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The S&P 500, Dow and Nasdaq Since Their 2000 Highs

Courtesy of Doug Short.

Here is a update in response to a standing request from a couple of sources that I also share with regular visitors to my Advisor Perspectives pages.

The request is for real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq Composite. In response, I maintain two overlays — one with the nominal price, excluding dividends, and the other with the price adjusted for inflation based on the Consumer Price Index for Urban Consumers (which is usually just refer to as the CPI). The charts below have been updated through the August 29th close.

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The charts require little explanation. So far the 21st Century has not been especially kind to equity investors. Yes, markets usually do bounce back, but often in time frames that defy optimistic expectations.

The charts above are based on price only. But what about dividends? Would the inclusion of dividends make a significant difference? I’ll close this post with a reprint of my latest chart update of the S&P 500 total return on a $1,000 investment at the 2000 high.

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Total return, including reinvested dividends, certainly looks better, but the real (inflation-adjusted) purchasing power of that $1,000 is currently, over 14 years later, only 235 dollars above break-even. That equates to a 1.47% annualized real return.





Tracking the Market with Social Media

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.


The Trade Followers Momentum indicator for the S&P 500 Index (SPX) is positive, but showing some short term caution signs. Seven day momentum reached extremely overbought territory last week and has now turned over. Previous peaks of high magnitude have led short term tops in the market by roughly a week or two. The peaks are often associated with sideways or slightly upward action in SPX that ultimately ends with a short term drop in price. This is the first indication of caution; however, it doesn’t imply a large consolidation in price…yet.

Breadth calculated between the strongest and most bullish stocks on social media compared to the weakest and most bearish continue to paint high readings and have mostly cleared their negative divergences. This indicator is a longer term measure of market health and suggests that the market will continue to move higher over the intermediate term due to the large number of stocks traders find attractive.

Support and resistance levels for SPX gleaned from traders tweets continue to target 2000, 2030, and 2050 as resistance. Traders are mostly tweeting higher prices which suggests they believe the market will move higher. Support is at 1955 and 1905. However, the 1955 level is not as active as the 1905 area. As a result, there is a lot of white space for the market to fall into if a decline starts from here. This adds some instability to the market.

Another sign of instability creeping into the market comes from social media momentum for volatility (VIX). After painting a series of lower highs, momentum from both StockTwits and Twitter are breaking above very long term down trend lines. This suggests traders are getting somewhat skittish and might be dancing close to the door.

Sector strength is showing support for every sector. In the past, this condition has almost always marked short term tops. It shows market participants rotating to safety which often causes choppiness in the market.

Overall momentum is still indicating higher prices in the intermediate term, but showing some caution signs near term. Rotation to safety and a fall from over bought readings on 7 day momentum suggest the market needs more time to digest recent gains.…
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A Labor Day Perspective: The Growth of our Services Economy

Courtesy of Doug Short.

In honor of Labor Day, which was signed into law as a national holiday in 1894, I’d like to share some graphical snapshots of a major change in our nation’s workforce over the decades.

The Department of Labor’s Bureau of Labor Statistics has monthly data on employment by industry categories reaching back to 1939. The first chart below is an overlay of the compete series of employment numbers for the two major categories, manufacturing and services industries.

When I say major, I’m referring to the complete domination of the labor market by these two industries — anywhere between 91.3% to 95.3% of total nonfarm employment.

In 1939 service industries employed more people than manufacturing by a ratio of 2.1-to-1.0. But that ratio was soon to change. For a clearer picture of the relative growth of manufacturing and services, the next chart illustrates just that: The cumulative growth of the two series, along with total nonfarm employment.

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The next chart shows the same data adjusted for population growth, I’ve used the Bureau of Labor Statistics’ Civilian Labor Force as the “deflator”, hence the 1948 start date, which was when the Civilian Labor Force 16 and Older began being tracked in the monthly Household Survey.

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During WWII, manufacturing employment rose dramatically, but it began returning to its pre-war pattern after the war ended. Thereafter, manufacturing employment has had a complex history with a peak in the late 1970s and a secular decline thereafter. Here are some observations about manufacturing and services over the past seven plus decades:

  • Manufacturing is far more sensitive to the business cycle. Compare, for example, the relative behavior of manufacturing and services relative to the recession bars.
  • Growth in services began accelerating in the 1960s and accelerated at an increasing rate after the double-dip recession in the early 1980.
  • Manufacturing accelerated at a slower pace in the 1960s and then oscillated around a flat line in sync with the four recessions from 1970 to 1982.
  • Manufacturing employment peaked in June 1979. It never recovered from the double dip recession of 1980-1982.
  • The spring of 1998 was the an interim high


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Daily Market Commentary: Semiconductors Gain

Courtesy of Declan.

Markets finished Friday on a flourish with a close at, or near new highs. Volume climbed to register an accumulation day, which keeps thing ticking over in favor of bulls over the long weekend.  The Semiconductors had the best of it, although these gains were posted at the open.


Gains in the semiconductor index helped the Nasdaq close at a new high.  Technicals remain strong too.

The Russell 2000 remains inside the rising channel. The push from Thursday’s tight action has swung in favor of bulls. – further gains remain favored.

The S&P is similarly in a good position, although Friday’s gain wasn’t as good as the Russell 2000.

Tuesday is set up for upside follow through following Friday’s bullish reaction to Thursday’s tight intraday action.

Accepting KIVA gift certificates to help support the work on this blog. All certificates gifted are converted into loans for those who need the help more.





World Markets Weekend Update: The Rally Moderates

Courtesy of Doug Short.

The broad rally of world indexes on my watch eased off the accelerator last week. Five of the eight posted gains, down from all eight for the two previous weeks. France’s CAC 40 was the hands-down winner with a 3.02% advance, more than double the runner-up Eurozone neighboring index, Germany’s DAX, which rose 1.40%. India’s SENSEX joined the two English-speaking countries with modest gains of less than one percent. The two China indexes joined Japan’s Nikkei as the week’s losers.

The Shanghai Composite remains the only index on the watch list in bear territory — the traditional designation for a 20% decline from an interim high. The index is down 36.13% from its August 2009 peak. See the table inset (lower right) in the chart below. The S&P 500 and the SENSEX both finished the week with record closing highs.

Here is a look at 2014 so far.

Here is a table highlighting the year-to-date index performance, sorted from high to low, along with the 2014 interim highs for the eight indexes. At this point, six of the eight are positive YTD, up from five last week.

A Closer Look at the Last Four Weeks

The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. I’ve also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the comparative performance over time.

The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500, CAC 40 and BSE SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.

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A Longer Look Back

Here is the same chart starting from the turn of 21st…
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Past Fear, Present Fear

Courtesy of Tim Knight from Slope of Hope.

From Slope of Hope: I was looking at the entire history of the volatility index (the oft-cited "VIX') and found an interesting parallel. Take note of this chart:

0831-oldfix

So what we have here is:

+ Cyan tint – a grinding, multi-year slide following the bursting of a gigantic bubble. In this instance, it was the bursting of the Internet bubble, and during Greenspan's deliberate inflation of the housing bubble, investors got calmer………..and calmer.

+ Yellow tint – The slide seemed to be over, and there was a period where fear seemed to be coming back. However, it really never seemed to take hold.

+ Magenta tint – Just when it seemed that fear was forever outlawed, and the VIX cracked briefly to lows never seen before (Grey tint), there was a sudden burst higher in volatility. In the case of February 2007, it was when the Chinese stock market made a brief tumble.

+ Green tint – Nope, the fear index falls back again to similar levels it has been grinding around at for a while. The "VIX fix" seems to be permanent.

Now take a look at more recent history, and apply every single one of those descriptions to the chart below. The only difference I see is that the most recent burst (Magenta) was muted compared to the one from 2007.

0831-newvix

Of course, after nearly six years of this nonsense, even someone like me starts to worry that, for the first time in the history of the universe, It Really Is Different This Time. But, ummm, that's kind of what they want us to think, isn't it?





Moving Averages: Month-End Update

Courtesy of Doug Short.

Valid until the market close on September 30, 2014

The S&P 500 closed July with a monthly gain of 3.77%. All three S&P 500 MAs and four of the five the Ivy Portfolio ETF MAs are signaling “Invested”.

The Ivy Portfolio

The table below shows the current 10-month simple moving average (SMA) signal for each of the five ETFs featured in The Ivy Portfolio. I’ve also included a table of 12-month SMAs for the same ETFs for this popular alternative strategy.

For a facinating analysis of the Ivy Portfolio strategy, see this article by Adam Butler, Mike Philbrick and Rodrigo Gordillo:

Backtesting Moving Averages

Monthly Close Signals Over the past few years I’ve used Excel to track the performance of various moving-average timing strategies. But now I use the backtesting tools available on the ETFReplay.com website. Anyone who is interested in market timing with ETFs should have a look at this website. Here are the two tools I most frequently use:

Background on Moving Averages

Buying and selling based on a moving average of monthly closes can be an effective strategy for managing the risk of severe loss from major bear markets. In essence, when the monthly close of the index is above the moving average value, you hold the index. When the index closes below, you move to cash. The disadvantage is that it never gets you out at the top or back in at the bottom. Also, it can produce the occasional whipsaw (short-term buy or sell signal), such as we’ve occasionally experienced over the past year.

Nevertheless, a chart of the S&P 500 monthly closes since 1995 shows that a 10- or 12-month simple moving average (SMA) strategy would have insured participation in most of the upside price movement while dramatically reducing losses.

The 10-month exponential moving average (EMA) is a slight variant on the simple moving average. This version mathematically increases the weighting of newer data in the 10-month sequence. Since 1995 it has produced fewer whipsaws than the equivalent simple moving average, although it was a month slower to signal a sell after these two market tops.

A look back at the 10-…
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Weekly Market Summary

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.


The 2Q earnings season is over. Per Fact Set, earnings grew at 7.7% yoy and sales grew 4.5%. These are the strongest results in several years and, remarkably, they are coming when the bull market is already more than 5 years old.

The sales growth rate was particularly strong. Analysts had expected 3.7% in 2Q. The consensus forecast for 3Q and for the full-year are still for 3.7%; so, some moderation is expected.

The recent macro data supports growth of 3.5% to 4.5% in sales. But it shows a curious lack of accelerating growth after the winter slump.

Real personal consumption (PCE), which comprises about 70% of GDP, grew at annual rate of just 2% in July. There had been a post-winter pop to 2.5% in March, but the rate of growth has declined every month since then.

These figures are inflation-adjusted. Adding a 1.6-2% deflator yields a roughly 4% annual growth rate in nominal terms, equivalent to the sales growth rate expected for SPX in 2014.

PCE is not an outlier. Real ‘final sales’ (which is GDP less changes in inventory, i.e., what was consumed during the quarter) grew at 2.2% last month. Real retail sales grew at 1.6%. All of these measures of demand are consistent and all also show a positive but tepid rebound after the post-winter pop.

In the bigger picture, demand growth is far below what the US economy is accustomed to. Real final sales has been growing at just 2-2.3% for the past 2-1/2 years. In prior expansionary periods, 3-5% annual growth was typical.

The prior two bull markets benefitted greatly from a boom in housing. This spurs demand and thus employment. There’s also a wealth effect with a reinforcing impact on consumption. Recovery in housing has so far been tentative. Until this changes, overall demand growth in the range of 3.5-4.5% (nominal) seems likely to persist.

All of which is to say that faster SPX sales growth, at this point, does not appear…
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Vehicle Miles Driven: A Structural Change in Our Driving Behavior

Courtesy of Doug Short.

The Department of Transportation’s Federal Highway Commission has released the latest report on Traffic Volume Trends, data through June.

Travel on all roads and streets changed by 1.4% (3.7 billion vehicle miles) for June 2014 as compared with June 2013 (see report). The less volatile 12-month moving average is up 0.13% month-over-month. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is up 0.06% month-over-month and down 0.1% year-over-year.

Here is a chart that illustrates this data series from its inception in 1970. I’m plotting the “Moving 12-Month Total on ALL Roads,” as the DOT terms it. See Figure 1 in the PDF report, which charts the data from 1990. My start date is 1971 because I’m incorporating all the available data from earlier DOT spreadsheets. As we can readily see, the post-recession pattern suggests a structural change in our driving habits.

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The rolling 12-month miles driven contracted from its all-time high for 39 months during the stagflation of the late 1970s to early 1980s, a double-dip recession era. The most recent decline has lasted for 79 months and counting — a new record, but the trough to date was in November 2011, 48 months from the all-time high.

The Population-Adjusted Reality

Total Miles Driven, however, is one of those metrics that should be adjusted for population growth to provide the most meaningful analysis, especially if we want to understand the historical context. We can do a quick adjustment of the data using an appropriate population group as the deflator. I use the Bureau of Labor Statistics’ Civilian Noninstitutional Population Age 16 and Over (FRED series CNP16OV). The next chart incorporates that adjustment with the growth shown on the vertical axis as the percent change from 1971.

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Clearly, when we adjust for population growth, the Miles-Driven metric takes on a much darker look. The nominal 39-month dip that began in May 1979 grows to 61 months, slightly more than five years. The trough was a 6% decline from the previous peak.

The population-adjusted all-time high dates from June…
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S&P 500 Snapshot: A New Record Above 2000

Courtesy of Doug Short.

In yesterday’s update I asked the question “Will the S&P 500 move back above 2000 prior to the extended Labor Day weekend?” It did indeed, closing today at a record high at 2003.37. The index finished the month with a gain of 3.77% gain, the biggest monthly advance since February’s 4.31% and the best August since the 6.07% surge in 2000.

The yield on the 10-year Note closed at 2.35%, up 1 bp from yesterday’s close.

Here is a 15-minute chart of the week.

Here is a monthly chart of the index. Trading volume for the month was the lowest in nearly 10 years.

For a longer-term perspective, here is a pair of charts based on daily closes starting with the all-time high prior to the Great Recession.

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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!

 
 

Insider Scoop

NXP To Supply Apple With Mobile Payment Chips

Courtesy of Benzinga.

Related NXPI Stocks Hitting 52-Week Highs Morning Market Movers

NXP Semiconductors NV (NASDAQ: NXPI) gained three percent in pre-market trading Friday on a report it's providing wireless chips to the Apple (NASDAQ: AAPL) iPhone 6, enabling a mobile payment system.

The Netherlands-based semiconductor company makes so-called Near Field Communications chips that smartphones use to communic...



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Chart School

The S&P 500, Dow and Nasdaq Since Their 2000 Highs

Courtesy of Doug Short.

Here is a update in response to a standing request from a couple of sources that I also share with regular visitors to my Advisor Perspectives pages.

The request is for real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq Composite. In response, I maintain two overlays — one with the nominal price, excluding dividends, and the other with the price adjusted for inflation based on the Consumer Price Index for Urban Consumers (which is usually just refer to as the CPI). The charts below have been updated through the August 29th close.


...



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Phil's Favorites

Black Sea Oil Claims Before and After Russia Annexed Crimea

Courtesy of Mish.

The significance of the annexation of Crimea by Russia goes far beyond land territorial claims. Here are a couple of maps that show how Crimea affects oil rights in the black sea.

Black Sea Claims Before Crimea Annexation



Black Sea Claims After Crimea Annexation



The above charts from the New York Times article ...



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Zero Hedge

Asian Property Prices Are Falling "As If There's A Global Financial Crisis"

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

With China's property developers slashing prices, piling on incentives, and still seeing sales slump; it is no surprise that demand from the top to the bottom across Asia is falling. As Reuters reports, even Singapore's Sentosa Cove (the man-made island resort billed as Asia's Monte Carlo) is eerily silent as the billionaires seem to be staying away with prices down over 20-30% in the past year. New mortgage business is down over 40% as "the...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's the latest issue of Stock World Weekly. Click on this link and use your PSW user name and password to log in. Or take a free trial. 

Enjoy!

...

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Option Review

Puts Active On Buffalo Wild Wings

Buffalo Wild Wings Inc. (Ticker: BWLD) shares are in positive territory in early-afternoon trading on Thursday, reversing earlier losses to stand up 0.50% on the session at $148.50 as of 12:15 pm ET. Options volume on the restaurant chain is running approximately three times the daily average level due to heavy put activity in the October expiry contracts. It looks like one or more traders are buying the Oct 140/145 put spread at a net premium of roughly $1.45 per contract. As of the time of this writing, the spread has traded approximately 3,000 times against very little open interest at either striking price. The put spread may be a hedge to protect a long stock position against a roughly 6% pullback in the price of the underlying through October expiration, or an outright bearish play anticipating a dip in BWLD shares in the next couple of months. The spread makes money at expiration if shares in BWLD decline 3.3% from the current price of $148.50 to breach the breakeven point...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Sabrient

Six Companies Push Tax Rules Most

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Sabrient Systems and Gradient Analytics

Gradient Senior Analyst Nicholas Yee reports on six companies that are using a variety of techniques to shift pretax profits to lower-tax areas. Featured in this USA Today, article, the companies include CELG, ALTR, VMW, NVDA, LRCX, and SNPS.

Six Companies Push Tax Rules Most

Excerpt:

Nobody likes to pay taxes. But some companies are taking cutting their tax bil...



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Digital Currencies

Disgraced Mt Gox CEO Goes For Second Try With Web-Hosting Service (And No, Bitcoin Not Accepted)

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Mt Gox may be long gone in the annals of bankruptcy, but its founder refuses to go gentle into that insolvent night. And, as CoinDesk reports, the disgraced former CEO of the one-time premier bitcoin trading platform has decided to give it a second try by launching new web hosting service called Forever.net and is registered under both Karpeles’ name and that of Tibanne, the parent company of Mt Gox.

From the company profile:

“TIBANNE Co.Ltd. ...



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OpTrader

Swing trading portfolio - week of August 25th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Market Shadows

Helen Davis Chaitman Reviews In Bed with Wall Street.

Author Helen Davis Chaitman is a nationally recognized litigator with a diverse trial practice in the areas of lender liability, bankruptcy, bank fraud, RICO, professional malpractice, trusts and estates, and white collar defense. In 1995, Ms. Chaitman was named one of the nation's top ten litigators by the National Law Journal for a jury verdict she obtained in an accountants' malpractice case. Ms. Chaitman is the author of The Law of Lender Liability (Warren, Gorham & Lamont 1990)... Since early 2009, Ms. Chaitman has been an outspoken advocate for investors in Bernard L. Madoff Investment Securities LLC (more here).

Helen Davis Chaitman Reviews In Bed with Wall Street. 

By Helen Davis Chaitman   

I confess: Larry D...



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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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Promotions

See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...



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