Turn Up The Volume

We have about 7 pages of stuff to throw your way today, but don't worry I won't. It is interesting to read all the newsletter this time of year because with the holiday's and the thing trading, these authors are actually stopping and thinking before then just write to fill a column. They are making sense.

I will eventually give my prognostication by this time next week, and a few of you have given me your guesses. Remember this is your chance to grab a number out of the air and tell us how you think the S&P 500 and Dow Jones will finish up next year. Again the winner, closest to, will receive either a premium membership to Morningstar.com or the Digital version of Investors.com which includes the eIBD. Each is valued at about $200.00. Douglas or Martin, in the UK if you want to play, Give me your guess at either the Dow Jones IA or the S&P 500 and the FTSE and I will get you an equivalent about of Investor's Chronicle on line or the premium FT membership. (That might be two week of the Investor's Chronicle as that bloody thing is expensive, but very good.)

This coming year, I really want to help you make money. I am going to tone down the options play and focus on Growth/Value investing centered around the CANSLIM IBD strategy. I will also be spending more time on ETFs and Mutual Funds sinece many of you have 401 K plans and IRA plans. Now I am not a professional and highly recommend you at least talk to a certified financial advisor or wealth management professional as I am just a blind folded monkey in the casino.

Now I reserve the right to loose lots of my own money playing in the options market and will suggest a few options plays that look truly enticing. I will also build a set of tutorials by Salvay and Lewcrum explaining call options and put options and how to use them to "hedge" your positions. Most of the information will come from Cramer's "Getting Back To Even" and all of the knowledge I have gathered from the investment school of hard kicks on the arse.

Now if we remember, as Salvay told us in the Market Direction tutorial (Over there to the right under Salvay and Lewcrum Explain) market direction plays an important role in the prices of a stock. The Street.com had a great piece about how to understand the Dow and use it as a "tell" about the future of the market. The concept is far from new and was established by Charles Dow whom the index is named. His concept called Dow Theory is very simple.

He believed that the market was just a discounting mechanism that could on occasion signal the FUTURE overall health of the economy. He used that theory to create the DJIA Dow Jones Industrial Average as well as the DJ Transportation (Originally called the DJ Rail Index) Index and later others identified the need for the DJ Utility Index. (Don't worry this trip down memory lane has a purpose.)

Here is how the Dow Theory works (remember our little ditties about linkage, here is classic linkage). When manufactures are busy building things (here and abroad) they are shipping raw materials to plants and shipping finished good to customers. The utility sector confirms the flow of good because those plants are having high factory utilization thus buying more water and power.

The theory is confirmed when two of the three sectors improve. Now XLU is an ETF that covers Utilities and it has been performing wonderfully during the back half of this year. If you have been following the DJIA with an ETF like DIA, last Friday you saw it break out nicely above its 50 day and 200 day SMA (Simple Moving Average yes I could have made you look it up in Investopedia over there to the right). The third leg, transportation can easily be tracked with another ETF called IYT. It is the last to shape up nicely, but it appears to be doing so.

What does this mean to you. If you believe the Dow Theory, then the IYT should continue to round up above its current 88 and change and heads toward its 2 year high of 100ish some time next year. If you don't feel confident in the Dow Theory though proven very accurate at forecasting the several rally's and corrections, this is indication a bullish sentiment in the market for most of next year.

If the casino pit bosses believe in the Dow Theory and many do, they will be pulling money off the sidelines and getting back in the game. You could also look at the components of IYT using Morningstar and pick some probably winners there. So go make some money and tell me how great I am.

Hey Buddy Can You Spare 1.2 Trillion

Thanks to all the hard work our congress did over the last three months in solving our debt issue, President Obama will have to ask them to increase our debt limit from 14.2 trillion to 16.4 trillion. The Treasury informed the White House and congress we are down to our last 100 billion in useable debt.

Now read that carefully we are down to our last 100 billion in debt. I am sure that some of you have checking accounts where you put your money in and when you spend it all Bank of America starts sending you bills and e-mails and puts your picture up when you run out of your money. Now let's pretend you had a line of credit (aka loan) there and you have 100 dollars left on the loan which if you did the math, on an equivalent basis you would owe Bank of America $14,100.00 and you could not pay it, you would simply call your branch office and say, "Hey hows about we just tag on another $1,200.00 on that line of credit. Oh yeah I am not going to do anything about my spending or saving, I just need some more money." Naturally BofA will say, "Sure Brian. No Problem."

Now that 1.2 trillion should be just enough to get us through next November, Mmmm. Won't the election be over with by then? Coincidence? Perhaps? Here is congresses choices. They can choose to ignore the Presidents request. That would make great political fodder for the Dems against the GOP during the election. If they deny or ignore the request, then President can veto the rejection, again giving him great political fodder. Or everyone can ignore it and it automatically get bumped to 16.2 trillion on January 14th, giving each side very muddy political fodder for the fall election.

Now you Salve Lucrum family members who are looking at our VXX options which are down 79% should be reading this and saying, "That boy is brilliant." This debt extension should give the market a little heartburn (which we might have seen some today.) and as a result the VIX did bump up a bit today.

Hey amico puoi risparmiare 11,8 miliardi di dollari?

Loosely translated, that is Italian for Hey Buddy Can You Spare 11.8 Billion Dollars?

Wednesday in Europe, there was some good news, but it did not help the market. Italy did a bond float to the tune of 11.8 billion and did not have to pay dearly for the pleasure. The average yield was about 3.25% as compared to 6-7 % of late. The rate of 3.25% is bearable even for the dismal Italian economy. This is a good sign for the Eurozone. Don't get me wrong, a few sovereign debt issuers are just pumping our bonds that will end up in frames and being sold on Ebay (Greece comes to mind), but this news out of Italy was comforting. This news was giving the market some support today, but when it was revealed that the ECB has been printing Euros like Lady Gaga concert posters, the walls tumbling down and we had down day. Because it was a light volume day I don't think O'Neil and ti IBD can call it a distribution day, but we will see.

Keep An Eye On

On our closely watch list, we have APEI American Public Education, Inc. provides online higher education focused primarily on serving the military and public service communities.

We also have ASML ASML Holding N.V., through its subsidiaries, engages in the design, manufacture, market, and servicing of semiconductor processing equipment used in the fabrication of integrated circuits.

Core Holdings

MGRC This was down about 2.5% today for no other reason that market direction. NUAN Despite the drop today in line with the market drop, Seeking Alpha had a very bullish technical analysis that made us feel better about our 25.50ish entry point. GWW Down 2.00% on the day in line with the market. XOM Down about 1.2% on a currency/commodity related cause and effect scenario. That is our core holdings in my and the Salve Lucrum Family portfolios.

Salve Lucrum