When our best buddy -Trader Rob sent me that quip I thought he was screwin with me. But no, he wasn’t. It seems that one of Goldman Sachs board members, a Mr. Bill George, said that you have to pay the bankers or they’ll leave. Sort of like pro athletes or Movie stars. Well that’s pretty damned funny Bill. I don’t know of any movie stars that drove the economy into the toilet on purpose so they could make ever more money. I never heard of a pro athlete that not only had the power to bankrupt the financial system, and then went and did it. Frankly this guy makes me ill to my stomach. Do you know what the bankers at Goldman; that fine upstanding sewer hole that sold toxic garbage around the world really deserve? Jail.

Consider this: Then there were the countless deceptions that emerged from the securitization process, the bad math that allowed banks like Goldman to do $474 million mortgage deals where the average equity in the home was just 0.71 percent, and sell 93% of that deal as investment grade paper.

Let me ask, where’s the jail sentences? Instead of rounding up these criminals, and doing their job, the SEC chases newsletter writers, and individual stock traders that they "think" might have done something wrong. What a bunch of crap. There should be a backlog of cases a mile long waiting to prosecute these people and yet there is "nothing". Why? Because the giant vampire squid that is Goldman and Wall Street, make the rules. There’s two sets of rules. One set for the ordinary Joe’s like you and I. Another for the vaunted bankers.

Early Tuesday morning I was enduring my almost lethal dose of CNBC, and they were giving out accolades to the "best fund managers" of the year. They were hootin and hollerin about Bruce Berkowitz, a fundie that posted a 39% gain for 2009. Whee! Whoopeee! The BEST, and he was granted Fund manager of the year. I bet he gets his picture on the centerfold of "Ghee I’m important" magazine. So, how did the esteemed Mr. Berkowitz fare in 2008, when the whole market wasn’t moving higher like it was this year?  Uh oh. It seems our dear "movie star" didn’t do so hot in 08. In fact, in 2008, his fund, the "Fairholme" fund LOST 29.7%. But, because the S&P fell more than that, he’s considered genius.  Excuse me? Fundie of the year???? Trader Rob’s account was up over 200% last year. Ours was up over 105%. In 2008, our 401K posted a 3.8% gain, NO losses. This genius lost 30%. Yet he’s a hero.

I swear I’m going to take up grinding my teeth at night like Trader Rob.

But since I usually use Sunday’s letter to roast the blowhards and slime balls of Wall street and our politicians, today I’d like to do something of a trading tutorial for anyone that might be interested. Let me set the stage for you.

Everyone has their own trading "style" and none of them are right or wrong, as long as it works for you, stick with it. Now, what we do here at InvestYourself is, we look at charts. NO, we aren’t chart slaves, who cannot make a move without some wild "indicator" telling us it’s a-okay to do. But, we do know as fact that support and resistance levels are indeed real, and charts show exactly where they are. For instance, take a peek at this chart of CAT

Notice how many times the stock ran up to the 60 level and was repelled back down? That simply means that at the 60 level all kinds of supply and shorting comes into the market, and there’s more down pressure from sellers than up pressure from buyers. Now, if that thing was to get over 60 AND HOLD IT, it would make a lot of the short sellers nervous. They’d start covering their shorts, which in essence is "buying" the stock. So, there’s a pretty good chance that if CAT could clear 60, hold it for a day, it could soar higher.  I’d consider that a pretty good "stock idea" and it would go on our watch list.

What we do for our Insiders ( and ourselves) is find good charts like that, and align it in a sector that has "reason" to move higher. For instance when the dollar is weak commodity stocks and resource stocks go higher. Find an impending breakout chart, in a sector that’s moving, and you have a very good combination. We hunt up 4, 5, 6 or more of them. But then the problem becomes, how on earth do you manage all that? Easy, use your ALERTS.

Most decent trading platforms today have a user activated alert system. Here’s how it works. You open the alert window and it will ask for some information. A common one that we do each and every day goes like this:  We enter the symbol. Then we enter a "criteria" that sets off the alert. We use price levels. Like in our CAT example above, we’d be interested in knowing when CAT crosses 60.00, so we’d set our alert to fire off if the last trade on CAT was = to or > 60.00. We’d get a pop up on our trade screen AND we’d get an audible signal. All it says is "your alert on CAT has fired".  So, at that moment we can pull up our order box, and if we like what we see, place an order for 1,000 ( or 500, or 200 or what have you) shares of CAT.

That is the only way I’ve found that I can manage 5 or more stocks on my wish list. I set an alert for each stock that I’d like to have if it nears a resistance level ( or crosses it) and that way I don’t have to toggle back and forth like a deranged monkey looking at each stock every couple minutes.  Years ago, before alerts, you’d have to load up multiple trading "boxes" and monitor them constantly. It was pretty lame, and now the computer does it for you. Some companies (Fidelity for example) will actually send your alert to your email, blackberry, cell phone, etc. I don’t  usually do that, I’m most often just sitting here watching the markets, reading news etc. All I need is the "beep" and the pop up box. But for those of you who work, or aren’t at your computer, having an alert "ring you" gives you the option to  call your brokerage and place that trade if indeed it makes sense to you.

If you’ve never used alerts before, I really do suggest you try them. I could never use a platform that didn’t offer alerts and frankly most of them do now.

Another feature that I can’t live without is "conditional" orders. Believe it or not, I don’t like being a slave to the market, where I have to sit here for 8 hours a day staring at screens. That is "not" good livin in my book. So, another trick we use a lot of the conditional order. What’s that? Well it’s an order that will fire off electronically for you, even if your not there. Lets use CAT again. Let’s suppose I’m going to the Doctors tomorrow, but I’d still be interested in some CAT if it were to bust over 60.00. I’d call up my "conditional order" screen. On that, you get to put in parameters, sort of like an alert. It would read something like "Buy 500 shares of CAT if CAT reaches 60.04. That’s called the "parent order" and then instantly you can put in the "child order". What’s that? Well just because my system is going to buy me 500 shares of CAT if it hits 60.04, I don’t want to be unprotected. So, the second part of the
conditional order reads something like this: If CAT is executed at 60.04, place a stop at "X" price.  That stop can be a limit, a trailing, etc. I like hard dollar stops, so I might say something like this "If CAT is executed at 60.04, immediately place a sell stop order at 59.75".  

So,  if I’m at the doctors and CAT crosses 60, then hits 60.04. I get filled at 60.05. Immediately my stop is set in motion, and if CAT were to fall to 59.75 , it would become a market sell order. Many is the day I’ve come home to find I either "have" the stock I’ve set my electronic buy for, or, I’ve bought it and stopped out already. In a way, I really enjoy using this feature. Why? It does remove a lot of the second guessing you have when you’re sitting there staring at the screens. It removes the emotional aspect. When CAT hits 60.04 you’re going to get it. If it stays above 59.75 you’ll still own it. Hopefully you’ll come home and CAT will be 60.55 or more and you’ve made a fine entry!

Today’s platforms are pretty advanced, and not all platforms do all things. Finding one that does everything I like is fairly hard actually. I know because I’m shopping for one now. The platform I’ve used for the last 8 years is being discontinued on the last day of January, and I have to use another one. I’ve been looking at Real tick, trade station, IB,  Sterling, the offerings from Scott, Fidelity, Ameritrade, King trade, you name it. So far I haven’t found anything else with ALL the features I know and love on my old platform, but I’m sure I’ll get something close.

Every one I’ve examined so far has good alert systems. Some of the "conditional" order systems however are a bit lacking and I can’t have that. I enjoy the freedom of "trading" even when I’m not here, so it’s important to me. I’ll let you all know what I end up with.

Now onto the market:

Monday was the first day of the trading year and they wanted to make a splash. So we had a rip roarin day. Then Tuesday things got pretty darned flat, as they digested Monday and fiddled around with the Carry trades. When it was all over the market closed statistically flat.  That’s not to say there weren’t things moving, because there were. We caught a couple very nice trades Tuesday morning, but frankly it was "touchy" trading. With the market in month 10 of it’s bear market bounce, the air is sort of thin. You can feel it, it’s just not robust. Stocks have come a long long way and need a massive pull back, but "they" don’t want it to happen, and keep pouring in the money. Naturally at "some" point that stops, and I wish I really knew when. It would make my job a lot easier!

For months now our mantra has been to "lean long, but keep your finger near the sell button". i think that continues to apply. There’s not much I hate more than being "up nicely" in a trade, only to see it all evaporate a day later and you have to sell out flat, or with a small loss. Yet if you take the quick 40,50, 60 cent profits, THAT will be the stock that runs for 5 dollars and you’ll kick yourself for not "sitting tight".  But unfortunately that’s the nature of the game we play, and you’ll never get them all right. I’ve been doing this for over 15 years and I learn a new way to get frustrated every day. (Grind, grind)

In any event, today we had some economic data via the ADP employment report and the Challenger lay off report. These are the warm up pitchers for Friday’s big jobs report and I think we ought to chat about that for a second.

Each first Friday of the new month brings us the "all important" non farm payroll report. For over two years now it’s been horridly negative,  and at one point we were bleeding 600K jobs a month. But, because of number crunching, Birth/death models, and moving people around in the "special programs", they’ve whittled it down and down to the point that last month we only lost 11K jobs. AND they keep preaching that we’re just a report or two away from a positive reading. In fact, many blowhards on TV are calling for a gain in this report, the first one in eons.

Now I dont’ want to be the bad guy here, but how can ADP say 84K private jobs got axed, the weekly sign ups for unemployment are still running over 450K per WEEK, the household survey hovers around – 500K a month, and yet Uncle Sam very well could print a positive number on Friday???? HOW is that possible? Sharp pencils. Fuzzy math. Creative accounting. Fraud, lies and swindle.

Here’s the point however. If by the magic of fraud they post a positive number Friday, there’s going to be some period of hootin and hollerin going on and stocks will soar. If they don’t lie to us and the number comes in worse than last months, there’s going to be some short term pain in stock land. Which one’s it going to be??

Naturally I don’t know. The FACTS would say we fall far far short of actually going positive, but since when has this market acted on facts? Not recently. If they manufacture a positive number 1) I won’t be surprised and 2) it will be the second greatest work of fiction since The Iliad.  All we can do is wait and see.

Good luck for the balance of the week folks, and we’ll see you on Sunday, for more examination of the games Wally Street plays..