Thursday, January 31, 2008

Clarion Whisper

Forget what have you done for me lately? Rather, what will you do for me tomorrow?

How this market digests bellwether Google's slackluster earnings (out after the close today) and tomorrow's employment report is all we're really concerned with tonight, right?

Reversal of fortunes are rampant lately, as we re-re-reverse curse and course on an almost daily basis. But one thing is clear - the troubled Financial, Consumer and Homebuilder industries are trending higher; regardless of how bad it is out there.

If we choke back tomorrow on hapless jobs and bellwether bungees, it's really only a matter of time before we re-turn these worms higher again. Scrambling shorts are surely playing a role, but there is significant buying going on at the same time, and for the moment both the shorts and the buyers are hoping to buy these stocks lower.

Today saw a confirmation rally day in the Russell 2000. Whether the Nasdaq and the S&P 500 also managed confirmation of a new trend is open for debate. You can make a case for either side, but I think the picture in the R2k is clearest - smaller-cap stocks have now begun a new trend.

I wouldn't call for any new secular trend here. I wouldn't say that in the long-term stocks will always out-perform. We've finally seen the beginning of the end for this old bull and if I could only make one bet for the next three years I would hammer the under.

But we have uber-stimulus, in an election year (pull out the almanac), we have pessimistic barber shop economists spouting from all corners and we see new up-trends developing.

Ideally, I should be pulling up my boat from the Bahamas only now. I'm underwater (wet pussy) instead of calm, cool and fat. But this is now and now is finally starting to click. I'll keep fighting (although in varying degrees based on action) until the major indices print lower-lows, or I blow a gasket; or both at the same time, likely.

Outside of Ag (Fertilizer, Farm Machinery and Agricultural Operations), new leadership is fuzzy at the moment and possibly an indication nothing secular is developing. Metals and Steel, for instance, is not exactly how you expect a new bull tape to print.

Tomorrow will be interesting. The Dry Powder List from last night was blasting Jesus all day, so it stands to reason then we'll see blood in these names tomorrow. That's just the way the ball has been bouncing lately.

However, if there is still a job being created in the world (or if the market doesn't give a poor rat's ass), I won't need it. Not with this bunch.

Current Longs (by size): LNN, JASO, CLP, DBRN, SBUX, BYI, TITN, IRIS, CAF, CUZ

LULU

Traded out of LULU, 33.85.
(this was a 1-3 day trade; took profits on the late insider sale filings, in case that hits the stock tomorrow; might reconsider later, depending).

TITN

Bot first tranche of Ag Machinery name, TITN; 16.55
(this is the most powerful IPO chart out there at moment, imo; which can be quite a lucrative place to be if the market trend is in fact changing).

BYI

Added long BYI; 47.38
(maker of gaming machines; strong growth; held Dec. breakout and 50-day m.a.)

JASO

Bot JASO long (52.20); 1-3 day trade if not stopped sooner.

SBUX, CUZ, DBRN

Traded back into SBUX long (18.72).
Bot CUZ (ave. 23.96); longer term play (a REIT), unless stopped out sooner.
Bot back DBRN, 11.76

Wednesday, January 30, 2008

Dry Powder Long-List

The market surged following the Fed's aggressive 50-50 cut and corresponding 'dovish' statement, only to thwack lower in the final hour. The S&P 500 had reversed up 1.7% following the FOMC announcement, but it re-reversed and closed negative by 0.6%; and kept right on going in the after-hours session.

I took a hit, but I pushed-out a fair percentage of my position and I have plenty of dry powder at the moment. Now that I've had several hours to rest and recover, I'm compiling a freshened list of longs to refer to for fresh attacks, assuming we're not deteriorating dramatically.

In the larger picture, only lower-lows in this market will cause me to back off from a long-only bias, as the fundamental picture for so many industry groups is solidly positive now and for the foreseeable future. I'm forced to keep cautious until the technicals improve (I still need a confirmation follow-though day, whereby the market rallies at least 1.5% on rising volume, to get aggressive). But in the meantime I'm willing to attempt selective entries, depending.

Dry Powder Long-List for Thursday/Friday stemming from leading or rising industry groups:

Retail-Apparel/Shoes:
COH
NKE
LULU (14.7% short int. managmnt owns 42% of shares)
SMRT (6.5% short int; guided lower on 10th and then Chairman bot >$1m stock following)
DBRN (12.5% shorts; they guided lower on Jan 10th and insiders bot heavy on 17-18th)
CHS (8.7% short int; heavy insider buys)
CBK (13% short int; multiple recent month insider buys, though not heavy)
CHRS (14% short int; heavy insider buying)
CACH (8.75% shorts; multiple recent, decent insider buys)
HOTT
URBN
ANF
ROST
AEO
CHIC

Retail-Home/Dept/Restaurant:
BBBY
WMT
COST
SBUX (need reversal higher on earnings/thursday)
PFCB (heavy insider buying in November + 37% short int.))




Finance-Investment Bankers:
FCSX
GS
BSC
MER
KBW

Banks:
USB
NTRS
JPM
Insurance:
AFSI
AFL

Transportation-Trans Svcs:
EXPD
PACR
FDX
CSX
KSU
NSC
BNI
RAIL

Steel:
SID
MTL
STLD
TX

AG/FERTILIZER:
LNN
SYT
TITN
CVI (Management holds 74%)
TRA
TNH
DAR
MOS


Homebuilder:
NVR (strong relative strength; 28% short int.; Chairman bot >$50M! in stock early Nov; reported earnings on Tuesday, before the open; reversed higher).


Finance/REITS:
The Financial REIT group jumped from 107 to 65 of 197 ranked industry groups, IBD.
1. Note that the group was already up to 107 before last week (it was ranked 161 3-mo's ago)
2. There has been consistent and massive insider buying in these stocks (began around Nov., grew in Dec. and still larger in Jan.)
3. These stocks have large short interest (interesting combination, large shorts vs. large insider buys)
4. These stocks had been basing/consolidating for some time, then held their lows in the recent panic.

HME (decent insider buy Nov07; 15% short int; yield 5.4%; decent relative strength (RS))
CDR (multiple insider buys; 8.5% yield; 8% short int.; ex-divd date 2-6-08)
CUZ ($1M inside buy by Cousins himself; 11.6% short int; 6.3% yield; did trade lower-low)
ALX (enormous insider buying, no divd, 3.5% short int; did briefly trade to lower-low)
CLP (low RS, but enormous insider buying in Dec; 8.6% short int; 8.3% yield)
CBL (low RS; heavy insider buying; 8.7% yield; 7% short int)

DBRN, NVR, JASO

Ugly close; sold out of DBRN, NVR and JASO late minutes.

Holding LNN, CLP, LULU, IRIS, CAF at moment (all long).

SBUX

Traded out of SBUX long at 19.44; late in session (not willing to take this into earnings tonight with the weak late action in the stock and the mkt).

LULU

Bot LULU long, 32.36; 1-3 day trade unless stopped sooner.

LNN (additional)

Bot further into LNN at 61.38. LNN provides equipment (irrigation systems) to the Ag. industry; the stock is thin, but pulled back and held previous breakout from 12/20, as well as the 50-day m.a. around the same level; decent entry here with a bench at that breakout/50-day m.a.

LNN

Went long a leadership/growth name following the 50-50bp cut by Fed; LNN (ave. 61.90)

Tuesday, January 29, 2008

Little Piggies

Tech remains sluggish here, but who needs sexy when there is money on the floor.

Retails, Homebuilders and REITS (settle down now) are still cruising higher. Almost everyone has recognized this now, but all I have heard so far is "take your profits if you've got them," "buy these on a pullback," yada etc. yada...

Volatility abounds, yet the market is churning every which way while standing more or less still lately, so trading in and out of positions makes sense right now. However, when I sell an ugly retailer (I do mean ugly, yes), it's not been super convenient getting it back at a lower price.

These are beasts. No better way to describe them.

The Solar group started to wake up today and I got off-track some, trading long into JASO. This idea may work in the end, but I don't have any time. I'm not willing to be long Solar by the time the Fed's FOMC statement is inked tomorrow. Hurry up or shut up - or someone else makes the money there without me.

In retrospect, I should have stayed away and traded this group only after verification of life post-FOMC.

At least I've been hanging out at bars more Dress Barn and Chico's. Fighting more Googly battles looks ugly from this side of the tracks. Christ, I bot a homebuilder (NVR) going into earnings today.

Sick

You need to know your enemy right now- the hideous groups are way out-performing sexy RIMM-jobs and AAPL-jacks. This may or may not change after the cut is announced tomorrow, but Ugly is in right now.

I'm only buying glossy if it has HOTT black glitter inside the package.

Long Holdings at moment (ranked by size): NVR, CLP, JASO, SBUX, DBRN, IRIS, CAF

JASO

Traded into JASO long for a trade (ave. 60.03). The solar group is moving into leadership for the day; This is a quick trade, however; out today, or before the FOMC announcement tomorrow at latest.

CHS

Traded out of CHS long at 9.30, just below the 50-day m.a.

Monday, January 28, 2008

ONXX

Traded out of ONXX (48.65) late in the session; mainly because I don't want so many names here; name not looking bad otherwise; same was true with the APOL today - took profit on that jack-higher since I have too many names; prefer holding names more directly impacted by stimulus at moment.

The market is recognizing the Fed will very likely cut a full 50 bp Wed. Holding plenty of stock here overnight; including NVR which reports before the open tomorrow.

Long Holdings (ranked by size): NVR, CLP, SBUX, DBRN, CHS, IRIS, CAF

APOL, SBUX, DBRN

Traded out of APOL long (ave. 75.08)
Reduced large new position of SBUX long (19.61)
Reduced large new position of DBRN long (11.56)

CLP, NVR

Added REIT long CLP (23.55); added homebuilder NVR long (596.00)
(NVR reports before the morning tomorrow, FYI)

CHS

Added a 2nd retail-apparel long, CHS (ave. 8.63)

DBRN, SBUX

Bot retailer DBRN (ave. 11.145) and bot back SBUX (19.35 - 10-day m.a.); early Monday.

Sunday, January 27, 2008

New Live-List

The futures are down pretty good tonight. Asia is taking further body shots.

I'm coming in light - if I can sense any sign of firming after the gap-down, I am going to trade into some of the areas I think will reverse and/or hold up the strongest in the market right now.

I spent the weekend looking for this combination: Stocks from groups that are most aided by new, uber-stimulus + No new lows last week + Recent insider buying + High short interest.

At the moment, I don't really mind if some of these are lagging significantly in terms of relative strength, since at the moment most of the power in the market is coming from stocks exhibiting these characteristics. These type stocks held up relatively well on Friday, for instance, giving back only a small amount of the recent gains and on considerably smaller volume. I may take a shot at one or two names at the open, but as soon as I can see these as beginning to reverse, following the down-open firming, or at the very least clearly firming, I will start firing into several. I need to see the continuing resilience (retracement-life) first.

Put another way, If pigs are still swimming Monday, I'm diving in with them.

RETAIL Clothing/Apparel/Shoe:
1. The Retail sectors are one of the areas most aided by the new stimulus and lower rates.
2. This list all show recent strong-to-heavy insider buys.
3. They all have significant short-interest levels.
4. These names did not go to lower-lows on the panic last week (exception CACH briefly.
5. None of these names hold debt.

(Keep an open mind, there are some floozies here, several of which were a short staple for me in '07)

SMRT (6.5% short int; guided lower on 10th and then Chairman bot >$1m stock following)
DBRN (12.5% shorts; they guided lower on Jan 10th and insiders bot heavy on 17-18th)
CHS (8.7% short int; heavy insider buys)
CBK (13% short int; multiple recent month insider buys, though not heavy)
CHRS (14% short int; heavy insider buying)
CACH (8.75% shorts; multiple recent, decent insider buys)
HOTT (yikes, but same theme)


Homebuilder:
NVR (strong relative strength; 28% short int.; Chairman bot >$50M! in stock early Nov; EPS is due here on Tuesday, before the open).
-I left out the rest of the group for now; they are too extended and/or suspect. This appears to be the real quality of the group. I would prefer not buying this below Friday's low, which would be moving back below the 200-day ma.

Finance/REITS:
The Financial REIT group jumped from 107 to 65 of 197 ranked industry groups, IBD.
1. Note that the group was already up to 107 before last week (it was ranked 161 3-mo's ago)
2. There has been consistent and massive insider buying in these stocks (began around Nov., grew in Dec. and still larger in Jan.)
3. These stocks have large short interest (interesting combination, large shorts vs. large insider buys)
4. These stocks had been basing/consolidating for some time, then held their lows in the recent panic.

(I have never bot a REIT in my life. These are unprecedented times indeed!)

HME (decent insider buy Nov07; 15% short int; yield 5.4%; decent relative strength (RS))
CDR (multiple insider buys; 8.5% yield; 8% short int.; ex-divd date 2-6-08)
CUZ ($1M inside buy by Cousins himself; 11.6% short int; 6.3% yield; did trade lower-low)
ALX (enormous insider buying, no divd, 3.5% short int; did briefly trade to lower-low)
JRT (large insider buying; large, 30% short int.; large, 17.4% yield)
CLP (low RS, but enormous insider buying in Dec; 8.6% short int; 8.3% yield)
CBL (low RS; heavy insider buying; 8.7% yield; 7% short int)

Saturday, January 26, 2008

Weekend Bend

I'm doing work on industry groups this weekend; hopefully giving me an edge in how to play this beast going forward.

Longer term, I'm not too excited about the US market. Intermediate term, I'm of the mind that we're going to fledge higher, but not necessarily in a fine, clean fashion; just higher overall. Near term, I think selling/shorting strength and buying/covering weakness is best. The buy and hold days are likely over, as far as a viable, best strategy; as are the more recently lucrative, short and hold days. Volatility may remain high while actual progress more muted; churning stuff.

But importantly, for the intermediate period the problem areas of the market appear to have put in their lows. The moves higher in the Housing, Financial and Consumer industry-groups were not merely 'one-day-wonder' counter-trend short squeezes.

The reason this is clear to me: 1.> we saw three days of intense rally in these sectors (As opposed to typical 1-day wonder counter-moves), followed by 2.> not an immediate and significant give-back on Friday in these trouble-sectors, at the same time the broad market coughed-up more than a little of its gains (in other words, the trouble-sectors have suddenly started out-performing the general market). 3.> New 52-week lows within the NYSE have dropped from over 1000 on Tuesday's session (roughly 1/3rd of all stocks made new 52-wk lows on Tuesday) to under 100 on Friday's retracement-decline (which is roughly only 3% of all stocks). This is a huge swing; evidence that the Builders, Financial and Consumer groups are out of their depression; at least for now.

Here is a list of (most of) the troubled-groups and what percentages higher they closed on Friday, from their recent, intraday lows:

Building-Residential (homebuilders)..........................+37%
Building-AC/Heating....................................................+12%
Building-Cement/Contract...........................................+12%
Building-Heavy Constr...............................................+11.5%

Finance-Mortgage Svcs (FNM, FRE, CFC, etc.)..........+10.5%
Finance-Consumer Loans (CIT, COF, ACF, SLM)..........+17%
Banks-Super Regional (KEY, WB, USB, WFC............+16.5%
Finance-Investment Bankers (GS, MER, LEH, etc).......+12%
Finance-Savings/Loan (WM, etc.)..................................+8%
Money Center Banks (C, BAC, JPM, HBC, etc.)...............+6%
Insurance-Prop/Cas (MBI, ABK, SAF, ALL, etc.)........... +6%

Retail-Discount/Variety (DLTR, FDO, NDN)................+23%
Retail-Home Furnishings..............................................+18%
Retail Dept Stores..........................................................+18%
Apparel-Clothng/Mfg................................................. ...+15%
Retail Restaurants.........................................................+14%
Leisure-Hotel/Motels.....................................................+14%
Apparel-Shoe...................................................................+9%

So if it is true that 1.> we have seen the market lows and 2.> we age going to have high volatility in the near-term, then it boils down to identifying trading ranges; buying or covering-short at the proper entries and selling or shorting on strength; at least until we confirm a new uptrend; at that point (if we get it, it is wiped-out by any lower lows in a major index going forward) I will focus on the long-side entries and exits only; shorting only when/if nec. as a hedge.

In other words, volatility is high in the market right now, but we're not necessarily going very far in the near term. I'm looking to buy dips and sell strength (long, short, medium...); until this changes. This is why I dumped the Ultra-QQQQ and most of the rest of my (long) position on the gap-up Friday. But as it turns out, I really should have sold everything and turned around and went short.

Live and learn - adjust before you die.

I may or may not manage to post some long and short names lists before Monday. Good weekend!

Friday, January 25, 2008

In ONXX

Bot ONXX at 47.52.
May or may not re-buy SBUX in the neighborhood of the 10-day m.a.; ~19.40

Back and Fill

It's Digestion day on the Street.

I unloaded most of the boat in the first half hour today, but I am hungry to buy back into a couple of ideas on this consolidation - not necessarily today; I may or may not nibble-back late.

There was a tremendous amount of relevant news the previous couple of days and the market swallowed it positive. And even though we are seeing clear lethargy today (MSFT blast-up has totally eroded now, reversed lower in fact), the environment has shifted and that is not changing in the near term; backing and filling is healthy action in that context.

We need a confirmation day, before we can confirm the trend in the market as higher; which technically is not eligible to occur until Tuesday at soonest. Look for a significant rise in the market, on rising volume, Tuesday or further-out to confirm a market bottom. In the meantime we have merely a market low.

Short term and possibly for a couple of months or more, buying weakness has likely replaced selling strength (short) as the optimum strategy.

Longer term, we have real problems, but we've know that for some time, right?

And now we can paint a clearer picture of just how the macro game is unraveling. George Soros has written an interesting thesis on this and I think it is an important read. Soros is not exactly the trader he was in the past, but making billions does have a way of notching lower ones priority for profiteering.

He is a guy who can still read the big picture, however, and that picture ain't quite glossy.

Out COST, SUNH

Traded out COST-long (ave. 67.40)
Out SUNH-long (ave 17.78)

Out SBUX

Traded out SBUX long 20.46.

Out QLD

Traded out of Ultra-QQQQ-long, QLD, at open, 78.54

Thursday, January 24, 2008

Out COH, MSFT, KLAC, TWM(short)

Took profits a couple of trades, on early strength in the open-30 min. today.

Out long-COH (ave. 30.52)
Out long-MSFT (32.54)
Out long KLAC (43.48)
Out short-TWM (83.74), too soon there perhaps, even though a very-quick 8 points; will be trading in and out however and entering higher is not a problem if entry is +EV.

Market still live; will keep hunting bear here. MSFT and KLAC report tonight. I would risk this, but convinced the edge is strong enough yet to take on bellwether earnings.

Holding long SBUX, COST, SUNH and CAF at moment.

[Edit: Bot APOL at (ave. 74.30), 75 min. into session; slightly above 50-day m.a. now]
[Edit: Bot QLD long at 74.45 w 20 min. remaining in session. Going double-long the Ultra-QQQQ's instead of re-shorting the Ultra-short Russell TWM]
[Edit: Bot IRIS at close (ave. 19.21)]

Wednesday, January 23, 2008

Praise Be Retrace

Worms were turning today.

Pigs were indeed jumping.

Housing, Banking, Financial and Retail groups followed though higher.

Much higher.

Volume was heavy. The Nasdaq reversed higher on the heaviest trade in at least 1000 sessions (my daily screen stops at 1k; no doubt we saw larger in the Great Purge of 2000; point is today was big in terms of volume traded, heaviest in several years).

And all in the face of iconoclastic-slambastic bloodletting of heroes AAPL and GOOG.

We knew volatility was running high this month. Wily and woolly. Opportunities open up for those left standing and inefficiencies can be lucrative. At one point on the tape, breadth on the NYSE was negative by only a few hundred issues (~1400 vs. 1900) at the same time the NDX was negative more than 4%.

That was enough for me to get excited (that is unprecedented underlying strength coincident with such ClockworkOranging upon a leading index). I didn't go woolly wild, but I added to my retail and tech positions by shorting the double-short Russell 2000, TWM (thus making me double-long the R2k index). This was basically a gimme (blind squirrel stuff). The Russell has tracked more closely the demise in the Financials than any outside index (remarkably so) for what has been around nine months now.

But today the Financials were blasting Jesus while the Russell was merely humming Yanni. Once the Russell started firming I (finally) got short TWM at 91.80. The last hour of the day today was exceptionally powerful.

The Lord, he set out with a hundred sheep - he gonna come home with a hundred sheep.

Jesus loves the weak and helpless after all.

In COH, COST

Bot retailers COH (ave. 26.28) and COST (64.95) on the down open.

Holding COH, SBUX and COST long in retail now. MSFT and KLAC tech from yesterday. Still long SUNH and CAF from prior.

Tuesday, January 22, 2008

Seller Beware (Five Tumbles and a Jump)

I spent the afternoon collecting some interesting historical data which regards multiple Fed rate cuts, largely from Norman Fosback's Stock Market Logic, originally published in 1976*

TWO TUMBLES AND A JUMP:

Fosback's Two Tumbles and a Jump rule states that when the Federal Reserve eases the monetary climate by decreasing one of three basic policy variables (Discount Rate, Margin Requirement, or Reserve Requirement) two times in succession, conditions are favorable for an ensuing "jump" in stock prices. Prior to today's 75+75 basis point cut, the Fed had already reduced the Discount Rate (cost for banks to borrow directly from the Fed), from 6.25 percent to 4.75 percent since August. That rate now stands at 4%.

Historic Successive Discount Rate Cut Results:

Signal
Date
SP500 Max %
SP500 Max %


Gain 1-Yr-later
Loss 1-Yr-later

1
Dec 23, 1914
+ 82%
0%
2
June 16, 1921
+ 41%
- 6%
3
June 12, 1924
+ 42%
0%
4
Nov 15, 1929
+ 28%
- 23%
5
June 24, 1932
+ 137%
- 4%
6
May 26, 1933
+ 31%
- 8%
7
Sep 14, 1942
+ 48%
0%
8
Mar 30, 1949
+ 16%
-11%
9
Apr 16, 1954
+ 36%
- 1%
10
Jan 24, 1958
+ 34%
- 3%
11
Aug 12, 1960
+ 20%
- 7%
12
July 10, 1962
+ 24%
- 6%
13
Dec 4, 1970
+ 17%
0%
14
Dec 6, 1971
+ 22%
0%
15
Jan 9, 1975
+ 34%
- 1%
16
June 12, 1980
+ 22%
- 1%
17
Dec 3, 1981
+ 31%
- 3%
18
Nov 22, 1983
+ 96%
- 11%
19
Oct 29, 1989
+ 39%
- 16%
20
Dec 19, 1995
+ 150%
- 2%
21
Jan 31, 2001
0%
-39%
22
Sep 18, 2007
?
min max loss will be -14%


37% median
- 7% median






Oct 31, 2007
3rd cut Discount Rate

Dec 11, 2007
4th cut Discount Rate

Jan 22, 2008
5th cut Discount Rate


This is but one indicator. I'm not ignoring that and I don't like to fight the tape, but I certainly don't want to fight the Fed with results like that. Today was the 5th Discount Rate cut and counting, since August. We should see higher prices beginning now, or sooner rather than later if not immediately.

A further look at the data reveals a little less certainty of a rise close to the cut-date and a progressively higher probability of a rise in prices 3 months out, 6 months out, 9 months out, 12 months out, and 18 months out. This is influenced, naturally, by the historic tendency of the market to rise over time, but these numbers are well above any mean norms.

* My Fosback data re Two Stumbles and a Jump runs from the period between 1914-1981. With the help of Hans Wagner and The Market Oracle, I was able to bring the data up to September 18, 2007

In SBUX

On the heels of the Fed action, Retail groups led in the market today. I bot SBUX late in the day (ave. 19.69). There was strong action from retail bellwethers WMT, TGT, HD, and COST, all of which look live for the near term.

AAPL was woodsheded after hours, following earnings, setting up another test of will for the market. We finished the day in promising fashion otherwise.

Force Fed

I finally figured out what Big Ben was saying on January 10th when he said the Fed was prepared for further substantive action in lowering rates.

He meant, "Just as soon as the world goes into a panic plunge, we are there for you." Not a day later; unless you count US holidays, then not 2 days later; but not much later in either case; because the Fed is on the job.

Pretty amazing when you think about it. Fed cuts have a delayed effect; the Fed admitted they saw the problem and they were prepared to respond; they then sat on Fed hands while the market eroded further (and further) and they jump to their feet and respond only after the world lost any and every bid.

I wanted to buy the open, at least for a quick trade, and last night my only hope was the Fed wouldn't come in before the open and muck up the ensuing panic-open. The Fed took the trade away (at least for me, the trade still worked, but I got cold feet not knowing if the Fed action would mean not opening at the lows).

We did catch a bid and a rather decent one at that. We may or may not need some amount of re-test and so I'm forced to be careful in the interim, but we have some extreme positives now from a trading perspective. First, we saw real fear. The entire world this time (good time for all). 2nd, we have dramatic rate cuts and more to come. The Fed's delivery left a little to be desired, but the bottom line is the bottom line and we trade in the present. Rates are a major positive right now.

If we can close above 1805 or so on the NDX, it is a victory for the market and if not, then we have further work before any clear healing has begun. The NDX was the last index to break the August lows and if it closes above that level today, you will have never broken that key index; a clear positive.

Several key NDX stocks never really broke down/or at least they held their long-term 200-day moving averages. MSFT, AAPL, GOOG, RIMM to name a few (AAPL reports tonight, FYI).

I'm buying some tech - I bot MSFT heavy today (ave. 31.95) and KLAC lightly (ave. 42.86). I may or may not hold MSFT into the eps number due after the market on Wednesday; depending on action.

For now, Fed fund futures are pricing in another 50bp for the January 30th FOMC meeting/announcement as probable; in addition to today's emergency hack(job) of 75bp. If the market rallies strongly between now and then , I assume we'll see only 25, but otherwise 50 is likely.

Oversold Financials and the Russell 2000 have reversed up on the day, which is important, but in and of itself is not that indicative of any bottom. Plenty of shorts have reason to take profits today, following the clear signs of panic. It does strongly suggest that we won't be crashing or anything like that today, however.

Today is clearly not the end of the world then, but it is not necessarily the beginning of an intermediate-term rally either. I think it is a little more than likely, to be clear, but my limbs are tightly held at the same time. Taking this one hour at a time.

Friday, January 18, 2008

Waxing Philosophical

Obv., today's open offered a more graceful exit for mash-minded, long-only whales like myself. Salt in my eyes and salt in my shorts (as in skivvy's) - salt and salted has been the theme for me this January.

Anyway, I'm taking a day off, following the cool drubbing of my leadership stocks. I'm steam-cruising to the (very)deep south as I write, having signed onto a 3-day underwater basket bob and weave seminar.

As far as the market, I'm not dialed-in at present. I have enough confidence to realize that I will know it when I see it, but we're at an important juncture at the moment and so far we have done nothing but failed when it has mattered (breaking almost all levels of support, etc.). I can no longer pretend to expect how it will turn out.

If rates were higher (instead of being low and going lower) this would be Dow Jonestown. It may be the beginning of a major bear anyway, low rates, election year and all, but at this point I still suspect it's merely selective depression.

To get aggressively long again, I really need to see the flush+reversal day on major volume. I'm hopeful we'll see that on Tuesday, but hope has not been a winning trade. The VIX is starting to wake-up at least and Tuesday is the first day following today's option-expiration - those post-expiry days can be quite nasty in a terrible market. Nasty + nasty + reversal would put me back into leadership longs.

To get short I need to see more of the erosion-action this market has been tracing (and then sell strength), but at the moment we are a little oversold to enter short-side plays. Also, the relative strength in the NDX remains (bullish) and the waking-up of the Semi-equipment stocks (KLAC, LRCX, AMAT, NVLS) which began the day Intel blew-up this week is still clear on the tape (also bullish).

In retrospect, I should have flushed-out my position on Tuesday, but that is just something I have to learn from, heal and move on. I had a huge month of December - blew it up in January. Fighting a shark and losing is not new to me, I'll pay tuition from time to time. But unlike some trading periods in my past, I try now to get out of the water when the beast is bigger than me. I can still yell expletives from the shore, whilst sewing-up my limbs and ankles. Club a pup seal or something when I can't take down the big stuff.

I'm no Ahab now. That sort of behavior is for folks younger (or older) than I. I'm just a long/short aggressive growth, frisky-with-the-risky trader with a temporarily sore lower back.

Hence the hiatus.

I dropped-out of APOL today. I'm left with a nursing home position (SUNH) and a closed-end Shanghai fund, CAF.

I'm sending inquiries to several Shanghai nursing homes now in fact...in case this long weekend doesn't put me on better tracks.

Thursday, January 17, 2008

Quick Note

I sold everything remaining, except for APOL, SUNH and CAF, beginning at 3:15 est; it took most of the hour.

I might check into a SUNH nursing home; maybe get a new degree online with my APOL; move to Shanghai w CAF; anyway, flushed-out today.

Last Chance to Dance

Gapping up these days is an ugly set-up for the trading day and I did start cutting names on strength early on...then continued to chop as the market reversed. I moved out of ~40% of my total portfolio. Most of that underwater.

I'm churning and I'm burning and it looks like I'm going down fighting. I'm actually up on the day, a fresh change and one several positive divergences out there at moment, but I'll churn it almost all out in the final hour if this is not improving further.

The market so far continues to view further bad news as negative. That's not how I wrote this script.

In fact, I just put on 3 trading buys, based on several positive divergences on the tape. If this does not re-reverse upward later today, I will sell it back and sell more of the pre-existing position. In that case I will be out-of-fight-and-light for tomorrow.

Okay, the Dow and SPX are flirting with new lows now (I am no longer up on the day), but the NDX is well above the earlier mark this morning - time for the Plung Protection Team to kick in at 2:30 - we'll see.

I bot SBUX (19.25 ave.), KLAC (43.13) an I bot back the JASO sold in the first hour (66.38 ave.)...at 62.78.

Earlier I let go of all GENZ, CVI, CPHD, OII, HK, LNN, CZZ, AKNS and HOLX.

Current long Positions (by size): KLAC, APOL,
SBUX, JASO, FCSX, SUNH, VIVO, PRXL, CAF, YGE, GHXD, IRIS, SOLF, TISI, ONXX, TITN, CSIQ

Wednesday, January 16, 2008

Maybe This or Maybe Splat

If every day in the market were like today, I'd prefer dismantling bombs for a living.

The glass was half-full early and middle, but leaning half-empty again by the close. Beaten-down Retail, Financial and non-Intel Semiconductor names were firing mad to the upside, while leadership groups were predominantly woodsheded. In the end, we did not get the reversal wave off of the emotional flush, marking a bottom on the negative Intel news. The market was maybe firming and maybe breaking the key-SPX lows from August.

All the damned day long.

Now the Medical/Healthcare/Biopharma sectors are the only leadership not to get nailed. If the market is turning, these groups are the clear cut leadership for focusing long. If the market is not turning, these will likely be the next leaders hunted down and boiled.

Historically, terrible markets do not bottom on Friday's and it has been a long time since a reversal-looking day coming off of an emotional-flush morning sold-off in the final hour instead of rallying strongly. I'm bailing out of longs tomorrow if the worm does not turn.

The only reason I am still in here is that 1.> we did close well-off the lows today and we did hold above the intraday August lows in the NDX and SP500 (the NDX is showing a nice positive divergence here in fact, even with the blow-up in heavily weighted INTC. 2.> Breadth was positive today on the Nasdaq and flat on the NYSE on the bad-news session. 3.> The Nasdaq traded major volume (with positive breadth) and closed above the level it opened (accumulation). 4.> The semi-equipment stocks woke up today (take a look at KLAC, NVLS, LRCX and even AMAT. Perhaps it is just short covering, or perhaps it was a 1-day wonder - but this is a group that turns early in the market and they turned on major volume today. I wasn't buying these (I tried getting into KLAC and LRCX, but missed and then didn't want to chase them), but I was getting that cozy reversal feeling intraday, seeing the moves there.

That mood turned progressive shades of chowder in the final 60 minutes.

Like today, tomorrow is key. I don't want to have to bail-out Friday in a panic, so I'll bail out tomorrow if we don't see a positive tape.

I added to APOL and JASO today and took on small tranches long in SOLF, AKNS and ONXX. This means I have that much more egg to sell tomorrow if the chowder is still on my face (one thing I will say - there are a lot of new shorts in the Solar group. I think we'll see a wicked bounce in that group if the market turns here).

Current long Positions (by size): APOL, GENZ, JASO, FCSX, OII, LNN, CVI, HOLX, SUNH, VIVO, PRXL, CAF, CPHD, YGE, GHXD, IRIS, SOLF, TISI, ONXX, TITN, CZZ, HK, CSIQ, AKNS

Tuesday, January 15, 2008

Here Comes the Flush

INTC earnings have flooded the sell-gates in the after-market. Anything and everything tech is getting flayed at moment.

Both the NDX and the S&P 500 will almost certainly test their august lows tomorrow; this will be an important session. If we flush and reverse or flush and at least hold above those August 16th lows by the end of the day, we will have a technical bottom on the heels of reasonable capitulation (trading bottom at least, but likely more than that in my opinion).

If we break the lows, only to break further later in the session, then we merely have a broken market (nothing for me then in the near term - back to nature)

Time of Day is going to be crucial for decision making tomorrow (at least for this trader). I detailed several things I look for to speculate on a potential capitulation/reversal within a damaged tape, prior to the almost-flush session of the 9th (scroll down on that link).

The results will define the opportunity. I'm expecting/hoping non-tech areas of the market put in their lows at the open and catch a bid from there; I have no tech at present.

Late trades today:

I finished the buy of FCSX at the close today (50.60).

I was shaken out of MR (ave. 38.50).

I sold the remaining SYT late (ave. 53.77). Still in LNN, CVI and TITN; fortunately I unloaded TNH on the move yesterday.

I got nervous today Ag could get nailed pretty good here; in similar fashion to the recent drubbing in the Solar group. I'm going to be careful putting new money into Ag short term.

Solar, however, is a group I will buy aggressively later tomorrow if the market survives and that group is of the first to turn higher. Those are a couple of big IFs, but in the case this transpires I think we'll see the biggest, tradable move there.

Medical/Bio/Etc. still appear quite firm. The medical groups dominate my Newer Breakouts and Live Set-Ups lists from over the weekend. There are a few newer names I've found since and some of those listed should now be removed, but I'm not going to spend the time tonight to bring it all up to date. I'm going into deep-freeze meditation instead, between now and tomorrow's (legendary) session.

Gut Shot

Shots to the body galore.

I'm pleased with the action in everything but the solar names in my portfolio, but I have more names than cavities right now and all without a hedge. I'm reeling, but persistent and at the moment I'm down a couple of Burger King lunches more than I finished up on the day yesterday, so the shock is somewhat absorbed.

Still...not pretty

Fed fund futures now indicate the potential for an interim meeting rate cut by the Fed has dropped significantly; likely now we're going to see nothing from the Jan. 30th FOMC meeting/announcement.

Steve Jobs failed to pull a rocket out of his pocket at Mac World today.

Citigroup's earnings this morning indicate the consumer is having trouble paying those credit cards from last year's fewer COH, etc. purchases.

Not too much new, but the market acts like it matters, so I can't just fade it. I'll have to reduce the worst of it in the last hour of trading if we're not coming off lows or showing better life.

New 52-week lows are considerably lower than the last time the indices were at these levels and today could potentially finish with a 90% down-day as far as declining-vol issues vs. advancing-vol issues - that is actually favorable in terms of 'wash' action and potentially a formidable, bottom-forming development. Flush-and-rush type stuff.

Good day to buy leadership if your gills are not already so stuffed; we'll see.

Current long Positions (by size): APOL, GENZ, OII, LNN, CVI, MR, HOLX, SUNH, VIVO, JASO, CAF, SYT, CPHD, FCSX, YGE, PRXL, GHXD, IRIS, TISI, CSIQ, TITN, CZZ

Quick Note

Taking body shots here with the red tape today. I haven't hedged my position; I may have to later today, depending. I'm expecting to hold the strong names, but in a bad tape I have no choice but to sell the trouble-names. Solars are going to have to close above these lows for me to survive and hold there beyond today. I'm happy with the Medical/Bio-related, Ag-related and Energy positions thus far.

Sold EDU premarket and at open (ave. 76.58).
Bot SUNH at (ave. 17.875).
Trying to buy FCSX within 2% of yesterday's breakout level; missed by a few cents again so far.

Current long Positions (by size): APOL, GENZ, OII, LNN, CVI, MR, HOLX, SUNH, VIVO, CPHD, JASO, CAF, SYT, YGE, PRXL, GHXD, IRIS, TISI, CSIQ, TITN, CZZ

[Edit: Bot 75% tranche of FCSX 3% above the breakout at 50.76]

Monday, January 14, 2008

Quick Note

-Bot tranche of Oil/Gas issue HK (ave. 18.34)
-Bot small tranche of Chinese Comm School play EDU (ave. 18.30) ; this one reports before the open tomorrow; speculative edge is in, given the environment right now; will sell today if it is to close <78.50; obv. risky
-Sold TNH up almost 20 points (>164.50); this one has run up huge, but volume is not so huge. Will look to re-enter later, depending

Competitive Eating

Quietly pulling in bricks of money at the moment. Not that it is quiet around my hovel, I'm in full boilhead mode here. But the Street sentiment is quiet as a drugged mouse.

Nothing drugged here - more like Ignatius speed-eating Swedish meatballs.

I'm trimming back some of the larger positions and/or ridiculous gainers, while trying to keep tabs on new breakouts and pull-back entries elsewhere (the chords are loudest here when an FCSX gets away from my limit price, by a few lousy pennies, and then the mammoth moonshot ensues before I can scramble fast enough; missed it by that much...).

The quiet advance action in the overall market is a positive. I prefer the slow start; backing and filling, wall-of-worry climate; meanwhile, under the surface, many stocks are obscene green.

I was able to sell TITN at the open at 18.32 at the open, but only for one account and I went ahead and bot it right back at 17.25. This one is a beast, but widows and orphans beware. Don't use the back hoe on this one.

I cut back the TNH >152. I will add this back more than likely; I'm trying to take advantage of the wild, thin moves in this one. Widowed orphans should beware here as well, although I will be willing to pay all-time high here one soon enough (that's what makes me tick); still holding 50% of what was a large position there at moment. Cow Pie Constantinople.

I cut back the LNN (ave. 69.83), too low but I had a large position there for a small, thin issue. I'm happy to sit on my hands now and watch this move towards the 75 - 77.50 area and test that recent high. Still looks like a monster to me; Ag services.

I cut back the added SYT shares on the gap-up; 55.45.

I bot PRXL pulling back; ave 52.68.

Fed fund futures are suggesting a reasonable chance for a 75 basis point cut by the end of the month (>40% probability at moment). And by March we should see a min of 100 bps lower for fed funds reductions. Candy Candy!

I'm not going to go on a bullish tirade here (ha!). I'll only say there are many dozens of stocks acting quit live - varying degrees of moonshots out there.

Current long Positions (by size): APOL, GENZ, OII, LNN, HOLX, CVI, MR, JASO, VIVO, CPHD, CAF, YGE, SYT, PRXL, GHXD, IRIS, TISI, CSIQ, TITN, TNH, CZZ