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“ Investors are irrational in a predictable way” “Listen to the markets”

Birkelbach Investment Securities, INC. and Birkelbach Management Corp. since 1974. “ Investors are irrational in a predictable way” “Listen to the markets” “Let the markets tell you what to do”. How to make money in the Stock Market?. Buy and Hold? 50 Years : 9%

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“ Investors are irrational in a predictable way” “Listen to the markets”

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  1. Birkelbach Investment Securities, INC. and Birkelbach Management Corp.since 1974 “Investors are irrational in a predictable way” “Listen to the markets” “Let the markets tell you what to do” Birkelbach Management Corp.

  2. How to make money in the Stock Market? Buy and Hold? 50 Years : 9% 1997-2009 : 0 % Birkelbach Management Corp.

  3. ANNUALIZED RETURNS Birkelbach Management Corp.

  4. DOW 1928-Present Why Sideways?Global CompetitionRedistribution of wealth from Shareholders to managementBanks, corporations and individuals need to rebuild balance sheets. Birkelbach Management Corp.

  5. The Great Sideways Since 1997 – UP 50% DOWN 50% Do you have an Investment Strategy for this kind of market ? Birkelbach Management Corp.

  6. New Market Reality Increased Volatility UP 50%; Down 50% will continue Investors must become more FLEXIBLE AVOID Buy & Hold Strategies Mutual Funds New Strategy Learn market timing techniques to Buy Low & Sell High Use ETFs to be Long and/or Short Birkelbach Management Corp.

  7. To be Successful in the stock market become self sufficient Brokerage Reports Company Announcements News S&P Ratings Today’s stock market prices represent investors’ perception of the future And Price is determined by supply and demand… Birkelbach Management Corp.

  8. Becoming Self SufficientLasting Truths… • Nobody controls the markets • We do control our selection and timing • We can’t tell the market what to do • We can let the market tell us what to do • “The trend is your friend” • Technical Analysis (The forgotten art) • A Picture is worth a thousand words Birkelbach Management Corp.

  9. Investors are irrational in a “predictable” way Learn to listen to the market Let the market tell you what to do. Birkelbach Management Corp.

  10. The “Lone Bull” I – Barron’s 1982 DOW : 1,000 to 11,000 Birkelbach Management Corp.

  11. The“Lone Bull” II – Fall 2002 Dow: 7,200 to 14,200 --up 97.22% Birkelbach Management Corp.

  12. Head and Shoulder Head Right Shoulder Left Shoulder Neck Line Volume Neck Line Head Amount Up Head and Shoulder Top Formation Right Shoulder Amount Down Left Shoulder Volume Head and Shoulder Bottom Formation Birkelbach Management Corp.

  13. The Dow… Giant Head and Shoulders Formation (2001 – 2005) 10,753 – 7,197 = 3,556; 3,556 + 10,753 = 14,309 Projected Goal? (14,309 + 32%) Birkelbach Management Corp.

  14. The S&P 500… Giant Head and Shoulders Formation (2001 – 2005) 1,170 – 820 = 350; 350 + 1170 = 1,520 Projected Goal? (1,520 + 31%) Birkelbach Management Corp.

  15. The NASDAQ Composite Index… Giant Head and Shoulders Formation (2001 – 2005) 2,000 – 1,195 = 805; 805 + 2000 = 2,805 Projected Goal? (2,805 + 45%) Birkelbach Management Corp.

  16. Lone Bull III Dow: 6,470 to 10,000 --up 54.56% Birkelbach Management Corp.

  17. Price of Ford February 12 2009- $1.79 Now-$7.61 Birkelbach Management Corp.

  18. Apply technical analysis for evaluation Birkelbach Management Corp.

  19. The Dow Theory Bear Market Bull Market Phase I Phase III Phase II Phase II Phase I Phase III Birkelbach Management Corp.

  20. Characteristics of the Market Cycle Distribution Reversion Progression Accumulation Birkelbach Management Corp.

  21. Trend movementsLook at 3 month charts 1 year charts 10 year charts Intermediate Trend Intermediate Trend Intermediate Trend Intermediate Trend Major Trend Line Birkelbach Management Corp.

  22. EXXON (XOM)5-Years as of 10/29/2009 Birkelbach Management Corp.

  23. EXXON (XOM)1-Year as of 10/29/2009 Birkelbach Management Corp.

  24. Monitor your investments Let the market tell you what to Do. Birkelbach Management Corp.

  25. Resistance Area B GOOD Resistance Area A C E D Birkelbach Management Corp.

  26. Support Area D C E B Support Area A BAD Birkelbach Management Corp.

  27. Trendlines and Trend movements GOOD BAD Uptrend Broken Sideways Trend Broken BAD GOOD Downtrend Broken Birkelbach Management Corp.

  28. Step-1 Determine your risk/reward tolerance Birkelbach Management Corp.

  29. A stock is only a vehicle to get you to where you want to go Birkelbach Management Corp.

  30. What are the benefits of using ETFs? Diversification • Exposure to wide spectrum of asset classes and investment styles • Helps to limit single-stock risk Lower Fees & Expenses -US Equity ETFs charge relatively lower fees than competing investment vehicles Tax Efficiency • Passive management and the creation/redemption process can help minimize capital gains distributions Trade on major stock exchanges throughout the day • Not subject to trading issues associated with 4:00 pricing of open-end funds Hedging - Be long and/or short the market Birkelbach Management Corp.

  31. EXCHANGE TRADED FUNDSETF’S • IYY Dow Jones Index Ishares • DOG Short Dow 30 IndexProshares • QQQQ NASDAQ-100 Powershares • PSQ Short NASDAQ-100 IndexProshares • IVV S&P 500 Index Ishares • SH Short S&P 500 Index Proshares • IWM Russell 2000 Index Proshares • RWM Short Russell 2000 Index Proshares • IEO Oil & Gas-Ex Index Ishares • DDG Short Oil & Gas Proshares • VFH Financials Vanguard ETF • SEF Short Financials Proshares • EEM MSCI Emerging Markets Index Ishares • EUM Short MSCI Emerging Markets ProShares Birkelbach Management Corp.

  32. Current Market Assessment Step-2 Birkelbach Management Corp.

  33. We avoided another Depression (Large Government Debt) Recession ending Corporate earnings improving because -Cutting expenses -Cutting employment Downstream effect negative Birkelbach Management Corp.

  34. The New Normal EconomySLOW GROWTH Consumers account for 70% of the economy Reverse wealth effect • Increasing unemployment • Maxed out on credit cards • Home equity down • 401K retirement funds down • Credit tight Birkelbach Management Corp.

  35. DOW 1928 to Present Why Sideways?Global CompetitionRedistribution of wealth from Shareholders to managementBanks, corporations and individuals need to rebuild balance sheets. Birkelbach Management Corp.

  36. The Great Sideways Since 1997 – UP 50% DOWN 50% Do you have an Investment Strategy for this kind of market ? Birkelbach Management Corp.

  37. Birkelbach Management Corp.

  38. DOW 1997 to Present 11,261 Drop 14,198-6,470 = 7,728 Points 50% Retracement = 3,864 6,470 3,864 10,334 62% Retracement= 4,791 6,470 4,791 11,261 Birkelbach Management Corp.

  39. DOW Sep 2008 to Present 9,683 - 6,470= 3,213 9,683+ 3,213=12,896 Birkelbach Management Corp.

  40. DOW April 2009 to Present Birkelbach Management Corp.

  41. Technical Market Comment Current value Dow 9,986 NASDAQ 2,102 S&P 500 1,063 Birkelbach Management Corp.

  42. S&P 500 1999 to Present Drop 1,576-666= 910 Points 50% Retracement = 412 666 455 1,121 62% Retracement = 600 666 600 1,266 Birkelbach Management Corp.

  43. S&P 500 April 2009 to Present Birkelbach Management Corp.

  44. NASDAQ 1999 to Present Birkelbach Management Corp.

  45. NASDAQ 2007 to Present Drop 2,825-1,268 = 1,557 50% Retracement = 778 1,268 778 2,046 62% Retracement = 965 1,268 965 2,233 Birkelbach Management Corp.

  46. NASDAQ April 2009- Present Birkelbach Management Corp.

  47. Hang Seng ($HSIX) Birkelbach Management Corp.

  48. Euro to US Dollar-10 Years Birkelbach Management Corp.

  49. STAGFLATIONGold-1975-Present Birkelbach Management Corp.

  50. Step-3 Establish the right broker/client or money manager relationship Birkelbach Management Corp.

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