Monday, May 25     Published daily Receive trading 'touts' free
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A Few Simple But Powerful Ideas for Investors

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[The thoughts of Colorado financial adviser Doug Behnfield have been featured here many times in the past. Doug is not only the hands-down smartest investor I know, he is one of the smartest guys I know. In the penetrating essay below, prepared for clients, he reflects on the timeless wisdom of two towering figures in the investment world: Nathan Rothschild (1777-1836), a second-generation scion of the European banking family; and friend and mentor Bob Farrell, Merrill Lynch’s chief stock market analysts for 25 years and a pioneer in sentiment studies and market psychology. RA]

Nathan (Baron) Rothschild was one of the most respected and successful investors in the 19th Century and when asked how he became the richest man in the world he responded: “I never buy at the bottom and I always sell too soon.” Bob Farrell, Chief Market Analyst for Merrill Lynch for most of the back half of the 20th Century, is one of the most respected market analysts alive today (and a personal friend). He gave us “Market Rules to Remember” in 1997 and I have always considered them to be sacrosanct. [click to continue…]

Thought for Today

Mr. Market Takes a Holiday

U.S. securities markets will be closed Monday in observance of Memorial Day. Look for fresh touts and updates Monday evening. Have a great weekend! I’ll see you in the chat room on Tuesday.

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$DIA – Dow Industrials ETF (Last:)

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$GCM15 – June Gold (Last:1205.70)

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$USM15 – June T-Bonds (Last:154^05)

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$GDXJ – Junior Gold Miner ETF (Last:26.70)

Easy move through p and D would beGDXJ has been moving higher since since mid-March — reason enough for us to give bulls the benefit of the doubt for the time being.  Even so, we shouldn’t let our guard down, since it is only the portion of the rally that has occurred since May 7 that is bullishly impulsive on the daily chart. The pattern shown will therefore be crucial to our analysis. Specifically, if we are to infer that significantly higher prices are likely, the first evidence in support of this would come from a rally that pushes easily past the midpoint pivot and D target (shown in inset). Neither pivot exists at this point, so there is no point in getting too far ahead of ourselves. Stay tuned.

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$TLT – Lehman Bond ETF (Last:119.51)

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$DXY – NYBOT Dollar Index (Last:93.68)

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$DHI – D.R. Horton (Last:25.27)

First crack in the dam xxCould this be the first crack in the dam? Homebuilder D.R. Horton’s shares have gotten schmeissed in the last two days (along with Lennar and Pulte Group), as the accompanying chart attests. Recall that the implosion of homebuilder stocks that began in the summer of 2005 led the stock market’s collapse by more than two years.  We ought to pay close attention in any case, since shorting the shares of Beazer, Horton, Lennar and other homebuilders back in 2005 was the best and easiest way to have profited from the Great Financial Crash. If this selloff is similar to the earlier one, it will give way to a secondary top achieved via a steep rally. For now, however, look for a short-term bottom at exactly 25.11. If this Hidden Pivot is easily exceeded, or if the stock closes below it for two consecutive days, it will be time to unfurl the yellow flag. _______ UPDATE (May 6, 11:26 p.m.): An opening-bar dive exceeded the 25.11 pivot by a whopping 17 cents. Even though the day ended on an upswing — a bullishly impulsive one on the lesser charts — the damage has been done. My immediate outlook is for more slippage to at least 24.41, a Hidden Pivot support (A= 28.97 on the 60-min chart on 4/21) that can be bottom-fished with a stop-loss as tight as 7 cents. Our goal would be to rack up some gains on a bullish trade that could cushion a stop-loss the next time we try to short this cinder block. _____ UPDATE (May 7, 11:24 p.m.): The stock rallied out of range yesterday.  Let’s wish buyers the best, since we’re looking to short this dead duck at the highest price possible.

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The laser-like accuracy of Rick Ackerman’s forecasts is well known in the trading world, where his Hidden Pivot Method has achieved cult status. Rick’s proprietary trading/forecasting system is easy to learn, probably because he majored in English, not rocket science. Just one simple but powerful trick -- managing the risk of an ongoing trade with stop-losses based on ‘impulse legs’ – can be grasped in three minutes and put to profitable use immediately. Quite a few of his students will tell you that using ‘impulsive stops’ has paid for the course many times over.

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