Friday, January 30, 2009

iii of 3 - And it Scares Me

A funny thing happened on the way to the bad-bank this week.

Wednesday's blast-up was faded furiously yesterday and now further flayed today. Elliot Wavers are pounding tables right now about having seen yesterday's i and ii and now today's iii of 3.

You got that right!

I would characterize it a little differently - you know how when you don't leave the house for a while a burgeoning smell isn't effectively noticed (rather it sneaks up on you), whereas if you return home after being out it is undeniable upon re-entering that something stinks?

Something died.

By default I'm net-short here, having removed myself from the longs acting weakest, while seeing no reason to cover my hedge (I did however cover YHOO at yesterday's close since it held > than the 50-day MA and I did add OTEX long yesterday, as that was breaking out on earnings, but this position is small and the benchmark leash is tight. I sold much more yesterday overall than I bought; more of the same today).

Next week could potentially get ugly. I'm going to attack this rather aggressively if we keep weakening, especially given the overwhelming attitude that we will hold the lows in the market. I thought we would break lows later in the year (September-ish), but if it is to happen sooner...I want to be a part of history.

I'll be pleased to get net-long or long-only again if the charts hold up and the market firms. At the moment however I'm not inclined to hold-on long in this tape and hope. I'll keep shooting first.

Current Shorts (according to size): SDS-long (SP500 Ultrashort), AAPL, VMI, MBT
Current longs (according to size): AVAV, ABX, CEPH, MYGN, ASEI (thin), OTEX, HOC (new), CECO, ATHN and DLTR

Thursday, January 29, 2009

Quick and UGLY

We got the big move up yesterday, but it was not the most graceful action, led by the uglies and in too-far-too-fast fashion.

To date, every rescue idea for the Financials has been a consistent pattern of blast-higher and then retrace retrace retrace. I hedged longs late yesterday with SDS (SP500 Ubershort) and by getting short some Financials (via SKF long and LYG short). I've already covered the Financials today for a quick gain but I've been adding so far to the SDS. I also have small shorts now in AAPL and YHOO.

This is an attempt to hold long onto what still look to be good-looking aggressive growth names. At the moment I'm equally long and short overall, but I would be happy to let go of hedges should/as the market dictates..or else blow out the long side if action worsens.

Current longs (according to size): AVAV, ABX (new), ASEI (thin), THOR, CEPH, TWGP (thin), HOC (new), CECO, ATHN, MYGN, MANT (thin, downgraded today), LPHI (thin) and DLTR
Current Shorts (according to size): SDS-long (SP500 Ultrashort), AAPL, YHOO

Tuesday, January 27, 2009

Quick Note

I'm slowing down here a bit as today's bond market advance and the plunge in oil has me concerned. FOMC announcement comes tomorrow and the bond market move may be signaling more quantitative easing to come out of the Fed. Stocks so far are holding fine, but I've cut back some and am a bit defensive until this event is out of the way and the light is still green. I'll hedge or back out all the way if the stocks start to fail...too soon to say just now.

I will definitely re-increase my long exposure if we come through this unharmed.

Currently long (according to size): AVAV, ASEI (thin), THOR, CEPH, TWGP (thin), ATHN, MYGN, MANT (thin, downgraded today), LPHI (thin) and DLTR

Monday, January 26, 2009

Roll Out the Green Carpet

Don't do what I do, but juicy night crawlers are worming higher, below.

We've been gearing up for another rally for the better part of 5 days and while today's earlier strength has stalled and the action chop-choppy, it still looks like we're getting started.

I'm pressing on the accelerator as we start coming off the lows here - looking to pyramid higher as long as we keep rallying.

Led by oil's turn higher, commodity prices are firming; the (defensive) bond market has sold-off and held at lower prices; the recent decline in the broad market saw a strikingly low number of new 52-wk lows, coincident to recent lows in the indices; and new leadership growth stocks have been poised all over the tape.

I don't want to guess yet if we take out the December highs, but if we do I think we're going to see the last real rally for a while and it will be led by catch-up garbage plays (like Financials, Energy, Materials and other cyclical uglies) and by the very decent looking growth names out there.

Even if we do not take out the December highs, I suspect many of the leadership names will, which is why I prefer the leadership for intermediate and swing trades and leave the snap-back uglies eligible for quick trades only.

Then, well a return to Hell of course - nothing less than the dreaded apathy-period whereby the investment world is slowly ground down to the realization that they wish they had all been insurance salesmen.

But that comes later. For now the Long List is Faster Faster once again...

Fat Worm Live List:

AVAV (the strongest solar paper airplane stock I know of)
ASEI (very thin, Big Brother Better Mousetrap play)
ATHN (because medical records should be hacked as much as anything else)
MANT (thin, watch your back...another Big Brother mousetrap play)
DLTR (shopping at its finest; lovely place)
MYGN (still my favorite Biotech at moment)
LPHI (why sell yourself short when you can sell your whole-life policy instead)
GXDX (thin and sleepy Biotech which has a very decent it higher)
AIPC (still thin, still strong...brand your own bad pasta)
CAL (ditch the airlines if oil keeps up an they break their uptrend)
UAUA (")
HMSY (thin)
TWGP (thin and heavy short interest requires caution)
BKR (thin)
NCIT (very thin)
SXCI (very thin)
EMS (thin)

Thursday, January 15, 2009

Tarpedo Trough

Today did turn out to be a good flush after all, followed by a strong volume rebound for stocks higher.

The key tell early in the day was the fact that so many quality leadership names were trading up in various leading industry groups, even while the World's banking system was ditching somewhere into the Hudson.

I don't know if we'll manage to make higher-highs on this turn, but I think we will see more than just a small counter-wave reaction. And some of these stocks will make higher highs.

1st) There are too many good charts existing at the moment in quality, growth names; exhibiting decent bases and in some cases already breaking out (although earlier breakouts before today did not manage any follow-through).

2nd) There are too few New Lows on this decline. Back in September the market had somewhere around 1600 new lows for the NYSE (meaning over 40% of stocks traded that day were making fresh 52-wk lows). Today there were only 147 NLs on the NYSE and 119 on the Nasdaq (3.8% and 4% respectively). This is a very good indication that the floor is not ready to fall-out on the vast majority of names, even if the common-stock Tarpedo ripping through the banking sector renders shares there essentially worthless. The rest of the market is consolidating at worst.

3rd) Bad news and lower expectations have been in full bloom lately, which sets up the psychology for O to grab the horns of his new term at the trough and nowhere higher. It is clear that his team is managing expectations, which means it is better for anything and everything ill to be known NOW...on Bush's watch. The news flow beginning next week will have a little less ill-charm; for a while.

The complexion of the market on this pullback has not been entirely beautiful, but quality has hung in there on the charts in the face of the Financial's return to the woodshed. This is why I only buy leadership - to try to avoid the head-chops.

Remember, the '29 crash which ultimately saw the market bottom in 1932, managed a 52% bounce from mid-November '29 until May 1930 (see chart below). Our market can be hell-bound to 2011 (or 2041), but that doesn't mean the first bounce/retracement from the initial lows cannot have a substantive rally - primarily due to the incredible volatility coming off the November low (think of wild oscillations which begin to finally subside. Until they subside, the counter moves are still quite strong...later when volatility dims, price action just grinds down until no one wants to play anymore. There will not be good-looking charts out there at that stage).

If you think that stocks are in trouble now but we will see strength sometime later this year (like 80% of the investing heads who speak on this), then you might be as full of shit as a Christmas turkey. The crowd can be a very dangerous place to hang out in in an emergency. The second half of the year has me a little nervous myself.

Of course, we will see and I may be wrong, wrong, wrong. In either case, I just prefer to ride the wave and not try to shape it. Not to get too caught up in scenarios, but staying flexible instead.

Nice plane crash often do you get to say that?

Bounce of the 1929 market - Mid Nov '29 to May '30:

Whether to Weather

Possible short-term flush-low w today's early storm. Quality is leading on the day, while the uglies are getting all the attention.

I think we're shaping up for a new swing-leg long. I'm re-attacking quality growth, positioning long. Will bail-out again if today ends in lower-lows late in session...

Live Kill List:

Slingshot off the 50-day from yesterday; up on strong, rising volume.
New relative-strength high today and holding today's sell-storm.

Also live today:

Holding well lately:

Monday, January 05, 2009

High Wire Bearpoon

So far so good.

The tape-action continues to paint a green picture and a rising number of leadership stocks are breaking-out of decent patterns.

I'm still of the mind we'll see strong overall action up to the inauguration.

After that point I am not so sure, but I'll be snorkeling in Tora Tora Bora or somewhere by then anyway (sooner if the bear comes out of hibernation before the 20th; otherwise I'm trading long until the 19th or 20th, depending).

Here is the updated Sling-Shot, Rubber-Bullet Hit-List for stocks I am trading around...and even pyramiding higher in some cases. The list is longer than that of 18 December, as there are more pup seals within easy club reach than in quite some time...

AVAV (the strongest solar paper airplane stock I know of)
DLTR (shopping at its finest)
MYGN (new breakout)
CEPH (poised for breakout)
AFAM (for almost-family members only)
BKR (thin, but breaking out now)
CAL (my new favorite airline, replacing ALGT and UAUA)
COCO (>16)
SXCI (very thin)
EMS (thin, breaking out but not yet w any major volume)
LOPE (thin, ipo, I did sell on De. 31 as planned, would re-buy if it won't drop)