iShares Launches Asia, Emerging Markets Funds

iShares Launches Asia, Emerging Markets Funds
February 28, 2012 | includes: DVYA, DVYE

iShares continued to aggressively expand its ETF lineup last week with the addition of two new ETFs focusing on dividend-paying stocks in international markets. The iShares Emerging Markets Dividend Index Fund (DVYE) will combine two asset classes that have become tremendously popular in recent years, targeting stocks from emerging markets that deliver attractive dividend yields. The iShares Asia/Pacific Dividend 30 Index Fund (DVYA) will focus on dividend-paying securities from developed markets in the Asia Pacific region, including Australia, Hong Kong, and Japan.
Interest in dividend-paying stocks has been surging over the past few years, the result of both a flight to stability and an increased desire to achieve meaningful yields from the equity side of a portfolio. The team at Dividend.com has put together a robust library of information that explains the appeal of dividend-paying stocks in any environment–and especially one where interest rates continue to hover near zero.
Many investors have elected to go beyond purchasing individual stocks, and embraced ETFs as efficient tools for achieving low cost, low maintenance exposure to dividend-focused strategies. Currently, there are nearly four dozen dividend ETFs available to U.S. investors, including products that target consistent dividend payers and those that target the highest possible yields [see SDIV vs. VIG: A Tale Of Two Dividend ETFs].
Under The Hood: DVYE
DVYE is linked to the Dow Jones Emerging Markets Select Dividend Index, a benchmark that consists of about 100 stocks from developing economies. The underlying securities are selected on the basis of dividend yield, subject to certain screens. The underlying index includes allocation to almost 20 different emerging markets, with Taiwan (24%) and Brazil (14%) getting the biggest allocations. Beyond Brazil, exposure to the BRIC is relatively light; Russia, India, and China combine to account for only about 5% of the portfolio. In other words, DVYE may have appeal as a way to diversify emerging market exposure away from the "Big Four" and into smaller developing economies that may maintain significant potential for capital appreciation over the long term.
DVYE joins a number of existing ETFs that focus on dividend-paying stocks in emerging markets. The most popular choice in this segment of the market is the WisdomTree Emerging Markets Equity Income Fund (DEM), which has more than $3 billion in assets. Other products with similar investment objectives include the EGShares Low Volatility Emerging Markets Dividend ETF (HILO) and SPDR S&P Emerging Markets Dividend ETF (EDIV).
DVYE will charge an expense ratio of 0.49% [see the DVYE fact sheet].
Under The Hood: DVYA
This ETF targets the developed economies of the Asia Pacific region through the Dow Jones Asia/Pacific Select Dividend 30 Index, a benchmark of about 30 high dividend-paying stocks. About 45% of the portfolio is allocated towards Australian stocks, followed by Hong Kong (21%), Singapore (17%), New Zealand (10%), and Japan (7%). From a sector perspective, DVYA is tilted towards financials (25%), consumer services (19%), and telecoms (18%) [see Asia-Centric ETFdb Portfolio].
DVYA is the first ETF to offer broad-based exposure to the developed Asia Pacific region while also targeting dividend-paying stocks. WisdomTree offers an Australia Dividend ETF (AUSE), and PowerShares has a RAFI product (PAF) that focuses on the region but excludes Japan [see the DVYA fact sheet].
DVYA also comes in with an expense ratio of 0.49%.
Disclosure: No positions at time of writing.
Original post

Disclaimer: ETF Database is not an investment advisor, and any content published by ETF Database does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. From time to time, issuers of exchange-traded products mentioned herein may place paid advertisements with ETF Database.

All content on ETF Database is produced independently of any advertising relationships.

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Reviewing The New Bond Sector ETFs

Reviewing The New Bond Sector ETFs
February 27, 2012 | includes: AMPS, ENGN, LQD, MONY
http://seekingalpha.com/author/michael-johnston

The innovation in the bond ETF arena just keeps on coming, as evidenced most recently by a trio of first-to-market products launched by iShares. Though there are more than two dozen ETFs in the Corporate Bonds ETFdb Category, until recently the level of granularity available from a sector perspective was rather limited. While investors can fine tune their effective duration, credit quality, and country exposure with fixed income ETFs, the options for targeting specific types of issuers had previously been non-existent. Bond ETFs generally cast a wide net from a sector perspective, including debt from various types of companies.
Earlier this month iShares rolled out three bond ETFs that focus on high quality corporate debt of companies in specific industries, including financials, industrials, and utilities:
iShares Financials Sector Bond Fund (MONY): The holdings of this ETF reads like a Who's Who of Wall Street; companies such as Citigroup, Morgan Stanley, Goldman Sachs, Merrill Lynch, and Wells Fargo are among the issuing institutions.
iShares Industrials Sector Bond Fund (ENGN): This ETF includes debt of companies engaged in a wide range of industries; a sampling of component issuers includes AT&T, Anheuser Busch, Wal-Mart, Pepsi, and NBC Universal.
iShares Utilities Sector Bond Fund (AMPS): The issuers of the debt included in this ETF may not be as well known as those highlighted above; AMPS includes paper of companies such as Indiana Michigan Power, Xcel Energy, and DTE Energy.
Using Sector Bond ETFs
The holdings of MONY and AMLP probably don't come as much of a surprise, but some may not have been expecting the degree of diversity offered by ENGN. Many of the issuers of the debt that makes up this ETF are not classified as industrials companies; AT&T is a telecom stock, while Anheuser Busch and Pepsi would fall into the consumer bucket. There are few similarities between the issuers of debt in ENGN and the stocks that make up the Industrials SPDR; XLI includes companies such as General Electric, Caterpillar, Boeing, and 3M. Other issuers in the industrial bond ETF include:
Kraft Foods (KFT) (Consumer Staples)
Pfizer (PFE) (Health Care)
Altria (MO) (Consumer Staples)
So ENGN can perhaps be thought of more accurately as an ex-financials ETF; the underlying portfolio consists of debt issued by companies in a number of lines of business, but is light on the financial sector [see the Better-Than-AGG ETFdb Portfolio].
Rounding Out Exposure
To understand the potential uses of these products, it is perhaps helpful to examine the composition if the iBoxx $ Investment Grade Corporate Bond Fund (LQD), which is the most popular ETF option for investors seeking exposure to high quality corporate debt. Just like any equity ETF, the holdings of this fund can be broken down by sector; LQD is heaviest in its allocation to financials (36%), consumer services (13%), and oil and gas (10%), but relatively light on its exposure to other sectors. Two of the segments targeted by the recent additions to the iShares lineup receive hardly any allocation in LQD; industrials make up only about 3%, while utilities account for less than 2% of the total portfolio.
The hefty weighting in LQD afforded to financial companies may be a bit disconcerting for some investors, especially considering the string of high profile bailouts and bankruptcies in this corner of the market over the past several years. ETFs such as ENGN and AMPS can be useful tools for achieving a more balanced corporate bond portfolio, eliminating sector concentrations that can potentially be problematic in turbulent environments.
LQD MONY ENGN AMPS

Effective Duration
11.6 years 5.4 years 7.3 years 8.6 years
Yield To Maturity 3.6% 3.8% 3.1% 3.4%
Weighted Average Coupon 5.5% 5.3% 5.4% 5.6%

Perhaps not surprisingly, AMPS and ENGN both feature yields to maturity that are slightly lower than LQD, while MONY has a higher effective yield. So the utilities and industrials ETFs can be thought of as ways to both achieve a bit of diversification and lower overall risk by a bit–along with, of course, a commensurate reduction in expected yield. Just as ETFs that focus on utilities stocks have historically been effective tools for lowering overall volatility and smoothing performance, a utility-focused bond ETF such as AMPS can be used to take a bit of risk off the table.
These ETFs can be potentially very useful instruments for investors looking to fine tune fixed income exposure. Though those looking to keep their portfolios simple may find them too granular, it's easy to see the appeal for those with very specific views on the fixed income market.

Disclosure: No positions at time of writing.

Disclaimer: ETF Database is not an investment advisor, and any content published by ETF Database does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. From time to time, issuers of exchange-traded products mentioned herein may place paid advertisements with ETF

Database. All content on ETF Database is produced independently of any advertising relationships.

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A Long-Term Idea About Where To Allocate Capital

A Long-Term Idea About Where To Allocate Capital
1 comment | February 26, 2012

The Barron's interview was with Jeremy Grantham and had some great nuggets -- I add a little to his comments.
Long-term returns of the U.S. market, if you take out dividends, is 1.8% real. If the market ticked along at 1.8%, which is its fair value, no one would make any money. Goldman Sachs (GS) would be a quarter as big as it is. Big investment firms love big, hairy bull markets and delicious crashes so they can design and sell more instruments.
The above is a tie in to the theme that Wall Street firms take advantage of the investing public. While this is probably true I don't know if there is a way to quantify it. I take this as a call to avoid expensive broker products, stick to portfolios of individual issues and ETFs and allow yourself to think independently about how to navigate market cycles. There has to be a reason why the usual perma-bulls are permanently bullish so do not buy what they are selling.
This is a business-as-usual overpriced market, and you'll get a zero return for seven years. So you should be able to get the return by going overseas or hiding in U.S. blue chips. If you have a fairly long horizon, like a seven-year horizon, you will do fine, and that's the only thing that matters.
I write a lot about investing over the course of the entire stock market cycle or longer. For most people the real goal is simple having enough when they need it which makes 2012's result meaningless. I clued into this from John Hussman and became a believer based on my experience as a portfolio manager. Long term outperformance compounds to benefit the portfolio and help with the objective of trying to have enough when you need it.
(Timber has) always been my favorite, but it doesn't make any sense unless you can think ahead 10 years or longer.
Another example of the importance of thinking long term even if you have no interest in timber.
The really bad news is that the 2% I thought we would have during the seven lean years is perhaps very close to what the long term will be, even after the seven years are up. It isn't clear to me that the developed world will grow faster than 2%, mainly because of the population, but also because we have caught up with each other.
This is a long term idea about where to allocate capital. While some studies conclude that there is no correlation between GDP growth and stock market results, I have said before that the 2000s would seem to refute that conclusion and I also believe it is logical that a country with a better balance sheet and more attractive growth factors would seem to have better chance for stock market success than an over-indebted slow grower.

I am aware of the confirmation bias in my gravitating to these points. I have been investing along these lines for a while now (and writing about it) but clearly I was not the first person on any of this. These are what I think of as being obvious long term themes and believe the results offered by these themes continue to justify the exposure.

Comments (1)

bbowen7Comments (847)
"I also believe it is logical that a country with a better balance sheet and more attractive growth factors would seem to have better chance for stock market success than an over-indebted slow grower."

I agree with this point, but the list is longer. The country needs also to have demonstrated over time a respect for the rule of law, at least as it relates to foreign investors - exclude Russia, Brazil, India, much of Africa and Latin America. China and Turkey as well as South Korea and Taiwan are probably OK. Somewhere there must be an authoritative listing of countries on this basis - my list is much too subjective.

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Candlestick Patterns - Is this True or False?

Candlestick Patterns – Kicking

February 23, 2012 6:02am EST by Jeremy
Filed under: Guest Bloggers

If you follow our blog, then you are definitely familiar with trader Larry Levin, President of Trading Advantage LLC. We have gotten such a great response from some of his past posts that he has agreed to share one more of his favorite trading tips as a special treat to our viewers. Determining the direction of the market can be tricky and just plain confusing at times, but Larry's expert opinion keeps it simple and straight-to-the-point. If you like this article, Larry's also agreed to give you free access to his Double Stop trading technique.

I think it's time for another look at Japanese candlestick analysis. Let's take a closer look at kicking, widely considered a high reliability pattern in candlestick charts.

Kicking patterns are another reversal signal.

Kicking patterns on a candlestick chart are formed when there are two marubozu – one white and one black – with a gap between them. Bullish kicking patterns would present as a black or filled candlestick without any wicks (shadows) followed by a gap higher with a white or hollow candlestick that is also without wicks. These are marubozu. They are formed when the market has a particularly one-sided trading session that closes at the high or low leaving just that real body of the candlestick.

In candlestick charts, kicking patterns are very rare.

The two marubozu back to back but at polar opposites in terms of market direction are obviously going to be uncommon. They reflect strong trading sentiment and to see that in two consecutive sessions would likely point to some kind of strong fundamental shift. Like most candlestick patterns, you would want to investigate what is going on behind the scenes before completing any analysis. Historically, there are no restrictions on where the kicking pattern would show up in relation to the beginning, middle or end of a trend.

This two-bar pattern is "kicking" away the previous price trend.

This signal is not necessarily a place to enter or exit – it is merely a sign that there is a pending reversal possible. The higher probability that candlestick analysts place on this one suggests that there is a strong chance of that reversal, but as always, you will want to wait for confirmation. Alternately, you could use this candlestick pattern with complementary analysis to plan a trade, relying on a signal like this as confirmation of your other fundamental and technical observations. Trading volume is among those complementary items to keep in your toolbox for this one. An increase in volume on the second candle would be a good thing for a kicking pattern.

Click here to see Larry's Double Stop trading technique.

Best Trades to you,

Larry Levin
Founder & President- Trading Advantage
larry@tradingadvantage.com

Disclaimer: Trading in futures and options involves a substantial degree of a risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.

Tags: candlestick analysis, candlestick formations, guest blogger, how to read candlestick setups, japanese candlesticks, Kicking, Kicking pattern, Larry Levin, Trading Advantage, Trading Tips & Techniques

Comments

Fwd: Financial Fascism

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Begin forwarded message:

From: "Larry Levin" <larrylevin@tradingadvantage.com>
Date: February 24, 2012 8:02:23 AM EST
To: sword7780@gmail.com
Subject: Financial Fascism
Reply-To: larrylevin@tradingadvantage.com

Financial Fascism Before I get into today's topic I'd like to hope I helped some of you short sellers this morning when you read the very end of yesterday's missive, "All of this is interesting and shows some weakness but without real volatility, it may simply be a tiny pullback of no major importance whatsoever.  Why?  Despite the aggressive selling, long term passive buyers were at the lows buying everything in site."  Although the market went a wee-bit lower after the open, the passive buyers didn't cancel any orders; all sellers were absorbed and the market went up just as the central banking meddlers ordered it.   In the prior missive I said "In the latest bank bailout via the Greek people, we learned that Puppet Papademos and Company agreed to more austerity for more cash - $172billion to be precise.  In order to get this, private bondholders are being forced to accept higher losses without being paid on their insurance policies (CDSs), the ECB accepts no losses, the ECB retroactively changed all bond language so they wouldn't lose money which radically changes all bond sales going forward, and Greece will be placed under a new wicked type of Financial Fascism by the EU that will make all decisions for the people of Greece."   As it turns out, the Financial Fascism is worse than I thought and is getting worse by the day.  Sure, I understand that if one "borrows" money one must have collateral that would be coughed up if the loan goes sour but let's get real – none of that applies here.  The Greek people are paying for bad loans made by the European banking syndicate to pay back the very same banking mafia, which was all promised by crooked politicians.     Excuse me, but aren't the "bankers" said to be so unbelievably intelligent that nobody should ever question their actions as that would indeed question their intelligence?  Isn't it odd that when these same scum-sucking bankers make horrifically bad loans based on the KNOWN lies of known low-life politicians that all of a sudden we're supposed to feel bad for the banking mafia's losses?  Oh, and then all of a sudden the people who had no say in the ridiculous loan arrangements have to pay for them?      I'm sorry but this is where I get ticked-the-f*c#-off, because the answer today is FINANCIAL FASCISM!  The people of Greece, NOT the politicians, are paying the ultimate price.  And guess what Portugal, Ireland, Spain, and others – this is your future!   According to the FT (http://www.ft.com/intl/cms/s/fde0e3d4-5e3b-11e1-85f6-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Ffde0e3d4-5e3b-11e1-85f6-00144feabdc0.html&_i_referer=http%3A%2F%2Fglobaleconomicanalysis.blogspot.com%2F#axzz1n2tUh4yi)   "European creditor countries are demanding 38 specific changes in Greek tax, spending and wage policies by the end of this month and have laid out extra reforms that amount to micromanaging the country's government for two years, according to documents obtained by the Financial Times.   "Among the measures that must be completed in the next seven days are reducing state spending on pharmaceuticals by €1.1bn; completing 75 full-scale audits and 225 value added tax audits of large taxpayers; and liberalising professions such as beauty salons, tour guides and diet centres."   You see that folks?  The Financial Fascists are taking away granny's meds.  Let's take a detour for a second and consider the USSA.  Do you think we can avoid this just because we're the formerly known country: USA?  How is it that the laws of finance stop at the shores of the USSA?  Just because our super-large military would make John Holmes (read: other countries) blush by comparison?  Really?  I seem to remember that Rome, Spain, and England had that same "super-large military" complex.  How'd that work out for them in the long run again?  Oh wait, but this time its different, right?     By the way, there is an election coming up soon so if you do NOT want financial fascism in this country I would suggest that you vote out the current loser in office, regardless of their indifferent D or R affiliation.  Just my 2-cents.  Then again, I highly doubt that even that would work in this sickeningly corrupt country. (Not one bankster is behind bars for the housing scam and/or 2008 collapse, etc)   Back to the sacking of Greece…   According to the New York Times http://www.nytimes.com/2012/02/22/world/europe/euro-zone-leaders-agree-on-new-greek-bailout.html?_r=2 Greece may be forced to give up its gold.  Said another way - the banking mafia is getting exactly what it wants: Greece's hoard of 111 tonnes of gold.   In the fine print of the 400-plus-page document — which Parliament members had a weekend to read and sign — Greece relinquished fundamental parts of its sovereignty to its foreign lenders, the European Commission, the European Central Bank and the International Monetary Fund. "This is the first time ever that a European and probably an O.E.C.D. state abdicates its rights of immunity over all its assets to its lenders," said Louka Katseli, an independent member of Parliament who previously represented the Socialist Party, using the abbreviation for the Organization for Economic Cooperation and Development.   Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece's lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal, and that future bonds issued will be governed by English law and in Luxembourg courts, conditions more favorable to creditors.   What happens when the banking syndicate steals the Greek gold and then drops Greece from the EU?  Let's look at a mathematical formula.  Greece – gold = Zimbabwe.   Call me crazy but when a bunch of global banking thieves loan money out at interest, they should be responsible for the consequences if said loans go sour.  What's happening, however, is that these bastards are getting away with stealing what's left of a county's dignity, assets, and its national sovereignty.   I simply cannot believe that the people of Greece haven't revolted to the point of a coup d'état – a genuinely new government.     For better or worse, at least the thieving banking mafia wouldn't be in charge! Trade well and follow the trend, not the so-called "experts." Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters. larrylevin@tradingadvantage.com Trading Advantage (888) 755-3846     Larry Levin's Trading Advantage is a leading investment education firm that empowers traders to achieve and surpass their financial goals. More than 50,000 students have used Larry Levin's proven techniques for powerful results.             Trading Signals from the Electronic (ES) mini-SP 500 Pivot sell @ 10:14am at 1359.50 = -0.25 & -0.25 (2 lots) Pivot sell @ 10:17am at 1359.50 = +0.75, -0.25, & b/e (3 lots) Algorithm positions (4) "Reading the Tape" positions (5) …combined Secret's, Algo, &   "Reading the Tape" total… +1.75                               Click Here to see the results of our signals     Value Areas: ES        1361.75 / 1353.75 POC... 1359.25 YM      12969 / 12909 NQ       2596.50 / 2580.50           Notes from the Pit Click here to read My Links: See how I became a trader See Larry's recommended trading computers View the results of my Day Session Signal Room recent trading signals Read about my intensive Training Programs IMPORTANT NOTICE: Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. Nothing in our website shall be deemed a solicitation or an offer to Buy/Sell futures and/or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our site. Also, the past performance of any trading methodology is not necessarily indicative of future results. DAYTRADING involves high risks and YOU can LOSE a lot of money. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those talked about in our site.

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New ProShares Leveraged TIPS/Treasury Spread ETFs: For Investors Or Traders?

New ProShares Leveraged TIPS/Treasury Spread ETFs: For Investors Or Traders?
February 23, 2012 | includes: FINF, RINF, SINF, TIP, UINF

http://seekingalpha.com/author/zacks-investment-research

Thanks to the murky economic outlook, the Federal Reserve looks likely to both keep rates extraordinarily low and refrain from more bond purchases at this time. However, if the economy continues to recover and rates remain low, some fear that inflation could begin to pick up and go higher than the Fed's comfort zone. Meanwhile, others are worried that a slumping economy will push down the rate of inflation and make longer-dated securities more attractive in comparison. Either way, some investors are growing increasingly concerned that the rate of inflation will change significantly in the near term, putting pressure on a number of key portfolio components.
For investors concerned about this, ProShares' recent leveraged ETF launch may be of some interest. In the release, the company revealed two new funds which look to target, for a single day, triple long and triple short exposure to the Dow Jones Credit Suisse 10-Year Inflation Breakeven Index. The two products, the 3x long UltraPro 10 Year TIPS/TSY Spread Fund (UINF) and the triple short UltraPro Short 10 Year TIPS/TSY Fund (SINF), look to play opposite sides of the benchmark. In the index, a long position is taken in the most recently issued 10-year Treasury Inflation Protected Securities (TIPS) bond and duration-adjusted short positions are obtained in U.S. Treasury bonds of the closest maturity. The difference in yield between these bonds is commonly referred to as a "breakeven rate of inflation" and is considered to be a measure of the market's expectations for inflation over a specified period of time (read Can You Fight Inflation With This Real Return ETF?).
So, for investors who believe that the rate of inflation is going to increase and the Fed is behind the curve, UINF could be an interesting pick. Yet for those on the other side of the issue, believing that deflation is more likely to strike than inflation, SINF could be an intriguing choice. However, it is also important to remember that the level of the index fluctuates based on the bonds and that this will not be the same on a percentage basis as changes in the breakeven inflation rate. Furthermore, due to the 3x leverage factor and the daily rebalancing, long-term performances are likely to deviate from what many investors might expect out of the funds (see Understanding Leveraged ETFs).
Inflation Spread Lineup
While it remains to be seen if these new products can capture investor assets, investors should note that for those looking for a similar but unleveraged play, two options are currently available, also from ProShares. The two products, the 30 Year TIPS/TSY Spread Fund (RINF) and the -1x version FINF, seek to apply a similar strategy to longer-dated bonds. Investors should note that while these products may not be leveraged, they are likely to move more on a daily basis than similar, short-duration funds, due to the higher risks involved with 30 year securities. As a result, RINF and FINF may be more appropriate for longer-term investors as well as those looking to buy and hold but play on possible inflation trends. Meanwhile, the newly launched UINF and SINF could be better choices for traders as well as those expecting big moves in a short period of time in the breakeven rate of inflation (read Do You Need A Floating Rate Bond ETF?).

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January 24, 2012 Subscribe to Lessons From the Pros: FEATURED ARTICLE Two Key Odds Enhancers for Any Trader

January 24, 2012

Subscribe to Lessons From the Pros:

FEATURED ARTICLE

Two Key Odds Enhancers for Any Trader

By Sam Seiden, Online Trading Academy Vice President of Education In our graduate online education program, the Extended Learning Track (XLT), one of the very first lessons we teach is on "Odds Enhancers." This is because it is a critical part of identifying the proper trading opportunity. After all, what trading and investing ultimately comes down to are two things: Where do I get in and where do I get out... The optimal opportunity gives us a low risk, high reward, and high probability entry and exit point. This means getting into the market right before the move in price happens and exiting right before the move ends - market timing. The Odds Enhancers help us identify these key turning points in markets with a very high degree of accuracy and that is the focus of this piece. Why do prices ever turn in any market? Simple, because of a supply and demand imbalance at a price level. So, to identify market turning points in advance, we need to be able to identify price levels where supply and demand are out-of-balance. Another way to say this is... We need to be able to identify the picture that represents a supply and demand imbalance. While it would not be fair to XLT members to go over all the Odds Enhancers in a free article, I will share two key Odds Enhancers with you that should help you, whatever type of trader or investor you are. Whether you trade stocks, futures, Forex, or options, all that really matters again is: Where do you get in and where do you get out? To go over these two Odds Enhancers, let's review a trading opportunity we had in a live XLT session with our students. Live Trading Session (XLT) - January 11th, 2012 Figure 1 During this live trading session, I was setting up the trading opportunities with our students before the market opened so that we could focus on simply executing our plan once the market got going. The plan was to sell short at the supply level shown above if and when the market rallied to that level. As you can see on our pre-market prep screen, that was the key supply level we went over before the market opened in the S&P (SPY). The level itself has a few Odds Enhancers that made it a very quality level. This is a two minute chart so the opportunity was for a short-term day trade. As we now dive into these two Odds Enhancers, remember that the focus is to identify the picture that represents a supply and demand imbalance. Odds Enhancer #1: How Did Price Leave the Level? Notice there was a gap down in price from the level. This is key... Price can leave a level in one of three ways. First, it can be a gradual move away from a level. Second, it can move in stronger fashion, maybe with big red or green candles. Third, it can gap away from a level. Out of those three choices, the gap is the picture that represents the strongest supply and demand imbalance. Lesson: The stronger the move in price away from an area, the more out-of-balance supply and demand is at the area. Odds Enhancer #2: How Much Time Did Price Spend at the Level? Notice how much time price spent at the level. In this supply level on the chart, price spent very little time. Most trading books teach you to look for lots of trading activity at the level with many candles on the chart when identifying key market turning points. If you think the simple logic through, however, you will find that the opposite is true. At price levels where supply and demand are most out-of-balance, there are very few transactions (trades). This is because of the big imbalance. So, the picture on the chart is not going to be many candles and lots of trading activity like all the books say; its going to be very little trading activity like the opportunity we had in the XLT with the S&P shorting opportunity. Lesson: The less time price spends at a level, the more out-of-balance supply and demand is at the level. When price finally rallied to the supply level, the plan was to sell short at the level. Who would buy at that level? Someone who is not focused on the reality of how and why prices move and turn in markets. Trading is simply a transfer of accounts from those who don't know what they are doing into the accounts of those who do. Hope this was helpful, have a great day. - Sam Seiden sseiden@tradingacademy.com DISCLAIMER:  This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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