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HOUSTON April, 2009

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Page 1: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

HOUSTON

April, 2009

Page 2: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

WALL STREET

AND

MY STREET

Page 3: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

The following is just my perspective.

I was a lookout at Pearl Harbor.

May not be dependable.

Am certainly not responsible

***Redneck disclaimer

Page 4: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

This has my reality written all through the process. It is not necessarily “right” but appropriate for ME.

…it fits my age (old), tolerances (not very) and blood pressure (very high)…

Page 5: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

… it does not matter how frequently something succeeds …

…if failure is too costly to bear…

Optimizing…..over confidence….believing Wall Street

BERNIE MADOFF!!!

Page 6: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

“TRILLION DOLLAR BAND AIDS”

AND

“SITUATIONAL ACCOUNTING RULES”

…in the land of…..

Page 7: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

PLANNING FOR

(AND DEALING WITH)

FAILURE***

***FAILURE = BAD DECISION OR LOSING MONEY

Page 8: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

NONO

INDICATOR OR SYSTEMINDICATOR OR SYSTEM

GIVESGIVES

CONSTANT ADVICECONSTANT ADVICE

Page 9: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

"You can't simply plan to get a 10% return because that's the number you need"

Page 10: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

“I don’t care about the economy,

I just need to make some money”

Page 11: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

20%, 20%, 20%, 5% beats 30%, 30%, 30%, -20%.

15%, 15%, 15%, 5% beats 25%, 25%, 25%, -20%.

20%, 10%, 5%, 5% beats 30%, 20%, 15%, -20%.

5%, 5%, 5%, 5% ties 15%, 15%, 15%, -20%.

Winning by NOT LOSING

It doesn’t matter what year the -20% occurs in examples above

Page 12: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

WALL STREET

•YOU MUST STAY FULLY INVESTED AT ALL TIMES

•IF YOU MISS THE BEST 10 DAYS OVER THE PAST 5 YEARS YOUR RETURN IS _____

MY STREET

•IF YOU STAY FULLY INVESTED YOU PAY THE MANAGEMENT FEES REGARDLESS OF PERFORMANCE (FUNDS)

•IN ANY TEST YOU RUN, IF YOU “MISS THE 10 WORST DAYS” IS ALWAYS SUPERIOR TO THE “MISS BEST 10 DAYS”

Page 13: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

WALL STREET

•ASSET ALLOCATION REDUCES THE VOLATILITY OF YOU PORTFOLIO

•YOU CAN’T TIME THE MARKET

MY STREET

•ALLOCATION REDUCES RETURNS & MAY HELP VOLATILITY

•HAD POSITIVE RETURNS IN 2000,2001 AND 2002

•ASSET CONCENTRATION (INCREASES RETURN AND VOLATILITY)

Page 14: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

WALL STREET

•THE MARKETS ARE EFFICIENT

•THE MARKETS ARE RATIONAL

MY STREET

•WHO BEST TO EXPLOIT INEFFICENCIES THAN INDIVIDUALS

•IF THE MARKETS ARE RATIONAL (THEN MAYBE WE INDIVIDUALS ARE NOT)

Page 15: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

Optimism “Investing isn’t so difficult”

Excitement “I’ll be able to retire early!”

Thrill “I am a brilliant investor” (Maybe I should write a book)

Euphoria The point of maximum risk

Complacency “It’s just a normal correction, a great time to buy”

Anxiety “If I double down it won’t take long to recover”

Denial “Its only paper losses. I’m in it for the long-term”

Range Of Investor Emotions

Page 16: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

Desperation “What’s going on? When will it stop going

down?”

Panic “I’ve lost most of my money. I may never be able to retire”

Capitulation “I’m selling everything and I’ll never own stocks again”

Depression “I wonder how cat food tastes?”

Defiance “Stocks may be going up but I’m not taking the risk”

Range Of Investor Emotions

Page 17: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

HOW FREQUENTLY DO YOU TRADE?

HOW MUCH MONEY DO YOU TRADE?

WHAT ARE YOUR PERSONAL TOLERANCES?

There are no RIGHT or WRONG answers….but we all must know our personal answer to the three questions above.

Page 18: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

Why we do what we do

How we do what we do

Page 19: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

Do you have measures to determine if you have an investment “edge” ?

Do you have a process to identify and purchase leading stocks/funds/ETFs/futures?

Do you have a process to “trade up” positions you own?

Do you have “disciplines” that preserve capital?

Page 20: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

DECISION MODELS

Market Risk Model

Asset Commitment Model

Fund Selection & Management Model

..And how they are linkedlinked to each other..

Page 21: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

SOME EXAMPLES OF AND “EDGE”

***DEFINITION OF “EDGE”

A positive expectancy for a profitable outcome

Page 22: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

To trade profitable in the long run, you must know your edge….

If you have no edge, you should not trade for profit…

Establishing and recognizing your edge is a prerequisite to predicting whether trading will be profitable.

Page 23: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

DETERMINING THE MARKET ENVIRONMENT

LONG TERM:

Relative Strength

Price

New Highs / New Lows

Advancing / Declining

Page 24: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

IMPORTANCE OF

LEVEL AND DIRECTIONLEVEL AND DIRECTION

FOR

PRICE OSCILLATOR

Page 25: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

USE WEEKLY DATA

ASSUMES PERFECT TRADES

BIG PICTURE MARKET FORCES

MOST PRODUCTIVE: LONG OR SHORT

WHERE WE ARE TODAY

Page 26: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

-7.5

-7.0

-6.5

-6.0

-5.5

-5.0

-4.5

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.012/26MACD (-3.00334)

750

800

850

900

950

1000

1050

1100

1150

1200

1250

1300

1350

1400

1450

1500

1550

1600SP500 (1,293.16, 1,333.26, 1,272.66, 1,308.77, -24.9299)

WEEKLY PRICE OSCILLATOR

LEVEL AND DIRECTION IMPORTANT

12/26 MACD

Mid point level 67% of time

Data since 1930

Page 27: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

BIG PICTURE …. LEVEL AND DIRECTION

Page 28: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

WHICH AREA IS MOST PRODUCTIVE FOR LONGS AND SHORTS?

Page 29: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

12 / 26 MACD

((Mov(C,12,E)-Mov(C,26,E))/Mov(C,26,E))*100

Above 0 level Below 0 level

Going UP 8.40% -0.90%

Going DOWN 1.70% -7.70%

From 1930 to Current

Page 30: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

12 / 26 MACD

((Mov(C,12,E)-Mov(C,26,E))/Mov(C,26,E))*100

Above 0 level Below 0 level

Going UP 7.16% -0.08%

Going DOWN 0.40% -6.81%

From 1990 to Current

Page 31: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

12 / 26 MACD

((Mov(C,12,E)-Mov(C,26,E))/Mov(C,26,E))*100

Above 0 level Below 0 level

Going UP +6.3 % +3.0%

Going DOWN -1.1 % -9.7%

From 2000 to Current

Page 32: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

PRICE OSCILLATOR DATA POINTS(level only)

S&P 500 Data: (1930) 62% time >0 level

>0 Level Weekly Monthly Yearly

+0.21% +0.86% +10.32%

<0 Level +0.05% +0.23% +2.76%

OTC Data: (1980) 62% time >0 level Weekly Monthly Yearly

>0 Level +0.50% +2.11% +25.36%

<0 Level -0.11% -0.48% -5.74%

Any conclusions???

Page 33: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

-7.5

-7.0

-6.5

-6.0

-5.5

-5.0

-4.5

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.012/26MACD (-3.00334)

750

800

850

900

950

1000

1050

1100

1150

1200

1250

1300

1350

1400

1450

1500

1550

1600SP500 (1,293.16, 1,333.26, 1,272.66, 1,308.77, -24.9299)

Level and direction

3-4 up/down moves per year

>0 Level, down direction = correction

<0 Level, down direction = “cat food”

Page 34: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

COMPARING “THEN” AND “NOW”

Page 35: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

2006 May June July August September November December 2007 February March April May June July August September November December 2008 February March

2000

2050

2100

2150

2200

2250

2300

2350

2400

2450

2500

2550

2600

2650

2700

2750

2800

2850

2900ND-COMP (2,263.61, 2,263.61, 2,263.61, 2,263.61, +19.7400)

-9.0

-8.5

-8.0

-7.5

-7.0

-6.5

-6.0

-5.5

-5.0

-4.5

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.519/39 MACD (-4.21493)

OTC WEEKLY PRICE OSCILLATOR (19 / 39 MACD)

Page 36: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2001 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 Feb Mar Apr May Jun Jul Aug Sep

1500

2000

2500

3000

3500

4000

4500

5000

ND-COMP (2,263.61, 2,263.61, 2,263.61, 2,263.61, +19.7400)

-20-19-18-17-16-15-14-13-12-11-10-9-8-7-6-5-4-3-2-10123456789

10111213141519/39 MACD (-4.21493)

OTC data (Bear Market 2000, 2001, 2002) 5000 to 1300

Page 37: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

LEVEL AND DIRECTION

USING

DAILY DATA

Page 38: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

Price oscillator using daily data

Page 39: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

DOMINANT MARKET THEORY

An edge

Relative measure

Jim Stack

OTC / NYSE

NDX / SPY

Russell growth / Russell value

Smoothing……macd & stochastic rsi

Page 40: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

July August September October November December 2007 February March April May June July August September November December 2008 February March

-0.45

-0.40

-0.35

-0.30

-0.25

-0.20

-0.15

-0.10

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.55

0.60

0.65

38/76 MACD <> 20 EMA (-0.14994)

2000

2050

2100

2150

2200

2250

2300

2350

2400

2450

2500

2550

2600

2650

2700

2750

2800

2850

2900ND-COMP (2,263.61, 2,263.61, 2,263.61, 2,263.61, +19.7400)

OTC / NYSE RELATIVE STRENGTH 11/2007

Page 41: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

Nov Dec 2000 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2001 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 Feb Mar Apr May Jun Jul Aug Sep

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.038/76 MACD <> 20 EMA (-0.14994)

1000

1500

2000

2500

3000

3500

4000

4500

5000

ND-COMP (2,263.61, 2,263.61, 2,263.61, 2,263.61, +19.7400)

BEAR MARKET RELATIVE STRENGTH

5000

TO

1300

Page 42: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

“THEN AND NOW”

Page 43: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

RETURNS FOR DOMINANT MARKET

Daily 1990 SPX & Nasdaq Relative         Ave. Ret        Ave. RetStrength        Nasdaq          SPX       

SmlCap        3.44%            1.83%LrgCap        -0.36%           0.15% 

% SmlCap Dominant    57.1%% LrgCap Dominant     42.9%

For period of dominance

Data points from 1980

Page 44: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

J A S O N D 2001 M A M J J A S O N D 2002 M A M J J A S O N D 2003 M A M J J A S O N D 2004 M A M J J A S O N D 2005 M A M J J

0

50

100

150

200

250

300

350

400

450

500

10% TREND, 10% TREND

1000

1500

2000

2500

3000

3500

4000

OTC COMPOSITE (2,233.55, 2,210.13, 2,218.93, -18.8201)

YEARLY NEW HIGHS & NEW LOWS (smoothed)

Page 45: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

COMPARING “THEN” AND “NOW”

Page 46: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

DETERMINING THE MARKET ENVIRONMENT

SHORT TERM:

Price

Highs / Lows

Advancing / Declining

Page 47: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

ALL BUY SIGNALS ARE NOT CREATED EQUAL

VARIED EXPOSURE TO THE MARKETS IS APPROPRIATE WHEN CONSIDERING THE MARKET ENVIRONMENT

Page 48: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

ASSET COMMITMENT

PROCESS

Page 49: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

SELECTION PROCESS

Page 50: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

UNDERSTANDING

“UP FROM DOWN”

Page 51: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

5 YEAR OLD NEPHEW

Page 52: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

THE DECISION ZONETHE DECISION ZONE

SIMPLE DECISIONSSIMPLE DECISIONS

Stoch(28,13)/2+RSI(14)/2April May June July August September November 1998 February April May June July August September November 1999 February

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5Fid SmallCap Sel (0336)**

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

85

90

95

100

>65 level = No Sell Zone>50 level = Buy zone<50 level = Sell zone

Negative Environment

Page 53: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

Sep October Nov Dec Feb March April May June July August Sep1997 October

20

21

22

23

24

25

26

27

28

29

30Founders Discove

10

20

30

40

50

60

70

80

90

100

>65 level = No Sell Zone>50 level = Buy zone<50 level = Sell zone

50

65

Negative Environment

Trend measure for all mutual funds / ETF’s

65

50

Page 54: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

Sep October Nov Dec Feb March April May June July August Sep1997 October

20

21

22

23

24

25

26

27

28

29

30Founders Discove

10

20

30

40

50

60

70

80

90

100

>65 level = No Sell Zone>50 level = Buy zone<50 level = Sell zone

50

65

Negative Environment

Trend Measure for All Mutual FundsTrend Measure for All Mutual Funds

Sell Zone <50 No Sell Zone >65

Our trend measures keep us with the trend

FundDecline

FundRise

Page 55: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

THOUGHTS AND POSITIONS FOR THE MARKETS

AT THIS TIME:

Long term: level (low) and direction (up)

Intermediate term: measures positive (but weakening)

Timing signals: 2 of 3 models are positive (long term is negative)

BE CAREFUL: A “trading” opportunity is upon us soon… ….MAYBE….SBIG

Page 56: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

you should expect that the next 10 years won't be anything like

the last 10

Page 57: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

IN CLOSING

EVERY DAY I want to know:

What is the “dominant market”

What is the long term level and direction of weekly measures

What is the consensus of 3 timing systems

What is the intermediate term market environment

Page 58: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

At age 66, I’m

developing a 3rd

and last career path

Page 59: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

OUTDOOR SWING SET $49.95

Page 60: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

ATHENS CAPITAL MANAGMENTATHENS CAPITAL MANAGMENT

1-877-460-79411-877-460-7941

[email protected]@athenscap.com

(returns data up front) (returns data up front)

Page 61: HOUSTON April, 2009. WALL STREET AND MY STREET The following is just my perspective. I was a lookout at Pearl Harbor. May not be dependable. Am certainly

Questions?