(Ebook) Commodity Trader's Almanac 2011: For Active Traders of Futures, Forex, Stocks & ETFs (Almanac Investor Series) by Jeffrey A. Hirsch, John L. Person ISBN 9780470557457, 0470557451
(Ebook) StockTraders Almanac by Jeffrey A. Hirsch; Christopher Mistal ISBN 9781119778769, 9781119778776, 9781119778783, 111977876X, 1119778778, 1119778786
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Published simultaneously in Canada
Editor in Chief
Editor at Large Jeffrey A Hirsch Yale Hirsch
Director of Research Graphic Design
Christopher Mistal
Darlene Dion Design
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ISBN 13: 978-0-470-55744-0
ISBN 10:0-470-55744-3
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Printed in China
This Forty-Fourth Edition is respectfully dedicated to:
Kenneth L. Fisher
Ken first came to our attention with, The Wall Street Waltz, our "Best Investment Book of 1988," still one of the best books on the market we've ever read. His latest book, How to Smell a Rat: The Five Signs of Financial Fraud (page 114-116), was a New York Times and Wall Street Journal bestseller Ken's 1970s theoretical work developed the Price-to-Sales ratio, a vital component of our stock picking Today Ken heads Fisher Investments, a highly-rated $39 billion money management firm, and for over 25 years has written the Forbes Portfolio Strategy column Over three decades of amazingly accurate stock market forecasting and prescience have made Ken one of the most influential people on Wall Street. His father, legendary investor Philip A Fisher (Common Stocks and Uncommon Profits), who died in 2004 at the age of 97, must have been quite proud
INTRODUCTION TO THE FORTY-FOURTH EDITION
We are pleased and proud to introduce the Forty-Fourth Edition of the Stock Tinder's Almanac. The Almanac provides you with the necessary tools to invest successfully in the twenty-first century
J. P. Morgan's classic retort, "Stocks will fluctuate," is often quoted with a wink-of-theeye implication that the only prediction one can make about the stock market is that it will go up, down, or sideways Many investors agree that no one ever really knows which way the market will move. Nothing could be further from the truth.
We discovered that while stocks do indeed fluctuate, they do so in well-defined, often predictable patterns. These patterns recur too frequently to be the result of chance or coincidence How else do we explain that since 1950 all the gains in the market were made during November through April compared to a loss May through October? (See page 48.)
The Almanac is a practical investment tool. It alerts you to those little-known market patterns and tendencies on which shrewd professionals enhance profit potential You will be able to forecast market trends with accuracy and confidence when you use the Almanac to help you understand:
n How our presidential elections affect the economy and the stock market—just as the moon affects the tides Many investors have made fortunes following the political cycle You can be sure that money managers who control billions of dollars are also political cycle watchers. Astute people do not ignore a pattern that has been working effectively throughout most of our economic history
n How the passage of the Twentieth Amendment to the Constitution fathered the January Barometer This barometer has an outstanding record for predicting the general course of the stock market each year, with only six major errors since 1950, for a 90.0% accuracy ratio. (See page 16.)
n Why there is a significant market bias at certain times of the day, week, month, and year
Even if you are an investor who pays scant attention to cycles, indicators, and patterns, your investment survival could hinge on your interpretation of one of the recurring patterns found within these pages. One of the most intriguing and important patterns is the symbiotic relationship between Washington and Wall Street Aside from the potential profitability in seasonal patterns, there's the pure joy of seeing the market very often do just what you expected.
The Stock Trader's A Imanac is also an organizer. Its wealth of information is presented on a calendar basis The Almanac puts investing in a business framework and makes investing easier because it:
n Updates investment knowledge and informs you of new techniques and tools
n Is a monthly reminder and refresher course
n Alerts you to both seasonal opportunities and dangers.
n Furnishes a historical viewpoint by providing pertinent statistics on past market performance.
n Supplies forms necessary for portfolio planning, record keeping, and tax preparation
The WITCH icon signifies THIRD FRIDAY OF THE MONTH on calendar pages and alerts you to extraordinary volatility due to expiration of equity and index options and index futures contracts Triple-witching days appear during March, June, September, and December
The BULL icon on calendar pages signifies favorable trading days based on the S&P 500 rising 60% or more of the time on a particular trading day during the 21-year period January 1989 to December 2009
A BEAR icon on calendar pages signifies unfavorable trading days based on the S&P falling 60% or more of the time for the same 21-year period.
Also, to give you even greater perspective, we have listed next to the date of every day that the market is open the Market Probability numbers for the same 21-year period for the Dow (D), S&P 500 (S), and NASDAQ (N). You will see a "D," "S," and "N" followed by a number signifying the actual Market Probability number for that trading day, based on the recent 21-year period On pages 121-128 you will find complete Market Probability Calendars, both long-term and 21-year for the Dow, S&P, and NASDAQ, as well as for the Russell 1000 and Russell 2000 indices
Other seasonalities near the ends, beginnings, and middles of months, plus options expirations, holiday periods, and other times are noted for Almanac investors' convenience on the weekly planner pages. We are not able to carry FOMC meeting dates, as they are no longer available at press time Only the first meeting of 2011, the two-day affair on January 25-26, 2011, has been scheduled However, the rest of the FOMC meeting dates and all other important economic releases are provided in the Strategy Calendar every month in our newsletter, Almanac Investor, available at our website www.stocktradersalmanac.com
As a reminder to long time Almanac readers, the ten years of monthly Daily Dow Point Changes have moved from their respective Almanac pages to the Databank section toward the rear of this book. We continue to rely on the clarity of this presentation to observe market tendencies In response to newsletter subscriber feedback, we include our wellreceived Monthly Vital Stats on the Almanac pages.
The "Notable Events" on page 6 provides a handy list of major events of the past year that can be helpful when evaluating things that may have moved the market. Over the past few years our research has been restructured to better follow the rhythm of the year. This has also allowed us more room for added data Again, we have included historical data on the Russell 1000 and Russell 2000 indices The Russell 2K is an excellent proxy for small and mid caps, which we have used over the years, and the Russell IK provides a broader view of large caps. Annual highs and lows for all five indices covered in the A Imanac appear on pages 149-151 We've tweaked the Best and Worst section, and with the Option Symbology Initiative now complete, we have "New Option Trading Codes" on page 190.
Pre-presidential election years like 2011 are the most bullish year of the 4-year cycle with no losing years since 1939 (page 32) On page 34 we show the amazing pattern of how the Dow has gained 50% on average from the midterm low to the pre-election year high "Market Charts of Pre-Presidential Election Years" on page 28 provides a view of the last 21 pre-election years at a glance First years have been the third worst year in the decennial cycle for 129 years, but much better when they are also pre-election years and foreign crises are at bay (pages 26 and 129). A more significant correction in 2010 increases the potential for greater gains in 2011.
Sector seasonalities have been revamped this year to include several consistent shorting opportunities, moved to pages 92-96, and expanded to three pages In response to many reader inquiries about how and what to trade when implementing the Best Months Switching Strategies, we detail some simple techniques, including a sampling of tradable mutual funds and ETFs on page 78 Now that the worst of the global financial crisis, bear market, and the Great Recession of 2007-2009 is likely behind us, on page 36 we reveal our brand new projection for the Next Super Boom to start in 2017 and carry the Dow up 500% to 38,820 by 2025
We arc constantly searching for new insights and nuances about the stock market and welcome any suggestions from our readers
Have a healthy and prosperous 2011!
NOTABLE EVENTS
2009
May 25 North Korea's 2nd successful nuclear test
Jun 1 Air France Flight 447 crashes, killing all 228
Jun 1 General Motors files for bankruptcy
Jun 11 Swine flu deemed global pandemic, 1st in 40 years
Jun 12 Iran presidential election protests and riots
Jun 17 Goldman Sachs first to pay back TARP
Jun 24 Obama signs cash-for-clunkers into law
Jun 25 Pop icon, Michael Jackson, dies
Jul 4 North Korea conducts ballistic missile test
Aug 25 Senator Edward Moore 'Ted" Kennedy dies of cancer
Sep 4 Natural Gas at $2.409, last seen in 2002, crude $70
Oct 7 Australia 1 st G-20 to raise rates post-financial crisis
Oct 15 Social Security COLA is zero, 1st in 38-year history
Nov 6 Obama extends unemployment benefits to 99 weeks
Nov 9 Obama extends home-buyer tax credit
Nov 25 Dubai debt crisis
Nov 26 U.S unemployment 10.2% highest in 26 years
Dec 8 Early warning on Greece's debt levels flashed
2011 OUTLOOK
2010
Jan 4 World's tallest building opens in Dubai
Jan 12 Haiti struck by 7.0 earthquake, widespread destruction
Jan 19 Mass elects Republican Senator, ends Dem's super majority
Feb 22 Action Comics # 1 Superman's debut, sells for record SI mil
Feb 27 8.8 magnitude earthquake strikes Chile
Mar 23 Landmark healthcare bill signed into law
Apr 3 Apple iPad released to public
Apr 6 Toyota fined S16.4 million, largest ever
Apr 16 SEC charges Goldman Sachs with civil fraud
Apr 14 Icelandic volcano closes European airspace for 6 days
Apr 20 Drilling rig explodes and sinks in Gulf of Mexico
May 1 Times Square N.Y evacuated, car bomb fails to explode
May 2 1000-year flood strikes Nashville, TN
May 5 Picasso painting sells for record SI06.5 million
May 5 Greek rioting turns deadly—three die
May 6 Dow plunges 650 points in 5 minutes
May 10 €75 0 billion bailout plan—global markets soar
May 12 Gold trades at new all-time high $ 1244.45
President Obama's first 100 days were quite rocky, with the stock market posting heavy losses as the 2007-2009 bear market bottomed Over the past year it has been an uphill battle for the new president, but the stock market rallied swiftly and powerfully, as the president pushed through many of his core agenda and policy items after some tough political battles. Much to the chagrin of his critics, the controversial liberal chief executive is gaining traction.
As with most of his predecessors, Obama will push hard to pass several other policy initiatives in 2010, including financial regulatory reform, climate change, and energy legislation. These divisive initiatives could trigger a typical midterm election year correction or bear market. Any hiccups in the one-year old economic recovery could increase the magnitude of a decline. The Democrats will likely lose some congressional seats in the midterm elections this fall. If the Democrats lose control of Congress, it could be a boon for stocks The combination of a democratic president and a republican Congress has produced the greatest gains, averaging gains of 19.5% for the Dow since 1949
2011 is a pre-presidential election year, and there has not been a loser among them since war-torn 1939 (page 32). The Obama political machine is well aware that they will need to begin priming the pump in 2011 if he is going to have a shot at a second term. If there is a substantial dccline in 2010 and the Democrats can grease the wheels of the economy, creating millions of jobs; the prospects for a 50% gain from the midterm low to the pre-election year high (page 34)—and Obama's reelection in 2012—increase dramatically
However, we do not expect the old all-time highs to be left behind forever just yet and expect several more years of sideways market action, as we experienced in the 1930s and 1940s, and the 1970s and 1980s, before the Next Super Boom is born and the Dow vaults 500% to 38,820 by 2025 (page 36) So, use any significant dips or bear market lows to position yourself for a big rally into 2011 and 2012, but do not get complacent as the secular bear still appears in command
Jeffrey A Hirsch, May 13, 2010
THE2011 STOCKTRADER’S ALMANAC
CONTENTS
102011 Strategy Calendar
12January Almanac
14January’s First Five Days: An “Early Warning” System
16The Incredible January Barometer (Devised 1972): Only Six Significant Errors in 60 Years
18January Barometer in Graphic Form Since 1950
20Hot January Industries Beat S&P 500 Next 11 Months
22February Almanac
241933 “Lame Duck” Amendment: Reason January Barometer Works
26The First Year of Decades
28Market Charts of Pre-Presidential Election Years
30March Almanac
32Pre-Presidential Election Years: No Losers in 72 Years
34Why a 50% Gain in the Dow is Possible from its 2010 Low to its 2011 High
36Next Super Boom–Dow 38820 By 2025
38April Almanac
40The December Low Indicator: A Useful Prognosticating Tool
42Down Januarys: A Remarkable Record
44Top Performing Months Past 601/3 Years: Standard & Poor’s 500 and Dow Jones Industrials
46May Almanac
48Best Six Months: Still An Eye-Popping Strategy
50MACD-Timing Triples “Best Six Months” Results
52Take Advantage of Down Friday/Down Monday Warning
54Top Performing NASDAQ Months Past 391/3 Years
56June Almanac
58Get More out of NASDAQ’s “Best Eight Months” with MACD-Timing
60Triple Returns, Fewer Trades: Best 6 + 4-Year Cycle
62First-Trading-Day-Of-The-Month Phenomenon: Dow Gains More One Day than All Other Days
64July Almanac
662009 Daily Dow Point Changes
68Don’t Sell Stocks on Monday or Friday
70A Rally for All Seasons
72First Month of Quarters Is the Most Bullish
74August Almanac
76Aura of the Triple Witch—4th Quarter Most Bullish: Down Weeks Trigger More Weakness Week After
78What To Trade During Best and Worst Months
80A Correction for All Seasons
82September Almanac
84Market Behavior Three Days before and Three Days after Holidays
86Fourth Quarter Market Magic
88Market Gains More on Super-8 Days Each Month Than on All 13 Remaining Days Combined
90October Almanac
92Sector Seasonality: Selected Percentage Plays
94Sector Index Seasonality Strategy Calendar
98Trading the Thanksgiving Market
100November Almanac
102Most of the So-Called “January Effect” Takes Place in the Last Half of December
104January Effect Now Starts in Mid-December
106Wall Street’s Only Free Lunch Served before Christmas
108December Almanac
110If Santa Claus Should Fail to Call, Bears May Come to Broad and Wall
112Best Investment Book of the Year: Far From Random
114Year’s Top Investment Books
1182012 Strategy Calendar
DIRECTORYOFTRADINGPATTERNSANDDATABANK
121Dow Jones Industrials Market Probability Calendar 2011
122Recent Dow Jones Industrials Market Probability Calendar 2011
123S&P 500 Market Probability Calendar 2011
124Recent S&P 500 Market Probability Calendar 2011
125NASDAQ Market Probability Calendar 2011
126Recent NASDAQ Market Probability Calendar 2011
127Russell 1000 Index Market Probability Calendar 2011
128Russell 2000 Index Market Probability Calendar 2011
129Decennial Cycle: A Market Phenomenon
130Presidential Election/Stock Market Cycle: The 177-Year Saga Continues
131Dow Jones Industrials Bull and Bear Markets Since 1900
132Standard & Poor’s 500 Bull and Bear Markets Since 1929/ NASDAQ Composite Since 1971
133Dow Jones Industrials 10-Year Daily Point Changes: January and February
134Dow Jones Industrials 10-Year Daily Point Changes: March and April
135Dow Jones Industrials 10-Year Daily Point Changes: May and June
136Dow Jones Industrials 10-Year Daily Point Changes: July and August
137Dow Jones Industrials 10-Year Daily Point Changes: September and October
138Dow Jones Industrials 10-Year Daily Point Changes: November and December
139A Typical Day in the Market
140Through the Week on a Half-Hourly Basis
141Tuesday Most Profitable Day of Week
142NASDAQ Strongest Last 3 Days of Week
143S&P Daily Performance Each Year Since 1952
144NASDAQ Daily Performance Each Year Since 1971
145Monthly Cash Inflows into S&P Stocks
146Monthly Cash Inflows into NASDAQ Stocks
147November, December, and January: Year’s Best Three-Month Span
148November Through June: NASDAQ’s Eight-Month Run
149Dow Jones Industrials Annual Highs, Lows, and Closes Since 1901
150Standard & Poor’s 500 Annual Highs, Lows, and Closes Since 1930
151NASDAQ, Russell 1000, and 2000 Annual Highs, Lows, and Closes Since 1971
152Dow Jones Industrials Monthly Percent Changes Since 1950
153Dow Jones Industrials Monthly Point Changes Since 1950
154Dow Jones Industrials Monthly Closing Prices Since 1950
155Standard & Poor’s 500 Monthly Percent Changes Since 1950
156Standard & Poor’s 500 Monthly Closing Prices Since 1950
157NASDAQ Composite Monthly Percent Changes Since 1971
158NASDAQ Composite Monthly Closing Prices Since 1971
159Russell 1000 Monthly Percent Changes and Closing Prices Since 1979
160Russell 2000 Monthly Percent Changes and Closing Prices Since 1979
16110 Best Days by Point and Percent
16210 Worst Days by Point and Percent
16310 Best Weeks by Point and Percent
16410
Worst Weeks by Point and Percent
16510 Best Months by Point and Percent
16610 Worst Months by Point and Percent
16710 Best Quarters by Point and Percent
16810 Worst Quarters by Point and Percent
16910 Best Years by Point and Percent
17010 Worst Years by Point and Percent
STRATEGYPLANNINGANDRECORDSECTION
172Portfolio at Start of 2011
173Additional Purchases
175Short-Term Transactions
177Long-Term Transactions
179Interest/Dividends Received during 2011/Brokerage Account Data 2011
180Weekly Portfolio Price Record 2011
182Weekly Indicator Data 2011
184Monthly Indicator Data 2011
185Portfolio at End of 2011
186If You Don’t Profit from Your Investment Mistakes, Someone Else Will; Performance Record of Recommendations
187Individual Retirement Account (IRA): Most Awesome Mass Investment Incentive Ever Devised
188Top 300 Exchange Traded Funds (ETFs)
190Option Trading Codes
191G. M. Loeb’s “Battle Plan” for Investment Survival
192G. M. Loeb’s Investment Survival Checklist
JANUARY ALMANAC
SMTWTFS 1 2345678 9101112131415 16171819202122 23242526272829 3031 JANUARY
SMTWTFS 12345 6789101112 13141516171819 20212223242526 2728 FEBRUARY
DECEMBERFEBRUARY
JANUARY
Market Probability Chart above is a graphic representation of the S&P 500 Recent Market Probability Calendar on page 124.
u January Barometer predicts year’s course with .783 batting average (page 16) u 14 of last 15 pre-presidential election years followed January’s direction u Every down January on the S&P since 1950, without exception, preceded a new or extended bear market, a flat market, or a 10% correction (page 42) u S&P gains January’s first five days preceded full-year gains 86.5% of the time; 12 of last 15 pre-presidential years followed first five day’s direction (page 14) u November, December, and January constitute the year’s best three-month span, a 4.2% S&P gain (pages 44 and 147) u January NASDAQ powerful 2.8% since 1971 (pages 54 and 148) u “January Effect” now starts in mid-December and favors small-cap stocks (pages 102 and 104) u 2009 has the dubious honor of the worst S&P 500 January on record.
20th Amendment made “lame ducks” disappear. Now, “As January goes, so goes the year.”
In nature there are no rewards or punishments; there are consequences. — Horace Annesley Vachell (English writer, The Face of Clay , 1861–1955)
Explosive growth of shadow banking was about the invisible hand having a party, a non-regulated drinking party, with rating agencies handing out fake IDs. — Paul McCulley (Economist, bond investor, managing director PIMCO; coined “shadow banking” in 2007, NY Times, 4/26/2010, b. 1957)
Don’t be scared to take big steps—you can’t cross a chasm in two small jumps.
— David Lloyd George (British prime minister, 1916–1922)
If you are ready to give up everything else—to study the whole history and background of the market and all the principal companies … as carefully as a medical student studies anatomy— … and, in addition, you have the cool nerves of a great gambler, the sixth sense of a clairvoyant, and the courage of a lion, you have a ghost of a chance. — Bernard Baruch (Financier, speculator, statesman, presidential adviser, 1870–1965)
Last Trading Day of the Year, NASDAQ Down 9 of Last 10 NASDAQ Was Up 29 Years in a Row 1971–1999
Genius is the ability to put into effect what is in your mind. — F. Scott Fitzgerald (author, 1896–1940)
New Year s Day
January Almanac Investor Seasonalities: See Pages 92, 94, and 96
The last 37 up First Five Days were followed by full-year gains 32 times, for an 86.5% accuracy ratio and a 14.0% average gain in all 37 years. The five exceptions include flat 1994 and four related to war. Vietnam military spending delayed start of 1966 bear market. Ceasefire imminence early in 1973 raised stocks temporarily. Saddam Hussein turned 1990 into a bear. The war on terrorism, instability in the Mideast, and corporate malfeasance shaped 2002 into one of the worst years on record. The 23 down First Five Days were followed by 12 up years and 11 down (47.8% accurate).
In pre-presidential election years this indicator has a solid record. In the last 15 pre-presidential election years 12 full years followed the direction of the First Five Days; however, 2007 was not one of these years. The full-month January Barometer (page 16) has an even better record, as 14 of the last 15 full years have followed January’s direction.
Small Caps Punished First Trading Day of Year Russell 2000 Down 14 of Last 21, Average Loss 0.2%
Interviewer: How is it possible to fight an enemy willing and ready to die for his cause? Accommodate him! — General Norman Schwartzkof (Ret. Commander of Allied Forces in 1990–1991 Gulf War, December 2001)
Second Trading Day of the Year, Dow Up 12 of Last 17 Santa Claus Rally Ends (Page 112)
Today we deal with 65,000 more pieces of information each day than did our ancestors 100 years ago. — Dr. Jean Houston (A founder of the Human Potential Movement, b. 1937)
If the models are telling you to sell, sell, sell, but only buyers are out there, don’t be a jerk. Buy! — William Silber, Ph.D. (New York University, Newsweek , 1986)
January s First Five Days Act as an “Early Warning” (Page 14)
Stock prices tend to discount what has been unanimously reported by the mass media. — Louis Ehrenkrantz (Ehrenkrantz, Lyons & Ross)
The only thing that saves us from the bureaucracy is its inefficiency. — Eugene McCarthy (U.S. congressman and senator, Minnesota 1949–1971, 3-time presidential candidate, 1916–2005)
Devised by Yale Hirsch in 1972, our January Barometer states that as the S&P 500 goes in January, so goes the year. The indicator has registered only six major errors since 1950 for a 90.0% accuracyratio. Vietnam affected 1966 and 1968; 1982 saw the start of a major bull market in August; two January rate cuts and 9/11 affected 2001; the anticipation of military action in Iraq held down the market in January 2003; and 2009 was the beginning of a new bull market following the second worst bear market on record. (Almanac Investor newsletter subscribers receive full analysis of each reading as well as its potential implications for the full year.)
Including the seven flat-year errors (less than +/–5%) yields a 78.3% accuracy ratio. A full comparison of all monthly barometers for the Dow, S&P and NASDAQ in our newsletter archives (March 2009) at www.stocktradersalmanac.com details January’s market forecasting prowess. Bear markets began or continued when January’s suffered a loss (see page 42). Full years followed January’s direction in 14 of the last 15 pre-presidential election years. The sole error was in 2003, as a new bull was beginning. See pages 18, 20, and 24 for more January Barometer items.
AS JANUARY GOES, SO GOES THE YEAR
Market Performance in JanuaryRanked by
Over the last 25 years, computer processing capacity has risen more than a millionfold, while communication capacity has risen over a thousandfold. — Richard Worzel (Futurist, Facing the Future, b. 1950)
January Ends “Best Three-Month Span” (Pages 44, 54,147, and 148)
Eighty percent of success is showing up. — Woody Allen (Filmaker, b. 1935)
The whole secret to our success is being able to con ourselves into believing that we’re going to change the world [even though] we are unlikely to do it. —Tom Peters (American writer, In Search of Excellence, Fortune, 11/13/2000, b. 1942)
One only gets to the top rung on the ladder by steadily climbing up one at a time, and suddenly all sorts of powers, all sorts of abilities, which you thought never belonged to you suddenly become within your own possibility… — Margaret Thatcher (British prime minister, 1979–1990, b. 1925)
Any human anywhere will blossom in a hundred unexpected talents and capacities simply by being given the opportunity to do so. — Doris Lessing (British novelist, born in Persia 1919)
Martin Luther King Jr. Day (Market Closed)
In the end, we will remember not the words of our enemies, but the silence of our friends. — Martin Luther King Jr. (Civil rights leader, 1964 Nobel Peace Prize, 1929–1968)
First Trading Day of January Expiration Week, Dow Up 13 of Last 18 Solid in 2010, Dow 1.1%, S&P 1.2%, and NASDAQ 1.4%
The political problem of mankind is to combine three things: economic efficiency, social justice, and individual liberty. — John Maynard Keynes (British economist, 1883–1946)
January Expiration Week Horrible Since 1999, Dow Down Big 8 of Last 11
Charts not only tell what was, they tell what is; and a trend from was to is (projected linearly into the will be) contains better percentages than clumsy guessing. — Robert A. Levy, (Chairman, Cato Institute, founder, CDA Investment Technologies, The Relative Strength Concept of Common Stock Forecasting, 1968, b. 1941)
If we did all the things we are capable of doing, we would literally astound ourselves. — Thomas Alva Edison (American inventor, 1093 patents, 1847–1931)
January Expiration Day, Dow Down 10 of Last 12 with Big Losses Off 2.1% in 2010, Off 2.0% in 2006 and 1.3% in 2003
Experience is helpful, but it is judgment that matters. — General Colin Powell (Chairman, Joint Chiefs 1989–1993, secretary of state 2001–2005, NY Times, 10/22/2008, b. 1937)
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infantry strength for other operations. Except for several small engagements Khe Sanh had remained relatively quiet; therefore, on the day after Colonel Lownds assumed command, the regiment was whittled down by two companies when K and L, 3/26, were transferred to the 9th Marines for Operation KINGFISHER. Three weeks later, the rest of 3/26 was also withdrawn and, as far as Marine units were concerned, Colonel Lownds found himself "not so much a regimental commander as the supervisor of a battalion commander." The colonel, however, was still responsible for coordinating the efforts of all the other Allied units (CACO, CIDG, RF, etc) in the Khe Sanh TAOR.(26)
Colonel John J. Padley turns over the colors and the 26th Marines to Colonel David E. Lownds on 12 August 1967. (Photo courtesy Colonel David E. Lownds)
As Operation ARDMORE dragged on, the Marines at Khe Sanh concentrated on improving the combat base. The men were kept busy constructing bunkers and trenches both inside the perimeter and on the hill outposts. On the hills, this proved to be no small task as was pointed out by the 1/26 battalion commander, Lieutenant Colonel Wilkinson:
The monsoon rains had little effect on 881, but when the first torrential rains of the season hit 861 the results were disastrous. The trenchline which encircled the hill washed away completely on one side of the position and caved in on another side. Some bunkers collapsed while others were so weakened they had to be completely rebuilt. Because of the poor soil and the steepness of the terrain, the new bunkers were built almost completely above ground. To provide drainage, twenty-seven 55 gallon steel drums, with the tops and bottoms removed, were installed in the sides of the trenches around 861 so water would not stand in the trenches. (Culvert material was not available.) All bunker materials, as well as other supplies, were delivered to the hills by helicopter. Attempts were made to obtain logs for fighting positions and bunkers in the canopied jungle flanking the hills. This idea was not successful. The trees close to 881 and 861 were so filled with shrapnel from the battles the previous spring that the engineers did not want to ruin their chain saws on the metal.... In spite of the shortages, Marines of 1/26 worked extremely hard until every Marine on 881(S) and 861 had overhead cover.(27)
Another bit of foresight which was to prove a God-send in the succeeding months was the decision by higher headquarters to improve the airstrip. The original runway had been a dirt strip on top of which the U. S. Navy Seabees had laid aluminum matting. The 3,900-foot strip, however, did not have a rock base and as a result of the heavy monsoon rains, mud formed under the matting causing it to buckle in several places. Upon
direction, Colonel Lownds closed the field on 17 August. His men located a hill 1,500 meters southwest of the perimeter which served as a quarry. Three 15-ton rock crushers, along with other heavy equipment, were hauled in and the Marine and Seabee working parties started the repairs. During September and October, U. S. Air Force C-130s of the 315th Air Division (under the operational control of the 834th Air Division) delivered 2,350 tons of matting, asphalt, and other construction material to the base by paradrops and a special low-altitude extraction system. (See page 76) While the field was shut down, resupply missions were handled by helicopters and C-7 "Caribou" which could land on short segments of the strip. Work continued until 27 October when the field was reopened to C-123 aircraft and later, to C-130s.(28)
On 31 October, Operation ARDMORE came to an uneventful conclusion. The absence of any major engagements was mirrored in the casualty figures which showed that in three and a half months, 113 NVA and 10 Marines were killed. The next day, 1 November, the 26th Marines commenced another operation, new in name only--SCOTLAND I. Again the mission and units remained the same, and while the area of operations was altered slightly, SCOTLAND I was basically just an extension of ARDMORE.(29)
One incident in November which was to have a tremendous effect on the future of the combat base was the arrival of Major General Rathvon McC. Tompkins at Phu Bai as the new Commanding General, 3d Marine Division. General Tompkins took over from Brigadier General Louis Metzger who had been serving as the Acting Division Commander following the death of Major General Bruno Hochmuth in a
helicopter crash on 14 November. In addition to being an extremely able commander, General Tompkins possessed a peppery yet gentlemanly quality which, in the gloom that later shrouded Khe Sanh, often lifted the spirits of his subordinates. His numerous inspection trips, even to the most isolated units, provided the division commander with a first-hand knowledge of the tactical situation in northern I Corps which would never have been gained by simply sitting behind a desk. When the heavy fighting broke out at Khe Sanh, the general visited the combat base almost daily. Few people were to influence the coming battle more than General Tompkins or have as many close calls.(30)
During December, there was another surge of enemy activity. Reconnaissance teams reported large groups of NVA moving into the area and, this time, they were not passing through; they were staying. There was an increased number of contacts between Marine patrols and enemy units. The companies on Hills 881S and 861 began receiving more and more sniper fire. Not only the hill outposts, but the combat base itself, received numerous probes along the perimeter. In some cases, the defensive wire was cut and replaced in such a manner that the break was hard to detect. The situation warranted action, and again General Cushman directed 3/26 to rejoin the regiment. On 13 December, the 3d Battalion, under its new commander, Lieutenant Colonel Harry L. Alderman (who assumed command 21 August), was airlifted back to Khe Sanh and the 26th Marines.(31)
On the 21st, the newly-arrived Marines saddled up and took to the field. This was the first time that Colonel Lownds had been able to commit a
battalion-sized force since 3/26 had left Khe Sanh in August. Lieutenant Colonel Alderman's unit was helilifted to 881S where it conducted a sweep toward Hill 918, some 5,100 meters to the west, and then returned to the combat base by the way of Hill 689. The 3d Battalion made no contact with the enemy during the five-day operation but the effort proved to be extremely valuable. First of all, the men of 3/26 became familiar with the terrain to the west and south of Hill 881S--a position which was later occupied by elements of the 3d Battalion. The Marines located the best avenues of approach to the hill, as well as probable sites for the enemy's supporting weapons. Secondly, and most important, the unit turned up evidence (fresh foxholes, well-used trails, caches, etc.) which indicated that the NVA was moving into the area in force. These signs further strengthened the battalion and regimental commanders' belief that "things were picking up," and the confrontation which many predicted would come was not far off. Captain Richard D. Camp, the company commander of L/3/26 put it a little more bluntly: "I can smell ... [enemy]."(32)
General Leonard F. Chapman, Jr., Commandant of the Marine Corps, talks with his son, First Lieutenant Walton F. Chapman, during the General's visit to Khe Sanh in January 1968. Lieutenant Chapman served with the 1st Battalion, 26th Marines and spent a good portion of the siege on Hill 950. (USMC Photo A190283)
FOOTNOTES:
[7] The two Special Landing Forces of the Seventh Fleet are each comprised of a Marine Battalion Landing Team and a Marine helicopter squadron, and provide ComUSMACV/CG, III MAF with a highlyflexible, amphibious striking force for operations along the South Vietnam littoral. During the amphibious operation, operational control of the SLF remains with the Amphibious Task
Force Commander designated by Commander, Seventh Fleet. This relationship may persist throughout the operation if coordination with forces ashore does not dictate otherwise. When the Special Landing Force is firmly established ashore, operational control may be passed to CG, III MAF who, in turn, may shift this control to the division in whose area the SLF is operating. Under such circumstances, operational control of the helicopter squadron is passed by CG III MAF to the 1st Marine Aircraft Wing.
[8] The system was an anti-infiltration barrier just south of the DMZ. Obstacles were used to channelize the enemy. Strongpoints, such as Con Thien, served as patrol bases and fire support bases.
[9] In addition to the action near the DMZ, there was one other area in I Corps that was a hub of activity. The Nui Loc Son Basin, a rice rich coastal plain between Hoi An and Tam Ky, was the operating area of the 2d NVA Division. Between April and October 1967, Marine, U. S. Army, and ARVN troops conducted 13 major operations (including 3 SLF landings) in this region and killed 5,395 enemy soldiers. By the end of the year, the 2d NVA Division was temporarily rendered useless as a fighting unit.
[10] The official designation of the unit at Khe Sanh was Regimental Landing Team 26 (Forward) which consisted of one
battalion and a lightly staffed headquarters. The other two battalions were in-country but under the operational control of other units. The rest of the headquarters, RLT-26 (Rear), remained at Camp Schwab, Okinawa as a pipeline for replacements. RLT-26 (Forward) was under the operational control of the 3d MarDiv and the administrative control of the 9th MAB. Any further mention of the 26th Marines will refer only to RLT-26 (Forward).
PART III THE BUILDUP AND THE OPENING ROUND
With the beginning of the new year, Khe Sanh again became the focal point of enemy activity in I Corps. All evidence pointed to a North Vietnamese offensive similar to the one in 1967, only on a much larger scale. From various intelligence sources, the III MAF, 3d Marine Division, and 26th Marines Headquarters learned that NVA units, which usually came down the "Santa Fe Trail" and skirted the combat base outside of artillery range, were moving into the Khe Sanh area and staying.[11](33) At first, the reports showed the influx of individual regiments, then a division headquarters; finally a front headquarters was established indicating that at least two NVA divisions were in the vicinity. In fact, the 325C NVA Division had moved back into the region north of Hill 881N while a newcomer to the area, the 304th NVA Division, had crossed over from Laos and established positions southwest of the base. The 304th was an elite home guard division from Hanoi which had been a participant at Dien Bien Phu.[12](34) The entire force included six infantry regiments, two artillery regiments, an unknown number of tanks, plus miscellaneous support and service units. Gradually, the enemy shifted his emphasis from reconnaissance and harassment to actual probes and began exerting more and more pressure on Allied outposts and patrols. One incident which reinforced the belief that something big was in the wind occurred on 2 January near a Marine listening post just outside the main perimeter. (35)
The post was located approximately 400 meters from the western end of the airstrip and north of where the Company L, 3/26 lines tied in with those of 1/26. At 2030, a sentry dog was alerted by movement outside the perimeter and a few minutes later the Marines manning the post reported that six unidentified persons were approaching the defensive wire. Oddly enough, the nocturnal visitors were not crawling or attempting to hide their presence; they were walking around as if they owned the place. A squad from L/3/26, headed by Second Lieutenant Nile B. Buffington, was dispatched to investigate. Earlier in the day the squad had rehearsed the proper procedure for relieving the listening post and had received a briefing on fire discipline. The training was shortly put to good use.
Lieutenant Buffington saw that the six men were dressed like Marines and, while no friendly patrols were reported in the area, he challenged the strangers in clear English to be sure. There was no reply. A second challenge was issued and, this time, the lieutenant saw one of the men make a motion as if going for a hand grenade. The Marines opened fire and quickly cut down five of the six intruders. One enemy soldier died with his finger inserted in the pin of a grenade. The awesome hitting power of the M-16 rifle was quite evident since all five men were apparently dead by the time they hit the ground. The lone survivor was wounded but managed to escape after retrieving some papers from a mapcase which was on one of the bodies. Using a sentry dog, the Marines followed a trail of blood to the southwest but gave up the hunt in the darkness. The direction the enemy soldier was heading led the Marines to believe that his unit was located beyond the rock quarry.
The importance of the contact was not realized until later when intelligence personnel discovered that all five of the enemy dead were officers including an NVA regimental commander, operations officer, and communications officer. The fact that the North Vietnamese would commit such key men to a highly dangerous, personal reconnaissance indicated that Khe Sanh was back at the top of the Communists' priority list.(36)
This series of events did not go unnoticed at higher headquarters. General Cushman saw that Colonel Lownds had more on his hands than could be handled by two battalions and directed that 2/26 be transferred to the operational control of its parent unit. On 16 January, 2/26, commanded by Lieutenant Colonel Francis J. Heath, Jr., landed at the Khe Sanh Combat Base; its arrival marked the first time that the three battalions of the 26th Marines had operated together in combat since Iwo Jima. The rapid deployment of Lieutenant Colonel Heath's unit was another example of the speed with which large number of troops could be committed to battle. The regimental commander knew that he would be getting reinforcements but he did not know exactly when they would arrive; he was informed by telephone just as the lead transports were entering the landing pattern. The question that then arose was: "Where could the newcomers do the most good?"(37)
Outside of the combat base itself, there were several areas which were vital. The most critical points were the hill outposts, because both General Tompkins and Colonel Lownds were well aware of what had happened at Dien Bien Phu when the Viet Minh owned the mountains and the French owned the valley. It was essential that the hills
around Khe Sanh remain in the hands of the Marines. Shortly after its arrival in mid-December 1967, 3/26 had relieved 1/26 of most of this responsibility. Company I, 3/26, along with a three-gun detachment of 105mm howitzers from Battery C, 1/13, was situated atop Hill 881S; Company K, 3/26, with two 4.2-inch mortars, was entrenched on Hill 861; and the 2d Platoon, A/1/26 defended the radio-relay site on Hill 950. This arrangement still left the NVA with an excellent avenue of approach through the Rao Quan Valley which runs between Hills 861 and 950. The regimental commander decided to plug that gap with the newly arrived 2d Battalion.(38)
At 1400 the day it arrived, Company F, 2/26, conducted a tactical march to Hill 558--a small knob which sat squarely in the middle of the northwestern approach. The rest of the battalion spent the night in an assembly area approximately 1,300 meters west of the airstrip. The following day, Lieutenant Colonel Heath moved his three remaining companies and the CP group overland to join Company F. Once the Marines were dug in, the perimeter completely encompassed Hill 558 and blocked enemy movement through the Rao Quan Valley.(39)
Even with 2/26 in position, there was still a flaw in the northern screen. The line of sight between K/3/26, on Hill 861, and 2/26 was masked by a ridgeline which extended from the summit of 861 to the northeast. This stretch of high ground prevented the two units from supporting each other by fire and created a corridor through which the North Vietnamese could maneuver to flank either Marine outpost. About a week after his arrival on Hill 558, Captain Earle G. Breeding was ordered to
take his company, E/2/26, and occupy the finger at a point approximately 400-500 meters northeast of K/3/26. From this new vantage point, dubbed Hill 861A, Company E blocked the ridgeline and was in a good position to protect the flank of 2/26. Because of its proximity to K/3/26, Company E, 2/26, was later transferred to the operational control of the 3d Battalion. Although these units did not form one continuous defensive line, they did occupy the key terrain which overlooked the valley floor.(40)
With the primary avenue of approach blocked, Colonel Lownds utilized his remaining assets to provide base security and conduct an occasional search and destroy mission. The 1st Battalion was given the lion's share of the perimeter to defend with lines that extended around three sides of the airstrip. Lieutenant Colonel Wilkinson's Marines occupied positions that paralleled the runway to the north (Blue Sector), crossed the eastern end of the strip, and continued back to the west along the southern boundary of the base (Grey Sector). The southwestern portion of the compound was manned by Forward Operating Base-3 (FOB-3), a conglomeration of indigenous personnel and American advisors under the direct control of a U. S. Army Special Forces commander. FOB-3 tied in with 1/26 on the east and L/3/26 on the west. Company L, 3/26, was responsible for the northwestern section (Red Sector) of the base and was thinly spread over approximately 3,000 meters of perimeter. The remaining company from the 3d Battalion, M/3/26, was held in reserve until 19 January when two platoons and a command group were helilifted to 881S. Even though it held a portion of the perimeter, Company D, 1/26 became the
reserve and the remaining platoon from M/3/26 also remained at the base as a reaction force.[13](41)
In addition to his infantry units, the regimental commander had an impressive array of artillery and armor. Lieutenant Colonel John A. Hennelly's 1/13 provided direct support for the 26th Marines with one 4.2-inch mortar battery, three 105mm howitzer batteries, and one provisional 155mm howitzer battery (towed). The 175mm guns of the U. S. Army's 2d Battalion, 94th Artillery at Camp Carroll and the Rockpile were in general support. Five 90mm tanks from the 3d Tank Battalion, which had been moved to Khe Sanh before Route 9 was cut, were attached to the 26th Marines along with two Ontos platoons from the 3d Antitank Battalion.[14] These highly mobile tracked vehicles could be rapidly mustered at any threatened point so Colonel Lownds generally held his armor in the southwestern portion of the compound as a back-up for L/3/26 and FOB-3. All told, the Khe Sanh defenders could count on fire support from 46 artillery pieces of varied calibers, 5 90mm tank guns, and 92 single or Ontos-mounted 106mm recoilless rifles. With an estimated 15,000 to 20,000 North Vietnamese lurking in the surrounding hills, the Marines would need it all.(42)
Ironically, the incidents which heralded the beginning of full-scale hostilities in 1968 occurred in the same general area as the encounter which touched off the heavy fighting in 1967. On 19 January 1968, the 3d Platoon, I/3/26 was patrolling along a ridgeline 700 meters southwest of Hill 881N where, two days before, a Marine reconnaissance team had been ambushed. The team leader and radioman were killed and, while the
