Friday, September 30, 2011

Thursday, September 29, 2011

Sunday, September 25, 2011

RR Tracks on AAPL Chart (screencast)

The dreaded Railroad track pattern is overhead now on The Apple Computer.

Click here for my screencast on attacking AAPL short (short-term trade only).

Trader's Ed (Red Asphalt edition)

Let's admit, some of what we saw last week was ugly.

Unwholesome actually.

Significant cracks re-emerged in the markets and I’ve backed-off, for the moment at least, my game plan of re-loading leadership longs into the resumption of your damaged mood.

As I’m prone to becoming cheeky when inspired, at times, I have to be disciplined and adjust the playbook when action in the market surprises me. This is especially true when forces larger than me aim for my head with ribboned toothpicks.

Animal spirits are fundamentally dampened now (which is important). Yes, yes, there were excited hopes of a bounce born Friday, but that’s a standard psychological response from men of business media who had their nuts up in a noose the day before. They’re just happy breathing, if you know what I mean.

This wasn’t the higher-low downdraft my salivary ducts were counting on (not yet anyway). For that strategy to maintain a positive expectation value, your mood should be ugly, certainly true. But coincident to lower sentiment, there should be clear indications of improving strength in the markets at the same time (a market making higher-highs and higher-lows from a previous month’s shockwaves, coincident to lower-lows in the prevailing mood, for example. We had something like that building before last week).

Negative sentiment, in and of itself, is not a bullish signpost. The worst elevator drops in history appeared coincident to negative sentiment and oversold conditions (re-read that line if you think an oversold market is a positive set-up). You need to see real strength (not merely value), coincident to the brood storm. Otherwise, you need to wait for a better market.

Then there's this anecdotal religiousware I use to preserve my neck from time to time: Severe damage can only persist for so long before everything becomes vulnerable. The path of wrath (if you will), when sufficiently inspired, sinks all ships (even if some more than others).

So, while I remain an idiot still and I can’t help but keep excited over the opportunity to get long leadership stocks, this nutcracker of a week was more than my balls were bulging for. I did get short ahead of the carnage (incroyable!), but the best strategy would have been simply to cover shorts during the panic, and go buy a couple of nice sweaters. I added several leadership longs during Thursday’s tumult instead, and three out of four of these silk-knits traded up from that point Thursday (which is a feat), but failed to exhibit any power then when the pressure came off on Friday (which is frightening). Friday should have been the gravy day for leadership, but the gravy was cold. Not a good sign.

If you’re trading aggressive leadership and your portfolio is acting aces on a flat market day, the next day the general market wakes up as well (hot money is the first to move). On days when your portfolio is going nowhere, however, while uglier merchandise is bid-up, the next session or two typically marks the beginning of a downdraft. When you buy leadership, you are ahead of the curve – for better or for worse.

And that is the point taken from Friday’s sermon. Leadership, which had sustained pressure so well (again!) on Thursday’s mega-drub, did not behave like the proverbial bar of soap under water once the pressure came off (the IBD-50 actually dropped .5% Friday and losers there had significantly higher relative-volume than did winners; the sort of action which terrifies me when I’m long of the same sack).

These lovelies should have popped right back to levels ordinary people are again uncomfortable to buy. They did not.

To be sure, I’m a bit of crackpot (crackpot scientist, actually). What you may not have realized though, is that, having failed to excel in the really advanced physics and math courses, I’m also something of a logician. Here is how I see the present situation:

1). When leadership fails to advance once external pressures come off, or if it is under-performing in that advance, it is likely to move lower instead.

2). When leadership is the only building left on the block that hasn’t been sufficiently hit and severe hits keep coming - leadership is going to get hit.

There’s no rocket science to this analysis. As a matter of fact, rocket scientists are too smart for such pedestrian logic (those guys have been short since 1999!).

In a true bear market, everything gets hit eventually. The group of stocks which held-up so well during the first few shockwaves, should get salted now if subsequent waves continue to appear; even if but for a session or two.

And hey, maybe not. Maybe we rally from here and for more than just a bounce. I don’t really mind. I can catch the next train (especially if it has left the station and you’re uncomfortable to pay-up and get aboard). It’s easy to pick fruit when it’s staring you in the face and your peers are primarily running for cover. But if fruit is no longer present, well then maybe there’s something to all the fuss. Hunting for squashed dimes near tracks of trains carries a negative expectation of value.

I need quarters to behave like that.

And it’s more than this subtle characteristic of Friday’s tape that has me fearing the quality of fruit. The smartest economist, we all know, is the price of Copper, and carnage was bathed in technicolor in in that market last week. Prices managed lower-lows on Monday (nothing sensational), but then accelerated into oblivion from that point forward (Copper fell 15.7% on the week, 18% counted to the low). Energy and softs were cemented and tossed from bridges as well, while Treasuries held firm and the Dollar strengthened. These are deflationary signals - signals that are screaming in concert now (hopefully for this weekend only).

Deflation is pretty much the market's worst fear.

I didn’t mention Silver. Put the children to bed and consider that Silver dropped 22% in two days (25% counting to Friday’s low). Train wreck is too kind a word right now for silver. Commodity futures trade 10x leverage, so that’s roughly a 220% loss in two days, in laymen terms. Those are Red Asphalt returns in Silver last week.

By the way, If you can’t watch that clip without getting sickened, you should not trade commodities (you probably shouldn’t anyway, but that’s another story). There are people with similar stubs for heads this weekend, having the misfortune of a bad trading week in commodities. As that movie once said (back in Trader's Ed and long before you were born, I think), “whether he failed to see the stop signs, or simply chose to ignore them, no one will ever know - but this account is dead.

Very good, I was wrong to suggest another wave of suffering was all I needed to re-load leadership and drive these stocks up into Thanksgiving. I’m sidestepping that plan for now and keen on letting leadership have its day in court (she’s a witch!)…Before considering my same strategy of driving these names higher into Thanksgiving (!).

If (as in, IF) there will be another shockwave this upcoming week, I’ll lay money the NDX, which held up so well up to now, is going to get clown-dunked; even if for one or two sessions. We’ve seen a desperate grab for liquidity lately, over a wide and certain swath. On Friday the NDX’s number just came up.

Step up to the counter cowboy, Swedish meatballs are to die for.

[I’ll be posting a screencast regarding the subtle flaws of Friday’s leadership tape. A pseudo science explanation on why I am now, temporarily for the time being, short the NDX, and in particular, the Apple Computer.]

Follow @Centrifugal to fade trades in real time

Current Position: Equity accounts are 2.1-1 net-short, 108% invested

Currently Long (according to size): LO (9.9%); ATHN (8.7%), ULTA (7.9%), CELG (7.3%),ROST (7.2%)

Currently Short: Nasdaq-100 index via QID-long (19.4%), NSC (14.5%), AAPL (12%), BAC(6.1%), CSX (6%), BIDU (5%), SINA (4.1%)
...due to relative beta vs. current longs, QID is weighted at 1.75 x's (not 2x's) in the net-short calculation.

Futures: Short Dec SP500 mini from 1134.25, 5% of accounts

Monday, September 19, 2011

Bloodsport Psychology (battle for investment survival)

While I didn't exactly turn bearish today, I did get religion.

Generally, when a market breaks to the upside, coincident to a majority of participants being skeptical, if not downright bearish (left-out in the cold in either case), a market en route to considerably higher prices will not let folks into the new, exclusive club so cheaply (or to cover shorts at lower levels).

I don't want to make too much out of this, but I was not happy for you last night, knowing you were going to get a chance to buy the market today at more more comfortable prices. It's nothing personal. I've learned to stop grabbing for shares when those left behind can suddenly get them easily (assuming they want them).

My buy-only spirit, in a tricky market like this, is dependent on you not finding an easy entry. I don't trust bargains, I don't like reasonable values and I sleep better at night after paying more for stocks. I can take a really deep nap in fact, to know you're not getting shares so easily.

Today's session was not like the gap-downs last week (nor the week before, snort!). YOU DIDN'T WANT TO BUY those gaps, right? This weekend though, even while you still contend the world to be a financial shithole, you felt genuinely desperate (pros especially) to get a piece of this charging market. You were keen to buy the dip, this time around.

Further troubling (besides the fact that treasuries did not let-up their gains, coincident to stocks recovering; very important), you got giddy rather quickly when those longs you stepped into at lower prices today were coming-on again and charging (with you on board this time). My favorite CNBC head (super secret SW), was essentially cheerleading with an hour to go in the day...coincident to the highest TICK reading I can see (since before the origin of this bounce in August, at least).

This is the religion I'm talking about. I'm actually quite spiritual when it comes to the miracle of how some in this game can lose money so flawlessly. Mind you, in my business I have to compete against real machines. Machines which get only-better at this game vs. me. As I am not going to win that match (not in the long run, certainly), I have to take cues from the humans. The best edge remaining for the likes of me.

I'm close to flat now (after churning TWM incessantly today and aided by the comeback in individual position prices). In this regard (not counting surprise individual blow-ups which have a way of arriving very soon after one insults his peers), I've locked-in for now the post-speech gains you wanted no part of (that tawdry evening of September 8th, for the record). And I intend to act more like a coward until you are sufficiently punished once again (yes yes, nothing personal).

If you want to win at blood sports, or the market in this case, every once in a while it is better to let the other guy make the money.

Your turn to shine.

As for today, I hedged things off and began unloading names at the same time. I may change my mind, but I don't expect to be especially aggressive again before late Wednesday; further if I don't have a decent read on things.


Follow @Centrifugal to fade trades in real time (don't get mad, get even!)

Current Total Position: Equity accounts are 1.21-1 net-long, 62% invested (down from 4.49-1 net-long into the weekend; 6.8-1 net-long Thursday)

Current Longs (according to size): LVS (11.8%), LO (10.4%); UAN (7.6%); NUS (12.2%), SIMO (4.9%)

Currently Short: Russell 2000 index via TWM-long (20.1%)
...due to relative beta vs. current longs, weighing SDS at 1.75 x's (not 2x's) in the net-long calculation.

Futures: Out remaining 5% tonight, Dec Russell 2000 mini, 691.55 ave (entered 10% late today, 704.10)

...super secret sw

Tuesday, September 13, 2011

Fresh Meat (for rotting vegetables)

While you fixate still on bear flag formations in the major indices, here's an inverse version of a chart which should give you what you're looking for - only in a hurry.

The very next bar if I were writing this.

Actionable 60 min chart, APKT; 13Sep2011 close. The next couple of bars look violent.

Monday, September 12, 2011

APKT is Charging

If this name is a runner again tomorrow, then you sweating the story of why the market's rallying and whether or not we can trust it will be music to my ears.

If not, then put this post to shame.


Sunday, September 11, 2011

Flesh Wound (+ updated RS list of live longs)

Not to worry, I remain an idiot still.

This doesn't mean I will hold long-only in the face of a plunging market, but I remain perfectly bullish still on the 'here-to-Thanksgiving' outlook.

By now, none of you are even hopeful I will come through this unscathed. I think you all know I am doomed. It's okay, really. I invite you to watch.

It's a rope-a-dope strategy and it requires taking some blows. I won three out of four trading rounds last week, but was knocked to the mat on Friday. So while my week was more than 2.5% profitable, being on my back at the ring of the bell Friday changes everything.

It means my head is ringing.

Click here for my Updated Leadership Live List
(a less-strict RS screen for this week's go-to leadership wipes)

Current Total Position: Equity accounts are 1.65-1 net-long, 92% invested

Current Longs (according to size): NUS (12.2%), LVS (11.8%), WFM (10.3%), ATHN (9.5%), CERN (8.2%), QCOR (8.2%)

Currently Short: SP500 index via SDS-long (21.4%), JPM (10.6%)
...due to relative beta vs. current longs, weighing SDS at 1.5 x's (not 2x's) in net-long calculation.

Futures: Long Sep Swiss Franc, from 1.1322 ave

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