Do you have a financial planner? Does one of your friends have a financial planner? Maybe you take your advice from your broker. As I have said countless times before a broker will make you broker. And a financial planner won’t do any better. I know. You thought they would.

Let’s look at the real reason investors choose to take advice from these so called “experts”. Once they get you into their office or sitting with you at the dining room table or kitchen table you are doomed. Mr. F.P. has come prepared with beautiful slick color brochures and will have a presentation that will utterly confuse, bedazzle and befuddle. You will sit there and be afraid to ask a question because you know it is so dumb. You can’t say ‘no’ or you will be admitting how dumb you are. And he knows that.

It is not that he is a liar. (I hope.) It is that all financial planners and brokers are taught the Wall Street method of “making money”. Unfortunately it doesn’t work.

The basic things that have been pounded into their heads are false. Let’s look at the big three: Do Research, Dollar Cost Average and Buy and Hold. There are others, but these you will hear from every broker and financial planner because that is what the big brokerage companies and mutual fund families want. They want your money and they want to keep it even when the stocks or funds you own go down. In fact, buy some more.

Research is like blowing in the wind. You will be inundated with green sheets, blue sheets, red sheets, slick full color glossies, videos, etc., etc. Think about this. If you can obtain this information then so can everyone else. Everything that is known about a particular stock is reflected in the last price. Morningstar will sell you a beautiful package about a company, but it is worthless. What you really want to know is will it go up after I buy it?

Of course, if it goes down you will be encouraged to buy more to average out your price so that when it heads up again you will make a fortune. Yes, and pigs can fly.

If it does go down your advisor may say to hold on as the market always comes back. He doesn’t tell you it may take 20 years or that the company might go out of business. Buy and Hold is the greatest myth of Wall Street. No one ever tells you to sell. Have you been told you don’t have a loss until you take it? Please!

You got that advisor because you have not admitted to your self that you cannot pull the trigger. When you have a stock or fund that is falling you don’t want to sell. You have to take charge of your money. Just you.

When you look back at the performance of most financial planners from 2000 to 2003 you know you can do a better job. Always ask to see what they did then. If they lost money you don’t want them. Don’t let them compare their performance to the S&P500. That’s smoke and mirrors.

You can do better. Just do it.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

Much like the middle child, mid-cap stocks have long struggled to find their identity. Carved out from the upper echelons of the small caps and the lower end of the large caps, the mid-cap sector has a rough definition of stock with a market capitalization of greater than $2 billion, but less than $10 billion. Taking components from both worlds, some analysts argue that mid-cap stocks can offer growth opportunities found in the small caps and the relative stability found in the large caps.

Within this rationale lies the argument for participation in mid-cap investing. Unlike the small caps that have not yet been seasoned by the market, nor like the large caps that have most of their growth behind them, there are those who claim that mid caps are in the "sweet spot" of the economy. You might say that they have survived the rigors of childhood and are now ready for their years of growth and maturity into adulthood.

Still other analysts point out that this area is ripe for merger and acquisition targets. With premiums often being paid on the acquired stock’s value, an opportunity presents itself for the investor looking for a little "extra."

There are literally hundreds of mid-cap stocks and, while some languish in obscurity, a number have widely recognized names. Abercrombie & Fitch, Circuit City, AutoZone, Marriott International, and Newell Rubbermaid all fit this category. Because this range is often a stop over point for the large caps, it goes without saying that the real heavy weights of the investment world have also spend at least some time here.

A number of indexes track mid caps, with The Standard & Poors Mid Cap 400 and The Russell Midcap Index being two of the more popular. The S&P 400 Midcap is a weighted index like the S&P 500, except that it covers the mid-cap sector of the U.S. stock market. The Russell Midcap Index currently has a weighted average market cap of $7.5 billion and includes the smallest 800 stocks in the Russell 1000.

The Steele Mutual Fund Expert database contains about 1,200 funds within its mid-cap categories, although less than 220 have track records of 10 years or more and less than 50 have been around for at least 20 years. The vast majority of funds that adhere to the mid-cap style are actively managed funds. For investors who follow an index approach, they won’t find as many choices compared to the large-cap index funds, but the number is growing.

Besides individual stocks and open-end mutual funds, exchange traded funds (ETFS) have also gotten into the act.

In recent years, mid-cap funds have started to receive substantial attention in the financial press. Using Steele Mutual Fund Expert as our source, they have come out from under the shadow of their bigger sibling, large cap funds, and turned in better returns. For the three years from1/1/ 2002 through 12/31/2004, the 162 funds in the mid-cap blend averaged 9.40% and beat the 853 funds in the large-cap blend, which averaged 2.91%. Importantly, the mid caps did this with only slightly greater standard deviation. The 228 funds in the small-cap blend averaged 11.65% and boasted the best track record for this period, but had greater volatility. While these results are not guaranteed in the future, they have helped the mid caps establish themselves as a formidable asset class.

So, for those looking for a palatable mix between large caps and small caps, the mid- cap sector deserves serious consideration.

Glenn (“Chip”) Dahlke, a senior contributor to the Living Trust Network, has 28 years in the investment business. He is a Registered Representative of Linsco/Private Ledger and a principal with Dahlke Financial Group. He is licensed to transact securities with persons who are residents of the following states: CA. CT, FL, GA, IL. MA, MD. ME, MI. NC, NH, NJ, NY.OR, PA, RI, VA, VT, WY.

If you have any questions or comments, Chip would love to hear from you. You may contact him at dahlkefinancial@sbcglobal.net. You may also contact him by going directly to the Living Trust Network web site located at http://www.livingtrustnetwork.com.

Copyright 2005. LivingTrustNetwork, LLC. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without the written consent of the Living Trust Network, LLC.

What is the Series 7 Exam?

If you are looking to become a licensed Stockbroker, you need to know about the Series 7.

The Series 7 is a 250 question exam that when passed, licenses you to act as a Registered Representative. Persons who receive this license are allowed to sell most securities. These securities would include: Stock, Bonds, Options, Mutual Funds and Annuities. The license itself is active while you are practicing it. Practicing with a Series 7 means that you are either employed or affiliated with a member firm. If you leave the business, your license will still remain active for 2 years after your last day with the firm. If you do not re-enter the business within 2 years, your license will expire. You would then have to re-take the exam again.

The Series 7 exam itself is comprised of many topics although not equally divided. Approximately 50 questions will be on Municipal Bonds alone. Other major topics include Options, Industry Rules and Customer Account handling.

The SERIES 7 is a multiple choice test graded on 250 questions administered on computer by an NASD testing vendor (Prometric Technology Center). 70% is needed to pass the SERIES 7 Exam. You will be given 6 hours to complete the exam in two 3 hour parts. Each question is worth .4 of a point. 175 questions correct will equal a passing grade. The score is not curved or rounded up so yes, if you get 174 questions right, you will get a 69.6% and you will fail. Each part also includes 5 experimental questions, which do not count on your total score. You will not know which ones are the experimental questions. Each exam is different, meaning if you take your test next to someone else, your test will not be the same. The percentages will be the same but the questions that each individual is tested on will be random. This applies to all Licensing exams but the difference between tests is less with smaller content exams like the Series 63.

You will be given a calculator to use at the center. Applicants are not permitted to bring their own. Scrap paper will be given to you as well for you to use during the test. Once the test officially starts you can write down anything you want (Formulas, Rules etc.). The computer also offers the student the ability to change their answers at the end of the first or second part of the test. Meaning, if you wish to change an answer to a question in the first half, you will have to wait until the end of the first half to do it. Once the second half starts, you will be unable to view your first half. Basically, you are taking 2 different 125 question exams. Even if you are unsure what the correct answer to a question is, you must enter something before the next question is shown.

Don’t Cheat: Today, the testing centers require fingerprint verification when you take your test. A student was caught a few years ago on camera cheating in the testing room. This person had a tiny video camera device on his tie and a listening transmitter in his ear. He was actually filming his screen while someone else at another location was feeding him the answers. I didn’t believe this one at first but several people told it to me. Pretty amazing. Needless to say, he was nabbed and busted. Just study and you will pass….and maybe learn something too!

Good Luck!

Nick Hunter is the President of American Investment Training, Inc. (AIT) http://www.aitraining.com He has personally taught thousands of students in the securities industry for over 15 years.

Picture one of those clubs where only the real heavyweights need apply. In the library the old aristocrats, General Motors and JP Morgan, are dozing in their leather chairs. On the terrace, a late luncheon is underway for those who have only improved their standing through marriage. ExxonMobil and Citigroup are part of the party. At the bar, a number of the"nouveau riche" have gathered - Microsoft seems to be buying for Intel and Hewlett Packard. Welcome to the world of the Large Cap Stock Club, the biggest of the worlds publicly traded companies.

For those interested in applying, membership includes a minimum market capitalization of at least $1 billion and can go upwards to $10 billion depending on whom you talk to. Included in the resumes are often affiliations with other well known groups. 30 are currently with the Dow Jones Industrial Index and many more with the Standard and Poor’s 500. Both these groups are widely followed indicators of the health of the stock market.

The Dow Jones Industrial Average (DJIA) traces its lineage back to 1928 when companies like Victor Talking Machine (later merged into RCA Corp.), Nash Motors (later merged into American Motors) and F.W. Woolworth Company kept company with General Electric and General Motors, the only two remaining original members. Today, household names like McDonalds, Home Depot, Disney and Wal-Mart have replaced some of their earlier brethren. Calculating the average is done by adding the prices of the 30 stocks and dividing by an adjusted denominator.

Because the Standard and Poor’s 500 Index (S&P 500) has 500 companies in the index, many believe this to be a more accurate indicator than the DJIA. Also unlike the Dow Jones Industrial Index, the S&P 500 is a weighted index - meaning each stock’s weight is determined by its market value.

Unofficially, some Large Cap companies are known as "blue chips". This term originally came from poker chips where the blue chips were the most expensive. Today, this generally denotes high quality, usually being reserved for large companies with stable earnings and a history of dividend growth.

Investors in mutual funds are apparently big fans of Large Cap stocks. Of the 10 largest mutual funds, seven are invested primarily in US Stock and all of these (Growth Fund of America, Investment Company of America, American Funds, Washington Mutual, Dodge & Cox Stock, Fidelity Contrafund, Fidelity Magellan, and Vanguard Index 500) are Large Cap funds.

One might think that, with all these pedigrees, the world of large caps might be scandal free, but with the recent lessons learned from Enron and WorldCom, we know that even the mightiest can fall from their lofty perches. Once again, we are reminded that when it comes to investing, there simply are no guarantees.

Looking at returns (using the annual returns of the S&P 500 from 1926 - 2004, including reinvestment of dividends ) we find that the best year for Large Caps was 1933 with a return of +53.99%. On the other hand, two years prior to that, in 1931, the return was a dismal -43.34%. Of the 78 years between 1926 - 2004, the S&P 500 posted positive returns for 56 of those years. To put it another way, therehave been more than twice as many up years as there were down years. Naturally, this is all past track record. The future holds no guarantees that this will continue.

Turning again to Large Cap mutual funds, it is important to note that most are "managed" funds, rather than "unmanaged" funds like the S&P 500 Index. This simply means that most mutual funds have managers who pick certain stocks out of the large cap universe rather than follow an index of the entire universe. This not only creates return differences between the funds and the indexes, but also creates differences between the funds as well.

It may also be a good idea to check the dividend history of funds. While some funds specifically buy stocks with higher dividends, other funds could care less what dividends are paid. Normally, stock based mutual funds will pay dividends once a year (usually in December), but sometimes pay more frequently. Whatever the case, the amount of dividends can be important depending on the need for income.

Obviously, large companies shouldn’t be the only asset class considered for a well rounded portfolio. Mid-size companies and small-size companies are important to achieve proper asset allocation. However, for investing in well known companies that are truly the "movers and shakers," nothing beats the Large Cap Stocks.

Home James!

Glenn (“Chip”) Dahlke, a senior contributor to the Living Trust Network, is a Registered Representative of Linsco/Private Ledger and a principal with Dahlke Financial Group. He is licensed to transact securities with persons who are residents of the following states: CA. CT, FL, GA, IL. MA, MD. ME, MI. NC, NH, NJ, NY.OR, PA, RI, VA, VT, WY.

If you have any questions or comments, Chip would love to hear from you. You may contact him at dahlkefinancial@sbcglobal.net. You may also contact him by going directly to the Living Trust Network web site located at http://www.livingtrustnetwork.com

Copyright 2005. LivingTrustNetwork, LLC. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without the written consent of the Living Trust Network, LLC.

Let’s say you are interested in this one company. You read its annual report, like what you see and your calculation indicates that the stock is trading way below its fair value. You are excited. It is time to buy! Hang on for a second. There are several techniques of buying stocks out there. Some are better than the other. Let me explore several useful ones.

Buy all at limit price. Assume that we have done our research and we want to invest $ 2000 to buy stock XYZ at $ 12/share. We can do this by setting a limit order of $ 12/share to buy 166 shares of XYZ. The advantage for this method is that we will not pay more than $ 12 for our XYZ share. If you use market order, instead of limit order, XYZ might run up to $ 13/share and execute your order at $ 12.50. Fifty cents may not sound a lot, but in this case, you just saves $ 83 for using limit order. Any better methods? Check out this next one.

Buying half at $12. Buying half when it drops. Stock market is volatile. It goes up and down due to various reasons. In this case, we set a limit order to buy $ 1000 worth of XYZ at $ 12/share. When XYZ drops lower, and if you think that the reason that you initially bought it is still valid, then you can buy more XYZ at a lower price. If XYZ drops by $ 1, you already save $ 83 off the bag. What else is there?

Dollar Cost Averaging (DCA). With DCA, investors normally buy a specified dollar of stock at regular intervals. In this case, you can decide to invest $ 500 monthly in XYZ stock. If the XYZ stock falls, you can buy more shares next month. If XYZ stock rises, you would buy less. But it is ok. You already made money on XYZ stocks that you bought at a lower price.

Which method is the best? There is no clear cut answer on this. Personally, I will never use market order when buying a stock. Commission for buying a limit order is not as expensive as it used to be. My favorite methods is by buying half position initially and then add half more when the share price drops. If you have done your research and you feel that $ 12 per share is a good buy, then why won’t you buy some more if it goes down to $ 10? Just make sure that the fundamental remains the same when the stock drops.

While knowing how to initiate your position is important, I am more inclined in focusing on how to calculate fair value of a stock. This is where the bulk of your investment return comes from.

Curious about fair value calculation? At http://www.noviceinvesting.com, these analysis are shown for free. No String Attached. No fee to be paid. You just need to put some time and effort into it. Honest.

Hari wrote regular commentary about stock investing. He is always on the lookout for stocks that match his buying criteria. You can share your ideas or questions in our discussion board. He would be more than willing to assist.

A common problem I often see when working with living trust beneficiaries and trustees is the lack of attention in rethinking income strategies in the event of the grantor’s death.

When the grantor of a living trust dies, the trustee (especially a family member or close friend) sometimes feels reluctant to revise the portfolio, feeling it’s an affront to the wishes of the deceased. After all, if the investments were sound during life, they should be sound enough upon his or her death.

While the fundamental values of the investments are certainly the same, a number of circumstances have changed and must be dealt with.

The most crucial change is because of the trust itself. There are sections within the trust instrument that deal with income distributions, both during the grantor’s lifetime and after his or her death. The trustee should become familiar with these sections and how their differences will have an impact upon investment decisions.

Secondly, with the passing of the grantor, new assets (such as life insurance death benefits) are often added to the trust assets and these new assets must be invested in a way that complies with the grantor’s wishes.

Thirdly, assets held outside the trust often need to be considered. For example, the grantor may have held qualified retirement plan benefits that are passed directly to a trust beneficiary. Utilization of these retirement benefits may need to be recognized and, in some instances, may even be discussed in the trust instrument.

Lastly, the trust beneficiaries may have assets of their own and these asets should be brought into the mix of things.

When revising an investment strategy, the needs of the income beneficiaries are a good place to start. First, determine available cash flow from sources outside the trust. Typically, this could include Social Security benefits, immediate annuities, deferred compensation, qualified retirement plans and, of course, the beneficary’s own assets.

Next, fund whatever income deficit is left by assuming a modest rate of yield in the trust. Hopefully, this modest amount will satisfy the needs of the income beneficiaries. If not, you can raise the yield somewhat, but not too much. At some point, you’ll reach beyond what yield can be readily achieved with an acceptable risk level, to speak nothing of breaching the trustee’s responsibility to act in a prudent fashion.

Because the trustee has a responsibility to all beneficiaries, including those who may ultimately inherit the trust, it may be necessary to balance the income needs of the income beneficiaries and the growth needs of the ultimate beneficiaries. This fidicuary role is paramount to the decisions made by the trustee.

It is also important to note the difference between "yield" and "total return," as applied to a trust. Total return includes capital gains, but those gains are often excluded from the definition of "distributable income" in a trust. Distributions that exceed income will be construed as principal and are often left to a trustee’s discretion. A trustee can say "no" as easily as "yes" to principal distributions.

If principal distributions are left to the trustee’s discretion, it’s a good guess that the intent was not to punish the beneficiary, but to keep the trust out of the beneficiary’s taxable estate.

Carrying this one step farther, many financial advisers will argue that, if a beneficiary’s own estate is large enough to be exposed to estate taxes, then the beneficiary might be wise to "spend down" his or her own estate and let the trust grow in value.

The inverse is also true. If a beneficiary has a small estate, then he or she may want income from the trust, but he or she may also want the principal to grow in his or her own name so as to get a stepped-up tax basis upon death.

These strategies are very common if the ultimate beneficiaries are the same people.

The role of the trustee can be difficult, but paying attention to the changes in income needs will avoid future problems and inefficiencies in carrying out the duties of administering the trust.

Glenn (“Chip”) Dahlke, a senior contributor to the Living Trust Network, has 28 years in the investment business. He is a Registered Representative of Linsco/Private Ledger and a principal with Dahlke Financial Group. He is licensed to transact securities with persons who are residents of the following states: CA. CT, FL, GA, IL. MA, MD. ME, MI. NC, NH, NJ, NY.OR, PA, RI, VA, VT, WY.

If you have any questions or comments, Chip would love to hear from you. You may contact him at Dahlkefinancia@sbcglobal.net. You may also contact him by going directly to the Living Trust Network web site located at http://www.livingtrustnetwork.com

Copyright 2005. LivingTrustNetwork, LLC. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without the written consent of the Living Trust Network, LLC.

Is the Dow going to dip under 10,000 and are we looking at a dip in the stock market? A simultaneous housing market bubble burst? There are good things today on Wall Street as Oil is retreating, but doesn’t it always after a three-day weekend? Don’t they always have some great excuse for high prices on three-day weekend holidays? Yes always and some are as good as the Hurricane Katrina reason, I mean that is certainly justifiable isn’t it? Meanwhile the airline industry already in bad shape and four airlines near bankruptcy and oil supply and capacity causing high side prices is causing ripples throughout our civilization. God help the independent truck drivers? Retail also taking a hit. Mervyns is calling for the closing of 64 stores and laying off some 4800 folks, which is not too concerning as unemployment is at a record low. Will we see a 2006 downward business cycle year? Will we continue to see high oil using industry sectors continue a downward sector rotation? Some are calling for a price limit on gasoline prices claiming that a group of folks controlling the market thru their strangle hold on the energy markets or simply a global issue with emerging market needs and natural disasters? Yet, even if that were true the price of something, anything should reach an equilibrium in the market intrinsically based on the desire of the buyer. Price controls do not help consumers, they hurt consumers, as anyone who studies such will conclude.

George Linsay, a technical analyst of the stock market has come up with a “Three Peaks and the Domed House” theory, which has been fascinatingly accurate in times past. If this occurs now we will see the Dow Dip below 10,000. If you look at the Dow Index Chart you will see some assimblance of George Linsay’s three peaks and a build up of what could be a domed house, which could mean a doomed market in 2006 and the start of the end and the beginning of the next business cycle? I think those who are chart watchers need to take a look at the market fundamentals of all industries and those industry analysts who do not believe in chart patterns may want to take a look at these three peaks and go pray in their domed house? Think on this as history repeats so maybe you will not be doomed in denial.

"Lance Winslow" - Online Think Tank forum board. If you have innovative thoughts and unique perspectives, come think with Lance in the Online Think Tank and solve the problems of the World; www.WorldThinkTank.net/

If you’re like many investors who squander those small dividend checks from your stock portfolio, a Dividend Reinvestment Plan (DRP) might be just what you need. Just as its name implies, a Dividend Reinvestment Plan allows you to reinvest some or all of those dividends into more stock of the issuing company. Unlike purchases made through traditional means, partial or fractional shares, as well as whole shares, are available.

Technically, there are two types of DRPs. The first type involves buying shares at the market through an outside trustee. Although the company may subsidize the transaction costs, buying shares at a discount is not allowed.

The second type allows you to purchase directly from the issuing company, which may provide a discount from the market price. This is a distinct advantage over buying from an outside trustee.

Besides giving dividends a better purpose than sitting in your pocket or in a brokerage cash account, a DRP may offer other advantages as well. By buying on a regular basis, you are “dollar cost averaging” your purchases, an investment strategy designed to reduce volatility. Dollar cost averaging involves continuous investment in securities regardless of fluctuation in the price. Of course you should consider your ability to continue purchasing through periods of low price levels. This type of plan does not ensure a profit or protect against loss.

Secondly, many companies offer added options with their DRPs, including purchasing stock at low minimums and sometimes even offering shares at a discount (often 3-5%) off current market prices.

From a tax standpoint, you are subject to income taxes on the value of the dividends whether you reinvest them or not. Your tax basis for all your shares including the reinvested dividends is the amount paid for the original shares plus the dividends, minus any costs deducted from your dividends as a service charge as part of the DRP.

Keeping good records is a necessity, especially if you plan to continue participating in a DRP over a number of years. Without the records, it may become very difficult to track all your purchases. A little bit of effort now can save you big headaches later on.

Usually, you will receive a quarterly statement outlining your DRP account. Among other things, these quarterly statements will detail your on-going investments, how many shares are held by the program, how many shares are held be you, and the value of all your shares.

Not all companies offer DRP’s but, for a list of one’s that do, there are many web sites dedicated to these plans. These internet sites not only have a full list of companies with DRPs, they also offers online enrollment services. For securities held in a brokerage or wrap account, check with your brokerage firm to determine if they have the means to enroll you. If all else fails, try either the company itself or its transfer agent.

Although it is easy to see the advantages of DRP programs to the investor, we should not overlook the benefits to the issuing company. Besides helping to stabilize market prices, a DRP is a relatively efficient way to raise capital and, because companies only “promise” to continue these programs in the future, the issuing company controls when and how much capital will be raised.

Over 1,000 companies currently offer some type of Dividend Reinvestment Plan and, with a little research, you should be able to get on the path of “automatic pilot” investing for the future.

Glenn (“Chip”) Dahlke, a senior contributor to the Living Trust Network, has 28 years in the investment business. He is a Registered Representative of Linsco/Private Ledger and a principal with Dahlke Financial Group. He is licensed to transact securities with persons who are residents of the following states: CA. CT, FL, GA, IL. MA, MD. ME, MI. NC, NH, NJ, NY.OR, PA, RI, VA, VT, WY.

If you have any questions or comments, Chip would love to hear from you. You may contact him at dahlkefinancial@sbcglobal.net. You may also contact him by going directly to the Living Trust Network web site located at http://www.livingtrustnetwork.com

Copyright 2005. LivingTrustNetwork, LLC. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without the written consent of the Living Trust Network, LLC.

The stock market rallied recently on anticipation of a pause in the monetary tightening cycle, when the FOMC meets Sep 20th, because of hurricane Katrina. However, the market is near major resistance, and it’s uncertain if the FOMC will pause or tighten. Moreover, the market rallied on a fall in oil prices, from over $70 a barrel about two weeks ago to just over $64 on the close Friday.

Next week is options expiration week, which is typically a volatile week. Some current September Max Pain expirations are: SPX 1,220 with the value of calls over twice the value of puts (which is bearish, since the put/call is a contrarian indicator). SPX closed at 1,241 1/2. OEX 570 with the value of puts three times greater than the value of calls (which is bullish). OEX closed at over 574. QQQQ 39 with the value of puts 40% more than the value of calls. QQQQ closed at over 39 1/2.

The first two charts below are same period daily charts of SPX (S&P 500) and OIH (an oil ETF). Both SPX and OIH rallied recently (although, oil prices fell), because institutions hedged oil and non-oil stocks, in case the FOMC does or doesn’t tighten. SPX is currently just over its upper Bollinger Band, which is resistance. Support is at 1,230, i.e. late last week’s low. There’s further support in the low 1,220s, i.e. the 10, 20, and 50 day MAs. OIH resistance is at its upper Bollinger Band. The 10 day MA is current support. If OIH fails to hold the 10 day MA, then the 20 and 50 day MAs, and lower Bollinger Band are support levels.

The third chart is an SPX monthly chart that shows further resistance at 1,246 (the recent and four-year high), 1,252 (monthly upper Bollinger Band), and 1,253 (multi-year Fibonacci level). Consequently, it seems, SPX is near a short-term top. So, if SPX rises early next week, that may be an excellent opportunity to buy September or October puts. Also, I may add, intrinsic value becomes more important closer to expiration. So, September in-the-money options are much safer than September out-of-the money options next week. Also, SPX September options will have huge leverage, because of time value decay and high strike prices.

Next week economic reports are: Monday: None, Tuesday: PPI, Trade Balance, and Treasury Budget, Wednesday: Retail Sales, Industrial Production, and Capacity Utilization, Thursday: CPI, Unemployment Claims, Business Inventories, Empire State Index, and Philadelphia Fed, and Friday: Current Account, and Michigan Consumer Sentiment. Also, the weekly oil inventory report is each Wednesday.

The unwinding of options, anticipations and announcements of economic reports, and oil prices should generate a great deal of volatility next week. If the market remains high before the FOMC announcement a week from Tuesday, then the news may be discounted, and the market may fall (whether the FOMC tightens or not). Moreover, earnings warning season in late September, end-of-the-quarter window dressing, and third quarter earnings in October should contribute to volatility over the next few weeks.

See PeakTrader.com Forum Index Market Overview section for free charts.

Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.

One of the main reasons many of us get into investing is to become financially independent. Who isn’t trying to amass a portfolio with enough income to ensure that we don’t have to work when we should be playing golf or traveling the world. While there are several strategies to invest, is active trading one of the ways to become a millionaire?

For those investors who want to achieve that million dollar portfolio, you may want to read The Millionaire Next Door by Thomas Stanley and William Danko. While it wont help you identify great stock picks (but investorandtrader.com can help), it will help you to establish the difference between those who dream of having a million dollar net worth, and those who do it. You may be surprised at the answers.

While I won’t give away all the secrets, I will share one of the surprising findings which impact investors over the long term.

95% owned stocks

9% of investors held for less than 1 year

1% held for a few days

1% held for a few weeks

7% held for a few months

Less than 10%, less than 1 in 10 people with net worth of $1 millionaire or more actively trade their portfolios. Most definitions of active traders would mean that 1 in 100 are active traders. 99% of millionaires do not actively trade their positions. They hold for long periods of time. They find good companies and let the companies make them money.

The biggest problem with active trading is the commission, and the taxes. Your brokerage gets paid whether you make money or not. Making the presumption that you’re trading with a discount broker, you’re paying $20 ($10 to buy, $10 to sell) each time you trade. If you do make money, you’re paying taxes on that gain. At the end of the year, you get to keep a portion. Make 2 trades per week, and you will spend over $2000 a year in commission. If you lost money, add $2000 to your losses. If you made money, subtract tax, and then subtract $2000 more.

It takes a lot of successful trades to make money. While it can happen, sometimes, just finding a good quality stock and sticking to them, might just be your key to a million dollar portfolio.

That’s just one guys opinion.

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