Technical Action Yesterday

Strange, but true! No S&P 500 stocks broke support or resistance yesterday. The Up/Down ratio was unchanged at (310/116=) 2.67.

Technical action by TSX stocks also was exceptionally quiet yesterday. One TSX stock broke resistance (MacDonald Dettwiler) and one stock broke support (Cardiome Pharma). The Up/Down ratio slipped from 3.53 to (134/39=) 3.44.

Weekly Bullish Percent Index Sector Review

Bullish Percent indices were mixed last week. Three indices were unchanged (Information Technology, Consumer Discretionary, Gold Miners), five indices rose slightly (Health Care, Financial Services, Industrials, Materials and Transportation) and four indices eased slightly (Consumer Staples, Utilities, Telecom and Energy). Three more indices moved above their 15 day moving average, an encouraging sign (Consumer Discretionary, Health Care and Materials). Seven of the 12 indices now are trading above their 15 day moving average. All indices remain intermediate overbought, but have yet to show signs of developing a downtrend.

THE CASTLEMOORE INVESTMENT COMMENTARY

Off the top, on behalf of CastleMoore I would like to extend our congratulations to Don and his college Brooke in the launch of their new fund Horizons AlphaPro Seasonal Rotation ETF due to begin trading today.

Don has been instrumental in my career in the investment business more than anyone else, full stop. During my rookie days at Richardson Greenshields in the early 90’s and later RBC Dominion, I gravitated to him like a child clinging to his dad’s pants. Of all the different departments investment advisors interacted with none meant so much to my personal development, or moreover, to the good management my client received than did my relationship with Don. Don showed by example more than anything else how to conduct one self on good and bad days, how to be a true professional who was committed to his craft. I knew Don’s counsel and kindness would be good road maps to last in a meaningful and healthy way in the industry. I think many people in this business and in the larger community would say very similar things about the man.

We very much look forward to the launch and will support its success as much as possible, but not for sentimental or reasons of indebtedness, simply because we always wish to present the best options for our clients who entrust their life savings to us.

Robert “Hap” Sneddon,

President & PM

Things are breaking to new highs all over the place. Of course, volume is not there to confirm things in our opinion. Sentiment can continue farther than anyone can believe, including us. We did pull away from gold in the last few weeks just for this reason. Gold bulls are north of 80%, but when using sentiment indicators you must be prepared for the price to continue on long past you, that is until you are able to repurchase at hopefully lower levels when sentiment is crummy, is bearish. The only story in town now is still the US greenback.

US Dollar Index

As we have noted before, the story of global stock markets is the story of the US dollar shown above against a “basket” of major world currencies (DXY). A large drop in the greenback occurred in March concurrent with the beginning of the powerful short/mid term stock market rise. It appears that it is making a bottom around 75. Caution is warranted in calling a bottom (The hardest of all TA tasks) as it attempted to make a bottom in May and again between June and August.

US Dollar Index vs. S&P, Chinese (Xinhau), European and Canadian Equities

It is hard to bet against the US dollar “mother of all carry trades” as the chart tells. We also know now the G20 are committed to kicking the can down the road as long as they can (hopefully to the next politicians’ watch anyway). This much was reiterated this past weekend in Scotland as their commitment to “liquidity” was restated. But the question (and should be put to Flaherty) how long can the G18 (US and China are okay with it all, as China is pegged to a devalued USD) deal with it before serious domestic issues in those nations are raised?

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If you live in the Toronto area and would be interested in attending an upcoming CastleMoore investment seminar, send an email to info@castlemoore.com. If you live outside of the Toronto area and would be interested in participating in a Castlemoore online webinar, we’d like to here from you too.

If you like to receive bi-monthly newsletter, know more about our model portfolios or access an audio file of our investment philosophy, “Modern Financial Fiascos”, click on the link http://www.castlemoore.com/investorcentre/signup.php. We are also accepting interest for seminar attendance.

CastleMoore Inc. uses a proprietary Risk/Reward Matrix that places clients within one of 12 discretionary portfolios based on risk tolerance, investment objectives, income, net worth and past investing experience. For more information on our discipline and methodology please contact us.

CastleMoore Inc.

Buy, Hold…and Know When to Sell

www.castlemoore.com

Adrienne Toghraie’s “Traders Coach” column

Emotional Threshold
By Adrienne Toghraie, Trader’s Coach

www.TradingOnTarget.com

Are you upset, angry, frustrated, anxious or worried? This is not the state of mind that creates good results in trading. If you repress emotions that are natural to the way you feel, it is even worse because they never go away and accumulate. What happens to your neurological system when you are depressed or in any negative state is that you shut down your ability to see and take opportunity at the appropriate time.

A trader named Daryl recently called to tell me that he is constantly missing the mark of making the right choices and he does not understand why. “It’s like I’m jinxed,” he said. The fact is that he is right, but he is the one who is behind the jinx. What I came to find out later in the conversation was that his wife lost her position as a computer engineer, and she was the main breadwinner of the family. Daryl had quit his job six months earlier to become a professional trader. He said that he consistently earned money from his strategy but was only working with twenty thousand dollars to start. Daryl said that he was at thirty five thousand dollars before the jinx started. This proved to me that he had something viable in his strategy and that his current circumstances created his present situation in trading results. With his wife losing her job, they were now having to take money from their savings and Daryl was rightfully worried.

Daryl’s situation and other situations that create negative feelings are being played out across the country more now than in recent times. The fact is that when a trader goes through negative feelings, performance suffers. In hindsight we can say that Daryl’s choice to become a professional trader with only twenty thousand banking on his wife keeping her job was not a good choice. This belief was backed up for me when I came to find out that Daryl’s wife felt stressed because of her husband not bringing in an income and it showed in her performance at work. When there were cuts made in the company, she was one of the first to go.

Everyone has his or her breakdown point

While it is not always easy to see the storm that is coming that will create havoc in your life, the only thing you can do is prepare for it by making good choices.

It is important to know the negative emotional threshold for yourself and the significant people in your life. The difficult part in knowing this is that people are not necessarily honest with themselves and/or do not know how to gauge this threshold. The past is a good teacher. Examining events in the past where negative emotions led to a negative outcome and how you came out of it are good lessons to draw on for dealing with future issues.

In Daryl’s case his wife told him that she was uncomfortable about his quitting his job because her company was not doing well. She came from a family where the man was the one who supported the family with a regular paycheck. On Daryl’s side of warning signs he felt confident in his ability to be a profitable trader, but he knew his strategy would not produce the kind of income that could support the family for at least two years. In Daryl’s case it was clear that the risk he was taking was too high.

How to prepare for possible upset

· Know the emotional thresholds of your family

· Prepare a personal strategy to overcome these emotions

· Consider if the calculated risk you are taking would best be delayed, but make

sure that you have a specific criteria for when you can take that risk

· Contingency plan for everything that can go wrong and right

· Pre-plan a periodic review of your strategy and yourself

· Handle psychological issues before they become a deep conditioned response

Negative emotions are a part of the human condition. Understanding your threshold and that of your family will help you to make a plan and know when risk is appropriate.

FEATURING

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Website – www.TradingOnTarget.com
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Thackray’s 2010 Investor’s Guide

Tech Talk frequently mentions Brooke Thackray and his book entitled, “Thackray’s 2010 Investor’s Guide”. The book summarizes attractive seasonal trades that are available during the year. The book can be purchased electronically or directly at Chapters, Amazon.ca, Barnes & Noble and Amazon.com. Following are links to these book stores:

http://www.chapters.indigo.ca/books/Thackrays-2010-Investors-Guide-Brooke-Thackray/9780978220037-item.html?ref=Search+Books:+%27thackray%27s%27
http://www.amazon.ca/gp/product/097822003X/ref=s9_sims_gw_s0_p14_i1?pf_rd_m=A3DWYIK6Y9EEQB&pf_rd_s=center-1&pf_rd_r=0773ED3P045NMSDK94ZA&pf_rd_t=101&pf_rd_p=465532811&pf_rd_i=915398
http://search.barnesandnoble.com/Thackrays-2010-Investors-Guide/Brooke-Thackray/e/9780978220037/?itm=1
http://www.amazon.com/Thackrays-2010-Investors-Guide-Seasonal/dp/097822003X/ref=sr_1_1?ie=UTF8&s=books&qid=1252640152&sr=8-1

Seasonal trades in the book that currently are active include Agriculture, Information Technology, Consumer Discretionary, Retail and Metals & Mining.

Tech Talk’s Weekly Column in the Financial Post tomorrow

(Available in hard copy or by paid subscription at www.nationalpost.com)

The topic is equity markets before and after the U.S. Thanksgiving holiday.

Disclaimer: Comments and opinions offered in this report at www.timingthemarket.ca are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed.

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