HOUSTON

April, 2009

WALL STREET

AND

MY STREET

The following is just my perspective.

I was a lookout at Pearl Harbor.

May not be dependable.

Am certainly not responsible

***Redneck disclaimer

This has my reality written all through the process. It is not necessarily “right” but appropriate for ME.

…it fits my age (old), tolerances (not very) and blood pressure (very high)…

… it does not matter how frequently something succeeds …

…if failure is too costly to bear…

Optimizing…..over confidence….believing Wall Street

BERNIE MADOFF!!!

“TRILLION DOLLAR BAND AIDS”

AND

“SITUATIONAL ACCOUNTING RULES”

…in the land of…..

PLANNING FOR

(AND DEALING WITH)

FAILURE***

***FAILURE = BAD DECISION OR LOSING MONEY

NONO

INDICATOR OR SYSTEMINDICATOR OR SYSTEM

GIVESGIVES

CONSTANT ADVICECONSTANT ADVICE

"You can't simply plan to get a 10% return because that's the number you need"

“I don’t care about the economy,

I just need to make some money”

20%, 20%, 20%, 5% beats 30%, 30%, 30%, -20%.

15%, 15%, 15%, 5% beats 25%, 25%, 25%, -20%.

20%, 10%, 5%, 5% beats 30%, 20%, 15%, -20%.

5%, 5%, 5%, 5% ties 15%, 15%, 15%, -20%.

Winning by NOT LOSING

It doesn’t matter what year the -20% occurs in examples above

WALL STREET

•YOU MUST STAY FULLY INVESTED AT ALL TIMES

•IF YOU MISS THE BEST 10 DAYS OVER THE PAST 5 YEARS YOUR RETURN IS _____

MY STREET

•IF YOU STAY FULLY INVESTED YOU PAY THE MANAGEMENT FEES REGARDLESS OF PERFORMANCE (FUNDS)

•IN ANY TEST YOU RUN, IF YOU “MISS THE 10 WORST DAYS” IS ALWAYS SUPERIOR TO THE “MISS BEST 10 DAYS”

WALL STREET

•ASSET ALLOCATION REDUCES THE VOLATILITY OF YOU PORTFOLIO

•YOU CAN’T TIME THE MARKET

MY STREET

•ALLOCATION REDUCES RETURNS & MAY HELP VOLATILITY

•HAD POSITIVE RETURNS IN 2000,2001 AND 2002

•ASSET CONCENTRATION (INCREASES RETURN AND VOLATILITY)

WALL STREET

•THE MARKETS ARE EFFICIENT

•THE MARKETS ARE RATIONAL

MY STREET

•WHO BEST TO EXPLOIT INEFFICENCIES THAN INDIVIDUALS

•IF THE MARKETS ARE RATIONAL (THEN MAYBE WE INDIVIDUALS ARE NOT)

Optimism “Investing isn’t so difficult”

Excitement “I’ll be able to retire early!”

Thrill “I am a brilliant investor” (Maybe I should write a book)

Euphoria The point of maximum risk

Complacency “It’s just a normal correction, a great time to buy”

Anxiety “If I double down it won’t take long to recover”

Denial “Its only paper losses. I’m in it for the long-term”

Range Of Investor Emotions

Desperation “What’s going on? When will it stop going

down?”

Panic “I’ve lost most of my money. I may never be able to retire”

Capitulation “I’m selling everything and I’ll never own stocks again”

Depression “I wonder how cat food tastes?”

Defiance “Stocks may be going up but I’m not taking the risk”

Range Of Investor Emotions

HOW FREQUENTLY DO YOU TRADE?

HOW MUCH MONEY DO YOU TRADE?

WHAT ARE YOUR PERSONAL TOLERANCES?

There are no RIGHT or WRONG answers….but we all must know our personal answer to the three questions above.

Why we do what we do

How we do what we do

Do you have measures to determine if you have an investment “edge” ?

Do you have a process to identify and purchase leading stocks/funds/ETFs/futures?

Do you have a process to “trade up” positions you own?

Do you have “disciplines” that preserve capital?

DECISION MODELS

Market Risk Model

Asset Commitment Model

Fund Selection & Management Model

..And how they are linkedlinked to each other..

SOME EXAMPLES OF AND “EDGE”

***DEFINITION OF “EDGE”

A positive expectancy for a profitable outcome

To trade profitable in the long run, you must know your edge….

If you have no edge, you should not trade for profit…

Establishing and recognizing your edge is a prerequisite to predicting whether trading will be profitable.

DETERMINING THE MARKET ENVIRONMENT

LONG TERM:

Relative Strength

Price

New Highs / New Lows

Advancing / Declining

IMPORTANCE OF

LEVEL AND DIRECTIONLEVEL AND DIRECTION

FOR

PRICE OSCILLATOR

USE WEEKLY DATA

ASSUMES PERFECT TRADES

BIG PICTURE MARKET FORCES

MOST PRODUCTIVE: LONG OR SHORT

WHERE WE ARE TODAY

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

-7.5

-7.0

-6.5

-6.0

-5.5

-5.0

-4.5

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.012/26MACD (-3.00334)

750

800

850

900

950

1000

1050

1100

1150

1200

1250

1300

1350

1400

1450

1500

1550

1600SP500 (1,293.16, 1,333.26, 1,272.66, 1,308.77, -24.9299)

WEEKLY PRICE OSCILLATOR

LEVEL AND DIRECTION IMPORTANT

12/26 MACD

Mid point level 67% of time

Data since 1930

BIG PICTURE …. LEVEL AND DIRECTION

WHICH AREA IS MOST PRODUCTIVE FOR LONGS AND SHORTS?

12 / 26 MACD

((Mov(C,12,E)-Mov(C,26,E))/Mov(C,26,E))*100

Above 0 level Below 0 level

Going UP 8.40% -0.90%

Going DOWN 1.70% -7.70%

From 1930 to Current

12 / 26 MACD

((Mov(C,12,E)-Mov(C,26,E))/Mov(C,26,E))*100

Above 0 level Below 0 level

Going UP 7.16% -0.08%

Going DOWN 0.40% -6.81%

From 1990 to Current

12 / 26 MACD

((Mov(C,12,E)-Mov(C,26,E))/Mov(C,26,E))*100

Above 0 level Below 0 level

Going UP +6.3 % +3.0%

Going DOWN -1.1 % -9.7%

From 2000 to Current

PRICE OSCILLATOR DATA POINTS(level only)

S&P 500 Data: (1930) 62% time >0 level

>0 Level Weekly Monthly Yearly

+0.21% +0.86% +10.32%

<0 Level +0.05% +0.23% +2.76%

OTC Data: (1980) 62% time >0 level Weekly Monthly Yearly

>0 Level +0.50% +2.11% +25.36%

<0 Level -0.11% -0.48% -5.74%

Any conclusions???

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

-7.5

-7.0

-6.5

-6.0

-5.5

-5.0

-4.5

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.012/26MACD (-3.00334)

750

800

850

900

950

1000

1050

1100

1150

1200

1250

1300

1350

1400

1450

1500

1550

1600SP500 (1,293.16, 1,333.26, 1,272.66, 1,308.77, -24.9299)

Level and direction

3-4 up/down moves per year

>0 Level, down direction = correction

<0 Level, down direction = “cat food”

COMPARING “THEN” AND “NOW”

2006 May June July August September November December 2007 February March April May June July August September November December 2008 February March

2000

2050

2100

2150

2200

2250

2300

2350

2400

2450

2500

2550

2600

2650

2700

2750

2800

2850

2900ND-COMP (2,263.61, 2,263.61, 2,263.61, 2,263.61, +19.7400)

-9.0

-8.5

-8.0

-7.5

-7.0

-6.5

-6.0

-5.5

-5.0

-4.5

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.519/39 MACD (-4.21493)

OTC WEEKLY PRICE OSCILLATOR (19 / 39 MACD)

Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2001 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 Feb Mar Apr May Jun Jul Aug Sep

1500

2000

2500

3000

3500

4000

4500

5000

ND-COMP (2,263.61, 2,263.61, 2,263.61, 2,263.61, +19.7400)

-20-19-18-17-16-15-14-13-12-11-10-9-8-7-6-5-4-3-2-10123456789

10111213141519/39 MACD (-4.21493)

OTC data (Bear Market 2000, 2001, 2002) 5000 to 1300

LEVEL AND DIRECTION

USING

DAILY DATA

Price oscillator using daily data

DOMINANT MARKET THEORY

An edge

Relative measure

Jim Stack

OTC / NYSE

NDX / SPY

Russell growth / Russell value

Smoothing……macd & stochastic rsi

July August September October November December 2007 February March April May June July August September November December 2008 February March

-0.45

-0.40

-0.35

-0.30

-0.25

-0.20

-0.15

-0.10

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.55

0.60

0.65

38/76 MACD <> 20 EMA (-0.14994)

2000

2050

2100

2150

2200

2250

2300

2350

2400

2450

2500

2550

2600

2650

2700

2750

2800

2850

2900ND-COMP (2,263.61, 2,263.61, 2,263.61, 2,263.61, +19.7400)

OTC / NYSE RELATIVE STRENGTH 11/2007

Nov Dec 2000 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2001 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 Feb Mar Apr May Jun Jul Aug Sep

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.038/76 MACD <> 20 EMA (-0.14994)

1000

1500

2000

2500

3000

3500

4000

4500

5000

ND-COMP (2,263.61, 2,263.61, 2,263.61, 2,263.61, +19.7400)

BEAR MARKET RELATIVE STRENGTH

5000

TO

1300

“THEN AND NOW”

RETURNS FOR DOMINANT MARKET

Daily 1990 SPX & Nasdaq Relative         Ave. Ret        Ave. RetStrength        Nasdaq          SPX       

SmlCap        3.44%            1.83%LrgCap        -0.36%           0.15% 

% SmlCap Dominant    57.1%% LrgCap Dominant     42.9%

For period of dominance

Data points from 1980

J A S O N D 2001 M A M J J A S O N D 2002 M A M J J A S O N D 2003 M A M J J A S O N D 2004 M A M J J A S O N D 2005 M A M J J

0

50

100

150

200

250

300

350

400

450

500

10% TREND, 10% TREND

1000

1500

2000

2500

3000

3500

4000

OTC COMPOSITE (2,233.55, 2,210.13, 2,218.93, -18.8201)

YEARLY NEW HIGHS & NEW LOWS (smoothed)

COMPARING “THEN” AND “NOW”

DETERMINING THE MARKET ENVIRONMENT

SHORT TERM:

Price

Highs / Lows

Advancing / Declining

ALL BUY SIGNALS ARE NOT CREATED EQUAL

VARIED EXPOSURE TO THE MARKETS IS APPROPRIATE WHEN CONSIDERING THE MARKET ENVIRONMENT

ASSET COMMITMENT

PROCESS

SELECTION PROCESS

UNDERSTANDING

“UP FROM DOWN”

5 YEAR OLD NEPHEW

THE DECISION ZONETHE DECISION ZONE

SIMPLE DECISIONSSIMPLE DECISIONS

Stoch(28,13)/2+RSI(14)/2April May June July August September November 1998 February April May June July August September November 1999 February

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5Fid SmallCap Sel (0336)**

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

85

90

95

100

>65 level = No Sell Zone>50 level = Buy zone<50 level = Sell zone

Negative Environment

Sep October Nov Dec Feb March April May June July August Sep1997 October

20

21

22

23

24

25

26

27

28

29

30Founders Discove

10

20

30

40

50

60

70

80

90

100

>65 level = No Sell Zone>50 level = Buy zone<50 level = Sell zone

50

65

Negative Environment

Trend measure for all mutual funds / ETF’s

65

50

Sep October Nov Dec Feb March April May June July August Sep1997 October

20

21

22

23

24

25

26

27

28

29

30Founders Discove

10

20

30

40

50

60

70

80

90

100

>65 level = No Sell Zone>50 level = Buy zone<50 level = Sell zone

50

65

Negative Environment

Trend Measure for All Mutual FundsTrend Measure for All Mutual Funds

Sell Zone <50 No Sell Zone >65

Our trend measures keep us with the trend

FundDecline

FundRise

THOUGHTS AND POSITIONS FOR THE MARKETS

AT THIS TIME:

Long term: level (low) and direction (up)

Intermediate term: measures positive (but weakening)

Timing signals: 2 of 3 models are positive (long term is negative)

BE CAREFUL: A “trading” opportunity is upon us soon… ….MAYBE….SBIG

you should expect that the next 10 years won't be anything like

the last 10

IN CLOSING

EVERY DAY I want to know:

What is the “dominant market”

What is the long term level and direction of weekly measures

What is the consensus of 3 timing systems

What is the intermediate term market environment

At age 66, I’m

developing a 3rd

and last career path

OUTDOOR SWING SET $49.95

ATHENS CAPITAL MANAGMENTATHENS CAPITAL MANAGMENT

1-877-460-79411-877-460-7941

don@athenscap.comdon@athenscap.com

(returns data up front) (returns data up front)

Questions?