Covering Investing Success Strategies For
Stocks ■ Bonds ■ Interest Rates ■ Natural Resources ■ Currencies ■ Venture Capital ■ Gold
A Publication of Princeton Research, Inc. (www.PrincetonResearch.com)
Contributing Staff: Michael King and Dr. Jan Vandersande
January 3, 2011; Market Strategies Guide To Successful Trading
We give great entries
Trading Options are a timely event , Since we can only report
weekly, Your Own Money Management on Options Trading may
be more timely to Take your Profits/Losses
MARKET LABORATORY – WEEKLY CHANGES
( Prices taken from Barrons and may be incorrect )
Dow Nasdaq S&P 500 Transportation Russell 2000 Nasdaq 100
11,569.71 2,662.98 1257.88 5108.60 789.74 2225.72
-3.78 -2.62 +1.11 +29.68 +0.78 -4.55
-0.03% -0.01% +0.09% +0.58% +0.10% -0.2%
Gold Silver Crude Heating Oil Unleaded Natural Gas
1405.60 3050.0 89.84 250.00 Gas 4.066
+25.60 -19.10 -1.67 -1.34 2.3178 -.351
+1.9% -0.6 -1.8% -0.5% +.0085 -8.0%
VIX Put/Call Ratios Put/CallRatios Bonds 10 Yr Note Copper
17.52 OEX CBOE Equity 122-04+1-15 120-12+21 415.90
+1.05. 168/100’s 54/100’s 4.33%-0.13% 3.28%-0.10% +4.70
+6.4% -92/100’s +1/100’s +1.1%
CRB Inflation Barron’s S&P100 5 Yr Note Dollar
Index Confidence 565.62 117-20+02 79.52
327.11 Index +0.19 2.00%-0.04% -0.98
-2.27 NA +0.03% -1.2%
AAII Bullish Bearish Neutral M1 Money M-2 Money.
Confidence 51.6% 20.1% 28.3 Supply +5.2%
Index -11.7% +3.7% +8.0% +8.2% Dec Dec20th
Prices may not be accurate due to Barron’s inconsistency.
Princeton Research Market Strategies Newsletter Page 1
We had a small loss last week in the amount of $ 255 stopped out on a
double inverse short gold position. Our gain for the last full year was
reduced to $ 36,879. We utilize stops and try to take small losses. Balance
is the key to our approach managing both long and short positions. This is
our first letter for the new year.
New Stock Recommendations
SDS- Triple Inverse S&P 500 ETF- 23.76- goes up when the S&P 500 goes down and vice versa.
Technicals, sentiment and cycles strongly suggest the market should selloff in January and we will try to
play this with the SDS. This is just a short term play. Take half profits at 27 and place a stop at 22.
Each stock is allocated a $ 5,000 share of the portfolio unless otherwise indicated.
Stock Purchase Purchase Stop/Loss Price/Date Profit/(Loss)
P,rice Date Sold
DZZ 8.43 12/20/10 8 12/31/10 ($ 255)
UEC 5.94 12/10/10 4
FAZ 10.92 12/3/10 9.50
WKBT 3.20 10/22/10 2.00
VIAS 16.00 10/8/10 13.50 20.0 half 11/9 $ 625
ARW 26.78 10/1/10 11.00 half 11/5 $ 394
TESS 11.22 9/3/10 9 15.21 half $ 889
(9 27 10)
TSTC 9.65 8/23/10 6 14.05 $ 1140
LEI 1.70 8/13/10 1.30 2.70half $ 1471
LINC 11.58 8/16/10 9 13.92 half $ 505
( 9 27 10 )
KCI 35.74 7/23/10 32
AAPL 246.94 7/6/10 238 262.48 half $ 157
SKBI 6.59 7/1/10 5.50 9.15 half $ 971
ES 5.80 6/11/10 4.50
FXI 38.88 5/14/10 36 42.61 half $ 557
( 9 27 10 )
ENZ 5.55 5/6/10 3.25
CHBT(half ) 17.99 4/23/10 11
CYD 17.86 4/1/10 12
HITK 21.53 2/19/10 16
CHBT 14.97 11/20/09 11
UUP 22.81 9/11/09 21 24.00 half $ 130
RMBS 17.75 8/14/09 14 25.00 half 21%
CSR 6.26 5/15/09 4 8.50 half 18%
ENZ double 4.29 11/21/08 2.50
Princeton Research Market Strategies Newsletter Page2
Note: Previous closed out positions can be found in the May 10, 2010 letter.
Model Portfolio Comments/Changes:
We will take some more profits. Sell the remaining half positions of VIAS and ARW and the full KCI
position at the open on Monday.
There was very little change last week in the Ten Dow Industrial Groups with the best, Oil and
Gas up just 0.87% followed by Basic Materials gaining 0.73%. Financials were up 0.53% and
Telecomm plus 0.47%. Industrials were barely up 0.9% and Technology was the lowest gainer
up just 0.03%. The four remaining groups were all losers but with miniscule losses. Consumer
Services fell 0.14%; Utilities lost 0.22% as frigid weather thawed somewhat. Consumer Goods
fell 0.32% and Health Care 0.47%.
2010 however, was an impressive year for stocks. The S&P 500 finished with a gain of
12.82%, while the Dow gained 11.06%. Nasdaq won top honors gaining 16.92%. 391 of the
S&P 500 were winners. Netflix was tops ( NFLX ) gaining 218.93%.
We closed out 2009 with the S&P 500 trading at 15x forward four quarters' earnings. At its
current level, the S&P 500 is trading at about13.5x forward four quarters' earnings. Following
the very strong earnings growth of 40% in 2010 (helped by easy comparisons vs. 2009 in first
three quarters of the year), earnings growth is expected to slow to 13% in 2011. Although this
is still strong earnings growth, it represents a notable slowdown from this year, which in
combination with continued recovery uncertainty, may justify the lower market multiple.
Interest rates are very low. Corporations have record cash and M&A activity is brisk. The
coming year will have challenges be a ‘bumpy road.’ Stay balanced always with some
protection against your longs.
THIS WEEKS ECONOMIC NUMBERS and Media DATA
MONDAY 10:00 hrs Construction Spending ( 0.2% vs 0.7% )
10:00 hrs ISM Index ( 57.3 vs 56.6 )
TUESDAY 10:00 hrs Factory Orders ( -0.4% vs -0.9% )
14:00 hrs FOMC Minutes
WEDNESDAY 07:00 hrs MBA Mortgage Applications ( NA vs – 18.6% )
07:30 hrs Challenger Job Cuts ( NA vs -3.3% )
08:15 hrs ADP Employment Change ( 100K vs 93K )
10:00 hrs ISM Services ( 55.7 vs 55.0 )
10:30 hrs Crude Inventories ( NA for 1/1 vs -1.26M)
Princeton Research Market Strategies Newsletter Page3
THURSDAY 08:30 hrs Initial Unemployment Claims 1/1 ( 405K vs 388K )
Continuing Claims ( 4070K vs 4128K )
International Consumer Electronics Show, the world’s largest in
consumer-electronics technology gets under way in Las Vegas
FRIDAY 08:30 hrs Unemployment Rate ( 9.8% Unchanged )
Nonfarm Payrolls ( 132K vs 39K )
Private Payrolls ( 142K vs 50K )
Hourly Earnings ( 0.1% vs 0.0% )
Ave Workweek ( 34.3 vs same )
15:00 hrs Consumer Credit ( -$2.5B vs $3.4B )
The major feature in the Western World was a continuation of economic stimulus especially in
the U.S., Japan and Europe, with the exception of England. Most Asian governments ( China,
Indonesia, India, Thailand and South American countries Brazil and Chile have been
tightening in an attempt to slow down rapidly rising economies and inflation.
INDEX OPTION RECOMMENDATIONS
We expect an important high cycle now in late December/early January so we want to play the expected
selloff. Buy the DIA February 118 Put at the open on Monday. Take half profits at DOW 11,300 and
place a stop at 11,800.
For investors it has continually been recommended that some puts are held to protect one’s portfolio
(portfolio insurance) against a market sell-off like we recently had. For those who have no put options to
protect your portfolio we recommended the following options, especially on any rally: the DOW (DIA)
March 116 put and the QQQQ March 56 put.
For those of you who do not buy puts to protect your portfolio, there is an ETF that is the inverse of the
DOW. The symbol is DOG and goes up when the DOW goes down and down when the DOW goes up.
STOCK OPTION RECOMMENDATIONS
Buy the MON February 70 Put- 3.65 - for a move to 66 and then lower. Place a stop loss on the option
when the stock closes above 73. Take half profits when the stock is at 66.
SDS– Inverse S&P 500 ETF – 23.76- goes up when the S&P 500 goes down and vice versa. We are
expecting a pullback so we will try to play it with this ETF. Buy the SDS February 22 Call- 2.25 - for a
move back to 26 and then higher. Place a stop loss on the option when the ETF closes below 22. Take
half profits when the ETF is at 26.
Princeton Research Market Strategies Newsletter Page4
We are holding all our options positions.
Previous Week’s Recommendations
All options count for 5% each for model portfolio calculations.
When the option has doubled sell half the position.
Stop Loss protection is 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)
at the close the previous Friday or at the open on Monday.
The options will be followed until closed out.
Option Symbols have changed. We will now use a new terminology. ( stock symbol with expiration
month and strike price )
Subscribers can follow us on Twitter or call 702 650 3000 for up to date information.
Option COST Date Sold Date Profit/(Loss)
DUGJan39 Call 2.00 12/20/10
SRS Jan 19 Call 1.28 12/20/10
CHBTFeb12.5 Call 2.20 12/17/10
HITKJan25 Call 0.90 12/17/10
ENZ April 5 Call 0.60 12/10/10
RIMMJan65 Put 5.35 12/10/10
CAVMJan40 Put 2.85 12/10/10
DIA Dec115 Put 1.95 12/6/10 0.75 stopped out 12/14/10 ( $ 1538 )
LVSJan52.5 Put 5.85 12/14/10 8.25 half 12/14/10 $ 513
XRTJan50 Put 2.90
TBTJan34 Call 4.60 12/7/10 4.60 half 12/14/10 $ 880
JCPJan 34 Put 3.10 11/29/10
GG Jan 46 Put 2.80 11/26/10
SCO Jan 11 Call 2.25 11/19/10
F Jan 17.5 Put 1.80 11/19/10
EBIXDec20 Call 2.25 11/15/10 3.25 12/17/10 $ 1111
SRS Dec 18 Call 1.85 11/15/10 1.85 12/17/10 $0
LINCDec15 Call 1.30 11/5/10 2.10 half 12/17/10 $ 48
VECODec43 Call 3.45 11/5/10 4.40half 12/3/10 ( $ 905 )
XLYDec38 Put 1.97 11/5/10 0.65 12/17/10 ( $ 1675 )
SYNADec25 Call 2.35 10/29/10 4.20 half 11/4/10 $ 2606
HITKdec29 Call 2.40 10/29/10 4.10 half 12/1/10 $ 1979
4.50 half 12/17/10
CYD Dec22.5 Call 2.70 10/22/10 3.80 half 10/28/10 $ 1620
CHBTDec 12.5 Call 1.35 10/22/10 1.65 12/17/10 $ 556
ENZ Jan 2 1/2 Call 1.40 9/17/10
Princeton Research Market Strategies Newsletter Page5
Note: Previous closed out option positions can be found in the October 11, 2010, September 13,
2010, July 26, 2010, June 14, 2010, May 10, 2010, January 25, 2010, November 23, October 23,
August 24, July 20, 2009 newsletters.
Two weeks ago we wrote that the market rally was showing signs of exhaustion (waning upside
momentum) with the advance/decline numbers narrowing and the number of new highs decreasing
sharply compared to the number of new highs made at the highs in April and early November and these
comments are still (if not even more) valid now. Also, call option buying was and still is at very high
levels (the put/call option ratio is at numbers typically seen at tops) and other sentiment indicators are
showing much too much bullishness and some are even at extremes (which is bearish) so a pullback
could start any day. A large part of the reason for the continuation of this rally (or just holding up at
around these levels) has been the fear of underperformance by fund mangers (whose year end bonuses
depend on their performance). Hence the under performing fund managers have been forced into the
market chasing performance before year’s end whether they wanted to or not. We now have an
intermediate term cycle in late December/early January and expect it to be a very important high. We
expect a sharp selloff in January once the high is in. This week is the first week of the month/year which
usually has an upward bias because 401k and pension money comes into the market. The market could
thus rally/hold up early this week before turning down. We have a short term cycle in late January and
expect it to be a low. Initial resistance is at DOW: 11,625, S&P 500: 1263 and QQQQ: 54.92. Initial
support is at DOW: 11,420, S&P 500: 1219 and QQQQ: 53.82, then DOW: 11,200, S&P 500: 1200 and
QQQQ: 53.00 and then DOW: 10,929, S&P 500: 1171-1976 and QQQQ: 50.42-50.85 while important
support is at DOW: 10,640, S&P 500: 1122 and QQQQ: 48.20. The parameters to watch are thus very
clear and let the support and resistance levels govern your trading and your stops.
We are in a secular bear market that appears to be far from over and we expect another big selloff this
year. However, every bear market has several good rallies that can last from a few weeks to many
months. We had one of those rallies (called a cyclical bull market in a secular bear market) which lasted
into the April-May time frame (exactly as we predicted based on longer term cycles). We are now again
in one of those cyclical bull markets. Long term cycles predict an important top in December/January.
Support Levels: S&P 500 1221 Resistance S&P 500: 1260-1275
DOW 11,380 Resistance DOW 11,660
QQQQ 5380 Resistance QQQQ 5492; 5650
We now have an intermediate cycle in late December/early January and expect it to be an important
high. Once the high is in we expect a sharp selloff into our next short term cycle in late January.
Princeton Research Market Strategies Newsletter Page6
HYPOTHETICAL TRADING RESULTS SHOWED A LOSS FOR THE WEEK OF
$ 255.00 IN CLOSED OUT POSITIONS. HYPOTHETICAL PROFITS FOR THE
YEAR INCREASED TO $ 36,879.00.
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Princeton Research Market Strategies Newsletter Page7