Monday, September 05, 2011

Relative Strength Strict List (front pocket leadership wipes)

That's me a hundred years ago. hopefully i've learned something about dropping-in by now

The future is uncertain, but the futures themselves tonight are rather clear. They'll be a continuation-whack in store for tomorrow (Tuesday).

I've begun accumulating stocks now and for more than a simple swing long. And while I may be forced to hedge some, and/or abandon the weaker cubs, my exposure is likely to hold aggressive.

I suspect.

I imagine you to be shaking your head now, fearing, cheering! my imminent demise, but I can afford some amount of heat. My year remains in benchmark gear and my quarter is all of flat. Unless tomorrow really turns dramatic, we remain well above lower-low territory (Europe and China not included) and nary a bull is left on the Street at this point tonight. Any gumption required to procure sick and unwholesome gains will not be lacking here. I am even rested, if you can imagine. If you don't want to buy in this environment, I cannot blame you. Capital preservation should come first, especially if you've whittled away a smart chunk already. In my case though, I am as preserved as they come and I'm not going to see too many more swells like this one, not from the perspective of being in the water still. I intend to grab one of these giants and charge.

Long-only professionals, in particular, suspect I am doomed. Anyone aggressively buying this market will be tomb-stoned, scorpioned and ultimately sprayed out onto the shallow reef. A bit of coral comfort. Nature's scrubbing bubbles.

If you insist on reasons I can make a logical argument, but remember you are reading from a madman. Besides a front-run calendar* which places us precisely into October (by my count) and coming off a September low, I'm also seeing: Clearly improved charts vs. a more Dower Jonestown mood; higher octave shrills from mouths of shills; lower-volume spills since the higher-low launch born August 23rd; and an insidious number of money managers under-peforming the market this year, who, when the market starts higher will have no choice if they value their careers except to play catch-up.

And they will. As sure as I'm stewing in my own meat sauce just now, these guys will be chasing performance. You don't have to be out-performing widowed orphans to know that much. Have you ever wondered why the market leaders tend to only get stronger in the last few months of the year?

I can't speak yet for tomorrow (yikes), but Friday's dramatic (lower-volume) slide, had but single-digit new 52-week lows (106 in the case of the Nasdaq, okay, but there were only 56 NL's Friday on the NYSE...out of more than 3100 issues traded).

I also use instinct (so you know I'm hopeless), which means I can feel my way to the top again as long as my legs aren't hooked into the coral. I expect to get knocked around sometimes. I just expect you to get knocked worse.

Obviously then, don't do what I do. But what follows is a screened list of names I am eligible to buy now, and as I see appropriate.

Click here for my Current Relative Strength Strict List

The reason for Strict is because I've screened out any stock not at or very-near new-highs in Relative Strength (RS); anything (almost) which hails from a less than A-rated RS industry-group; anything under $8 (7.99 actually); anything too thin; too defensive in nature; too modest in terms of growth; and/or any stock with an SMR-rating less than A**.

The screen has turned up 53 names.

Current Total Position: Equity accounts are long-only, 69% invested

Current Longs (according to size): AAPL (19.9%), ATHN (13%), NUS (11.8%), WFM (10.1%), DECK (7.6%), QCOR (7%)

Currently Short: no current position

Futures: Reloaded Long 10% Sept NDX, 2113.875 ave., Monday night (after getting rocked for 28 points Sunday night; sucks to be me, but that's how I spent my day-off)

**SMR Rating: A proprietary Oneil-database rating analyzing a company's fundamentals. SMR = Sales + Profit Margins + ROE (Return on Equity). Please note that I will make an exception in the case of IPOs, assuming they satisfy all other criteria. Both ARCO and UAN from today's screen are currently B-rated in terms of SMR. I make exceptions for IPOs exhibiting leadership because these stocks have a higher potential for short-term success as institutions accumulate stakes in the newer names from leading groups. Having said that I should note: As a group, in and of themselves, IPOs trade worse than the average stock during a bear market. A bear market is not the environment to hold IPOs on the way down. I have zero faith for any stock trading lower in a bear market and even less if it is an IPO. To excite me with a strong IPO, you need a market trending higher. The IPOs which resist hemorrhaging in a bear market are definitely intriguing and should be noted, but remain too risky as plays until the market supports their trend higher.

*Front-run Calendar: This is the subject for a larger piece (knock yourself out if you like), but essentially the seasonal calendar in the markets has been askew from historical trends since the lows of March, 2009. Do not count on September being a negative month and do not count on December being a strong month (do not count on anything anymore, really). Until proven otherwise, this market looks to me like a typical early-October market which is backing and filling now after forming a double-bottom low in September (or August 9th + 22nd in this case). If that holds up, then I see no reason why we won't trend higher up to the Thanksgiving holiday in Late November (similar to an October bottom rallying then to the end of the year). That is speculation on my part, but the major point here is to throw out what you think you know from the calendar (especially since CNBC heads will read from it like the old testament).

Whenever CNBC can tell you all about an upcoming negative, it's generally time to fade the fear. If they evacuate lower Manhattan in order to protect us from the month of September, that market should generally be bought; especially once it is going up.

That sounds bullish, doesn't it? It might be for all I know.


Follow @Centrifugal to fade trades in real time

No comments: