Learn the Discipline

Learn the Discipline Model Portfolio Summary - Week 19 During the past four weeks there have been more activities to complete than the time I had (same as everyone else) to complete them. Something had to wait and it was the compiled weekly summary of the Model Portfolio. The Model Portfolio has continued to operate during this time with some new positions, some positions being stopped out, a small number of futures trades and a lot of positions rising in value. I finally have some time that was available and I am working on the weekly update today...so stay tuned...

We'll be back will the detailed review...briefly the portfolio since inception, Feb. 2, is up 24.48% vs. 14.63% for the SPX. That is 67.35% better than the SPX even though the portfolio has not been fully invested like the SPX. Currently the portfolio is 74.30% invested in stocks and 25.7% in cash.

April to June trades

(click image to enlarge)

March trades (click image to enlarge)

Learn the Discipline

Learn the Discipline Model Portfolio Summary - Week 15 summary will posted here on Monday... (click image to enlarge)

Learn the Discipline

Learn the Discipline Model Portfolio Summary – Week Fourteen All the positions opened since March 10 are listed in the table below. Positions prior to March 10 are listed in prior posts which can be accessed under Key Topics; Learn the Discipline in the left hand menu. Those new to the blog can find a description in the February 7 post that gives an overview of how the Model Portfolio is being run. You can read it by clicking here: http://chartsignals.blogspot.com/2009/02/coming-next-week_07.html As of Friday May 8 the portfolio is 69.05% invested in stocks. The balance is in cash. This is just below last weeks invested level. The portfolio was stopped out of two positions this week: GME and ALGT. We did not enter any new stock positions this week. The total value of open stock positions is $120,879.28. The portfolio value increased this week while the SPX rose 51 points. There are now 32 positions that have been open at least four weeks ranging in returns from +1.05 to +139.77%. The longer intermediate term trend in the market is still neutral or sideways. These 32 positions indicate that this intermediate term strategy is working. Since February 2 the portfolio has increased 15.16% while the SPX has risen 12.57%. This is 20% better than the SPX. During that time the SPX has been fully invested while the Model Portfolio has mostly been less than 50% invested until the past two weeks. Because the Model Portfolio has been less than fully invested it has been exposed to less market risk than the SPX. On a risk adjusted basis the portfolio is outperforming the SPX by more than 100%. Originally we stated that we would start the portfolio on using stocks and the One Green Arrow Strategy as the core concept behind decisions. We also indicated that we would make modifications. See last week’s comment regarding futures trading. Moving forward we will look to take similar short term futures positions when appropriate. Many funds employ this type of strategy when they have large cash balances and use the futures as a temporary but quick way to raise their investment levels to participate in market moves. Futures could also be used to hedge a stock portfolio against temporary declines. Intermediate term stock positions will continue to be our primary strategy. (click image to enlarge)

Learn the Discipline

Learn the Discipline Model Portfolio Summary - Week Thirteen All the positions opened since March 10 are listed in the table below. Positions prior to March 10 are listed in prior posts which can be accessed under Key Topics; Learn the Discipline in the left hand menu. Those new to the blog can find a description in the February 7 post that gives an overview of how the Model Portfolio is being run. You can read it by clicking here: http://chartsignals.blogspot.com/2009/02/coming-next-week_07.html As of Friday May 1 the portfolio is 69.67% invested in stocks. The balance is in cash. This is our highest invested percentage since inception. The portfolio was stopped out of two positions this week: SLGN and GPRO. We entered 12 new stock positions this week: ISRG, LEAP, ALGT, ADBE, ADS, AG, SNA, ATW, SYNA, CAM, GR and BYI. The total value of open stock positions is $116,065.58. The portfolio value increased this week while the SPX rose 11 points. There are now 29 positions that have been open at least four weeks ranging in returns from -1.60 to +65.14%. The longer intermediate term trend in the market is still neutral or sideways. These 29 positions indicate that this intermediate term strategy is working. Since February 2 the portfolio has increased +9.6% while the SPX has risen +6.31%. This is 52% better than the SPX. During that time the SPX has been fully invested while the Model Portfolio has mostly been less than 50% invested until this week. Because the Model Portfolio has been less than fully invested it has been exposed to less market risk than the SPX. On a risk adjusted basis the portfolio is outperforming the SPX by more than 100%. Originally we stated that we would start the portfolio on using stocks and the One Green Arrow Strategy as the core concept behind decisions. We also indicated that we would make modifications. For the first three months those modifications have stayed strictly with stocks. For the first time this week we entered a futures trade long four ES e-mini contracts. The position was in the real time virtual account on April 27 and was open for almost 3 hours. It generated a profit of 10 ES points and after commissions generated a net gain of $1,972. The margin requirement for the trade was $22,500. Moving forward we will look to take similar action when appropriate. Many funds employ this type of strategy when they have large cash balances and use the futures as a temporary but quick way to raise their investment levels to participate in market moves. Intermediate term stock positions will continue to be our primary strategy. I am interested in knowing how many readers are trading or want to trade futures on an intraday basis? If you are interested send me an email and let me know at chartsignals@yahoo.com (click image to enlarge) Cheers...

Stocks Move Higher...Nasdaq, RUT Breakout...

DJIA + 168.78, +2.11% SP500 + 18.48, +2.16% NASDAQ Comp. + 38.13, +2.28% Russell 2000 + 18.63, +3.94% Exchange NYSE NASD Advancing 3,109 2,125 Declining 634 631 Oil $50.97 +$1.05 Gold $899.80 +$7.00 SOX 251.55 +4.88 VIX 36.08 -1.87 The VIX moved down and did confirm the move up in the SPX on Wednesday. Strongest Sectors: XLF +4.31%...XLI +3.34%...XLE +2.76% Weakest Sectors: XLV +0.37%...XLU +0.74%...XLK +1.12% All nine Sectors moved higher on Wednesday. Financial was again the leading sector. Financial stocks stronger than XLF +4.31% include: MS, IVZ, PRU, C, MET, BK, BAC, ZION, USB, SCHW, AFL, GS, SPG, JPM, TROW, MMC and ETFS UYG and FAS. Leading tech stocks stronger than XLK, +1.12% include: MA, ADBE, DELL, CSCO, HPQ, YHOO, AMT, TXN, ADP, EMC, IBM, GOOG, INTC, QCOM, SYMC, EBAY, MSFT and AMAT. Sector Watch Up Trending: Sideways: XLE, XLY, XLV, XLK, XLB Down Trending: XLF, XLP, XLI, XLU We wrote last night, “…a potential exits for Wednesday to resume the move to the upside. If the indices move up on Wednesday this would be from Tuesday’s higher low compared with April 21, which could provide the support base for the SPX to break above the 875 resistance.” That is what occurred on Wednesday, a break above 875 with a late pull back with the SPX closing at 873. The Nasdaq did close above resistance and made a new high close along with a new 2009 high. Take a look at the chart below and see the Nasdaq’s relative strength. The RUT closed above resistance with a strong move up. The breakout of these two leading indexes suggests a continuation of the current up trend. There will continue to be pause or pull back days, perhaps very similar to what the market has produced since March 10. Take a look at these YTD Index Charts...What do you notice about the Nasdaq and RUT compared with the SPX and DJIA? (click image to enlarge)

Index Commentary The DJIA formed a large white candle…closed at 8,190 horizontal resistance…new high close…volume was below average at 300 million shares…closed above its 20, 30 and 50 DMA. The SPX formed a large white candle that broke above 875 horizontal resistance intraday and closed just below…new high close since Jan 29…closed above its 20, 30 and 50 DMA. The Nasdaq formed a large white candle making a new high close for 2009…broke and closed above horizontal resistance of 1682…short term chart price target is 1,765…closed above its 20, 30 and 50 DMA. The RUT formed a large white candle following Tuesday’s piercing line pattern…broke through horizontal resistance of the past two weeks and late January and early February resistance…new chart target 606 during next 8+ weeks…within 30 points of 2009 high …closed above its 20, 30 and 50 DMA

At the Open on Thursday SPY – white candle ALGT – large white candle in bull flag SCHN – bull flag breakout ICE – white candle confirm inverted hammer at 20 DMA DECK – spinning top support bounce SNDA – large white candle support bounce at 20 DMA ADBE – bull flag break high of low day and horizontal resistance EBAY – white spinning top in pennant GME – spinning top close below 200 DMA SHLD – white spinning top at 200 DMA WYNN – bull flag breakout WHR – breakout after day pull back LEAP – large white candle does not confirm potential bearish harami ISRG – bull flag breakout DHR – bull flag breakout DE – two week ascending triangle

Learn the Discipline We opened 12 new positions in BYI, GR, CAM SYNA, ATW, SNA, AG, ADS, ADBE, ALGT, LEAP and ISRG in the Model Portfolio. We also took a short term SP futures position. Stocks to Watch on Thursday Leading Stocks Holding Above 30 DMA BIDU, CLB, ICE, ALGT, DLB, PWR, VPRT, AMZN, USD, AAPL, CTSH, AXYS, BAP, CAM, GMCR, JCOM, JOSB, ATW, GR, SYNA, EBAY, GES, SNA, ORCL, WRC, HDB, PCP, UYG, FSLR, GME, WCG, RIMM, X, BYI, CBST, HLF, AMX, MHS, WAB, FAS, AFAM, JW.A, K, RBN, ESRX, PCLN, URE, VAR, PCR, PPD, HANS, SWN, FLS, SNHY, GILD, GXDX, TDG, NIHD, RCI, STRA, CPLA, ACN, AMED, DLTR, GPRO, NFLX, EZPW Moving Above 30 DMA = 5 JOYG, MON, MUR, PSYS, SPWRA Moving Below 30 DMA = 1 DECK Staying Below 30 DMA JEC, CHL, MCD, BDX, PETS, CBST, MYGN, DV, SLGN, TDG, BIIB, MOS, NTLS, WMT, GILD, BKC, APEI, BLUD, ESI, GXDX Intermediate Term Market Trend: Neutral Short Term Market Trend: Up

Learn the Discipline

Learn the Discipline Model Portfolio Summary - Week 12 You can see all the positions opened in the Model Portfolio since March 10. Positions prior to March 10 are listed in earlier posts. If you are new to the blog there is a description in the February 7 post that details an overview of how the Model Portfolio is being run. You can read it by clicking here: http://chartsignals.blogspot.com/2009/02/coming-next-week_07.html All prior posts can be found in the left hand menu under Key Topics...Learn the Discipline. As of Friday April 24 the portfolio is 49.86% invested in stocks. The balance is in cash. The drop is stocks positions was a result of being stopped out of four positions this week: NTLS, MOS, MYGN, and BDX. We entered no new positions this week primarily a function of market action and Dave's focus on teaching a two day Advanced Technical Analysis Workshop in Atlanta. The total value of open stock positions is $80,963.87 and the total portfolio value is $162,383.49. The portfolio value increased this week while the SPX was down three points. There are now eight positions that have been open at least four weeks ranging in returns from -0.83% to +35.68%. The longer (six month) intermediate term trend in the market is still neutral or sideways. These eight trades are suggesting that the intermediate term strategy is working. As we have stated for the past several weeks the performance time period is still too short to be conclusive. The early results are still very positivie. The portfolio continues to outperform the SPX since February 2. The portfolio has mostly been less than 50% invested during its existence which means it has been taking less risk than the SPX which is fully invested. As a result the risk adjusted returns continue to be more than double the SPX. Full details on the positions can be viewed in the table below. (click image to enlarge)

Learn the Discipline

Learn the Discipline Model Portfolio Summary - Week 11 In the table below you can see all the positions we have opened since March 10. Positions prior to March 10 are listed in earlier posts. As of Friday April 17 the portfolio is 54.66% in stocks and the balance in cash. The Portfolio was stopped out of two positions this week, PETS and GILD, both with losses. We entered just one new position this week, a second position in FAS. The total value of the open positions is $$88,471.00 and the total portfolio value is $161,859.57. There are still only seven positions that are open longer that four weeks with returns ranging from 4.00% to 39.21%. Four of the positions DLB, NFLX, PCLN and VPRT increased in value this week, while ICE, MCD and WMT pulled back. These seven trades along with the five trades that were opened at the same time that have been stopped (see the April 11 post - click here: http://chartsignals.blogspot.com/2009/04/learn-discipline.html ) continue to suggest that this intermediate term strategy is working. Again we reiterate that it is too early and the number of trades surviving over four weeks is too small to be conclusive regarding the validity of the strategy. However the early evidence continues to be encouraging. The portfolio continues to outperform the SPX over the time period since February 2, even though it has not been fully invested like the SPX. Its risk adjusted return is still more than double the SPX.

Learn the Discipline

Learn the Discipline Model Portfolio Summary - Week Ten In the table below you will see all the positions we have opened since March 10. The positions opened and closed prior to March 10 are listed in past posts. As of Thursday April 9 the portfolio is 55.63% in stocks and the balance in cash. The Portfolio was stopped out of five positions this week, four with losses and one just above break even. NIHD announce on April 6 lower than expected net subscribers for the quarter and the stock dropped and filled the stop. GXDX, AMX and BLUD were also stopped out this week. Even with the realized losses from these positions, the Portfolio had a gain for the week and is still outperforming the SPX during the same time frame on both a net gain and a risk adjusted basis. We entered four new positions this week in GILD, VAR, AMED and SLGN. The total value of the open positions is 89,665.95 and the total portfolio value is 161,168.52. Because daily values will fluctuate in any portfolio, what is of greatest interest this week is the seven open positions that are now over four weeks old. These seven positions have gained from 4.95% to 43.28%. You may review the positions opened on March 10 on the Summary below. There are also five closed positions that had been opened on March 10 that had returns of -10.25% to +2.96%. This is the first intermediate term evidence of the value of this intermediate term strategy. The open intermediate term gains are initially far out performing the early exits supporting our original expectations that the strategy would produce losses in the short run and still produce larger profits over the intermediate term. While it is still too early to draw any definite conclusions the early results are beginning to support the validity of the strategy. We reiterate this week that: It is always better to outperform than underperform the market. (click image to enlarge)

Learn the Discipline Model Portfolio

Learn the Discipline Model Portfolio Summary - Week Nine You will notice a new feature in the right hand menu; Key Topics. Under Key Topics you will see Learn the Discipline. Clicking on Learn the Discipline allows you to see all the posts where we have discussed the Model Portfolio. Reading the February 7 post, if you have not already read it, will give you a better understanding of how we are managing the Model Portfolio. You can directly access that post by clicking here: http://chartsignals.blogspot.com/2009/02/coming-next-week_07.html In the table below you will see all the positions we have opened since March 10. The positions opened and closed prior to March 10 are listed in past posts. Since inception on Feb. 3 the portfolio has primarily been in cash. This is the first week where the portfolio has been more than 50% invested in stocks. As of Friday April 3 the portfolio is 61.42% in stocks and the balance in cash. We entered 31 positions this week and two open postions were stopped out. There are a total of 43 positions open with a total value as of Friday $97,882. 38 positions are profitable and 5 are negative but still above their stop loss. The portfolio is profitable by more than double the return of the SPX since Feb. 3. Risk adjusted the performance is more than three times the SPX return during the same time. Since this is an intermediate term strategy it is still too early to make thorough evaluation and comparision. As we stated originally we expected failed positions to show early and it would only be after several weeks that some of the winners, those that follow through with an intermediate term up trend after an entry signal, would emerge. While 18 of the 38 profitable positions have more than a 10% return, the longest held position is 25 days at this point, so it won't be until next week that any positions are longer than one month. Even though the portfolio is not old enough to do a thorough evaluation, one thing is always true and that is: It is always better to outperform than underperform the market. (click image to enlarge)

Futures Point to Higher Open

1:52 pm ET - The SPX is up 15 points to 803 and currently forming a bullish harami on the daily chart...of course the candle is not closed and change form by the end of the trading day... (click on image to enlarge) Our AT Webcast virtual trade SNDA, which was a buy stop (if stock rises 37.25) limit (2.25) on 10 May 40 calls filled at 7:31 at 2.15. Currently is at 3.30 or just over 50% on the call options. (click on image to enlarge) 11:35 am ET - ES +9, NQ +14 and the SPX +9 are all trading higher Tuesday morning. Our real time vitural trades on SNDA and DECK from Monday nights AT Webcast filled Tuesday morning. As stated we are using the recent pull back as an opportunity to enter additional positions in our Model Portfolio. (click on image to enlarge) Learn The Discipline We have added 24 positions this morning in the Model Portfolio. These are done in a real time virtual account and done at the real time trading price at the time the orders are filled. (click on image to enlarge) http://chartsignals.blogspot.com/2009/02/coming-next-week_07.html BMO - ES +8 and NQ +12 futures are higher in pre-market trading pointing to a higher open. If the cash markets open higher and continue to move higher, Monday could be the low day in a two day pull back, so watch for a break of the high of the low day. At the Open on Tuesday SPY – lower high, lower low SNDA – hammer DECK – hammer UNP – confirmed bearish harami CTSH – hammer X – lower high, lower low at 30 DMA DLB – confirmed bearish harami CRM – lower high, lower low NFLX – bullish engulfing GME – harami ISRG – broke bearish pennant down WYNN – lower high, lower closed below 20 DMA ILMN – dragon fly doji

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The Model Portfolio opened three new positions on Tuesday and Wednesday in X, DECK and ESI. None of the existing positions were stopped out this week and all 10 open positions are profitable. The portfolio is about $22,000 of the $152,000 portfolio in stocks and the balance is in cash. As stated last week, now that the market has changed to a more neutral intermediate term trend from from down and we will use a pullback opportunity to a higher low to become more invested. With the bearish harami in the indices and many stocks on Friday, this week might present the opportunity to do just that. (click on image to enlarge)

Learn the Discipline

Learn the Discipline Week Seven Summary (click image to enlarge) All positions closed or stopped out this week are trading at or below their exit price except AMZN which rallied after being stopped out. We have been rather conservative in our risk exposure over the past several weeks because the market broke support and was down trending. During this time that approach paid off by outperforming the negative return of the SPX as we mentioned last week. If the market forms a higher low in its current pull back from Thursday's high, that is the point we will become more aggressive in getting the Model Portfolio more fully invested. Remember, we want to think like a Master Chess Player thinking several moves in advance.

Looks Like a Key Reversal Day...

I know you are busy…in fact when I was first asked to start a blog by those who listened to me once a week but wanted to know what I was thinking every day, I delayed for a whole year, because I was busy too and I knew it would take time to put what I see and think each day into writing…and I knew it was my personal time that I would be using…I finally took the plunge a year ago and I think it has been a good experience for you and me… I would like to make some enhancements for your benefit to the blog, both in what I share and how I share it…but before I do, I am asking for your insight as a regular reader of this blog…I know you are busy and that it is easy to think someone else will give their input, so Dave won’t need mine (apparently they are thinking the same thing you are)…actually several already have and I am very appreciative to those who have taken the time out of their busy day to give me feedback…their insights are very helpful…however, the feedback I have received is not yet a valid sample size…what that means to the non-statistical types is that if I take their insight and add it to mine, it is essentially still guessing at what most of you find useful on Chartsignals…Sooooo…I’m asking you…yes, You… Will you please take just a moment now to email me at chartsignals@yahoo.com and tell me: What information in Chartsignals do you find useful right now? The benefit of taking a moment is that I won’t delete something that is useful to you and I will delete information that is not that useful…and Chartsignals will become a more effective and efficiently delivered source of what I see and what I’m thinking every day…I do appreciate everyone that is willing to help me help you…Dave DJIA - 7.01, -0.10% SP500 - 2.66, -0.35% NASDAQ Comp. - 27.48, -1.92% Russell 2000 - 6.73, -1.71% Exchange NYSE NASD Advancing 2,198 1,207 Declining 1,590 1,552 Oil $47.35 +$1.10 Gold $922.00 -$8.10 SOX 212.16 -7.95 VIX 43.74 +1.38 The VIX moved up and did confirm the move down in the SPX on Monday. Strongest Sectors: XLU +2.71%...XLB +1.57%...XLP +1.56% Weakest Sectors: XLY -2.36%...XLF -1.95%...XLV -1.08% Sector Watch Up Trending: Sideways: XLE, XLY, XLV, XLK Down Trending: XLF, XLP, XLI, XLB, XLU Stocks rose in early trading Monday only to reverse and move lower by the afternoon. The financial sector which had been the leading sector ETF early Monday fell to the next to the weakest sector by the end of the day. . Technically, the indices had a key reversal day with stock prices opening and moving higher only to have sellers push prices down to close near their low of the day. For many stocks Monday is the high day of the recent support bounce and a break below the low of the high day on Tuesday would represent a bearish entry signal and an exit signal on short term bullish trades. Some stocks broke the low of the high day today. The Financial Sector XLF fell -1.95%. Leading financial stocks which gained 1%+ included MET, ZION, AFL, KEY, STT, PRU and USB. Remember that all of these stocks are in intermediate term down trends. Learn the Discipline We closed positions in FAS at 5.11, UYG at 2.33 and stopped out on AMZN at 66.74. All three trades were profitable. Index Commentary The DJIA formed a tombstone doji right at its 50% Fib retracement (Feb 9) and at its 30 DMA. This is also the high day. Watch for a potential break of the low of the high day. The SPX formed a shooting star ath the 30 DMA and the 50% Fib Retracements (Feb 9). Today is the high day in the counter trend. Watch for a potential break of the low of the high day on Tuesday. The Nasdaq formed a bearish engulfing which confirmed Friday’s hanging man at its 50% Fib retracement (Feb 9) and its 30 DMA. Today is also the high day in this counter trend move. A bearish engulfing requires no confirmation. The RUT formed a bearish engulfing that confirmed Friday’s hanging man at its 38.2% Fib retracement (Feb 8) and just above its 20 DMA. This is also the high day. A bearish engulfing requires no confirmation. At the Open on Tuesday Counter Trend Up in a Down Trend SPY – bearish harami at 30 DMA in bear flag BA – shooting star above 20 DMA in bear flag WHR – black spinning top at 30 DMA in bear flag BDK – shooting star at 30 DMA in bear flag DE – shooting star at 30 DMA in bear flag WYNN – bearish engulfing at 20 DMA in bear flag ADS – shooting star/bearish harami at 30 DMA in bear flag DECK – bearish engulfing at 20 DMA in bear flag VNO – evening star at 30 DMA in bear flag SPG – evening star at 30 DMA in bear flag FWLT – shooting star confirms shooting star at 30 DMA in bear flag Stocks to Watch on Tuesday Leading Stocks: Holding Above 30 DMA BIDU, CLB, BKC, NFLX, DLTR, HANS, ICE, ALGT, MOS, DLB, JEC, PWR, VPRT, AMZN, MON, AAPL, CTSH, FLS, JOYG, AMX, APEI, AXYS, BAP, CAM, GMCR, GPRO, JCOM, JOSB, MUR, PCLN, PETS, WMT Moving Above 30 DMA = 2 ATW, GR Moving Below 30 DMA = 4 FSLR, MYGN, SYNA, SNHY Staying Below 30 DMA EBAY, GME, SLGN, WRC, CPLA, ESRX, GES, PSYS, CHL, DECK, GILD, MHS, TDG, SPWRA, AMED, BIIB, GXDX, PCP, RBN, DV, ESI, VAR, WCG, BLUD, JW.A, MUR, ORCL, RCI, SWN, HLF, STRA, PCR, RIMM, BDX, BYI, PPD, ACN, NIHD, K, NTLS, HDB, CBST, SNA, AFAM, MCD, EZPW, WAB, FAS, UYG Monday’s Action (=> +$0.70 or -$0.70) Moving Up: MON, PCLN, CNX, AGU Moving Down: STRA, BIDU, FSLR, GS, MA, SOHU, MS, SINA, PNRA, AEM, ANR, NDAQ, AFAM, NEM, HANS, ONXX, BRCM, POT, MOS Intermediate Term Market Trend: Neutral – Nasdaq; Down – DJIA, SPX, RUT Short Term Market Trend: Up

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Week Six Summary: Approximately $30,000 of the $152,000 model portfolio is currently invested. After six weeks the portfolio is down approximately 1% compared with the SPX which is down over 8% in the same time period. As we stated six weeks ago, the model portfolio is essentially a stock only portfolio at this time and intended to be primarily an intermediate term strategy. There is a difference between making individual trades and managing a portfolio and our objective is to reinforce some portfolio concepts that will make large differences over time. As we get a valid sample size of trades we will become more explicit in our explanations. So stay tuned and you will become plesantly surprised over the next few months as the portfolio unfolds.

Break of the High of the Low Day...

DJIA + 379.44, +5.80% SP500 + 43.07, +6.37% NASDAQ Comp. + 89.64, +7.07% Russell 2000 + 24.49, +7.13% Exchange NYSE NASD Advancing 3,459 2,356 Declining 398 465 Oil $45.71 -$1.36 Gold $895.90 -$22.10 SOX 205.84 +15.37 VIX 44.37 -5.31 The VIX moved down confirming the move up in the SPX on Tuesday. Strongest Sectors: XLF +14.86%...XLI +7.55%...XLY +6.15% Weakest Sectors: XLU +1.32%..XLP +1.85%...XLV +3.61% Sector Watch Up Trending: Sideways: XLE, XLY, XLV, XLK Down Trending: XLF, XLP, XLI, XLB, XLU Technically today was the break of the high of the low day for many stocks and represents a short term entry opportunity. Stock already in an uptrend may also be presenting intermediate term entry opportunities. The strength of Tuesday's move suggests that it is more probable to continue in the short term, so watch the short term support and resistance levels. Everyone has known this market was oversold. What no one knew was; where was the bottom of irrational selling? Selling has been driven been by uncertainty in the banking system. The news that C was profitable for the first two months of 2009 was enough to drive C up 38%. The Financial Sector XLF rose14.86% as financial stocks BAC, MS, PNC, JPM, MET, PRU, WFC, STT, IVZ, SPG, TROW, GS and AFL all rose more than 15%. All of these stocks are in down trends except STT and IVZ which sideways and MS and GS which are in up trends. Support bounce in a down trend is a counter trend move and in an up trend is a bull flag support bounce. A sideways trend is a horizontal support bounce. Gold and oil were down today. Gold stocks many of which broke the low of the high day yesterday were down again on Tuesday as financials moved up. Dave’s Insight: Trend is the most important factor in every trade. Know the short term and intermediate term trend in each stock you trade. Know if you are trading the short or intermediate term trend in each trade. If you are trading up in a down trend make sure you are aware that this is a counter trend move. AMZN gapped up on the open and closed above its 200 DMA, a hold above the 200 DMA is long term bullish. PCLN formed a bullish harami at its 20 DMA in a bull flag, confirmation of the harami would be short term bullish. Trading just below its 200 DMA BIDU gapped up and closed above recent resistance…is nearing the 169 chart price target we calculated in last week’s Advanced Technical Workshop. Index Commentary The SPX and DJIA confirmed Monday’s inside days and Friday’s bullish harami while breaking the high of the low day which was Friday. The Nasdaq gapped up and formed a large white candle that confirmed Monday’s inverted hammer and Friday’s hammer and closed above the high of the low day which was Monday. The RUT gapped up and formed a large white candle that confirmed Friday’s bullish harami and closed above the high of the low day which was Monday. Great Questions, Great Answers (Email us at chartsignals@yahoo.com with your technical question.) Bruce G asks… Last night I asked the question about "swing" vs. "trend" and I understood your clarification, and need for precision that will lead to better rules, and ultimately, trading / profits. After thinking about it though, I still am unclear on the fundamental issue of when or how do you decide whether to trade the short term or intermediate term trend? As I am formulating a better set of rules, I see both entries very often being the same, but the exits will be different. Does selecting the appropriate time frame depend upon overall market conditions? What tools do you use to determine this? Thanks again, Answer… The entry for a short term and an intermediate term trade can indeed be the same and the exits are almost always different. I have covered this exact point by walking through the difference in the reasoning process that a trader uses in a short term trade versus an intermediate term trade in my live Technical Analysis Workshops. Let’s clarify that in my view a short term trend on the daily chart is two days to four weeks. An intermediate term trend is four weeks or longer. The choice of which to trade is entirely personal to the trader. One trader may choose only to trade short term, a second only intermediate term, while a third trader may choose to have both a short term and intermediate term trading system. Certain traders may choose to trade both short and intermediate term on the same stock at the same time; exiting the short term trade for a short term profit while continuing to hold the intermediate term trade in expectation of a larger profit. In all circumstances it is important to predetermine which trend is being traded and then to manage that trade based on the selected trend. A short term strategy should be usable at all times. A trader that chooses to trade intermediate term would generally do so when they expect a trend to last longer than four weeks. When the broad market is trending up or down there will be more individual stocks trending in the same direction on which a trader can trade the intermediate term trend. At the Open on Wednesday Counter Trend SPY – confirmed inverted hammer, rose 5.26% NSC – confirmed Friday’s bullish harami, rose 4.68% SCHN – confirmed Monday’s inverted hammer, rose 14.45% Up Trend HANS – broke out of horizontal resistance and pulled back to close just above, rose 1.37% SGP – rose another 4.72% following MRK recent buyout offer CF – support bounce in bull flag, rose 4.37% Sideways Trend OSIP – confirmed Monday’s inside day, rose 3.51% RE – continued to rise from Friday’s bullish engulfing, rose 3.28% FWLT – rose to 20 DMA and pulled back, rose 6.99% Down Trend SYNA – rallied through 20 DMA resistance, rose 5.71% ISRG – did not confirm Monday’s shooting rose through 20 DMA in bear flag pattern, rose 4.39% LZ – did not confirm Monday’s shooting star/bearish harami in bear flag pattern, rose 6.34% Learn the Discipline As we posted on Saturday our Model Portfolio was all in cash. We entered eight positions during the first hour on Tuesday following our pre-stated guidelines of approximately $2,000 per trade in stock: 1,200 shares UYG 1.75 600 shares FAS 3.32 62 shares ICE 62.20 25 shares PCLN 81.19 41 shares WMT 48.27 38 shares MCD 53.25 55 shares HANS 36.47 50 shares NFLX 39.39 We entered six additional positions during the last 30 minutes of the trading day: 66 shares DLB 30.20 85 shares VPRT 23.63 25 shares MYGN 81.49 100 shares PWR 20.58 52 shares JEC 38.15 30 shares AMZN 65.39 Approximately $28,000 of the Model Portfolio is now invested. Stocks to Watch on Wednesday Leading Stocks: Holding Above 30 DMA BIDU, CLB, PCLN, BKC, NFLX, DLTR, HANS, ICE, ALGT, MOS Moving Above 30 DMA = 8 DLB, JEC, MYGN, PWR, VPRT, AMZN, MON, WMT Moving Below 30 DMA = 0 Staying Below 30 DMA GMCR, GME, JCOM, SLGN, WRC, FLS, ICE, CPLA, ESRX, GES, PSYS, CHL, DECK, GIL, MHS, TDG, SPWRA, AMED, APEI, BIIB, GPRO, GXDX, PCP, RBN, AAPL, CTSH, DV, ESI, VAR, SYNA, WCG, ATW, BLUD, JW.A, MUR, ORCL, RCI, SWN, GR, FSLR, HLF, EBAY, AMX, STRA, PCR, RIMM, BDX, BYI, CAM, PPD, ACN, NIHD, SNHY, JOYG, K, JOSB, PETS, NTLS, BAP, HDB, CBST, SNA, AFAM, EZPW, WAB, AXYS Tuesday’s Action (=> +0.70 or -0.70) Moving Up: BIDU, FSLR, GS, MA, POT, NUE, MON, MS, SOHU, STRA, MOS, SCHN, V, NDAQ, X, AGU, CF, PNRA, CNX, ESRX, KRE, PCLN, SINA, INFY, IPI, COH, BRCM, KMT, NIHD, BTU, ANR, KBE, GRMN, FWLT, CLF, ADM, AFAM, EBAY, ZION, LAMR, MEE Moving Down: GOLD, NEM, GLC, AEM, GDX, GG Intermediate Term Market Trend: Neutral – Nasdaq; Down – DJIA, SPX, RUT Short Term Market Trend: Up

Learn The Discipline

Since the parameters of our Model Portfolio are currently to buy stock for an up trending market and use stops, all of the positions have been stopped out. And while a few stocks have crossed above their 30 DMA over the past two weeks we have decided to enter no new positions at this point. So the portfolio is in entirely in cash at this moment and we will evaluate establishing new positions new week. We have not ruled out opening a position in an up trending stock, we just choose not to do so this past week.

Learn the Discipline Model Portfolio

Learn the Discipline We took two new positions this past week; DV and CTSH. DV was stopped out for second time on news related to another stock in its industry group. CTSH stayed above its stop. We started with a $152,000 account balance and for now continue to make stock trades only. Starting position size is approximately $2,000. There are 5 positions open after week 3, so approximately $10,000 is invested. We made took only two positions because the market was pulling back and there were fewer entry signals and we exercised judgment to hold on entering new positions as the market was making a short-term move from resistance down to support. The portfolio action and performance is inline with our original expectation for a sideways trend market. DV stopped out on a move down due to CECO announcement

Stocks Hold Support...Gold Rises...PCLN Reports

DJIA + 3.03, +0.04% SP500 - 0.75, -0.10% NASDAQ Comp. - 2.69, -0.18% Russell 2000 - 5.72, -1.33% Exchange NYSE NASD Advancing 1.009 988 Declining 2,696 1,738 Oil $34.62 -$0.31 Gold $977.70 +$10.70 SOX 205.87 +0.94 VIX 48.46 -0.20 The VIX moved down not confirming the move down in the SPX on Friday. The change in SPX and VIX is insignificant and practically should be viewed as neutral or flat for the day. Strongest Sectors: XLP +0.53%...XLI +0.16%...XLK +0.07% Weakest Sectors: XLU -1.51%...XLY -0.92%...XLB -0.58% Sector Watch Up Trending: Sideways: XLE, XLP, XLU, XLY, XLV, XLI, XLB, XLK Down Trending: XLF Buyers and sellers traded to a virtual standstill on Wednesday as the DJIA and SPX formed a doji. DJIA volume was below average. Downward momentum certainly exhausted at least temporarily on Wednesday. There is a bullish cluster on the DJIA and SPX indicating the potential for a short-term reversal. The nine Sector ETFs ranged from +0.53% strongest to -1.51% weakest. Bank stocks were mixed as NTRS, USB, BK STT, KEY and ZION rose. BAC, C, WFC, RF and JPM moved lower. PCLN rose over $8 or almost 13% in after-hours trading after reporting better than expected earnings. BIDU which missed estimates by 1 cent reporting $1.31 on estimates of $1.32 rose more than $3 in after-hours trading. FOSL and WMT continued higher after better than expected earnings.

Index Commentary The DJIA formed a doji top the second candle of a possible morning star at horizontal support. The SPX formed a doji at the S1 level of the Nov 21 large white candle…possible morning star pattern. The Nasdaq formed a spinning top at horizontal support around 1,460. The RUT formed a black candle as it fell below Jan horizontal support and closed near Dec 420 support area.

Stock Commentary Our list of 22 Bull Flags from the NDX 100 continued to consolidate in their flag pattern. Several formed a new low day and some moved up on Wednesday. Watch for a break above the high of the low day on Thursday. If they don’t bounce don’t trade them yet. The list: CHKP, DISH, EXPE, HANS, ILMN, LLTC, MRVL, MXIM, STLD, XLNX, VRTX, AAPL, AKAM, BIIB, GILD, AMZN, CEPH, GENZ, GOOG, JAVA, RYAAY, SYMC Coal stocks and steel stocks moved lower: KOL, BTU, CNX, FCL, JRCC, MEE, WLT, STLD, NUE, SCHN and X. Rail stocks BNI, CSX and UNP each formed a bullish harami and NSC formed a spinning top.

Semiconductor stocks ALTR, LLTC, MRVL, NSM, NVLS, TXN and XLNX showed signs of support buying.

Earnings Wednesday, Feb 18 AVA +0.32 below +0.39 moved lower XEC +0.32 below +0.45 moved lower CMCSA +0.27 beat +0.22 moved lower CEG +0.03 below +1.24 moved lower DE +0.48 below +0.63 moved lower GT -1.22 below -0.97 moved higher JAKK +0.55 below +1.05 moved lower OMX +0.02 below +0.15 up 3 cents STP -0.27 below -0.26 moved lower AAP +0.51 beat +0.37 AEM +0.15 beat -0.01 CBS +0.34 beat +0.26 BIDU +1.31 below +1.32 NILE +0.24 below +0.35 DENN -0.03 below +0.06 DBRN -0.02 below +0.01 HPQ +0.93 inline +0.93 NHP +0.56 inline +0.56 NTRI +0.16 below +0.20 OII +0.93 inline +0.93 PCLN +1.29 beat +1.05 SNPS +0.50 beat +0.41 WFMI +0.20 beat +0.15 Numbers exclude non-recurring items Thursday, Feb 19 BMO – APA, CCC, CTL, DSX, EV, EXPE, GM, GG, HOS, MGM, NEM, PDCO, PNCL, RS, SPAR, S, TRAD, WST, XTO AMC – BUCY, CECO, CYH, RIO, DRYS, HE, JCOM, OIS, OSIP, RRGB, TSO, VLCMWBMD Fri Feb 20 BMO – ABX, JCP, LPNT, LOW, Learn the Discipline The Model Portfolio was stopped out of positions in BLUD and LLTC on Wednesday. The portfolio entered 34 shares of DV at 57.41 with the initial stop at 54.75. There are seven open positions. Stocks to Watch on Thursday Leading Stocks: Holding Above 30 DMA NFLX, ESI, MYGN, APEI, HANS, WRC, GMCR, PCP, GES, MHS, MOS, TDG, AAPL, BIIB, GPRO, VAR, VPRT, AMZN, SLGN, AMED, DLB, PSYS, CTSH, ESRX, CPLA, GXDX , DV Moving Above 30 DMA = 1 BIDU Moving Below 30 DMA = 3 RBN, SYNA, WCG Staying Below 30 DMA ATW, BLUD, CHL, FLS, GILD, GME, ICE, JCOM, JW.A, MUR, ORCL, PCLN, RCI, SWN, GR, MON, SPWRA, FSLR, HLF, EBAY, AMX, STRA, PCR, PWR, RIMM, BDX, BYI, CAM, PPD, ACN, NIHD, SNHY, JOYG, CLB, DLTR, K, BKC, JOSB, JEC, PETS, NTLS, BAP, HDB, CBST, DECK, SNA, AFAM, EZPW, WAB, ALGT, AXYS Wednesday’s Action (=> +0.70 or -0.70) Moving Up: STRA, MA, POT, V, CF, MON, MOS, AGU, HANS, SOHU Moving Down: FSLR, SCHN, X, NUE, PNRA, UAUA, GS, BTU, CLF Intermediate Term Market Trend: Neutral – DJIA, SPX, Nasdaq, RUT Short Term Market Trend: Down

SPX, DJIA & RUT Break Support...Nasdaq Holds

DJIA - 297.81, -3.79% SP500 - 37.67, -4.56% NASDAQ Comp. - 63.70, -4.15% Russell 2000 - 19.46, -4.34% Exchange NYSE NASD Advancing 357 416 Declining 3,453 2,361 Oil $34.93 -$2.58 Gold $967.00 +$25.50 SOX 205.87 -14.68 VIX 48.66 +5.73 The VIX moved up confirming the move down in the SPX on Friday. Strongest Sectors: XLP -1.45%...XLV -1.73%...XLY -3.79% Weakest Sectors: XLF -9.94%...XLY -6.92%...XLP -5.06% Sector Watch Up Trending: Sideways: XLE, XLP, XLU, XLY, XLV, XLI, XLB, XLK Down Trending: XLF Sellers took over on Tuesday after the three-day President’s Day weekend. Bullish patterns and candles from Thursday which did not confirm on Friday, failed to confirm again on Tuesday. All sectors were lower as Financial Sector etf, XLF led the market lower falling another -9.94%. Bank stocks STT, KEY, USB, WFC, ZION, C, JPM, and BAC all were down more than 10% on Tuesday. Transports dropped -5.20% making a new 52 week low. Rail stocks, BNI, CSX, NSC and UNP all moved lower. Oil fell to another low while gold reached its highest level in seven months as gold stocks GDX, GOLD and AEM also moved higher. The SPX broke below January’s short-term support levels by 1.88% and is still 48 points above its November low. The DJIA moved lower on average volume while breaking well below January’s lows, closed 103 points or just 1.38% above it’s November lows. The Nasdaq is still above its Feb 2 short-term support low. AKAM formed a black candle and moved to the support level of its horizontal bull flag…it is above the S1 level of its Feb 5 candle. AMZN formed a doji and found support at the S2 level of its Feb 5 large white candle…today is the new low day in its current bull flag. FOSL, MDT, TEVA and WMT all moved higher on better than expected earnings reported before the open on Tuesday. Index Commentary The DJIA formed a large black candle which fell below short-term support of 7,693. The SPX formed a large black candle. The Nasdaq gaped lower and formed a black candle breaking last Thursday’s support of 1,495…short-term support is 1, 460. The RUT formed a large black candle…closed just below its Jan horizontal support of 432. Stock Commentary None of the 22 Bull Flags that we selected from the NDX 100 on Thursday night moved higher on Tuesday. All moved lower still in their bull flag patterns, all forming a new low day. What to do now? Since today is a new low day, watch for a break above the high of the low day on Wednesday. If they don’t bounce don’t trade them yet. Here is the list: CHKP, DISH, EXPE, HANS, ILMN, LLTC, MRVL, MXIM, STLD, XLNX, VRTX, AAPL, AKAM, BIIB, GILD, AMZN, CEPH, GENZ, GOOG, JAVA, RYAAY, SYMC Steel stocks STLD, NUE and SCHN in bull flag pull backs fell to a new low day in the pull back. Coal stocks KOL, BTU, CNX, FCL, JRCC, MEE and WLT all formed a new low day in their pullbacks. Semiconductor stocks ALTR, LLTC, MRVL, NSM, NVLS, TXN and XLNX pulled back and formed a new low day. Earnings Tuesday, Feb 17 AMED +0.98 beat +0.91…moved lower FOSL +0.69 inline +0.69…moved higher MDT +0.71 beat +0.70…moved higher RJET +0.56 beat +0.47…moved lower TEVA +0.76 beat +0.73…moved higher RIG +3.69 below +3.70…moved lower WMT +1.03 beat +0.99…moved higher AXYS +0.59 below +0.61 CHK +0.73 below +0.74 LZB -1.25 below -0.10 UPL +0.43 below +0.48 Numbers exclude non-recurring items Wednesday, Feb 18 BMO – CMCSA, DE, GT, OMX, STP AMC – AAP, AEM, CAR, BIDU, NILE, DENN, DBRN, HPQ, NHP, NTRI, OII, ORLY, PAAS, PCLN, SNPS, WFMI Thursday, Feb 19 BMO – APA, CCC, CTL, DSX, EV, EXPE, GM, GG, HOS, MGM, NEM, PDCO, PNCL, RS, SPAR, S, TRAD, WST, XTO AMC – BUCY, CECO, CYH, RIO, DRYS, HE, JCOM, OIS, OSIP, RRGB, TSO, VLCMWBMD Fri Feb 20 BMO – ABX, JCP, LPNT, LOW, Learn the Discipline The Model Portfolio was stopped out of positions in ATW, AMX, EBAY, FLS, NIHD and PCLN on Tuesday. We entered no new positions. There are eight open positions. Stocks to Watch on Wednesday Leading Stocks: Holding Above 30 DMA NFLX, ESI, MYGN, SYNA, APEI, HANS, WRC, GMCR, PCP, GES, MHS, MOS, TDG, AAPL, BIIB, GPRO, WCG, VAR, VPRT, AMZN, SLGN, RBN, AMED, DLB, PSYS, CTSH, ESRX, CPLA, GXDX Moving Above 30 DMA = 1 DV Moving Below 30 DMA = 18 ATW, BIDU, BLUD, CHL, FLS, GILD, GME, ICE, JCOM, JW.A, MUR, ORCL, PCLN, RCI, SWN, GR, MON, SPWRA Staying Below 30 DMA FSLR, HLF, EBAY, AMX, STRA, PCR, PWR, RIMM, BDX, BYI, CAM, PPD, ACN, NIHD, SNHY, JOYG, CLB, DLTR, K, BKC, JOSB, JEC, PETS, NTLS, BAP, HDB, CBST, DECK, SNA, AFAM, EZPW, WAB, ALGT, AXYS Tuesday’s Action (=> +0.70 or -0.70) Moving Up: GOLD, AFAM, GDX Moving Down: FSLR, GS, POT, MA, SCHN, CLF, ANR, MOS, AGU, X, BTU, CF, CNX, NUE, MON, MS, PCLN, STRA, SOHU, IPI, NIHD, MEE, FWLT, NDAQ, KBE, ESRX, V, ZION, ONXX, INFY, KRE, ADM, HANS, DRYS, KMT, SINA, PNTRA, BRCM, EBAY, LAMR, GRMN Intermediate Term Market Trend: Neutral – DJIA, SPX, Nasdaq, RUT Short Term Market Trend: Down

Learn the Discipline Model Portfolio

We hope you remembered your Sweetheart today and let them know how much you care! Learn the Discipline

We encourage those who have not read our Model Portfolio explanation post on Saturday, Feb 7 to take the time to read it. Here is a portion of that posting:

“We want to reiterate that this is an intermediate term strategy and we would expect mixed results while the market stays in a sideways trend and for the first few weeks of operation until any good trends we get into have a chance to develop.” “If you are a hyper-short-term trader this will be a lot like the old fable of the tortoise and the hare. Just remember the tortoise didn’t look that good in the beginning but in the end won the race.” “Entry and exit trades will be placed in a real-time virtual account so it will simulate the placement of real trades.” We started with a $152,000 account balance and for now are making stock trades only. Starting position size is approximately $2,000.

18 new positions were opened this week.

10 positions were stopped out. 14 positions are open after week 2, so approximately $28,000 is currently invested.

The trades are working in line with the expectation that there will be several small lossess in the few weeks as signals fail and the larger winning trades from signals that follow through with a good trend move taking several weeks to accumulate larger profits. Week Two Summary and Comments Comments AMED stopped out on a automatic trailing stop GME stopped out on a raised stop PPD stopped out and moved 1.67 lower CAM stopped out and moved 63 cents lower CPLA stopped out on a gap down due to EDU announcement STRA stopped out on a gap down due to EDU announcement DV stopped out on a gap down due to EDU announcement HLF stopped out and moved 16 cents lower CHL stopped out and moved 6 cents lower ICE stopped out and moved 74 cents lower AMED – we chose to use an automatic trailing stop here because of the approaching ERD. In this case the trailing stop proved to be moved too quickly even though the trade produced a profit. GME – the manual trailing stop worked fine in this case. STRA – we entered a trade on STRA on the day before earnings because APOL and ESI had an earnings gap up and we concluded there would be reasonable probability that STRA could experience the same. STRA did beat expectations, however, EDU had a negative announcement and as a result all educational stocks gapped down on the open Feb. 12 filling the stop on STRA, CPLA and DV below the pre-determined stop. A gap down in a stock and being stopped out with a larger than desired stop is one of the risks that exists with placing a stop in the computer.