An Introduction To CANDLESTICKS, PART 2

PART 2

One of the main differences between the Western Line and the
Japanese Candlestick line is the relationship between open and closing
prices. The Westerner places the greatest importance on the closing
price of a stock in relation to the prior periods close. The Japanese
place the highest importance on the close as it relates to the open of
the same day. You can see why the Candlestick Line and its highly
graphical representation of the open to close relationship is such an
indispensable tool for the Japanese trader. To illustrate the
difference, compare the daily chart plotted with Western Lines (Figure
3) with the exact same chart plotted with Japanese Candlestick lines
(Figure 4). In the Western bar chart as with the Japanese Candlestick
chart, it is easy to interpret the overall trend of the stock, but note
how much easier it is to interpret change in sentiment on a day to day
basis by viewing the change in real body color in the Japanese
Candlestick chart.

Figure 3

Figure 4

Trader's sentiment

One of the greatest values of the candlestick chart is the ability to read
market sentiment regarding a stock. To illustrate consider the
following example of a stock traded from the eyes of a Western chart
trader and then from the eyes of a candlestick chart trader.

Western Chart Trader

At the close of the day's session you observe that the stock closed well above your entry price (2), which
leaves you very content with your trade.

After the close of day 2, you open the financial section of the paper and check the closing price of the
stock and observe that not only is your stock well above your entry price, but also has gained slightly (it is
worth mentioning
that most western papers only publish closing prices while Japanese papers publish both opening and
closing prices).

On day 3 you open and the newspaper to check the close and notice a slight dip in your stocks price but
you do not panic, because you are still well in the money.

You convince yourself that the stock has only dipped slightly relative to the entry day close (day 1), and
should resume its up trend on the next day.

On day 4, you check the close and notice that the stock has fallen significantly relative to the prior days
close.

You are now concerned about protecting the profits that you had previously bragged about just days
before.

On the beginning of day 6, you call your broker (or logon to your online trading account) and place a
market order to sell at the first opportunity.

At the day 5 markets open, the stock opens sharply lower and continues to fall.

Your order is executed at a price several points below where you entered.

You then shrug off the trade as an unpredictable misfortune, and move on to the next trade.

Figure 5

Candlestick Chart Trader

Now suppose you are a candlestick chart trader trading the same stock
using a candlestick chart (Figure 6).

At the beginning of Day 1 you enter the stock based on a candlestick
pattern entry signal (we will discuss proper entries in detail latter in
this unit).

At the close of the day's session you observe that the stock closed well
above your entry price (2) which leaves you very content with your
trade, but also moves you into a state of caution for signs of a change
in trend or reversal.

After the close of day 2, you observe the candlestick formed for the
day and notice that the real body is small indicating that there was a
tug of war between the bears and the bulls.

You also observe that the real body is read in color indicating that the
stock closed lower than the open indicating that the bulls actually lost
the tug of war to the bears.

Based on these observations you conclude that the bullish rally in the
stock has ceased, and the bullish sentiment of the market regarding
the stock is changing.

You decided to sell your position at the days close, or at the market
open on the next day to lock in your profit.

If this were a stock in the midst of an overall downtrend, you may
decide to short the stock under the low of the day 2 bearish
candlestick.

As you can see the candlestick chart trader has the advantage over
the western chart trader in that he can use the signals generated in
each candlestick to help foretell the changing sentiments of the market
regarding a stock.

The open to close relationship revealed in the candlestick is more
effective than the close-to-close relationship commonly used by
western traders.


Figure 6

An Introduction To CANDLESTICKS, PART 1

PART 1

AN INTRODUCTION TO CANDLESTICKS

Technical Analysis vs. Fundamental Analysis

There are two types of ways to analysis the price of a stock, fundamental
analysis, and technical analysis. Fundamental analysis is used to gauge the
price of a stock based on the fundamental attributes of the stock, such as
price/earnings ratio, Return on invest, and associated economic statistics.

Technical analysis deals more with the psychological component of trading a
stock, and is influenced for the most part on emotionalism.

The technical analyst is seeking to answer the question "how are other traders
viewing this stock, and how will that affect the price in the immediate future".

As you will see, the candlestick chart is the most effective way to gauge the
sentiments of other traders.

History of Candlestick Charts

The Japanese were the first to use technical analysis to trade one of
the world's first rice futures markets in the 1600s. A Japanese man by
the name of Homma who traded the futures markets in the 1700s
discovered that although there was link between supply and demand
of the rice, the markets were also strongly influenced by the emotions
of the traders.

Homma realized that he could benefit from understanding the
emotions to help predict the future prices. He understood that there
could be a vast difference between value and price of rice.

This difference between value and price is as valid today with stocks,
as it was with rice in Japan centuries ago.

The principles established by Homma in measuring market emotions in
a stock are the basis for the Candlestick Chart analysis, which we will
present in this seminar.

Candlestick vs. Western Charts

The Western bar chart is made up of four parts components, open,
high, low, and close. The vertical bar depicts the high and low of the
session, while the left horizontal line
represents the open and the right
horizontal line represents the close.

Figure 1

The Japanese Candlestick Line (Figure 2) uses the same data (open,
high, low, and close) to create a much more visual graphic to depict
what is going on with the stock. The thick part of the candlestick line
is called the real body. It represents the range between the session’s
opening and closing prices. If the real body is red, it means that the
close of the session was lower than the open. If the real body is
green, it means that the close was higher than the open. The lines
above and below the body are the shadows. The shadows represent
the session’s price extremes. The shadow above the real body is
called the upper shadow and the shadow below the real body is called
the lower shadow. The top of the upper shadow is the high of the day,
and the bottom of the lower shadow is the low of the day.

Figure 2

HangSeng chart

*No Comment.......

DowJones chart

*No Comment.........

Stock Pick - KUB

*After my 2 stocks comment about GPacket & KNM trigger by so called 2 blogger big brother, now i want to post here one of my stock pick recently, my other stock pick no need to say here la ok.
*ok here we go :
>>> 1) KUB oredi form symm triangle on both chart n RSI signal.
>>> 2) stock price breakout at end of triangle apex when it breach 0.28 resistant for a buy call trigger at 0.29 on monday 5th Jan 2009. (c chart 4 confirmation)
>>> 3) at the same time RSI signal also breaking its symm triangle formation 1 day earlier on friday 2nd Jan 2009, RSI line break tru 0.54 high of the triangle to settle at 55.7 that day. The nx day price breakout happen on monday 5th Jan 2009. (please c chart la oii) kekeke
>>> 4) its also a mid BB breakup together with price xtion, altho BB break is the same day as RSI break a day earlier.
>>> 5) my GREPS method only enter buy on monday 5th from price range breakout of 0.28. So from the chart we can c, very strong support at 0.24, so the most logic TA stop order shud be place under 0.24, >> 05.01.09>BUY 0.29-SELLstop 0.23 (c chart if blur blur)
>>> 6) after the breakout on 5th Jan 2009, the nx 3 days KUB consolidate n retest the 0.28 breakout again on the 3rd day after breakout, on the 8 Jan 2009 KUB close with a spinning doji (watever they call it) at price ngam ngam breakput point of 0.28, but b4 close big crocs try to shake out contra players or weak holders out by hitting 0.275.
>>> 7) btw after the breakout at 0.28, KUB hit high 0.31, n the beauty of TA, from FIBO calculation the pullback level at 0.275/0.28 on 8 Jan 2009 is also at 50% FIBO, 0.28 also the breakout point level.
>>> 8) after the pullback on 8 Jan, KUB make a small kurakura push to high 0.33 on 13 Jan 2009 7 at the same time RSI making a double line top.
>>> 9) SO, 05.01.09>BUY 0.29-SELLstop change to 0.26 from 0.23 , yeah yeah its still a lost because its trend follower style, hold position till hit the stop order.
>>> 10) BUT, yes BUT...hehe, Resistant candle body target at 0.34 on 10 Nov 2008, shadow candle resistant at 0.35 on 11 Nov 2008, KUB hit high of 0.33 on 13 Jan 2009.
>>> 11) from current chart KUB might retest the 0.28 breakout again bcoz its also act as mid BB support.

** SO the conclusion :- 1) trend follower shud still hold KUB BUY at 0.29 with adjusted stop at 0.26 from initial strong stop at 0.23.
2) ikan bilis trader like me surely oredi "lari kuat kuat" at 2sen 3sen profit, very poor me FA dunno to use, TA also so so oni, always blur blur one... but no worry if go higher i'll use jossstick & backhand method, a guarantee sure win one... wakakakkaaka
3) so logically after scalp 2 3 sen, i can still park to buy back at same price 0.29 or slitely higher then 0.26 stop at 0.27... C la how, errr sorry for my very poor engrishhhh, hehe

ASTALAVISTA & ADIOS....

my Comment about KNM

>>> I just cannot tahan to give my view about another HOT stock "so call lah", its KNM or KNN to fred, wakakakaka
>>> 1st i would like to say to Samgang there's no BUY signal at all at 1.75 using TA method, maybe Confuse'ion Investo TAFA (Try And Fuse Anything) system give him the buy signal (maybe he dream about it) hehe, IF Malaysia can ShotSell i definitely will SHOT at 1.75 level bcoz its very clear all SELL mode in TA when break under 1.73 EMA,RSI,MACD,ADX,STOCH,BBand etc etc....
>>> 1.75 level at at 15 Aug 2008 break down occur, n KNM never stop from trending down till it made a bid whack down on 16 Oct 2008 to hit 0.39 from opening of 0.67 same day & close with a very strong Long Legged DOJI or HAMMER time close.
>>> BUT, yes BUT.. its still not a buy signal yet, after the hammer KNM go to DING DONG mode or we can say Confuse'ion Investo so call favourite Backhand Smash PING PONG trade system (its a sure win u know, bcoz backhand maa)
>>> on 28 Oct 2008 KNM try to retest 0.39 again but oni get to hit 0.415 low this time... BTW at this current level RSI oredi showing a BULLDIV pattern. BUT yes still BUT...hehe, there still no buy entry, maybe uncle/aunty BUY LOW type system la.
>>> KNM rebound to as high as 0.71 on 5th Nov 2008, but still no buy signal, TA traders very sabar one, we need a reaction 1st to see how low KNM can pulback & yupp KNM pullback nx 2 days to 0.595 or at 38% FIBO pulllback level.
>>> BUY signal trigger when KNM break above 0.71 on 11 Nov 2008, SO buy confirm at 0.72 with stop place under the 0.595 FIBO 38% pullback, SO stop at 0.58 la...
>>> KNM try to push higher but yes, but again... its move up meet up resistant from 20EMA, oni manage to go as high as 0.765 on 12th Nov 2008, then make a slow pullback to low of 0.625 on 18 Nov 2008, from here KNM try to be HERO (uncle/aunty fav move) n rebound the nx day but oni to as high 0.665 but manage to break previous day high 0.655, but all still under EMA4, 7, 20, 50, 100... n oso 0.625 ngam ngam at mid BB level... SO TA method will adjust stop at under 0.625... so 0.61 the new stop move higher from the initial 0.58 stop.
>>> the nx day 20 Nov 2008 0.61 stop level hit... meaning Buy 0.72-Sell 0.61 = -0.09 loss, its a loss but TA method oredi limit the loss at 0.61 level, but easily can scalp n win 3 4 sen one & after break this 0.61 stop KNM go down the Long'kang all the way to 0.395 again on 9 Dec 2008... Meaning PIVOT or strong support level for KNM at 0.39 level again manage to tahan the pushdown. BUT yes BUT still no new buy signal yet.
>>> KNM ding dong from 9 Dec 2008 with a small movement till 31 Dec 2008... but it manage to push to high of 0.435 on 15 Dec 2008, at this consolidation period RSI oredi showing a BULLDIV pattern, SO for TA method any breakout above 0.435 is a must buy with stop order place under 0.39.
>>> 2nd Jan 2009, KNM breakout above above 0.435, SO TA method oredi a BUY at 0.44 with stop place under 0.39 at 0.38.... STOP a must info here if not Confuse'ion Investo will marah....wakakakaka, bcoz last time he mention i'm a new blogger maa with low hits, to me- yes i tell u blogger n trader is 2 different thing ya, remember that!!
>>> SO till yday friday 17 jan 2009, KNM buy entry still maintain at 0.44 with STOP under 0.39... still a lost of 5sen, BUT yes BUT again... KNM hit 0.52 on 12Jan 2009, meaning if you a scalper you can get easily maximum 8sen IF u park to sell at 0.52 la... but from 0.44 buy entry easily 3 to 5sen scalp, sap sap sui la... but for trend follower or position trader they'll still hold KNM with stop under 0.39.

*SO THE CONCLUSION SAMGANG MUST KNOW WHAT IS THE REAL TA METHOD OR CONFUSE'ION INVESTO TAFA METHOD.... N CANNOT LABEL ALL TA AS HIS FOOT, JGN MARAH YA... WAKAKAKAKKA
*WAA, LONG TIME I NEVER GIVE MY TA VIEW ABOUT ANY STOCKS, VERY SYIOK ONE LA... KEKEKEKEK
*DISCLAIMER: I'M VERY SORRY TO ANY NAME MENTION HERE, ALL NAME ONLY FICTION BTW, I TOKKOK ONI MAAA, HEHE

ADIOS

my Comment about GPacket

>>> After reading for quite sometimes about the TA/FA blog war between Samgang & Ah Seng (of Confuse'ion Investo blog), i decided i'll give my TA view (so often called by Samgang- TA as "his foot", i wonder why ??? wakakakkaa)


>>> No doubt Samgang's FA called very good. but he cannot label all TA traders as "his foot" wakakaka, laugh again, what's wrong with me.
>>> From the above GPacket chart that Samgang claim TA asking to BUY at 4.50, i laugh my assss when he mention, why Ah Seng TA asking to buy Gpacket at 4.50 level, my answer very simple, Ah Seng maybe CONFUSE about the real TA trading (bikin malu the genuine TA traders oni) any TA trader can see from chart above that 100% no buy signal for GPacket at 4.50 level, full stop.
>>> n errr, Samgang make a mistake when saying Ah Seng buy call last year 2008. It suppose to be 2007.
>>> u guys can see from the chart above only BUY SIGNAL from TA signal at 30 Aug 2007 when GPacket broke through 4.06, meaning BUY confirm at 4.08 price with 1st stop at 3.68 using 29 Aug 2007 bar low. (for those so called TA trader that dunno what stop meaning, i no time to explain here, go "BACA" buku, wakakakka, laugh again.
>>> for almost 1 month GPacket move up slowly like "kurakura" till it hit the Stop Loss or now Stop Profit already at 4.16 on 24 Sept 2007. BUT bear in mind GPacket hit high 4.44 on 12 Sept 2007, meaning instead waiting 4.16 STOP profit to hit, savvy TA traders may oredi cabut at 4.20, 4.30, 4.40 level... "sindri mau ingat la to take profit ya"
>>> its a small profit about 0.08 oni, but its still money maaa.
>>> after GPacket hit 4.16 STOP Profit, it went down the Long'kang all the way with our Confuse'ion Investo holding to dear live till now...oppssss - I hope Confuse'ion Investo oredi cut loss la "IF" he using TA method as guidance. wakakakka, laugh again, really sumthing wrong with me.


>>> OK, now lets move to current GPacket price level.
>>> Yupp, Samgang very tru, at 0.63 there's no way TA method will give any signal to buy, but, yes BUT, TA entry signal ringing a bell, screaming a BUY signal entry emerge at 0.71. So when it crack tru to 0.72 GPacket trigger BUY signal on 11 Dec 2008... most my clients bought at this break out & still holding till now.
>>> ok, after break BUY hit at 0.72 , i must give a stop level if not Confuse'ion Investo will "marah" like last time he try to teach me about stop, wakakakkaak, laugh again. OK 1st STOP at 0.58 under the last strong support low at 0.59.
>>> when GPacket move higher 2nd STOP emerge n stop change to 0.67, yupp still a loss for 2nd stop. & now when GPacket spike up to 1.31 on 12 Jan 2009, the 3rd STOP emerge, but now becomes STOP PROFIT oredi at 1.02 level, but still any savvy TA traders surely oredi block PROFIT at 1.10, 1.20, 1.30 level.
>>> SO nx move just wait & hold the 0.72 BUY entry till GPacket hit the 1.02 STOP Profit level, now just wait, sit back & watch the show....

*I THINK ENOUGH FOR MY BLA BLA BLA BLA, SO THE CONCLUSION NO MATTER WHO IS RIGHT OR WRONG, FA power or TA power (Samgang claim TA as his foot), THE REAL THING IS TO MAKE $$$ like what cpotrader always say.... kekekekek, sori cpotrader i pinjam ur word.

*TO ALL, JANGAN MARAH YA.... ADIOS

ps- btw i would love to here any FA method to trade Futures market, i know one remiser using FA method to trade futures... wakakaaka, less then 5 month go down the Long'kang oredi

FKLI & CPO (December Month)

>> $69,869

1)01.12>FKLI SHOT 5@859-BUY 5@858 = +5 (01.12)> +100= 69,969
>FKLI SHOT 2@859-BUY 2@852 = +14 (01.12)> +640= 70,609

2)02.12>FKLI SHOT 4@840.5-BUY 4@844 = -14 (02.12)> -580= 70,029

3)03.12>FKLI LONG 4@845-SELL 4@844 = -4 (03.12)> -320= 69,709

4)03.12>FKLI SHOT 4@844-BUY 4@841= +12 (03.12)> +480= 70,189

5)04.12>FKLI LONG 4@842-SELL 4@844 = +8 (04.12)> +280= 70,469

6)05.12>CPO02 LONG 1@1432-SELL 1@1445 = +13 (05.12) +295= 70,764

7)05.12>FKLI SHOT 1@840-BUY 1@840.5 = -0.5 (05.12)> -55= 70,709

8)05.12>CPO02 LONG 1@1461-SELL 1@1486 = +25 (05.12) +595= 71,304
>>> 1st week december profit = +$1,435

9)09.12>CPO02 LONG 1@1538-SELL 1@1538 = -0 (09.12) -30= 71,274

10)09.12>CPO02 SHOT 1@1538-BUY 1@1520 = +18 (09.12) +420= 71,694

11)09.12>FKLI SHOT 2@854-BUY 2@843 = +22 (09.12) +1040= 72,734

12)10.12>FKLI LONG 3@850-SELL 3@858 = +24 (10.12) +1110= 73,844

13)10.12>CPO02 LONG 1@1585-SELL 1@1567 = -18 (10.12) -480= 73,364

14)10.12>CPO02 LONG 1@1580-SELL 1@1590 = +10 (10.12) +220= 73,584

15)10.12>FKLI LONG 1@856.5-SELL 1@859 = +2.5 (10.12) +95= 73,679 *re-entry,sell at close

16)10.12>CPO02 LONG 1@1590-SELL 1@1595 = +5 (10.12) +95= 73,744 *re-entry,sell at close

17)11.12>FKLI LONG 5@855-SELL 5@858 = +15 (11.12) +600= 74,344

18)11.12>FKLI LONG 2@860-SELL 2@865 = +10 (11.12) +440= 74,784
>FKLI LONG 1@860-SELL 1@859 = -1 (11.12) -80= 74,704

19)12.12>FKLI SHOT 5@855-BUY 5@851 = +20 (12.12) +850= 75,634

20)12.12>FKLI LONG 5@851-SELL 5@848 = -15 (12.12) -900= 74,734

21)12.12>CPO02 LONG 1@1585-SELL 1@1583 = -2 (12.12) -80= 74,654
>>> 2nd week december profit = +$3,300

22)15.12>FKLI LONG 7@860-SELL 7@863 = +21 (15.12) +840= 75,494

23)15.12>FKLI LONG 2@862-SELL 2@859 = -6 (15.12) -360= 75,134

24)15.12>FKLI SHOT 1@859-BUY 1@857 = +2 (15.12) +70= 75,204

25)16.12>FKLI LONG 5@860-SELL 5@864 = +20 (16.12) +850= 76,054

(15)28.11>FKLI SHOT 1@872.5-BUY 1@866 = +6.5 (17.12) +305= 76,359 *POSITION TRADE

27)17.12>FKLI LONG 5@866-SELL 5@869.5 = +17.5 (17.12) +775= 77,134

28)17.12>CPO03 LONG 1@1567-SELL 1@1560 = -7 (17.12) -195= 76,939 *stop hit less 2min

29)17.12>CPO03 LONG 1@1567-SELL 1@1558 = -8 (17.12) -220= 76,719

30)18.12>FKLI LONG 2@878-SELL 2@886 = +16 (18.12) +760= 77,479

31)18.12>FKLI LONG 11@888-SELL 11@889.5 = +16.5 (18.12) +605= 78,084
>>> 3rd week december profit = +$3,430

32)22.12>FKLI LONG 5@890-SELL 5@894 = +20 (22.12) +900= 78,984

33)22.12>FKLI LONG 1@895-SELL 1@877 = -18 (22.12) -920= 78,064
>FKLI LONG 1@895-SELL 1@868 = -27 (23.12) -1370= 76,694*POSITION TRADE

(26)17.12>FKLI LONG 1@866-SELL 1@868 = +2 (23.12) +80= 76,744 *POSITION TRADE
>>> 4th week december profit/loss = -$1,310

DECEMBER month fkli & cpo profit/loss = +$6,875/+9.8% ($76,744:+59.8%)

32) 33) FKLI - intraday trade, position trade

32)22.12>FKLI LONG 5@890-SELL 5@894 = +20 (22.12)

33)22.12>FKLI LONG 1@895-SELL 1@877 = -18 (22.12)
>FKLI LONG 1@895-SELL 1@868 = -27 (23.12) *POSITION TRADE

30) 31)FKLI - intraday trade

30)18.12>FKLI LONG 2@878-SELL 2@886 = +16 (18.12)

31)18.12>FKLI LONG 11@888-SELL 11@889.5 = +16.5 (18.12)

26)FKLI - position trade, 27)FKLI - intraday trade, 28) 29)CPO - intraday trade

26)17.12>FKLI LONG 1@866-SELL 1@868 = +2 (23.12) *POSITION TRADE

27)17.12>FKLI LONG 5@866-SELL 5@869.5 = +17.5 (17.12)

28)17.12>CPO02 LONG 1@1567-SELL 1@1560 = -7 (17.12)

29)17.12>CPO02 LONG 1@1567-SELL 1@1559 = -8 (17.12)

25)FKLI - intraday trade

25)16.12>LONG 5@860-SELL 5@864 = +20 (16.12)

22) 23) 24)FKLI -intraday trade

22)15.12>FKLI LONG 7@860-SELL 7@863 = +21 (15.12)

23)15.12>FKLI LONG 2@862-SELL 2@859 = -6 (15.12)

24)15.12>FKLI SHOT 1@859-BUY 1@857 = +2 (15.12)

19) 20) FKLI - intraday trade, 21) CPO02 - intraday trade

19)12.12>FKLI SHOT 5@855-BUY 5@851 = +20 (12.12)

20)12.12>FKLI LONG 5@851-SELL 5@848 = -15 (12.12)

21)12.12>CPO02 LONG 1@1585-SELL 1@1583 = -2 (12.12)

CI & FKLI Daily channel

FKLI



Composite Index

17) 18) FKLI - intraday trade

17)11.12>FKLI LONG 5@855-SELL 5@858 = +15 (11.12)

18)11.12>FKLI LONG 2@860-SELL 2@865 = +10 (11.12)
>FKLI LONG 1@860-SELL 1@859 = -1 (11.12)

12) 15) FKLI - intraday trade, 13) 14) 16) CPO02 - intraday trade

12)10.12>FKLI LONG 3@850-SELL 3@858 = +24 (10.12)

13)10.12>CPO02 LONG 1@1585-SELL 1@1567 = -18 (10.12)

14)10.12>CPO02 LONG 1@1580-SELL 1@1590 = +10 (10.12)

15)10.12>FKLI LONG 1@856.5-SELL 1@859 = +2.5 (10.12) *sell at close

16)10.12>CPO02 LONG 1@1590-SELL 1@1595 = +5 (10.12) *sell at close

9) 10) CPO02 - intraday trade, 11) FKLI - intraday trade

9)09.12>CPO02 LONG 1@1538-SELL 1@1538 = -0 (09.12)

10)09.12>CPO02 SHOT 1@1538-BUY 1@1520 = +18 (09.12)

11)09.12>FKLI SHOT 2@854-BUY 2@843 = +22 (09.12)

6) 8) CPO02 - intraday trade, 7) FKLI - intraday trade

6)05.12>CPO02 LONG 1@1432-SELL 1@1445 = +13 (05.12)

7)05.12>FKLI SHOT 1@840-BUY 1@840.5 = -0.5 (05.12)

8)05.12>CPO02 LONG 1@1461-SELL 1@1486 = +25 (05.12)

5) FKLI - intraday trade

5)04.12>FKLI LONG 4@842-SELL 4@844 = +8 (04.12)

3) 4) FKLI - intraday trade

3)03.12>FKLI LONG 4@845-SELL 4@844 = -4 (03.12)

4)03.12>FKLI SHOT 4@844-BUY 4@841 = +12 (03.12)

2) FKLI - intraday trade

2)02.12>FKLI SHOT 4@840.5-BUY 4@844 = -14 (02.12)

1) FKLI - intraday trade

1)01.12>FKLI SHOT 5@859-BUY 5@858 = +5 (01.12)
>FKLI SHOT 2@859-BUY 2@852 = +14 (01.12)

FKLI & CPO (November Month), Part 2

>> $72,696 (Oct 08) to current $73,576 (Nov 19)

1)10.11>FKLI LONG 1@898.5-SELL 1@852 = -46.5 (20.11)> -2355= 71,221

3)20.11>FKLI SHOT 3@854-BUY 3@850 = +12 (20.11)> +510= 71,731

4)21.11>FKLI SHOT 3@845-BUY 3@851 = -18 (21.11)> -990= 70,741

6)21.11>FKLI LONG 6@850-SELL 6@857 = +42 (21.11)> +1920= 72,661

7)21.11>FKLI LONG 6@865-SELL 6@869 = +24 (21.11)> +1020= 73,681 *sell at close
>>>3rd week november fkli & fcpo profit = +$105

8)24.11>FKLI SHOT 3@857-BUY 3@861 = -12 (24.11)> -690= 72,991

5)21.11>CPO SHOT 1@1399-BUY 1@1495 = -96 (24.11)> -2430= 70,561 *POSITION TRADE, burn badly, sigh

9)24.11>FKLI LONG 3@861-SELL 3@857 = -12 (24.11) -690= 69,871

10)24.11>FKLI SHOT 3@857-BUY 3@853 = +12 (24.11) +510= 70,381

11)26.11>FKLI LONG 4@860-SELL 4@856 = -16 (26.11) -920= 69,461
>>FKLI LONG 3@860-SELL 3@869 = +27 (26.11) +1260= 70,721 *sell at close

2)20.11>FKLI SHOT 2@852-BUY 2@872 = -40 (27.11) -2060= 68,661 *POSITION TRADE

12)27.11>FKLI LONG 3@872-SELL 3@873 = +3 (27.11) +60= 68,721

13)27.11>FKLI LONG 5@871-SELL 5@873 = +10 (27.11) +350= 69,071

FKLI December contract :
14)28.11>FKLI LONG 7@872-SELL 7@875 = +21 (28.11) +798= 69,869 *add 6 more lots when re-break 871 towards evening & sell 2min b4 auction.

15)28.11>FKLI SHOT 1@872.5-BUYstop 1@892 = *POSITION TRADE,shot at close
>>>4th week fkli & cpo loss = -$3,812

NOVEMBER month fkli & cpo profit/loss = -$2,827/-3.9% ($69,869:+45.6%)

14) FKLI - intraday trade, 15) FKLI - position trade

FKLI December contract :
14)28.11>FKLI LONG 7@872-SELL 7@875 = +21 (28.11) *sell 2min b4 auction, add 6 more lots when re-break 871 again towards evening

15)28.11>FKLI SHOT 1@872.5-BUY 1@866 = +6.5 (17.12) *POSITION TRADE

12) 13) FKLI - intraday trade

12)27.11>FKLI LONG 3@872-SELL 3@873 = +3 (27.11)

13)27.11>FKLI LONG 5@871-SELL 5@873 = +10 (27.11)

11) FKLI - intraday trade

11)26.11>FKLI LONG 4@860-SELL 4@856 = -16 (26.11)
>>FKLI LONG 3@860-SELL 3@869 = +27 (26.11) *sell at close

8) 9) 10) FKLI - intraday trade

8)24.11>FKLI SHOT 3@857-BUY 3@861 = -12 (24.11)

9)24.11>FKLI LONG 3@861-SELL 3@857 = -12 (24.11)

10)24.11>FKLI SHOT 3@857-BUY 3@853 = +12 (24.11)

Super Year End Discount ....????

??? wakakakkaka

4) 6) 7) FKLI - intraday trade, 5) FCPO - position trade

4)21.11>FKLI SHOT 3@845-BUY 3@851 = -18 (21.11)

5)21.11>FCPO SHOT 1@1399-BUY 1@1495 = -96 (24.11) *POSITION TRADE

6)21.11>FKLI LONG 6@850-SELL 6@857 = +42 (21.11)

7)21.11>FKLI LONG 6@865-SELL 6@869 = +24 (21.11)

Dow Jones Industrials Crash Analysis - Great Depression Versus Today

Article Submitted by: Sol Nasisi
The Economy

I've wondering how the performance of the Dow in 2008 compares to the drop during the Great Depression. To find out, I graphed both and set them side by side. The results are interesting...

Today, as I watched the Dow sink below 8,000, I wondered how the sell-off of the last six months compares to the sell-off during the Great Depression. The chart below shows what I found. To create it, I graphed historical data taken from the DJ Indexes website for the Dow Jones Industrial Average.

Let me explain how to read the chart.

The years 1930 and 2008 are time 0 on the x axis of the graph. I then looked at the 21 years before 1930 and 2008 to see how the markets performed before the 1930 and 2008 crashes. I also charted the 10 years after the crash in 1930, represented by the positive numbers on the X axis. The left Y axis shows the Dow's price during the early part of the 20th century and the right Y axis shows the Dow's price in more modern times. One other note on the methodology is that I used the closing price of the Dow on November 11 of each year.

As you can see by looking at the blue and pink lines, before both crashes there was a sharp run-up in the value of the Dow. But the data shows that the pre-crash bubble is much bigger now than it was prior to the Great Depression. While the Dow increased about 2.5x during the priod 21 years before the crash of 1929-1930, it increased over 6X from 1988 to 2008.

In 1929, with Black Friday, the Dow began to deflate and it hit a bottom in 1932. By that point, the Dow was down almost 75% from its peak a few years earlier. Today, the Dow has fallen about 42% from its high of 13,850. As the chart shows, if this economic downturn is not over and comes close to approaching the early severity of the Great Depression, then the Dow is not done falling. It's important to note that the largest damange to the market happened at the beginning of the Depression. While economic problems continue until the beginning of World War II, the stock market began to recover from its lows in 1936. What does that mean? It means that even if our current downturn doesn't last as long as the Depression, it could be as deep for a concentrated period of time, and during that time cause further equity losses.

I don't usually use Wikipedia as a source but I came across this entry on the Great Depression and thought it appropriate. You can decide if there are parallels to today:

The Great Depression was not a sudden total collapse. The stock market turned upward in early 1930, returning to early 1929 levels by April, though still almost 30 percent below the peak of September 1929.[6] Together, government and business actually spent more in the first half of 1930 than in the corresponding period of the previous year. But consumers, many of whom had suffered severe losses in the stock market the previous year, cut back their expenditures by ten percent, and a severe drought ravaged the agricultural heartland of the USA beginning in the northern summer of 1930.

In early 1930, credit was ample and available at low rates, but people were reluctant to add new debt by borrowing. By May 1930, auto sales had declined to below the levels of 1928. Prices in general began to decline, but wages held steady in 1930, then began to drop in 1931. Conditions were worst in farming areas, where commodity prices plunged, and in mining and logging areas, where unemployment was high and there were few other jobs. The decline in the American economy was the factor that pulled down most other countries at first, then internal weaknesses or strengths in each country made conditions worse or better. Frantic attempts to shore up the economies of individual nations through protectionist policies, such as the 1930 U.S. Smoot-Hawley Tariff Act and retaliatory tariffs in other countries, exacerbated the collapse in global trade. By late in 1930, a steady decline set in which reached bottom by March 1933.

The quote doesn't touch on the obvious parallels in the banking system. Although there haven't been as many bank failures, the magnitude of the financial failures today are enormous - Bear, Lehman, Fannie, Freddie, Wachovia, Washington Mutual, Countrywide, National Citi, AIG. I realize not all of these were failures but many of the banks listed were purchased at firesale prices to prevent a failure.

The question to ask yourself about this recession is whether you think it's like the relatively mild downturns of 2001-2002, and 1991-1992 and even 1980 or is it really the worst economic downturn since the Great Depression? Because if you believe the latter, then that blue line has further to fall.

How the Mighty Have Fallen: Buffett, Other Legends Feel Bear Market Bite

Feeling mauled by the seemingly undying bear market? Take a look at the year-to-date performance for some biggest of the big-name investors and consider yourself in good company:

• Warren Buffett (Berkshire Hathaway): -43%
• Ken Hebner (CMG Focus Fund) -56%
• Harry Lange (Fidelity Magellan): -59%
• Bill Miller (Legg Mason Value Trust) -50%
• Ken Griffin (Citadel): -44%
• Carl Icahn (Icahn Enterprises): -81%
• T. Boone Pickens: Down $2 billion since July
• Kirk Kerkorian: Down $693 million on his Ford shares alone

My guest John Roque, managing director and technical analyst at Natixis Bleichroeder, suggests these staggering losses are simply a matter of the fact that "a bear market gets everyone" — even Wall Street legends.

Look no further than Warren Buffett: Shares of his Berkshire Hathaway have tumbled as his recent investment in Goldman Sachs has raised more concern about his exposure to financials than inspired confidence. The cost of credit-default swaps (CDS), or insurance against default, on Berkshire's debt has nearly tripled in two months and is wider than CDSs on many other insurance and financial firms, Bloomberg reports.

Of course, Buffett is truly a long-term investor and his defenders say it's far too soon to judge his investment in Goldman, or his much-ballyhooed "Buy American" call in October. But in a true bear market, "everybody gets taken to the cleaners," Roque says, maybe even the "Oracle of Omaha."

The Great Crash of '08 (Cont.): Dow Below 7600, S&P at 11-Year Low

Unprecedented. Historic. Ugly.

Even veteran traders were agog Thursday as the "Great Crash of 2008" added another chapter to its grisly tale.

The Dow fell 444 points, or 5.3% to 7553.56, breaching its October 2002 lows, and the Nasdaq tumbled 5.1% to 1316.

The S&P 500 fell 6.7% to 752.44, its lowest close since 1997; the index is now down 49% for the year and on track for the worst annual decline in its 80-year history, Bloomberg reports.

The Dow was actually up nearly 200 points at its high of the session, but stocks plummeted in the afternoon after:

• A speech by Treasury Secretary Paulson in which he said: "There was no playbook for responding to a once or twice in a hundred year event."
• Rumors of Congressional relief for automakers proved unfounded, although GM and Ford each closed higher.
• Layoff announcements by JPMorgan and Bank of NY Mellon.
• Citigroup tumbled anew, despite reports Saudi Prince Alwaleed will raise his stake in the bank to 5% from 4% currently.

Beyond floundering financials, basic material stocks like Foster Wheeler, Temple Inland, Mosaic and Chesapeake Energy were the big losers Thursday as commodity prices tumbled again.

In addition to more evidence of economic weakness, including the Philadelphia Fed survey and index of leading indicators, commodity producers continue to be punished by hedge fund selling. Hit by redemptions and falling market prices, assets in hedge funds shrunk by $155 billion in October alone, according to Hedge Fund Research.

Hedge funds still had about $1.56 trillion in assets as of Oct. 31, which may just mean the great unwinding still has a ways to go.

If Stocks Are So 'Cheap,' Why Are They Still Going Down?

After recovering from their initial decline, stocks were struggling midday, with the Dow threatening to violate its October low of 7882.

With the S&P and Nasdaq having failed their "retest" yesterday, the Dow is almost certain to follow suit sooner vs. later. Many market watchers believe a retest of the October 2002 closing lows of Dow 7286, S&P 777 and Nasdaq 1114 are likely before this brutal bear market ends.

"I think it's pretty reasonable to look to the '02 lows as the next support area," says John Roque, managing director and technical analyst at Natixis Bleichroeder. "But ultimately, the market will find support at a lower level than that."

Roque predicts the S&P will hit 680 and the Dow the high 6000s before this downturn is over.

As to the claim stocks are "cheap" and long-term investors should be buying, Roque has a simple response: "Have they stopped going down? If they haven't stopped going down, they're not cheap. If people have no confidence to own [stocks], they're likely to go lower."

In other words, the habitual bottom-pickers are going to get burned yet again.

Recession or Depression? Finding the Trigger ...

Recession or Depression? Finding the Trigger ...

Posted By:Daryl Guppy

The key question facing markets these days is the difference between recession and depression. A recession is an economic slowdown that may last for 6 to 18 months. A depression is an economic pullback that may last from two to four years. We'd rather not have a recession at all but if we have to choose one or the other, I'd rather be recessed than depressed!

In either case, the market moves in anticipation of the event. The market decline develops before the fundamental signs of a recession or depression become evident. The market leads the confirmation of conditions.

The market also leads a recovery. In a recession, the market will develop strong trending behavior many months prior to the official confirmation of the end of a recession. This recovery provides trend trading opportunities.

In a depression the market will develop a long-term consolidation pattern. This is an investment period that lays the foundations for generational fortunes. Trend-trading opportunities do not develop for several years. This consolidation and accumulation phase concentrates on creating income flow from dividends. The fundamental end of a depression is not recognized until many months after the market has already reacted.

Right now, market is hovering near significant support levels. The closest of these we call recession support targets. The lowest of these we call depression targets. Many analysts have compared the current market situation to the market collapse in 1929. This week we look at charts from the 1929 period. In particular we look at the similarity of behavior.

The above chart is the weekly Dow for 1929 to 1930. The significant features are these:

• The rapid fall is followed by a rebound and rebound failure.
• The primary rebound failure occurs rapidly with another market collapse.
• The pile driver low is retested within 12 months
• Support, defined by the pile driver low, is not successful

The pink circle shows the comparable position of today’s market. This is a period of high volatility, but volatility lessens and the market moves into a more clearly defined trending behavior. This pattern of behavior suggests that a rebound from the current support levels may persist for around 20 weeks.

The important feature is the rapid failure of the trend line followed by a rapid failure of the pile driver low support-level. The failure of pile driver support brings the really bad news. This failure is acute because the pile driver low support does not equal any previous historical support level.

The low of the market develops in 1932, about three years after the 1929 crash. The key trigger is the failure of support set by the pile driver low. The disaster is that it takes 25 years for the market to exceed the high of 380 set in July 1929. This is why the Depression is referred to as a generational event. The current situation has the potential to have the same generational impact.

The key trigger that separates a recession from a depression is the behavior of the rebound from the pile driver low. After the 1987 crash the rebound quickly developed strong trending behavior. The move above the midway point in the market fall signaled a continuation of the uptrend. This is recession behavior. Depression behavior is when the market fails to move above the midpoint of the extreme fall area.

On the current Dow chart, the area near 12,000 is the key level to watch. Failure to move above this level suggests a depression scenario may develop.

A sustained move above 12,000 signals a recession. There is one caution in this analysis. The Dow has not yet developed a confirmed pile driver bottom pattern on the weekly chart. The low of this pattern will determine the mid-point resistance level that is used to signal a recession recovery.

Markets will not behave the same way as in 1930, but they will develop in a similar fashion. There is a high probability that these behaviors will develop in shorter time frames.

3) FKLI - intraday trade

3)20.11>FKLI SHOT 3@854-BUY 3@850 = +12 (20.11)

2) FKLI - position trade

2)20.11>FKLI SHOT 2@852-BUY 2@872 = -40 (27.11)*POSITION TRADE

BEHIND THE MONEY: Dow's Bermuda 'Triangle' Points to More Lost Returns Ahead, Analysts Say

BEHIND THE MONEY: Dow's Bermuda 'Triangle' Points to More Lost Returns Ahead, Analysts Say

The Dow average is forming a pattern that's generating a lot of chatter among the technical analyst community (there's a community?) and the Fast Money traders. Using a bar chart for the Dow, draw a trend line from the September intraday high diagonally down, touch the November 4 high and keep going. Then draw a straight line across the lows, touching the October 10 intraday low and the low made during the day last Thursday (right before the monster intraday rebound) until you connect with the hypotenuse. You're looking at a right triangle, also called a wedge among chart worshippers. The Dow is clearly bouncing around within this triangle, posting lower high after lower high.

"We know only that 'triangles' such as this one tend to resolve themselves to the downside,'' writes Dennis Gartman this morning in The Gartman Letter, which is standard reading on Wall Street trading floors everywhere. But he's not alone by any means.

"A case can be made that the equity base could be a 'triangle,' which is often a continuation pattern within a dominant trend," said Mary Ann Bartels, Merrill Lynch's Technical Research Analyst, in a note to clients yesterday. "In the S&P 500's case, the triangle carries the risk for a breakdown" of another 13 to 19 percent, said Bartels, who was the No. 2 ranked technical analyst in the latest Institutional Investor magazine poll.

And our very own Jeff Macke said on the Fast Money conference call this morning, "It sounds silly, but I've made a lot of money trading evil triangles." He cautions that a few more fake rallies within this triangle could point to a pretty severe breakdown as frustrated investors throw in the towel.

Are enough people talking about this Bermuda "triangle" that it will become a self-fulfilling prophecy? That's pretty much what technical analysis is all about. Voodoo or not. It is being talked about enough to give some credible traders some pause.If we form yet another lower high today (which looks like the case), watch for the triangle chatter to get even louder.

4) FCPO - position trade

4)14.11>SHOT 1@1460-BUY 1@1467 = -7 (19.11) *stop change to 1467 from 1522

6) 7) FKLI - intraday trade

6)13.11>SHOT 3@867-BUY 3@870 = -9 (13.11)

7)13.11>LONG 3@870-SELL 3@870 = -0 (13.11)

5) FKLI - intraday trade, 3) FCPO - position trade

5)12.11>FKLI LONG 3@886-SELL 3@889 = +9 (12.11)

3)12.11>FCPO SHOT 1@1542-Buy 1@1455 = +87 (14.11)

2) FCPO - position trade

2)11.11>LONG 1@1595-SELL 1@1542 = -53 (12.11)

4) FKLI - position trade

4)10.11>LONG 1@898.5-SELL 1@852 = -46.5 (20.11)

Hedge fund managers 'funereal' in midst of crisis More pain expected, but some look for opportunities in 'rubble', PART 4

Part 4

By Alistair Barr, MarketWatch

Last update: 8:32 p.m. EST Nov. 7, 2008

'Carnage'

Seth Klarman, a top-performing value investor and head of The Baupost Group LLC, told clients in an Oct. 10 letter that the economic downturn could be "vicious and protracted."

"The financial market collapse and bailout makes us sick," he wrote. "There is likely more carnage to come."

The U.S. dollar will likely weaken and its reign as the world's reserve currency could end, Klarman predicted. Longer-term, U.S. interest rates may rise as foreigners have to be enticed more to invest in dollar-denominated assets, he added.

The recent Treasury Department bailout has yet to be paid for and should add to inflationary pressures over time, especially when the economy begins to recover, he said.

Hedge fund managers 'funereal' in midst of crisis More pain expected, but some look for opportunities in 'rubble', PART 3

Part 3

By Alistair Barr, MarketWatch

Last update: 8:32 p.m. EST Nov. 7, 2008

Buffett bashing

"Be careful buying ANYTHING today," Kyle Bass, managing partner of Hayman Advisors, warned in an Oct. 17 letter to investors.

"There will be a time to buy stocks," he added. "That time is a few years into the future when the strong have separated themselves from the week ... a time when unemployment has hit 10% and U.S. GDP has dropped 4-5% (maybe more)."

He criticized Berkshire Hathaway Chairman Warren Buffett who advised investors to buy U.S. stocks in a New York Times column last month.

"Mr. Buffett has enough money to be able to have his holdings drop 50% and still fly in his jets and live the way in which he has become accustomed," Bass wrote. "Do you have enough capital to take what you have left, cut it in half, and continue to live the way you have for the past few years? I don't."

Hedge fund managers 'funereal' in midst of crisis More pain expected, but some look for opportunities in 'rubble', PART 2

Part 2

By Alistair Barr, MarketWatch
Last update: 8:32 p.m. EST Nov. 7, 2008

'Funereal'

Steve Galbraith, a partner at Lee Ainslie's Maverick Capital, read about 25 letters other hedge funds sent to their investors in October.

"The tone of the discourse was funereal," he wrote in Maverick's own Oct. 9 letter to clients. "The global economy has already entered a grim recessionary period akin to those of the '90s and '80s rather than the shallow post tech bubble recession of 2001-2002."

The Maverick Fund, Ltd. was down more than 7% last month through Oct. 17, leaving it off roughly 26% so far this year, according to a hedge fund performance report compiled by HSBC's private bank.

In Maverick's Oct. 9 letter to investors, the firm reported that its funds lost between 14.4% and 40.6% during the third quarter.

"I cannot find words to describe our disappointment, embarrassment and shock over the above results," Ainslie wrote.

Oct. 1 marked the 15th anniversary of Maverick Capital, during which time Ainslie has outperformed the S&P 500 handily.

But Maverick couldn't shelter from what Ainslie called a "perfect storm" of hedge fund de-leveraging and failure, short selling bans, slumping equity markets, faltering prime brokers and a spike in volatility.

Hedge fund managers 'funereal' in midst of crisis More pain expected, but some look for opportunities in 'rubble', PART 1

Part 1

By Alistair Barr, MarketWatch

Last update: 8:32 p.m. EST Nov. 7, 2008

SAN FRANCISCO (MarketWatch) -- In the midst of the worst financial crisis since the Great Depression, several top hedge fund managers sent a grim message to their investors in October: it isn't over.

One said he was sickened by the crisis, while another admitted shock and embarrassment at the severity of the market slump and the losses his firm suffered. A third warned clients to be careful about buying anything and said it will be years before investors should buy stocks.

Such pessimism is often taken as a sign that markets may have hit a bottom and most of the managers realized this. Indeed, some said they'd already begun buying securities that they think are cheap enough to discount all the gloom.

The Standard & Poor's 500 index slumped more than 16% in October, while credit markets collapsed.

Spreads on investment-grade corporate debt jumped by 151 basis points, while junk bond spreads surged by 521 basis points to a record 1,617, according to CreditSights.

Losses in these markets so far this year reached 19% and 31% respectively, prompting the fixed-income research firm to ask "Can it get any worse?"

Hedge funds have been hit particularly hard by this market collapse. The average manager lost 5.43% in October, leaving them down more than 15% so far this year, according to preliminary estimates on Friday from Hedge Fund Research.

That puts the $1.7 trillion industry on course for its worst year since at least 1990, when HFR began tracking performance. Before 2008, hedge funds had only one down year in that time: in 2002 they lost 1.45% on average.

3) FKLI - intraday trade

3)07.11>LONG 3@894-SELL 3@894.5 = +1.5 (07.11)

1) FCPO - intraday trade

1)07.11>LONG 1@1607-SELL 1@1627 = +20 (07.11)

Dr. Alexander Elder Tokkok...

The Crash of 2008... Education...



By Dr.Alexander Elder



Dear Trader,



We live in extraordinary times. The world stock markets have crashed, and their volatility is unprecedented. Back in the 1970s, when I first entered the markets, the 1,000 level of the Dow was called 'the graveyard in the sky' - any time the market went up to that level, it turned and entered a bear market that would go down 200 or even 300 points within the next year or two. Now the Dow can leap almost a thousand points in a single day, and a 200 point range feels almost like a quiet day.



We have seen severe damage to the price structures of major market indexes worldwide. On some days, as I listen to investors and traders, the feeling of fear is almost palpable. It pays to keep in mind that a savvy trader plans ahead, while a poor beginner jumps in response to emotions - he or she buys amidst the optimism of market tops and dumps shares in fear at market bottoms.



Let us review the current market situation, try to look ahead, and plan for the future. We also must begin thinking about the lessons this crash can teach us. This will take a long time and we will not accomplish everything in a single letter, but there are several points worth discussing today.



To find a parallel to today's state of the world's stock markets and global economy one must go back to 1929 and its aftermath. Those times seem like ancient history to most people, but when I first entered the markets I met guys who traded in 1929 and during the bear market that followed the crash. I eagerly listened to those old-timers and learned from them.



The Crash of 1929 rolled over into a Depression due to two severe mistakes by the Republican administration of that day. First, it focused on defending the US Dollar by jacking up interest rates which dealt a body blow to the real economy. Second, a misguided Congress tried to 'protect American industry' by erecting high tariff walls. It never occurred to those gentlemen to ask how we can expect the world to buy our goods if they cannot make money by selling their goods to us.



The current government is acting quite differently. It reminds me of Sigmund Freud's famous quote: 'the voice of reason is quiet but persistent.' Simply put, I think that the current administration has learned from those old mistakes and is handling the crisis much better. They are pumping money into the markets, supporting the banks, and not allowing the system to seize up. Sure, it feels disgusting that taxpayer money is going into the pockets of those who got us into this mess, but the key point is that trust must be restored so that the system can continue to function. Furthermore, instead of building self-defeating protectionist walls, today there is a remarkable degree of cooperation among finance officials around the globe. We are living through the worst worldwide financial crisis since 1929, but the signs are that we will muddle through a lot better now than our forefathers did back then. We do not expect to see what was a sad norm in the 1930's: a 25% unemployment rate, massive repossessions of busted out farms, and other such Grapes of Wrath stuff.



At the same time, I think we have not yet seen the bottom of this decline. Markets rarely if ever trace out V-bottoms. Individual stocks can do it occasionally, but it would be highly unlikely for the entire stock market to turn on a dime. A violent bottom, like the one we just saw, is likely to be retested a few months later on lower volume. Or rather - we hope it gets retested and then the market reverses, but there is no guarantee that the current lows will hold.



Let us look at a few numbers. The average length of a US bear market is about 18 months. This bear is just one year old, meaning it is reasonable to expect this weakness to last into Spring 2009. And what about the real economy? The stock market tends to lead the economy by about 9 months, although this lead may have shortened a bit, as the pace of life has speeded up. This would seem to indicate another year of continued weakness in the economy. When things get ugly in the economy, interest rates decline further, and almost everyone forgets what a bull market looks like, but that's when the first stage of the new bull market can begin - possibly some time in 2009.



Keep in mind that bear market bottoms present fantastic buying opportunities. Prepare yourself to think of incredible bargains you will be able to scoop up. This is a very important topic that we will be tracking in the months ahead.



And what about the lessons we should learn from this crash? The very first one is that every position deserves what I call 'a catastrophic stop'. An experienced trader may manage a short-term trade with only a mental stop, but every position you plan to hold for any length if time deserves a real stop at a level that one hopes never to see. Two friends of mine bought a stock at $20 that they thought was a bargain, but now it trades at 20 cents. One bailed out at $18, the other still holds it today. At the time he bought he should have asked himself, what level he never expected to see - $15? $12? Whatever it was, that's where he should have put his 'catastrophic stop!'



Most traders have very short memories. They look at recent events and extrapolate them into the future. They feel bullish at the tops and bearish at the bottoms. Long-term successful people possess a knowledge of history and a memory of how things work. They need it in order to do the counter-intuitive thing - sell at the tops and buy near the bottoms.



Make no mistake about it - there are fantastic buying opportunities ahead of us on the horizon. It is our goal to learn to recognize them, time them reasonably well, and have the intestinal fortitude to buy. These are the tasks on which we will be focusing.



PS - one day before this email was to be sent out, a message arrived from one of our clients. I reprint it here, with writer's permission, to show how a serious person takes steps to protect himself in a decline and even to profit in it:



"Dr. Elder,



In the last Bear market, I watched my 401k plummet and didn't know who to believe or trust.



After reading your books, attending your webinars and live seminars I began trading. Not successfully at first, but eventually producing consistent results.



Now, I am trading independently and trusting my own analysis of the chart patterns. This year has been incredible for my trading!



Thank you for sharing your lessons and wisdom. Without it, I certainly would be experiencing the same despair as in 2002.



Kyle Richardson"

2) FKLI - intraday trade

2)06.11>SHOT 3@882-BUY 3@886 = -12 (06.11)

1) FKLI - intraday trade

1)03.11>LONG 3@869-SELL 3@875 = +18 (03.11)

FCPO (November Month)

>>$40,765

FCPO January contract :

1)07.11>LONG 1@1607-SELL 1@1627 = +20 (07.11) +470= 41,235

2)11.11>LONG 1@1595-SELL 1@1542 = -53 (12.11) -1355= 39,880

3)12.11>SHOT 1@1542-BUY 1@1455 = +87 (14.11) +2135= 42,015

FCPO February contract :

4)14.11>SHOT 1@1460-BUY 1@1467 = -7 (19.11) -205= 41,810

5)

NOVEMBER month FCPO profit/loss = +47 ($41,810:+30.7%)
>>+1,045/+2.6%

FKLI (November Month)

>>$31,931

1)03.11>LONG 3@869-SELL 3@875 = +18 (03.11) +810= 32,741

2)06.11>SHOT 3@882-BUY 3@886 = -12 (06.11) -690= 32,051

3)07.11>LONG 3@894-SELL 3@896.5 = +1.5 (07.11) -15= 32,036

4)10.11>LONG 1@898.5-SELLstop 1@862 = *position trade

5)12.11>LONG 3@886-SELL 3@889 = +9 (12.11) +360= 32,396

6)13.11>SHOT 3@867-BUY 3@870 = -9 (13.11) -540= 31,856

7)13.11>LONG 3@870-SELL 3@870 = -0 (13.11) -90= 31,766

8)13.11>

NOVEMBER month FKLI profit/loss = +3 ($31,766:+98.5%)
>>-165/-0.5%

17) FKLI - intraday trade

17)31.10>LONG 4@864-SELL 4@856 = -32 (31.10)

7) FCPO - intraday trade

7)30.10>LONG 1@1540-SELL 1@1560 = +20 (30.10)

14) 15) 16) FKLI - intraday trade

14)30.10>LONG 5@845-SELL 5@858 = +65 (30.10)

15)30.10>LONG 3@857-SELL 3@860 = +9 (30.10)

16)30.10>LONG 1@862-SELL 1@857.5 = -4.5 (30.10)

6) FCPO - intraday trade

6)29.10>LONG 1@1412-SELL 1@1422 = +10 (29.10)

13) FKLI - intraday trade

13)29.10>SHOT 2@832-BUY 2@823 = +18 (29.10)

4) 5)FCPO - intraday trade

4)28.10>SHOT 1@1353-BUY 1@1350 = +3 (28.10)

5)28.10>LONG 1@1403-SELL 1@1443 = +40 (28.10)

11) 12) FKLI - intraday trade

11)28.10>SHOT 3@809-BUY 3@835 = -78 (28.10)

12)28.10>LONG 6@840-SELL 6@843 = +18(28.10)

3) FCPO - intraday trade

3)24.10>SHOT 1@1513-BUY 1@1390 = +123 (24.10)

10) FKLI - intraday trade

10)22.10>SHOT 3@908-BUY 3@905 = +9 (22.10)

2) FCPO - intraday trade

2)21.10>SHOT 1@1662-BUY 1@1653 = +9 (21.10)

8) 9) FKLI - intraday trade

8)21.10>LONG 4@921-SELL 4@911.5 = -38 (21.10)

9)21.10>SHOT 2@911.5-BUY 2@913 = -3 (21.10)

7) FKLI - intraday trade

7)17.10>SHOT 4@914.5-BUY 4@908 = +26 (17.10)

6) FKLI - intraday trade

6)15.10>SHOT 3@953-BUY 3@947 = +18 (15.10)

1) FCPO - intraday trade

1)13.10>LONG 1@1825-SELL 1@1835 = +10 (13.10)

4) 5) FKLI - intraday trade

4)13.10>LONG 3@952-SELL 3@963 = +33 (13.10)

5)13.10>LONG 1@965-SELL 1@961 = -4 (13.10)