 in a hurry, but we need Mr. Bernanke to feed the bull.

As we will see in Brians recap, a lot of technical breaking down is going on. However, one can also look at the USD and a DELL stock today, and see a different picture.

Stock Market Video 8/4/08 from brian shannon on Vimeo.

Bottom line, if the FED does not signal a rate increase at their next meeting, we will exit our longs and then regroup. The market moves fast, so my advice is to put on a trailing % stop tonight, something like 4%, to ensure you will be able to exit timely.--Jon

The market averages managed to recover late in the day despite a big spike in oil. Wall Street likes to say the pros buy the close, so that would lead us to think for now the big money is betting on Dow 12,000.

However, at Trademechanic, we dont get bullish or bearish, we just look under the hood for direction.

Looking at the ETF DUG which is short oil, we see the downtrend channel for now is intac with todays pull back. If this trend holds, that would be a signal that we need to change sides and exit our current longs. I think $30 is a key area, any close below that and we will exit quickly.

However, the reverse of that trade is a close above $36, in which case we will keep our existing longs, and buy shares in DUG and possibly HA.

Hawaian Air got creamed today, I believe because of the rise in oil, and some profit taking into earnings. We calculate a 62% chance of HA closing over the next 16 days above $7.5 per share.

I will not get bullish on the stock until 2 things happen, HA closes above $8.50, and oil begins to move lower.

If these two things happen, and I believe they will, this will be our next trade.--Jon

As we can see by the chart RFMD has been putting in higher lows, working its way slowly back towards its declining 40 day moving average. After the bell they reported numbers that seem to set well with Wall Street.

Options trading suggest the stock has a 70% chance of finishing between $2.5 and $5 over the next 18 days. Trademechanic is betting on closer to $5, and if not, willing to risk less then a $1 a share from the current price. In otherwords the risk/reward set up is bullish.

We will be buyers above $3.28.--Jon

I know everyone is bearish and predicting the end is near. However, there are too many possible long set ups still forming, that I am not willing yet to jump on the markets grave.

As we can see in the above Ultra Semi Chart, they have broken back down to the bottom of what has turned out to be a 7 month trading range. Just maybe, when everyone is expected all to go wrong, something can go right.

Remember the false break pattern on the DXD-Dow Short. That pattern still holds as we have seen 3 up days for the DXD. Now those days have come at a heavy toll to the DOW in big down moves, but the count is still 3.

Remember the pattern of trend for a false break is 1-4 counter trend days, then resume the normal trend. The DXD is now in a congested area, going into its 4th up day.

I am still playing this possible up side move, by watching the action in the USD tomorrow and Wednesday. I believe we can possible get some good news on the gas and oil inventory front that will justify a purchase, quickly sending the shares back up 10 points.

As always with this market, things move quick, so one has to anticipate. The calculated pivot point is $41.11, support at $39.54, 10 day on the daily chart is $43. I will be looking for heavy panic type volume down at the support level, and if we get it, then buying 1/2 a position above the pivot point, the other half on a close above the 10 day. We need to see over 200,000 in volume by Noon either Tuesday or Wednesday, other wise, we will start to consider a short position.

If the long works, also looking at the UYG, TIBX, AND TGI--Jon

This weekend, all the TV show experts were saying how the recent rally was nothing more then a bear rally and a chance to get short the market. These of course are the same folks that told everyone to buy Financials and Tech back at DOW 12,700 all the way down.

As you know we tagged the UYG for 6 points a little over a week ago. We also in the last month have been Dow long, Dow short, Gold long and Gold short, all of which we made money on.

As of this writing, I strongly disagree with the TV pros, and say the best set ups are from the long side, but have to be executed properly. What that means is we set a parameter for the stock to qualify for trade, then buy back in when the buyers are back in control. We have to anticipate such parameter first, then see if it plays out as we anticipated.

In the case of UYG, we anticipate early next week the bears will be able to drop the shares at or below the 10 day mva of $19.50. So the trade trigger to set up in ones broker account is if UYG has a ask price of $19.50 or less, then BUY 1/3 position of UYG if the share price is greater then $20.50. At $20.50, the buyers stepped in to defend the 10 day and are now back in control of the stock. Our next purchase of UYG would come above the 40 day at $22.--Jon

Yesteday I asked the question where are the shorts hiding, today they answered in a big way. Sorry, I didnt mean to upset the Bear this much.

Are the shorts just going to sit back and take this rally on the chin? DOUBT IT. The DDM is fast approaching an obvious area where the shorts will try to make a stand. As we see on the above daily chart, the 40 day mva is just above the gap price of $65 per share. We can expect the shorts to make a case at this level.

Good news for the longs is the MACD on the weekly chart has not even crossed yet, and on both charts we are far from an RSI over bought position. Here on the weekly chart, the 40 day is at $75 a share. I would suspect the shorts to make a stronger case at this level, then the $65 on the daily.

Remember our pattern of time trend, 4 days have passed, the longs have won. We now look for 7 to 11 days, which will get us to the $65 range. Should the shorts stand at that level look more like the Alamo, then expect a nice 50 day romp up to the $72-75 level.

Expect that to be WWIII for the shorts, they will fight to the death at $74. I don't think the bulls will have enough ammo to win that battle, but as stated over the weekend, the war is over, the Bull has won.--Jon

As we talked about last week, the market did put in a bottom and moved nicely higher. We we able to catch some good % moves with the purchase of the Dow Long DDM and the Finacials Long UYG. So, far our play on the declining oil price has not panned out yet.

By looking at this chart of GOLD long, we can see some obvious turning points with over bought RSI, and some potential gaps that need to be filled before GOLD bulls can claim victory. With that in mind;

We are setting up a trigger buy on shares of DZZ-Gold short at 6% higher from the current closing price, this should be an area where the bears are back in control in the short run, sending GOLD down to the bottom of its trading range. As always news events will effect this trade, but the short term technicals favor shorting GOLD as of today.

The last question on everyones mind is obviously has the market bottomed? I believe that is has bottomed for the year, but caution everyone to be ready to change at the drop of a hat. The above chart of the S&P shows 3 straight lines following tops as the market declined.

Generally, we see this type of market bottom with 3 exhaustion top patterns, the 3rd line being the final market bottom.

Adding to my thought on this is every one I have seen on TV, which is the ultimate contra indicator, all say we have not bottomed. If we can make 4 trading days without retesting the bottom, then we should be able to make it 7 to 11 trading days, if we get a few days past that and are still trending higher, then your next stop will be 50 to 99 trading days.

To make money in the markets, one has to trade with the trend, so keep counting, and look for those possible change of trend number days, or moving averages that provide resistance or support. We are still limiting our stock purchases as many land mines remain.--Jon

Below you will find charts of the DXD-Dow short, and DDM-Dow long. In this bear campaign I have stressed limiting your stock purchases to very few actual company stocks, and lean more towards Pro Share ETFS, except in the case of GOLD where I have endorsed owning GOLD miner stocks.

The reason we do this is because in a slowing economy, every company is vulnerable to an earnings miss. When your in a bear market, an earnings miss or analyst downgrade can quickly result in a 50% haircut for that companies stock.

The potential land mines are so great and hard to miss, even a long time trader like myself finds it almost impossible not to get bombed. Knock on wood, this year so far we have been up as much as 50% thanks to short ETFs, coal, and some timely bets on dry bulk. However, as we come closer to this bottom, we have narrowed our focus to GOLD miners, and short the DOW, nothing else.

As we see with the DOW short, a trade that has been very poriftable for us, it is now clearly in an over bought state. The standard deviation is above 3, which only occurs 1 out of every 333 trading days.

Here we have the DOW long, showing same thing except extremely over sold. On both charts I have marked GAP areas which stocks tend to fill, and potential change of direction Target locations. We saw last week, that the easy money on the downside, became difficult, as the market was able to rally back from the brink several times. I believe it will take some really bad news beyond simple missing of earnings reports, to send the market substainally lower. Now, in the times we are in, we just might very well get that bad news. However, it is time to start setting buy triggers on the DDM long. We will start with a 2% buy stop on DDM, half the position you would normally buy.

Every night I go to Schaffers web site to see what call options were being bought to extremes. Friday, Fannie and Freddie were both on the call option list trading a whopping 370,000 contracts compared to normal 40,000 combined. Options expire this Friday, so a lot of money on Wall St seems to be betting the market will rebound.

One quick note, did you notice Fast Money program got pulled from its Prime Time slot. Thats because these "experts" caused people so mucy money telling everyone to buy all the way down as the DOW suffered its worst month in history. Please watch these shows for entertainment only, come to Trademechanic to actually make money.--Jon

The driver of the stock market will largely be earnings over the next 2 months. A possible outcome could be the majority of companies exceed earnings expectations and guide higher. In this case, being long GOLD and short the DOW as we are, would not make one much money.

The second possible outcome could be that the majority of companies miss their earnings or hit the low end expectations, but guide lower for the fourth quarter, in which case we are well possition to make money.

For my money, I will plan on sticking to option 2 until proven otherwise.-Jon

Ok, here is how we are going to play the pending ECB decision. If you look at a chart of the GOLD short, and GOLD long, they are both at resistance and support levels. We are either going to remain within those levels, or finally break out.

I am of the opinion that GOLD will break out to the high side someday. However, Thursday, might not be that day. If the ECB raises rates, GOLD will not move much higher at first, but the uptrend will be confirmed, the downtrend in the dollar will be confirmed.

If the ECB does not raise rates, then GOLD if vulnerable to fast and violent move down, possible back to the range bottom.

So with that in mind, what we will do is buy DZZ on the close as a hedge against the possible down move. Then if that happens, quickly closing our long GOLD positions in the morning. If ECB raises rates, then we can quickly close the DZZ position for a small loss.

If the move in GOLD is down, the sell off will be so fast, you will not be able to react to it. We need the DZZ position to hedge against that possibility.--Jon

Standard Deviation for DXD is above 2. Only happens 1 out of every 22 trading days, with a panic low this week might even get to 3, which happens 1 out of every 333 trading days. Siemens announced 17,000 lay offs, and they were supposed to be doing well. This along with interest rate hikes by ECB on Thursday, should be sufficent enough to create a short term panic low in the DOW. A 2% trailng stop on DXD is advised.--Jon

Ok, as we have seen our positions in DXD, GLD, etc are spot on correct. We look for this to continue to be a winning trade with one possible detour comming up, BERNANKE.

The rest of the world is raising interest rates including Mexico and Brazil right here in our own back yard. Should the FED raise rates on Wednesday, this would trigger a short run up in the dollar, drop in oil and gold, and the market averages would rally. What I am saying in otherwords is, we would be in a losing trade.

The FED has a broader mandate then these other countries do, and they dont have the housing, unemployeement, and financial meltdowns that we do. So, I believe the FED will talk tough, but is boxed in and will only move towards a tighten bias.

While we still might see a small bump up short term for the dollar, that should be quickly sold. However, an actual rate increase, would most likely set a trade in motion that could run some short sell stop to cover and cause our position to be deep in the red.

The playbook, buy DZZ on a FED rate increase, move out of GLD and the DOW short DXD until further notice. FED no action, don't expect to move off the trade, but be ready to if Bernanke can talk up the dollar some.--Jon

The above chart is Vector Vest MTI-Market Timing Indicator chart. This incorporates 3 different mathmatical numbers calcualted using 10,000 stocks. Its nice guideline indicator not to get you in early on a trend change, I have already done that for you weeks ago, but more so a confirmation of your exisiting play book.

However, I did wait until this confirmation signal before I was willing to short the market. Now, why am I shorting the indexs today? Because, go back to the first of the month when we explained to you the false break out pattern of trend. A False break pattern, will see 1-4 up days within the downtrend. A couple of days ago, the MTI confirmed the downtrend, and we have been up 3 trading days since. So, I figure we are either done going higher or maybe 1 or 2 more up days, before the Dow test 12,000, then ultimatly the March lows. So, now is a good time to take a short position.

Ok, come inside and let me take you through the GOLD trade and some market history to back it up;
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As you know we have been accumulating China Yuachi for sometime, while we await the release of their earnings. Trademechanic believes China Yuachi to be one of the potential best investments going into 2009.

This company has been in business since the 50's, they are a Fortune 500 company in CHINA, and the product they make, Diesel Engines, is the ultimate GREEN play, in the fastest growing part of the world.

China is in the process of building out their road infrastructer highway system to mirror the USA. CHINA law requires any vehicle over 2000 lbs, must be powered by a diesel engine. This is big business for China Yuachi that will last for years or decades to come.

Next page is this weekends New America write up in IBD about Diesel engine maker Cummins. I believe the investment idea to be correct, however, they got the wrong stock. CHINA YUACHI is the way to play-Jon
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Shares of gold and silver companies rise as overall market drops
NEW YORK (AP) -- Gold and silver stocks rose Friday against a backdrop of a declining broader market, propelled by a jump in oil prices and a decline in the value of the U.S. dollar.

Looks like we are on the right track. Stay with GOLD, I will let you know when its time to take down market short ETFs.--Jon

I apologize for the lack of daily post. I have been letting the market do its thing and quietly putting the pieces together to form an opinion. If I don't post a trade on SocialP, then I havent executed a trade. If you have run money long enough, you know there are big run times, and inflection times.

Having said, that and surveyed the action, I find that we are locked in a bear market, and the pattern of trend is following a false break pattern, which has the highest probability of retesting the March lows;
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Once the ball starts rolling for you, and the big money starts coming in, for your next car you might want to consider the Bugatti. Zero to 60 in 2 seconds, top speed of 300 mph, 1000 horse power, simply the most incredible car in the world.

With a $300,000 down payment, Bugatti will make you one for $2.3 million dollars.--Jon

I would be the last person to ask for a price target on the price of GOLD. However, my track record is sold in spotting trends and trend reversals early, and my friends, getting on a trend early is how one makes big money in markets.

This one has recovered back into its 5 year bull trend, and looks poised to reach the upper level of this trend channel. If GOLD was to move over $1000, this stock is worth at least $40 a share. Long for now.--Jon

As I stated over a month ago, I continue to gobble up ETRADE shares like nobodies business. Just in the last week they retired more debt with a stock swap, and raised cash by selling interest in an India Trading Firm, and closing a US call center. Yet, the stock remains with over 100 million shares shorted, and priced as if they will be filing bankruptcy.

The biggest money you ever make, is when Wall St. has it wrong. Every anaylst has a sell rating or hold, no buys, and they have E losing money through 2009. (All wrong)--Jon

Boy did I get that last blog wrong. However, the most important life saving thing to learn if you want to run money for a living is to be able to say the very next day, "I am WRONG", and switch sides or change your playbook.

Its amazing how the stock market bears can crash every technical support in 2 trading days, that the bulls just spent 60 trading days building.

Bottom line here, we must play from a defensive stand point for now. I sold a big stake in NM, CYD today, but not all of the shares. Will begin taking down some gold positions tomorrow, starting with AUY and DBS. When we get a confirmed downtrend signal, then we will short the indexes, but not yet.-Jon

After the bell today we got, "HP’s profits spike on overseas growth". I also saw out of London HSBC was able to unload over 1 billion of assets to a buyer. The question on everyones mind of course are we begining a monster sell off.

To that I would point to 3 stocks we have been accumulating for months, ETFC, NM, CYD. Big down day, they didnt budge. I believe the market has finally uncoupled the good stories from the bad ones and quality earnings, with superior growth will rule the day.

I do not believe the Bears, no matter how much bad spin about the markets they print and show on TV, will be able to carry the day. The Financials are the biggest drag, but they have not moved higher. This is good, because the last bear move down to 11,700 on the DOW, was lead by Financials such as Citi, but their stocks were much higher. In the case of Citi, when this all started it was almost $60. The stock is $22 now. It is simple math. If Citi went to zero, that would still be less then the fall from $60 to $22.

I am not saying don't be cautious, I am just saying don't pack up and run to the exits just yet.--Jon

High Risk Play in Focus CYD 5/16

In case you missed it, China Yuchai CYD said today after the close they will finally get their 2005-2006 earnings released on June 30th, with current earnings to follow shortly after.

This is a stock we have been accumulating for a fairly long time. Its a Bio Diesel play in CHINA, Fortune 500 company, forgotten by Wall Street. I believe that is soon to change.--Jon

Market Re-Cap 5/15

The Next Big Trade Coming November 2008 5/13

When one runs money for a living, you live in 2 trading worlds. The here and now, and stalking prey for 6 months from now. Our prey 6 months from now is, The Oil Refiners!

Once its certain the DEMS are going to take the White House, watch oil plunge, finally enabling the refiners to make money;
Read more Stock Trader Blog

S & P Midcap 400 Index Buy Confirmation IJH 5/10

IJH gaves us a buy confirmation on Friday by "a white candlestick which has an open equal to the previous close but closing higher." If you been with us long enough, you know Trademechanic is named that way because we turn off the TV and look under the hood at the nuts and bolts to get the facts.

This weekend I am laying out for everyone the evidence, the set up, so next week we will be able to confirm in our minds, bear market continues, or bull market trend reversal marches on.

One can not trade in the opposite direction of the broader trend and make serious money. The buy confirmation for the S&P midcaps is good news for the bulls, but the candlestick patterns are day to day, so that can change by Monday. However, wanted to point it out because that came on an overall down day.--Jon

How To Trade the Market Now 5/10

Remember last month I posted a chart of the Japanese Currency FXY, showing how if it goes down, the S&P goes up, but if FXY moves higher, the S&P moves lower. Well, that trade still works.

I did a quick check at askstockguru.com for the calculated support and resistance levels for the FXY. Here is the verbage they use for a "breakout trade" of the FXY, "Breakout Trade: A close above the resistance level of 98.13 could trigger a buy signal. Confirmation would occur when the low of the day would be above 98.13."

Traders, we need to watch this level. If the low of the day for the FXY is above that level, then the 2008 bear market resumption probability goes to above 90%. You will need to do 2 things quickly, look at your profitable longs for support/resistance levels, be ready to exit quickly. Second, look to enter a 2x pro shares short ETF of the DOW, S&P, and Nasdaq. Good Luck.--Jon

Market Re-Cap 5/9

Counting Distribution Days 5/8

Jon, are we going higher, or will the bears take back control? There is no question the market bears fired off the first warning shot on Wednesday saying, we are still here. Wednesday was a distribution day. Down over 1% on high volume.

Here is where things get tricky. Investors Business Daily is counting 3 distribution days for the DOW since the confirmed rally began. I do not remember 3 Distribution days, my count is 1 distribution day. Generally in healthy markets, we can get 5 good distribution days be for a rally will turn.

My prediction is we will hold this rally through this quarter into July, then sell off big as earnings disappoint once again in the financial and housing and retail sectors.

Having said that, I am still putting in a tight stop at $13 on NM just in case I am wrong. For now, I look for NM to break into the 20’s over the next 2 months. But I am not about to let almost 100% gain go, so we are going to play it tight.

For those who bought FDG with us at $38, congrats. Sitting at $70 a share now, its hard to get 100% returns in a bear market. At Trademechanic however, we get it done.--Jon

High Risk Play in Focus ONNN 5/6

5:44PM ON Semiconductor beats by $0.07, beats on revs; guides Q2 revs above consensus (ONNN) 7.81 +0.09 : Reports Q1 (Mar) earnings of $0.21 per share, excluding non-recurring items, $0.07 better than the First Call consensus of $0.14; revenues rose 12.7% year/year to $421.9 mln vs the $386.9 mln consensus. Co issues upside guidance for Q2, sees Q2 revs of $545-560 mln vs. $400.6 mln consensus.

Social Picks Trade Data 5/6

Just want to fast point out the 45% trade average for total all time. When I signed up on that site, I wasnt active on it. I just dumped a bunch of stocks on there and didnt pay much attention to them for a while.

During that time frame, the stock market dropped 20%. That is why that number is low, compared to the gains you see on the actual active picks. This number will climb over the next 6 months as we book more daily winners. Our long term winning % is 95%, unbeatable in our industry.

Use the known winning math % in your favor to make the trading easy for you. In other words, If I give you 5 picks, 4 will win most times. The best way to trade it, is to buy all 5 using the pivot point math calculations that we use. Then limit any one stock to a down side risk around 2%. Long run, you will book 4 out of 5 winners at 3 to 20% gain, and 1 loser at 2% loss.

Remember when using your pivot points, if the futures are not strong, try to buy just above the calculated support level first. If the futures are smoking, then buy just above the pivot point. The market tends to change direction after the first hour of trading, then revert back to the original trend. This is your highest % entry time frame.--Jon

ETRADE Keep Buying 5/4

Turn Around Plays 5/2

Turn around plays, just like the Small Cap list, is another stock list I maintain. This list consist of stocks that traded much, much higher in years or even just months past. If these companies can regain their mojo, the shares offer investors the potential for big returns.

I will bring you headlines from this list of stocks as I come across them for you to view, and consider purchasing. Take a look at the stocks price history, current businss model and climate, then determin if its worth a small bet. Remember, these former big winners, can once again be big winners. A small bet, doesnt put your portfolio at risk, but offers the potetial for great return.

As example, this week I went long shares of ABK-Ambac. I believe this stock to be a possible take out target by Warren Buffett, and if not, a the least they will not be going out of business. The stock traded at $100 this year, I bought the shares for $4. The downside risk for me is 4 points, upside potential, is 96 points.

Here is a headline from another one that is way down that I am looking at, ADVNB "On the positive side, small-cap credit card issuer Advanta skyrocketed 16.5% to $8.78. The small businesses-focused company reported a first-quarter boost of $11.7 million from Visa's initial public offering. The stock remains down 74% for the year."

Again, you can buy a basket of these companies, bet small, and sleep well at night knowing a few of them will be big winners again some day.-Jon

Highest VST Small Cap Plays 5/2

VST is a combo number used by Vector Vest to combine all measurements of a stocks worth into one number. Includes, p/e, growth, sales, etc. If you have been with me for a while, you know that I continually run a shopping list portfolio of stocks under $10 that have the potential to be 1000% winners.

This list has produced many big, big winners for me over the years, one of the most recent being GTI-Graph Tech. Added in 2006 at $6, now trades over $21. In years past, another big winner was Nutri-System. Added to the list at $4, went on to trade above $80. So, this list is a key part of a bigger stratedgy for anyone hoping to trade for a living. To get yourself from A to Z, you will need to discover some big time winners that you can buy a lot of shares before they become big time winners.

Here is the current Top 6 VST rated Small Caps in order, UFPT, CDS, AEHR, DAIO, NM, TQNT. Full disclosure I am very much long NM and have traded in and out of TQNT many times.--Jon

Market Re-Cap 5/1

Keep Buying 5/1

Here we have a T-Bond chart

Looks like classic head and shoulders pattern. Remember, money flowed into bonds, to hide from stocks, not to get great returns.

Here we have S&P chart; Inverted head and shoulders pattern. Watch as the money flows out of bonds, and into stocks this quarter.

I have called this since 4/11, and am staying with it. Keep buying with both fist. Find a way to buy as much ETRADE over the next year as possible.--Jon

Market Re-Cap 4/23

Going Higher 4/23

Here we see a market timing graph that I have shown before. This graph combines the movements of 8000 stocks into one graph. The graph is for general market trend direction only, and calls up and down trends based on its timing indicator above or below 1.00. As always, to be successfull in any market, one must trade with the trend. On it I have drawn in the clear downtrend that started when the change in market direction was called by this chart.

As you can see as well, the downtrend has now been broken, and the 40 day moving average is acting as support. As long as this action is in play, all stocks are a buy. I for one have been accumulating shares of ETFC and NM for some time.--Jon

Playbook Week of 4/21

Ok kids, remember the best way to trade is always with one eye on the past. A lot of people always say to me, sure wish we had a crystal ball. We do, its the past.

The market never changes, just repeats. We told you on 4/11 to buy with both fist, now after a large move, time to put back on our caution hats. We have reached an inflection point. I will let Bill walk you through it on the next page.-Jon
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Market Re-Cap 4/17

I will first restate what I said 4 days ago, all stocks are a buy here, in paticular ETRADE. Hold ETrade for 2 years, keep buying the shares, it will make you rich. With that said, will let Brian take you the rest of the way. I think he has taken off his bear cap for now.--Jon

Feeling Good Everything is a BUY 4/15

I am upgrading all stocks to strong buy for the rest of the week. Look for the DOW to move back towards 12,700. Options data just released shows puts at all time highs.

Keep a watch on shares of ETRADE. 100 million shares shorted, stock priced as if they lost every customer and made nothing but bad loans. I for one am going against the crowd on this one, have been buying under $4 for a while, and will continue to accumulate. If Schwab is worth $20, ETrade is worth $30--Jon

Friday Good for the Bulls? 4/11

What really happened Friday? Everyone can see by looking at the SPY chart above, all that happend was an anticipation of what was going to happen, made more scary by the large outside day move. What I am saying is the bulls expected the bears to make a stand at SPY $126, GE gave the bears more mojo to work with, and gave the Bulls no reason to get in the way.

We have a big earnings week this week. What happens to the bears, when the bulls are handed some ammo at SPY $122 level? This could happen. All we know from Friday is what everyone expected to happen, which was top of trading 126, move down towards bottom of trading range 122, happend.

Brian Shannon is telling you to get defensive, I am saying not so fast. Remember our playbook Brian, we might have at least one more charge at 126 before months end. If we fail at that point, then we would be 90 days into the counter trend, and set up to take the DOW, NASDAQ, SPY to fresh new yearly lows. However, if financial companies give the all clear, DOW 13,000 will be here overnight, and the counter trend, looks more like a bull trend reversal.--Jon

Market Re-Cap 4/11

Market Re-Cap 4/10

Cramer Vs Anthony 4/9

Based on last nights Citibank news, I am going with ITU and ETFC for my picks against Jim. One an overseas bank and the other a company that I feel offers the small investors a fast way to double their money.

Watch for ETFC to really gain traction after their earnings next week as the shorted shares currently top 100 million strong, and I believe any bad news is already factored in, giving the shorts nothing to cheer about.--Jon

Market Re-Cap 4/7

Stock Market Technical Analysis 4/7/08 from brian shannon on Vimeo.

Confirmed Uptrend Playbook 4/3

I am today confirming the Bull uptrend. Please read on to get the reasons why, and playbook going forward;
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Timing the Market 4/2

Wall Street digested yesterday's enormous gains as all of the Major Indexes closed in the red. The Price of our VVC however, worked its way higher by eight cents a share, indicating that the rally is still intact. With one green light and an UpUp situation--VectorVest

Market Re-Cap 4/1

Have We Bottomed? 3/31

Cramer Vs Anthony Re-Cap 3/31

For the Month ending March 31st, Cramer gave you 5 winners and 10 losers, losers totaling $3241.

For month ending March 31st, I gave you 8 winners and 5 losers, losers totaling $1966, with $1434 of that coming from 1 stock.

Keep in mind there is no trading involved here, just buy on open and hold for the month. Some properly timed entry and exits would have netted a good trader money in all of these stocks. I will start the new month tomorrow.-Jon

Have We Bottomed? 3/29

What looked like a promising rally ran into headwinds the last three days, holding the Price of the VectorVest Composite to a $0.30 per share gain for the week. It now has gone up for the second consecutive week, giving a preliminary signal of a sustainable upturn. While I am disappointed by the market's weak performance over the past three days, I haven't given up on the idea that a base has been formed by the March 10th, 13th and 17th closing lows;--VectorVest
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Daily Set Ups 100% 3/27

Honestly I usually don't check the Daily Set Ups the next day for accuracy, usually I review them at the end of the week. However today since the tape was so lousy today, I decided to review. You never want to set sail with a Captain that has only sailed calm waters. (Old English Proverb) So, I like to check my work on the days when the odds of failure are the highest.

Looking at the long picks for long set ups, and the Extended section for short sets, out of 12 stocks total, 9 shorts and 3 longs, I am proud to announce 100% were correct. Bottom line as mention before, we trade to win here.--Jon

Market Re-Cap 3/27

Stock Market Technical Analysis 3/27/08 from brian shannon on Vimeo.

Climbing the Wall of Worry 3/27

The Dow Jones Industrial Average ($INDU) is up by about 800 points from its recent lows. Naturally the bottom callers are out in full force across various financial media outlets. But I want you to stay vigilant in your risk management.
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Cramer Vs Anthony 3/24

Looks like somebody is all hyped up. Mr Cramer came at us tonight with 6 buy recomendations. Clearly he was holding these until I returned from Kansas. Jim tryed to jump on the natural resources band wagon with his early March picks, which cost him big time.

Now its clear he is on the tech band wagon. I will admit tech is looking the strongest from a chart stand point. However, I have chosen some home, asia, tech, oil and a few others for diversification reasons. We only got a week left in March, we will be lucky to get back to even for the month.--Jon

Market Re-Cap 3/24

DUG Swing Trade Playbook 3/23

Just to advise what I am looking at for an exit point in shares of DUG that we went long at $36, I am using DIG as our guide. That ETF has a more defined trade range with the support level being $80 per share.

I am watching the RSI an additional sell signal. If we get $80 in DIG, together with an RSI below 20, that might signal a good spot to book profits in DUG.--Jon

Bottom In? 3/23

Keep in mind when we are saying bottom, we only are looking for the 1st leg down bottom. This will set up a tradeable rally on the upside that we can comfortably swing trade to the long side of things. No matter how good a companies numbers are, or how cheap the valuation, bottom line it takes big dollar purchases to move the shares higher. And if there are no takers, then taking a trade against that back drop is harder then what we are able to handle.

We like to count days and weeks based on past history, when looking for bottoms and give that a higher weighting then chart patterns. This doesnt mean we ignore chart patterns, but as you know with me, patterns hold a small value in my trading compared to other methods;-Jon
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Market Re-Cap 3/17

Stock Market Technical Analysis 3/17/08 from brian shannon on Vimeo.

Cramer Vs Anthony 3/17

Well, I have now moved into the losing column for YTD totals. So in this market, if you went long either one of our picks over the last 2 months combined, you would be down.

This just enforces the lessons I have preaced in the past, not every day is a good day to be in the markets. I see Jim put a sell on Bear Sterns tonight, give me a break please. He didnt pick any longs, which is the right call. Hard to say what tomorrow will bring.

One thing is for certain, Mr. Bernanke whom I believe thought he was determined to be independent of the financial markets, has found out the hard way who the real boss is. Unfortunately, the rest of us have had to suffer through his learning curve.--Jon

Market Re-Cap 3/13

Stock Market Technical Analysis Review 3/13/08 from brian shannon on Vimeo.

Cramer Vs Anthony 3/13

Cramer is stepping up his game this month. He has cut his YTD loses down from $5000 to $3000. As you might be able to tell I have been slacking out of kindness for my fellow trader.

However, he says one bad word about me on T.V. and the gloves come off. I am just trying to let him back in the game, don't push your luck Jim--Jon

Have we Bottomed Part II 3/11

I have been following this action for a while, here you will see a comparison chart of the S&P 500 vs The Jap Yen

As you can see the two move in the opposite direction since 1 year ago. The RSI reading for the Yen tracking stock ETF FXY is above 80 or at a trading top. This would indicate we have a good chance of a continued rally in the US Markets at least back to the top of the previous trading range.-Jon

Have We Bottomed? 3/11

This is the question everyone is asking me, rightly so. My question to everyone, what was different today then previous moves? We moved on news, as we have been doing up or down for a while now. From a technical stand point, as of right now, which you we see on the next page in Brian Shannons video, today the bulls managed to get us back into the previous trading range, for now. Its rare to call a bottom on a 400 point up day that is up right out of the gate.

We didn't snatch victory from the panic jaws of defeat, market trended higher all day on news. Now, every technical indicator showed we were way oversold and due for a bounce, the Fed provided the ammo for the bounce. This could have been a bottom, sure, but we need some bad news, and to see the reaction to that news to know for sure. Otherwise, we are back at the bottom of the previous trading range for now, of which we can comfortably trade, but otherwise nothing more than that can be determined for sure;-Jon
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Cramer Vs Anthony 3/9

I will be in Kansas City the week of March 17th, so probably will not have any picks that week against Jim. To make things fair for him, since he is down $5000 dollars of his viewers hard earned money, when I get back I will count his winning picks to my no picks for that week. I will not count his losers that he picks that week.

He has instructed his followers on Fridays show to buy Blockbuster BBI. I find this pick very interesting and smells of fraud, but Jim wouldnt do something almost illegal to get an edge would he? The ISE or International Securites Exchange reported call options on BBI traded 2354 calls, compared to 1 put on 3/6. Friday before Jims show during the day, Citigroup added BBI to its "Top Picks" list.

Jim, you wouldnt be giving your picks a few days ahead of time would you? Or be in bed with one of the big banks to pump n dump stocks? Just here to help us little people, right Jimbo?

Market Playbook 3/9

First, I apologize for not being around last 3 days. Took some time off to watch the market tank. Sometimes there is not a good reason to look at anything once irrational emotion takes over the markets.

Lets not forget what playbook we are running. Bear markets will complete several legs. I had thought we completed the 1st leg down with the 3 peat retest of the Jan lows, I was wrong. What we are looking for is a successful completion of the first leg down, which then sets us up for 90 calander day run to the upside. We need this run up in order to book some serious, predictable profits. This also allows us to then take on some short positions.

I have not done that yet, because we should bottom here somewhere. Lets go to our good friend Bill M. for some clarity on this issue;
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Trade Alert 3/4

As mentioned yesterday, we got confirmation today on the "Harami" pattern. To start the day it didnt look like it was going to happen, but by the close, we got confirmation. I also see confirmation in many key areas like Transports and Finance, with sell signals given in areas such as oil and aluminum.

With that in mind, we will attempt to go long shares of HPQ tomorrow. Also don't forget the beat down I plan on handing to Cramer this month over on the Cramer Vs Anthony page. He has already started out by losing his views $400 today.--Jon

Market Re-Cap 3/3

Today we saw a nice come back by the bulls at the end of the day, causing a bullish "Harami" pattern to form. Harami” is an old Japanese word for “pregnant”. The long black candlestick is “the mother” and the small candlestick is “the baby”.

We may need a third day confirmation to be sure that the downtrend has really reversed. This confirmation of the trend reversal may be signaled by a white candlestick, a large gap up or by a higher close on the third day. With that in mind, I will let Brian give us a video review;
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OEH Orient Express Call Options March 3rd

For those that have been around a while, you will be familiar with shares of OEH. We have speculated this upscale hotel chain will be purchased some day. Looking at call options for Friday Feb 28th, we see volume of 4025 contracts, 7xs normal. A bidding war between Indians and Arabs may be close at hand;
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Cramer Vs Anthony March 2nd

Ok, assuming one would have held on until the close Friday, watching his/her stocks drop like a stone, you have ended up with Cramers picks having all 8 be losers for a total loss of $4048.00 on 100 share purchases for the month of Feb.

Assuming one would have held on to the close Friday, and watched what was $1700 in gains on Thursday disappear, you would have ended up with 5 winners, 3 losers for a total profit of $46 for Feb with my picks.

Cramer was doomed from the day he opend his mouth, all longs were doomed by the bear market. These stocks go into the archives, the totals for Feb remain, but the stocks go away, and new picks in March count.--Jon