Zeal Speculator is our weekly subscription newsletter for active traders.  We typically publish it every Tuesday afternoon, although sometimes this day shifts due to market holidays and how month-ends fall (which affects the publishing of our monthly Zeal Intelligence newsletter).  Rarely if we see an astonishing trading opportunity in between our usual publishing schedule, we'll shoot out a special e-mail Flash Alert.  Just as market-moving developments vary widely from week to week, so do the topics we cover.  We focus on trends and trading ops.

This tour will walk you through the actual May 11th, 2010 issue of Zeal Speculator.  That's when the infamous Flash Crash erupted, one of the most interesting days in financial-market history.  While most traders were very scared of what it portended, we remained true to our contrarian worldview and considered it a great opportunity to buy oversold stocks.  You can click on the thumbnails below to read large screenshots of that issue.

Page 1  Nothing affects short-term trades more than swings in prevailing market psychology.  Our masthead motto, borrowed from the legendary Warren Buffett, reflects our contrarian approach.  When other traders are scared like after the Flash Crash, we eagerly buy the resulting out-of-favor and cheap stocks.  When other traders are excited, we realize our gains before a new correction hits.

Since any development shapes psychology in a way that steers and colors many subsequent developments, we cover the week's market action chronologically.  Understanding how the markets behaved in sequence really helps highlight critical causal chains that affect our trades.  If events A and B lead up to C, you can't understand C in isolation if you aren't up to speed on precursor events A and B.

Since our primary mission in Zeal Speculator is to grow our fortunes through high-probability-for-success trades, we focus on any current market developments that help drive and shape the primary price trends our open trades are riding.  We are brutally honest and direct, always writing frankly and communicating clearly.

We put our money where our mouths are and bet our own capital on our analysis and trading recommendations.  Our open-positions board documents how our trading book is faring each week.  It also shows any current positions we are closing and new positions we are adding.  Zeal always has been and always will be fully accountable publicly for all our trades.  Our full history is available here.

Our open-positions-board methodology is simple.  The stock symbol is followed by the date when and price where it was originally recommended.  Next is the current price and resulting trade-to-date unrealized gain or loss.  Finally if applicable, stop-loss orders are noted.  Certain market conditions demand trailing stops to protect unrealized gains, but volatile times negate their usefulness.

We strive to let our winners run while selling our losers as soon as possible.  But we time this basic strategy based on broader stock-market trends.  If the odds really favor a stock-market rally for example, and one of our losing trades tends to follow the stock markets, we'll wait for that rally before closing that trade.

In order to buy low and sell high, traders have to define "low" and "high" at any given time.  This is challenging because the baseline is constantly changing.  The very same stock price that seems ludicrously high early on in a secular bull will look catastrophically low a few years later.  200-day moving averages are very effective proxies for these ever-changing baselines.  Depending on where a price is relative to its 200dma, and where its primary drivers are relative to their own 200dmas, traders can buy low and sell high with confidence.

Many years ago Adam Hamilton developed a trading system based on prices' relationships with their 200dmas that he called Relativity.  It expresses prices as constant multiples of their 200dmas.  Charted over time, the result yields a perfectly-comparable constant-percentage horizontal trading range.  This theory is explained in this essay.  The matrix on Page 1 documents the latest relative price levels, ranges, and extremes seen in the past 6 months.  This powerful and elegant tool helps optimize the buy-and-sell timing for all of our trades.

Finally Page 1 includes the latest logon information for Zeal Charts access.  Price charts are critical for trading, they distill a vast amount of noisy daily data into readily-recognized and tradable trends.  They really help keep things in perspective, helping traders avoid the mistake of getting too caught up in today's developments and losing sight of broader context.  We update these high-resolution charts on a private part of our website for our own research and trading.  They are very useful for all traders.  Here are some Zeal Charts screenshots.

Page 2  One great advantage of Zeal Speculator is we have plenty of room to delve deeply into the past week's developments.  We can analyze them in great detail from multiple perspectives, and figure out how they are altering psychology and probabilities governing the trends we are actively trading.  In this particular Zeal Speculator, the wild Flash Crash was the dominant theme of that week.

On the curious afternoon of May 6th, 2010, suddenly out of the blue the S&P 500 plunged 4.5% in 5 minutes!  This unprecedented selling anomaly drove the day's total losses to 8.6% at that point.  Then over the next 25 minutes it gained back 5.1%, and only closed down 3.2%.  No one had ever seen anything like it.

Naturally this stoked tremendous fear, frightening away retail investors who were just starting to nibble again following 2008's once-in-century stock panic.  We thought the Flash Crash was pretty fun though, a rare opportunity to witness an event that will be studied for decades.  We explained why it happened, why it was an anomaly that would not happen again, and why it should be bought.

When helpful, we create unique one-of-a-kind charts for Zeal Speculator subscribers.  These help traders keep recent events and market action in proper perspective, reining in greed and fear.  They also illuminate subtle interrelationships between markets, helping traders better understand what is going on, why, and how it shapes the probabilities governing near-future price action.  Zeal Speculator integrates everything into a coherent and logical whole, greatly helping traders navigate the emotional minefield of chaotic day-to-day market action.

Page 3  Following our analysis of important and relevant market developments of the week, we dive into any new trading recommendations.  We are disciplined traders who patiently wait for high-probability-for-success opportunities.  We do not trade for trading's sake, but patiently bide our time until the stars align.  Then when the odds are very favorable, we buy or sell aggressively to capitalize.

While we do a tremendous amount of deep fundamental research on individual stocks (documented in Zeal Reports), we time our trades based on sector and broader-stock-market conditions.  Generally, 90% of the price action of any stock over time is directly attributable to that stock's sector.  And 90% of the sector action is driven by whatever is happening in the broader stock markets.

So while we mostly trade fundamentally-sound companies we've uncovered in our deep research, we look to prevailing technical and sentimental conditions in the stock markets and commodities for timing cues.  It doesn't make any sense to buy a stock, no matter how awesome, just as its sector is due to correct hard.

We also layer in and out of trading campaigns to better manage risk.  When the odds really favor a big move in a given sector, we usually don't buy or sell a bunch of stocks at once.  Instead we gradually layer in new trades or sell out of old ones over a period of weeks.  While we sometimes buy momentum stocks when our indicators forecast a sector and stock-market rally, usually we focus on out-of-favor stocks with the greatest potential to soar.  The more oversold any stock becomes, the faster its gains are likely to multiply and the bigger they'll be.

Our time horizon for Zeal Speculator trades is centered around a 6-month target.  We are not day traders, it is too stressful and riddled with chaotic randomness.  Instead we target intermediate trends like major uplegs and corrections.  These can often be predicted with a high degree of certainty.  They last long enough to filter out random daily noise, and evolve in a fairly-predictable fashion based on sentiment.  Large 50%+ realized gains are not uncommon in high-quality stocks in a given sector that happens to experience a major upleg.

Perhaps most importantly of all, the whole of Zeal Speculator casts market developments in a rational light that short-circuits the dangerous emotional excesses that are so damaging to traders.  Many long-time subscribers praise us for helping them see the markets logically in perspective, which helps them keep their own fear and greed in check.  As traders we need to totally ignore our own internal emotions yet be hyper-sensitive to those of other traders around us.  We can then buy low when they are scared and sell high when they get too greedy.

Zeal Speculator is our acclaimed weekly eagerly anticipated by traders all over the world.  Subscribe today!