April 7, 2014

Market Strategies Newsletter

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Balanced Investing Strategies 

Covering High Return Balanced Investing Strategies To

Make Money In Up Or Down Markets

A Publication of Princeton Research, Inc. (www.PrincetonResearch.com)

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Balanced Investing Market Strategies

$10,000 Trading Account

Traders Comments

There is one open position:

TLT April Calls

Funds in Use $ 291

Loss for the week $ 798

In 2013 YTD gains were $28,479

Over 284% Returns

A $10,000 Portfolio would be worth $38,479

The last 3 years our gains have gotten progressively greater year over year.

284% Returns for $28,400 Profits In 2013

171% Returns for $17,100 Profits In 2012

77% Returns for $7,700 Profits In 2011 (only 33 weeks)

 

Last week in this space I made the comment that “They Don’t Ring a Bell” at the top or bottom, and while we made a nominal new high in the S & P 500 and the Dow, the momentum stocks have taken a real beating.  On Friday the NASDAQ powered lower by 2.6% while the Dow was lower by under 1% and the S & P 500 1.2%.  The air has really come out of some of the big names.

I have been hesitant to be a buyer of calls in this extended market. Unfortunately, I have been keying off the big names in momentum and they have been pointing me lower.  Also, unfortunately I have been stopped out on rallies in the Puts that I choose.

Friday’s action might just have been the Bell. Although, we have seen another Dow Theory breakout, with confirmation by the Transports, it would not beall that unusual to have yet another correction matching the past several and bounded by the 3-5% range.  In fact, a move down to the 200-day moving average would be a 4.8% drop from Fridays close.  However, the month of April has been up 70% of the time since 1950.  The cross-currents are extreme.

There will not be any new trades today, as I need to access the action in the early part of the week.  New trades will most like be in the SPY options and will be sent via text.

Have a good week.

…CAM

 

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Balanced Investing Market Strategies

$10,000 Trading Account

Trade Table

Remember, these trades are based on your participation in the

Subscriber Members Only

TEXTING SERVICE TO RECEIVE ALL UPDATES.

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Previous closed out trades not listed here may be seen in previous market letters in the Subscribers Members Area.

Options Trading Strategies Notes: In Texting we have a limited amount of words. In the interest of brevity: we use 8=August , 9=September . The Quantity and Strike Price for each trade is specific.

We may trade weekly options and they are noted: SPY 1/25 147 for SPY Jan 25^th 147 calls or puts.

 

Market Laboratory

Weekly Changes For Market Indicators

Prices are copied from Barron’s Weekly and Yahoo Finance and may be incorrect

M1…all money in hands of the public, Time Deposits Traveler’s Checks, Demand Deposits

M2.. adds Savings and Money Market Accounts both compared with the previous year.

 

New Balanced Investing Strategies

Stock Recommendations

$ 100,000 Account

Each stock is allocated a theoretical $ 5,000 share of the portfolio unless otherwise indicated.

 

 

Recommendations will be both listed in this letter and texted to members.

Previous closed out stock and option positions can be found in past Market Strategies Newsletter issues available in the Subscriber Members Area.

For those of you who do not buy puts to protect your portfolio, there are many ETF’s that are the inverse of the DOW. The symbols are DOG, DXD, SDS,TZA and RWM, which go up when the  DOW, S&P 500 and Russell 2000 go down and down when they go up. The DZZ goes up double when gold goes down.

Balanced Investing Strategies

$100,000 Trading Portfolio

Recommendations And Overall Comments

We had three closed out option positions last week losing a total of $ 1596.

Our losses for the new year were increased to $ 5,432.

For the full year 2013 we had realized gains of $ 53,556.

We have open position losses of about $ 9,811 most of which are in small cap bio-med stocks held over from last year.

We also have not counted dividends received on stocks like Apple, Nordic American ( NAT ) and JP Morgan.

 

We have one long option position:

TLT April 108 Calls

 

The Stock table has the following 16 positions:

AA(2), AAPL (2), DSX, GRPN, GSG, HL, INSM,

NBG (2), REPR, RPTP, TEXQY, WLT, XRGYF

 

The options call for a $ 2,500 investment unless otherwise stated; each stock position requires $5,000 unless specifically stated.

We are basing money management on a hypothetical

$ 100,000 and are using

$ 582 in one options position and

$ 68,194 in 16 stock positions

totaling $ 68,776 with

$ 31,224 in cash.

These figures are approximate.

We do not count commission costs and there may be errors.

Executions that have occurred at or near the open or close of trading sometimes vary from our actual numbers.  For example, when something opens down and it is through our price, we take the next trade whether it is an uptick or continues lower.  This sometimes results in a 50% trade that is slightly above or below the exact number.

 

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Previous Week’s

Recommendations and Rules for

the Balanced Investing Strategies

$100,000 Portfolio Trading Account

• All options count for about $ 2,500.00 for model portfolio calculations unless otherwise stated
•  When the option has doubled sell half the position 

• Stop Loss protection is either half or offered with each trade 

• The cost of the option is the asking price (or the price between the bid and ask, whichever is more realistic)

• The options will be followed until closed out.

• Option Symbols are stock symbol with expiration month and strike price

Note: Previous closed out stock and option positions can be found in past Market Strategies Newsletter issues available in the VIP Subscribers Members Area.

 

This Weeks’ Market Strategies

Economic Numbers and Media Data

 

 

Balanced Investing Strategies

Economic Data

Nonfarm Payrolls for March were decent but a little disappointing at 192K after February numbers were revised up to 197K from 175K originally reported an increase of 22,000 jobs even with inclement weather. It was widely assumed that the March numbers would have been substantially better. The Unemployment rate rose slightly to 6.7%. The number of employed workers increased by 476,000 in March, but that was more than offset by a 503,000 surge in the labor force as a number of discouraged workers returned to the labor market. That is theory was supported by the decline (from 8.1% to 8.0%) in U-5 unemployment number, which includes discouraged workers and all those marginally attached to the labor force. Also, Government  jobs are 535,000 below the number when the recession began in December 2007. As a result the overall economy still has 422,000 fewer jobs than it did almost seven years ago.

Hourly Earnings were dismal, flat, no change after rising 0.4% in February. Janet Yellen who had advance preview of the numbers reiterated her disappointment.

Winter weather, which was blamed for prior weaknesses, again did not show up in the payroll numbers. Construction employment increased by 19,000 in March, which was only marginally above the 18,000 added in February. If winter weather conditions really impacted the economy, construction payrolls should have spiked in March as employment recovered from winter delays.

The one area that winter weather did impact was the number of hours worked. The average workweek fell to 34.3 in February as weather conditions prevented employees from working their normal hours. As temperatures and conditions returned to normal, the average workweek jumped to 34.5.

The Trade Balance was a negative $ 42.3B, about $ 3 bil worse than February which was likewise disappointing. The lower number will have a deleterious effect on GDP.

Factory Orders increased 1.6% in February after falling 1% in January. The upside surprise in Factory Orders was a result of stronger-than-expected nondurable goods orders.

Nondurable goods orders increased 1.0% in February, which more than offset the 0.7% decline in January.

Durable goods orders were unrevised from the advance report, up 2.2% in February after falling 1.4% in January. Excluding transportation, durable goods orders increased 0.1% in February, down from an originally reported 0.2% gain in the advance report.

Business investment demand was revised down. Orders of nondefense capital goods excluding aircraft fell 1.4% (from -1.3%) in February after increasing 0.8% in January. Shipments, which factor into GDP, were revised up to 0.6% (from 0.5%) and should boost first quarter growth estimates.

 

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Trading Fundamentals

The Dow Transportation average was up 1.6% even after the violent sell-off last Friday. It came to support at the 13-day moving average. The S&P 500 also remained higher for the week gaining a meager 0.4%. The Dow was a casualty falling 0.7%. Microsoft has excellent support down to $ 38.20, its 50-day moving average. We would buy weakness for a position trade. After analyzing Microsoft’s cash-cow businesses and Satya Nadella’s new direction for the company, I believe that Microsoft is once again becoming a great company and that the stock could be a good buy, depending on its current price compared to its intrinsic value. Microsoft is becoming a great company again because Satya Nadella is guiding the company in the right direction to focus on “mobile  and cloud first” and because the company has an exceptionally profitable commercial business that should continue to grow in the next decade.

Alcoa begins earnings season Tuesday afternoon April 8^th.  Expectations aren’t nearly as good as the forward look expecting just a nickel. In fact, we could begin the usual seasonal setback early this year if earnings disappoint.

The chart below shows a seasonal tendency for weakness, “ sell in May and go away.” for this period beginning next week. We continue to want to buy severe weakness as we look for much higher prices by year-end.

Wednesday brings earnings of Constellation Brands, Bed Bath & Beyond and Ruby Tuesday.

Thursday — Family Dollar, Pier 1 Imports and Rite Aid. Friday we will hear from JP Morgan, Wells Fargo and Fastenal.

Investing can be very rewarding where the professionals aren’t looking especially Micro-cap and Small- cap quality stocks. Look at Xinergy ( XRGYF: $ 0.55 ) a case in point. In lower cap stocks the high frequency guys can be avoided. Stops always need to be placed in case things fail to work out.

Opting not to play their game. Day trading was a loser’s game for the majority of those who tried it before the advent of high-frequency trading. Now the odds are even more stacked against individual investors who attempt to day trade. The arms race favors ultra-high-speed connections and servers as close to the exchanges as possible. The only way you can beat high-frequency traders is to circumvent them

Limiting the number of transactions. The less you trade, the less chance high-frequency traders have to jump in front of your orders.

Buying funds with less portfolio turnover. The average large-cap mutual fund covered by our mutual fund guide had a portfolio turnover ratio of 64% last year. In comparison, the Vanguard 500 Index fund (VFINX) had a turnover ratio of 3%. Even if high-frequency trading does drive up costs, buying funds with low turnover ratios will limit the impact on your wealth.

The game changed in 2008 when the US economy was introduced to quantitative easing. 

This venture into uncharted territory has become one of the largest financial experiments in modern time, and only history will be able to judge the value of this policy. Up until the point that QE was introduced, there were never any excess reserves in the system, yet if you notice, the monetary base kept slowly increasing. Why is that? During this period, as the population and the economy continued to grow, the quantity of money needed to support the growth in goods and services also had to grow.

In principle, QE operates in similar fashion to normal open-market operations which have been with us for nearly a century. The major difference is the size of the bond purchases, and the types of bonds

 

Balanced Investing Strategies

Technical Information

Support Levels S&P 500    1838

Resistance S&P 500           1897

 

Support Levels DOW          16,300 – 16,040

Resistance DOW                 16,040

 

Support Levels QQQ           84.90 – 83.65                  

Resistance QQQ                  89.40

                  

Support Levels NASDAQ      4004

Resistance NASDAQ             4275

 

Balanced Investing Strategies

Cycles

Although March finished mostly in the green, 10 of the 29 ETF sectors tracked were down.

In addition Biotechnology, Pharmaceutical,  Broadband, Networking, Internet, Software and Natural Resources and Gold suffered notable declines.

Despite straying off course a few times this year, markets have tracked the midterm election year pattern reasonable well. Looking at the year-to-date performance of DJIA, S&P 500 and NASDAQ below, it can be seen that all three indices were down in January, which usually is a prognostication for a negative year. February was a solid up month across the board, again matching the midterm pattern. However, NASDAQ was down 3.5% in March. The Dow rose 0.8% and the S&P 500 was up just 0.7%, which were irregular.

If the market continues to track past midterm years reasonably closely, as they have done for the past three months, then a mid-April top and a rough, down May and June are likely. Earnings (real and Q2 estimates), economic data and monetary policy will need to remain supportive in order to stave off typical Q2 & Q3 midterm year weakness. Thus far, economic data has been soft and monetary policy is less supportive each month as the Fed continues to trim QE at each meeting. Then, October has often begun a resumption of the bull trend as in the chart.

After gold peaked in mid-March, its steady decline through month-end also pulled down mining ETFs. The worst was Market Vectors Jr Gold Miners (GLDX), off 12.4% in March. However, GLDX is still up 16.7% year-to-date. If gold holds support in the $1280-1300 per ounce price range, new long positions in gold-related ETFs should be considered.

Margin debt has climbed to a new all-time high well over $ 450Billions. The chart below illustrates the relationship between prices and debt. There is an uncertain relationship between high prices and margin debt. The only certainty is that high margin debt contributes to high volatility.

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Rule 17B Attestations

Princeton has approximately 2,581,578 shares of AIVN both free and restricted and represents them for I.R.. Princeton also has about 40,000 shares of TXGE. Princeton is paid $ 1,500 per month from RMS Medical Products. Princeton has bought 81,100 shares of RMS Medical Products. Princeton Research has been paid $ 2,500 to write a report on Xinergy.

Princeton has been engaged by Target Energy. No contract is currently in place. When there is no movement in penny stocks, even though there is none or very small losses, we will liquidate ( sold AIVN on stop ) even though we like the company, if money is needed for better opportunities.

We now believe REPR represents upside opportunity. The Target ADR trades at about $ 4.50 in U.S. vs 0.045 in Australia. Princeton owns 400,000 Australia shares and about 500 U.S. ADR’s. Princeton is paid about 500,000 shares of Leo Motors.

Pursuant to the provisions of Rule 206 (4) of the Investment Advisers Act of 1940, readers should recognize that not all recommendations made in the future will be profitable or will equal the performance of any recommendations referred to in this Email issue. Princeton may buy or sell its free-trading shares in companies it represents at any time.

 

CONTACT

Please Direct All Inquiries To:

Mike King

(702) 650-3000

mike@princetonresearch.com

Princeton Research

3887 Pacific Street,

Las Vegas, Nevada 89121

 Balanced Investing Strategies